SHAREHOLDER LETTER
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Your Fund's Goal: Franklin Gold and Precious Metals 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.
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Dear Shareholder:
This annual report for Franklin Gold and Precious Metals Fund covers the 12
months ended July 31, 2000. On April 10, 2000, Franklin Gold Fund officially
changed its name to Franklin Gold and Precious Metals Fund. This name and
strategy change permits the Fund greater flexibility to invest in precious
metals such as platinum, palladium and silver, in addition to gold. While the
Fund will continue to focus on gold investments, this new strategy will allow
for better management of the volatility resulting from recent, historically low
gold prices and resulting market consolidation.
CONTENTS
<TABLE>
<S> <C>
Shareholder Letter .................................................... 1
Special Update ........................................................ 6
Performance Summary ................................................... 8
Financial Highlights & Statement of Investments ....................... 12
Financial Statements .................................................. 18
Notes to Financial Statements ......................................... 22
Independent Auditors' Report .......................................... 26
Tax Designation ....................................................... 27
</TABLE>
[PYRAMID GRAPH OMITTED]
The dollar value, number of shares or principal value, and complete legal titles
of all portfolio holdings are listed in the Fund's Statement of Investments
(SOI). The SOI begins on page 16.
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets 7/31/00
[PIE CHART OMITTED]
<TABLE>
<S> <C>
South Africa ................................................. 35.4%
Canada ....................................................... 20.1%
United States ................................................ 20.1%
Australia .................................................... 6.7%
Other ........................................................ 11.9%
Short-Term Investments & Other Net Assets .................... 5.8%
</TABLE>
In August 1999, the price of gold fell to a 20-year low of $252.55 per ounce.
Although it shot up on the news that 15 European central banks agreed to limit
their sales, it pulled back once again over the following months and closed the
period 8.32% higher than it had been at the beginning of the reporting period.
In this environment, gold mining companies' stock prices generally trended
downward, as it is difficult for these companies to profitably grow their
businesses with gold below $300 per ounce. Platinum and palladium were up
strongly for the period, with palladium reaching an all time high of $815.50 in
July and platinum continuing to appreciate in value.
Within this environment, Franklin Gold and Precious Metals Fund - Class A posted
a -4.42% 12-month cumulative total return for the reporting period, as discussed
in the Performance Summary on page 8. The Standard and Poor's(R) 500 Composite
Index (S&P 500(R)) and the Financial Times Gold Mine Index returned 8.98% and
-13.73%, respectively, during that time.(1)
1. Sources: Standard & Poor's Micropal; Financial Times. The S&P 500 Composite
Index consists of 500 domestic stocks spread across all major industry groups.
The index serves as a standard for measuring large-cap U.S. stock market
performance. Since some industries are characterized by companies of relatively
small stock capitalization, the index is not composed of the 500 largest
companies on the New York Stock Exchange. The Financial Times Gold Mine Index is
compiled by Financial Times Ltd., Goldman Sachs & Co., and Wood Mackenzie & Co.,
Ltd. in conjunction with the Institute of Actuaries and the Faculty of
Actuaries. Indexes are unmanaged and include reinvested dividends. One cannot
invest directly in an index, nor is an index representative of the Fund's
portfolio.
On July 31, the Fund was geographically diversified across all of the world's
major gold and precious metals-producing regions. Throughout the reporting
period, we focused on quality gold and precious metals companies with solid
production profiles, low costs, sound balance sheets and strong management
teams. We invested in companies with the ability to add low-cost reserves
through exploration or acquisition and growth prospects that are not dependent
on improving prices. In our opinion, companies with solid assets and healthy
balance sheets are more capable of lowering their production costs through
rationalization, restructuring and consolidation in difficult times. And when
pricing improves, these efforts enhance earnings.
This strategy is clearly demonstrated by the Fund's top holdings -- Anglo
American Platinum, Barrick Gold, Impala Platinum and Newmont Mining -- all of
which are large-cap, low-cost producers with established production histories
and solid management. The shares of companies related to platinum and palladium,
such as Impala Platinum and Anglo American Platinum, were solid performers over
the past twelve months.
TOP 10 HOLDINGS
7/31/00
<TABLE>
<CAPTION>
COMPANY, % OF TOTAL
COUNTRY NET ASSETS
--------------------------------------------------------------------------------
<S> <C>
Anglo American Platinum Corp. Ltd., ADR, South Africa 9.8%
Barrick Gