CONTENTS
Shareholder Letter ............................................. 1
Performance Summary ............................................ 4
Financial Highlights &
Statement of Investments ....................................... 6
Financial Statements ........................................... 12
Notes to Financial Statements .................................. 15
[FUND CATEGORY PYRAMID GRAPHIC]
- --------------------------------------------------------------------------------
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 semiannual report of Franklin Gold Fund covers the six months ended January
31, 1999. Although this period was characterized by decreased sales of gold by
central banks, reduced hedging activity by producers and strong demand from
Europe and North America, continued weak demand from Asia and increased global
production contributed to continued pressure on the price of gold bullion. As a
result, it declined slightly from $286.45 per ounce on July 31, 1998, to $286.15
on January 31, 1999.(1) Within this environment, the fund's Class A shares
posted a +3.45% cumulative total return for the reporting period, as discussed
in the Performance Summary on page 4.
The fund's performance was due primarily to declines in the price of bullion and
related prices of gold stocks. Maintaining our conservative investment strategy,
we remained focused
1. Source: Bloomberg.
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 10 of
this report.
<PAGE>
GEOGRAPHIC DISTRIBUTION
BASED ON TOTAL NET ASSETS 1/31/99
Canada .......................................... 28.7%
South Africa .................................... 24.2%
United States ................................... 21.7%
Australia ....................................... 9.4%
Other ........................................... 11.6%
Cash & Short-Term Securities .................... 4.4%
INDUSTRY BREAKDOWN
BASED ON TOTAL NET ASSET 1/31/99
Long-Life Gold Mines ............................. 47.4%
Platinum ......................................... 16.2%
Mining Finance Companies ......................... 15.2%
Medium-Life Gold Mines ........................... 9.8%
Gold & Diversified Resources ..................... 7.0%
Cash & Short-Term Securities ..................... 4.4%
on gold mining stocks as long-term growth vehicles and continued to invest in
large-capitalization (large-cap), liquid companies with attractive reserve and
production growth profiles. For example, Newmont Mining Corp. and Barrick Gold
Corp. (the fund's top two holdings on January 31, 1999) are large-cap, low-cost
producers with established production histories and solid management.
Recognizing the importance of diversification across geographic regions and
commodity groups, we added to our position in De Beers Consolidated Mines AG,
ADR, a South African company that controls the marketing for most of the world's
diamonds. We also increased the fund's exposure to Australian and platinum group
producers by adding to our holdings of Normandy Mining Ltd., an Australian
gold-mining company, and Impala Platinum Holdings Ltd., ADR, a South African
company.
Looking forward, we remain optimistic about gold's future. Stable supply coupled
with greater demand for gold, economic recovery in Asia, fear of inflation in
developed countries, or a restriction by Switzerland on future gold sales might
contribute to higher prices for gold bullion. But even if they don't, downward
pressure on prices may force companies to look for profitability through
downsizing, mergers, increased cost control, and reduced production. Therefore,
the longer gold prices remain low, the healthier the industry may be in the long
term.
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
2
<PAGE>
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 January 31, 1999, 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 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/ Suzanne Willoughby Killea
Suzanne Willoughby Killea, CFA
Portfolio Managers
Franklin Gold Fund
TOP 10 HOLDINGS
1/31/99
COMPANY, % OF TOTAL
COUNTRY NET ASSETS
- --------------------------------------------------------------
Barrick Gold Corp.
Canada 11.4%
Newmont Mining Corp.
United States 8.9%
Stillwater Mining Co.
United States 6.7%
Anglo American Platinum Corp.
South Africa 5.8%
AngloGold Ltd.
South Africa 5.0%
Placer Dome Inc.
Canada 4.9%
De Beers Consolidated Mines AG, ADR
South Africa 4.9%
Euro-Nevada Mining Corp.
Canada 4.8%
Homestake Mining Co.
United States 4.7%
Franco-Nevada Mining Corp. Ltd.
Canada 4.6%
3
<PAGE>
- --------------------------------------------------------------------------------
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. May 1, 1994, the fund implemented a Rule 12b-1plan,
which affects subsequent performance. Past expense reductions by the fund's
manager increased the fund's total returns.
CLASS B:
Not subject to 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 apply; available to a limited class
of investors.
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY AS OF 1/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION (8/1/98 - 1/31/99)
CLASS A CHANGE 1/31/99 7/31/98
- --------------------------------------------------------------------------------
Net Asset Value +$0.22 $7.70 $7.48
DISTRIBUTIONS
----------------------------------------
Dividend Income $0.0405
CLASS B 1/31/99
- --------------------------------------------------------------------------------
Net Asset Value $7.69
CLASS C CHANGE 1/31/99 7/31/98
- --------------------------------------------------------------------------------
Net Asset Value +$0.23 $7.66 $7.43
DISTRIBUTIONS
----------------------------------------
Dividend Income $0.0063
ADVISOR CLASS CHANGE 1/31/99 7/31/98
- --------------------------------------------------------------------------------
Net Asset Value +$0.24 $7.85 $7.61
DISTRIBUTIONS
----------------------------------------
Dividend Income $0.0547
Past performance is not predictive of future results.
4
<PAGE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
CLASS A 1-YEAR 5-YEAR 10-YEAR (5/19/69)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) -12.66% -42.66% -9.35% +130.94%
Average Annual Total Return(2) -17.65% -11.58% -1.56% +2.65%
Value of $10,000 Investment(3) $ 8,235 $ 5,406 $ 8,547 $ 21,758
</TABLE>
<TABLE>
<CAPTION>
1/31/95 1/31/96 1/31/97 1/31/98 1/31/99
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One-Year
Total Return(4) -17.50% +34.53% -16.72% -28.97% -12.66%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS B (1/1/99)
- ------------------------------------------------------------------------------------------
<S> <C>
Cumulative Total Return(1) -.39%
Aggregate Total Return(2) -4.37%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 1-YEAR 3-YEAR (5/1/95)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) -13.27% -49.48% -42.58%
Average Annual Total Return(2) -14.99% -20.62% -13.97%
Value of $10,000 Investment(3) $ 8,501 $ 5,003 $ 5,685
</TABLE>
<TABLE>
<CAPTION>
1/31/97 1/31/98 1/31/99
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One-Year
Total Return(4) -17.29% -29.58% -13.27%
</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) -10.74% -41.18% -7.01% +136.89%
Average Annual Total Return(2) -10.74% -10.07% -0.72% +2.95%
Value of $10,000 Investment(3) $ 8,926 $ 5,882 $ 9,299 $ 23,689
</TABLE>
<TABLE>
<CAPTION>
1/31/95 1/31/96 1/31/97 1/31/98 1/31/99
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
One-Year
Total Return(4) -17.50% +34.53% -16.66% -28.76% -10.74%
</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 total return of
Advisor Class shares was -38.45%.
- --------------------------------------------------------------------------------
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.
5
<PAGE>
FRANKLIN GOLD FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JULY 31,
JANUARY 31, 1999 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ......... $ 7.48 $ 11.44 $ 14.65 $ 15.07 $ 14.88 $ 15.63
------------------------------------------------------------------------------
Income from investment operations:
Net investment income ....................... .03 .10 .07 .21 .18 .19
Net realized and unrealized gains (losses)... .23 (3.96) (2.37) .01 .27 (.75)
------------------------------------------------------------------------------
Total from investment operations ............. .26 (3.86) (2.30) .22 .45 (.56)
------------------------------------------------------------------------------
Less distributions from:
Net investment income ....................... (.03) (.10) (.09) (.13) (.20) (.19)
In excess of net investment income .......... (.01) -- -- -- (.06) --
Net realized gains .......................... -- -- (.82) (.51) -- --
------------------------------------------------------------------------------
Total distributions .......................... (.04) (.10) (.91) (.64) (.26) (.19)
------------------------------------------------------------------------------
Net asset value, end of period ............... $ 7.70 $ 7.48 $ 11.44 $ 14.65 $ 15.07 $ 14.88
===============================================================================
Total return* ................................ 3.45% (33.83)% (16.45)% 1.65% 3.14% (3.52)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............ $ 188,206 $ 189,591 $ 291,544 $ 364,032 $ 391,966 $ 418,698
Ratios to average net assets:
Expenses .................................... 1.27%** 1.19% 1.05% .95% .95% .81%
Net investment income ....................... .71%** 1.05% .55% .99% 1.20% 1.30%
Portfolio turnover rate ...................... 2.99% 6.09% 16.05% 28.74% 6.36% 1.46%
</TABLE>
* Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized. Prior to May 1, 1994, dividends from
net investment income were reinvested at the offering price.
** Annualized
6
<PAGE>
FRANKLIN GOLD FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS B
--------------------
JANUARY 31, 1999***
(UNAUDITED)
--------------------
<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 realized and unrealized losses (.03)
-----
Net asset value, end of period ....................................... $7.69
=====
Total return* ........................................................ (.39)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)..................................... $136
Ratios to average net assets:
Expenses ............................................................ 1.98%**
Net investment income ............................................... .01%**
Portfolio turnover rate .............................................. 2.99%
</TABLE>
* Total return is not annualized.
** Annualized
*** For the period January 1, 1999 (effective date) to January 31, 1999.
7
<PAGE>
FRANKLIN GOLD FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JULY 31,
JANUARY 31, 1999 -------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995+***
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $ 7.43 $ 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) ... .24 (3.93) (2.38) (.02) .09
-----------------------------------------------------------------------------
Total from investment operations .............. .24 (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 period ................ $ 7.66 $ 7.43 $ 11.37 $ 14.61 $ 15.05
=============================================================================
Total return* ................................. 3.18% (34.35)% (17.18)% .81% 1.45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $ 23,966 $ 20,353 $ 20,783 $ 12,977 $ 3,104
Ratios to average net assets:
Expenses ..................................... 2.03%** 1.96% 1.83% 1.74% 1.73%**
Net investment income (loss) ................. (.05)%** .25% (.16)% .16% .33%**
Portfolio turnover rate ....................... 2.99% 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.
** 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.
++ Includes distributions in excess of net investment income in the amount of
$.002.
8
<PAGE>
FRANKLIN GOLD FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
ADVISOR CLASS
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JULY 31,
JANUARY 31, 1999 ----------------------------
(UNAUDITED) 1998 1997***
----------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ...... $ 7.61 $ 11.43 $ 13.12
-------------------------------------------------
Income from investment operations:
Net investment income .................... .05 .14 .07
Net realized and unrealized gains (losses) .24 (3.84) (1.67)
--------------------------------------------------
Total from investment operations .......... .29 (3.70) (1.60)
--------------------------------------------------
Less distributions from:
Net investment income .................... (.04) (.12) (.09)
In excess of net investment income ....... (.01) -- --
--------------------------------------------------
Total distributions ....................... (.05) (.12) (.09)
--------------------------------------------------
Net asset value, end of period ............ $ 7.85 $ 7.61 $ 11.43
==================================================
Total return* ............................. 3.83% (32.46)% (12.24)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ......... $ 2,707 $ 2,207 $ 3,211
Ratios to average net assets:
Expenses ................................. 1.03%** .96% .83%**
Net investment income .................... .96%** 1.30% .80%**
Portfolio turnover rate ................... 2.99% 6.09% 16.05%
</TABLE>
* Total return is not annualized.
** Annualized
*** For the period January 2, 1997 (effective date) to July 31, 1997.
See notes to financial statements.
9
<PAGE>
FRANKLIN GOLD FUND
STATEMENT OF INVESTMENTS, JANUARY 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS & WARRANTS 95.6%
GOLD & DIVERSIFIED RESOURCES 7.0%
Freeport-McMoRan Copper & Gold Inc., A United States 308,011 $ 2,945,355
Orogen Minerals Ltd. Australia 54,000 532,629
Rio Tinto PLC United Kingdom 752,401 9,035,437
Teck Corp., B Canada 382,100 2,529,291
------------
15,042,712
------------
LONG LIFE GOLD MINES 47.4%
AngloGold Ltd. South Africa 91,265 3,686,622
AngloGold Ltd., ADR South Africa 351,822 7,036,440
Ashanti Goldfields Co. Ltd., GDR Ghana 1,133,050 9,772,556
Barrick Gold Corp. Canada 1,282,249 24,442,872
Compania de Minas Buenaventura SA, ADR Peru 426,993 5,444,161
Compania de Minas Buenaventura SA, B Peru 100,593 613,646
Driefontein Consolidated Ltd., ADR South Africa 534,700 2,506,406
(a)Gold Fields Ltd. South Africa 500,000 3,079,972
(a)Gold Fields Ltd., ADR South Africa 67,631 410,858
(a)Harmony Gold Mining Co. Ltd. South Africa 273,000 1,221,799
Homestake Mining Co. United States 1,074,194 10,137,706
(a)Lihir Gold Ltd. Australia 1,049,600 1,068,248
Newmont Mining Corp. United States 1,087,745 19,239,490
Placer Dome Inc. Canada 938,820 10,503,049
(a)Randfontein Estates Ltd., wts. South Africa 46,537 28,436
(a)TVX Gold Inc. Canada 997,000 1,458,509
(a)Western Areas Ltd. South Africa 357,979 1,158,728
Western Areas Ltd., ADR South Africa 23,523 76,142
------------
101,885,640
------------
MEDIUM LIFE GOLD MINES 9.8%
Acacia Resources Ltd. Australia 4,122,000 6,344,646
Battle Mountain Canada Inc. Canada 583,600 2,163,342
(a)Campbell Resources Inc., wts. Canada 722,000 5,632
(a)Canyon Resources Corp., wts. United States 339,000 --
Great Central Mines Ltd. Australia 658,375 591,484
(a)Greenstone Resources Ltd. Canada 568,900 301,264
(a)Newcrest Mining Ltd. Australia 865,050 1,374,976
(a)Niugini Mining Ltd. Australia 133,750 170,578
(a)Niugini Mining Ltd., ADR Australia 610,000 777,933
Normandy Mining Ltd. Australia 5,352,451 4,647,229
Sons of Gwalia Ltd. Australia 1,575,500 4,593,707
------------
20,970,791
------------
MINING FINANCE COMPANIES 15.2%
Anglo American Corp. of South Africa Ltd., ADR South Africa 65,000 1,901,250
De Beers Consolidated Mines, AG, ADR South Africa 736,000 10,488,000
Euro-Nevada Mining Corp. Canada 658,200 10,413,040
Franco-Nevada Mining Corp. Ltd. Canada 526,800 9,920,871
------------
32,723,161
------------
</TABLE>
10
<PAGE>
FRANKLIN GOLD FUND
STATEMENT OF INVESTMENTS, JANUARY 31, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS & WARRANTS (CONT.)
PLATINUM 16.2%
Anglo American Platinum Corp. Ltd., ADR .......................... South Africa 840,138 $ 12,417,744
Impala Platinum Holdings Ltd. .................................... South Africa 240,000 3,765,328
Impala Platinum Holdings Ltd., ADR ............................... South Africa 267,800 4,201,487
(a)Stillwater Mining Co. ............................................ United States 150,000 3,937,499
(a)Stillwater Mining Co., 144A ...................................... United States 400,050 10,501,313
------------
34,823,371
------------
TOTAL COMMON STOCKS & WARRANTS (COST $263,568,992) ................ 205,445,675
------------
PRINCIPAL
AMOUNT
------
(b)REPURCHASE AGREEMENT 3.8%
Joint Repurchase Agreement, 4.686%, 2/01/99 (Maturity
Value $8,173,814)
(COST $8,170,623) ................................................ $8,170,623 8,170,623
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Chase Securities Inc.
CIBC Oppenheimer Corp.
Deutsche Bank Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Lehman Brothers Inc.
NationsBanc Montgomery Securities LLC
Paine Webber Inc.
Paribas Corp.
Warburg Dillon Read LLC
Collateralized by U.S. Treasury Bills & Notes
------------
TOTAL INVESTMENTS (COST $271,739,615) 99.4% ...................... 213,616,298
OTHER ASSETS, LESS LIABILITIES .6% ............................... 1,398,266
------------
NET ASSETS 100.0% ................................................ $215,014,564
============
</TABLE>
(a)Non-income producing
(b)Investment is through participation in a joint account with other funds
managed by the investment advisor. At January 31, 1999, all repurchase
agreements had been entered into on January 29, 1999.
See notes to financial statements.
11
<PAGE>
FRANKLIN GOLD FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments in securities:
Cost ...................................................................................... $ 271,739,615
=============
Value ..................................................................................... 213,616,298
Cash ....................................................................................... 1,272,574
Receivables:
Capital shares sold ....................................................................... 1,169,129
-------------
Total assets .......................................................................... 216,058,001
-------------
Liabilities:
Payables:
Capital shares redeemed ................................................................... 308,498
Affiliates ................................................................................ 387,521
Shareholders .............................................................................. 299,621
Other liabilities .......................................................................... 47,797
-------------
Total liabilities ..................................................................... 1,043,437
-------------
Net assets, at value $ 215,014,564
=============
Net assets consist of:
Accumulated distributions in excess of net investment income ............................... $ (272,697)
Net unrealized depreciation ................................................................ (58,123,317)
Accumulated net realized loss .............................................................. (43,934,380)
Capital shares ............................................................................. 317,344,958
-------------
Net assets, at value ................................................................. $ 215,014,564
=============
CLASS A:
Net asset value per share ($188,206,100 / 24,456,030 shares outstanding)* .................. $ 7.70
=============
Maximum offering price per share ($7.70 / 94.25%) .......................................... $ 8.17
=============
CLASS B:
Net asset value and maximum offering price per share ($136,168 / 17,705 shares outstanding)* $ 7.69
=============
CLASS C:
Net asset value per share ($23,965,510 / 3,128,857 shares outstanding)* .................... $ 7.66
=============
Maximum offering price per share ($7.66 / 99.00%) .......................................... $ 7.74
=============
ADVISOR CLASS:
Net asset value and maximum offering price per share ($2,706,786 / 345,013
shares outstanding) ......................................................................... $ 7.85
=============
</TABLE>
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
12
<PAGE>
FRANKLIN GOLD FUND
Financial Statements (continued)
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1999 (UNAUDITED)
<S> <C>
Investment income:
(net of foreign taxes and fees of $101,300)
Dividends ................................................... $ 1,530,524
Interest .................................................... 718,154
------------
Total investment income ................................. 2,248,678
------------
Expenses:
Management fees (Note 3) ..................................... 608,820
Distribution fees (Note 3)
Class A ..................................................... 242,992
Class B ..................................................... 70
Class C ..................................................... 119,655
Transfer agent fees (Note 3) ................................. 371,859
Custodian fees ............................................... 31,023
Reports to shareholders ...................................... 82,235
Registration and filing fees ................................. 32,647
Professional fees ............................................ 19,999
Directors' fees and expenses ................................. 7,805
Other ........................................................ 10,328
------------
Total expenses .......................................... 1,527,433
------------
Net investment income .................................. 721,245
------------
Realized and unrealized gains (losses):
Net realized loss from:
Investments ................................................. (10,914,387)
Foreign currency transactions ............................... (6,369)
------------
Net realized loss ....................................... (10,920,756)
Net unrealized appreciation on investments ................... 19,406,764
------------
Net realized and unrealized gain .............................. 8,486,008
------------
Net increase in net assets resulting from operations .......... $ 9,207,253
============
</TABLE>
See notes to financial statements.
13
<PAGE>
FRANKLIN GOLD FUND
Financial Statements (continued)
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JANUARY 31, 1999 (UNAUDITED)
AND THE YEAR ENDED JULY 31, 1998
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1999 JULY 31, 1998
---------------- -------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ....................................................... $ 721,245 $ 2,588,383
Net realized loss from investments
and foreign currency transactions ........................................... (10,920,756) (24,125,933)
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities denominated in foreign currencies . 19,406,764 (83,348,247)
------------------------------------
Net increase (decrease) in net assets resulting from operations ......... 9,207,253 (104,885,797)
Distributions to shareholders from:
Net investment income:
Class A .................................................................... (731,635) (2,450,206)
Class C .................................................................... (14,458) (100,018)
Advisor Class .............................................................. (12,834) (47,704)
In excess of net investment income:
Class A .................................................................... (262,890) --
Class C .................................................................... (5,195) --
Advisor Class .............................................................. (4,612) --
------------------------------------
Total distributions to shareholders ......................................... (1,031,624) (2,597,928)
Capital share transactions: (Note 2)
Class A .................................................................... (8,756,296) (5,299,204)
Class B .................................................................... 141,688 --
Class C .................................................................... 3,077,078 8,809,758
Advisor Class .............................................................. 224,976 585,881
------------------------------------
Total capital share transactions ............................................ (5,312,554) 4,096,435
Net increase (decrease) in net assets ................................... 2,863,075 (103,387,290)
Net assets:
Beginning of period .......................................................... 212,151,489 315,538,779
------------------------------------
End of period ................................................................ $ 215,014,564 $ 212,151,489
====================================
Undistributed net investment income (accumulated distributions in excess of net
investment income) included in net assets:
End of period ............................................................... $ (272,697) $ 37,682
====================================
</TABLE>
See notes to financial statements.
14
<PAGE>
FRANKLIN GOLD FUND
Notes to Financial Statements (unaudited)
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 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.
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.
15
<PAGE>
FRANKLIN GOLD FUND
Notes to Financial Statements (unaudited) (continued)
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. The shares differ by their initial sales load, distribution fees, voting
rights on matters affecting a single class and the exchange privilege of each
class.
At January 31, 1999, there were 100 million shares authorized ($0.10 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>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 1999 JULY 31, 1998
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
CLASS A SHARES
Shares sold .................................. 35,671,476 $ 285,548,026 57,684,355 $ 528,508,829
Shares issued in reinvestment of distributions 103,633 845,641 249,615 2,059,834
Shares redeemed .............................. (36,674,396) (295,149,963) (58,064,574) (535,867,867)
------------------------------------------------------------------------
Net decrease ................................. (899,287) $ (8,756,296) (130,604) $ (5,299,204)
========================================================================
CLASS B SHARES*
Shares sold .................................. 17,705 $ 141,688
Shares issued in reinvestment of distributions -- --
Shares redeemed .............................. -- --
--------------------------------
Net increase ................................. 17,705 $ 141,688
================================
CLASS C SHARES
Shares sold .................................. 1,089,825 $ 8,522,519 1,899,675 $ 17,713,130
Shares issued in reinvestment of distributions 2,093 17,019 10,632 88,159
Shares redeemed .............................. (703,287) (5,462,460) (997,164) (8,991,531)
------------------------------------------------------------------------
Net increase 388,631 $ 3,077,078 913,143 $ 8,809,758
========================================================================
ADVISOR CLASS
Shares sold 1,412,000 $ 11,426,009 3,101,828 $ 29,749,285
Shares issued in reinvestment of distributions 1,703 14,155 3,197 26,417
Shares redeemed (1,358,798) (11,215,188) (3,095,800) (29,189,821)
------------------------------------------------------------------------
Net increase 54,905 $ 224,976 9,225 $ 585,881
========================================================================
</TABLE>
*Effective date of Class B shares was January 1, 1999.
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.
16
<PAGE>
FRANKLIN GOLD FUND
Notes to Financial Statements (unaudited) (continued)
3. TRANSACTIONS WITH AFFILIATES (CONT.)
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%, 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 period of $50,701 and $12,606,
respectively.
The Fund paid transfer agent fees of $371,859, of which $310,364 was paid to
Investor Services.
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 had deferred capital losses occurring subsequent to
October 31, 1997 of $17,835,212. For tax purposes, such losses will be reflected
in the period ending July 31, 1999.
At January 31, 1999, the net unrealized depreciation based on the cost of
investments for income tax purposes of $271,739,615 was as follows:
Unrealized appreciation ........... $ 30,710,306
Unrealized depreciation ........... (88,833,623)
------------
Net unrealized depreciation ....... $(58,123,317)
============
Net investment income and net realized capital losses differ for financial
statement and tax purposes primarily due to differing treatments of foreign
currency transactions.
17
<PAGE>
FRANKLIN GOLD FUND
Notes to Financial Statements (unaudited) (continued)
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended January 31, 1999 aggregated $18,910,021 and $5,846,150,
respectively.
18
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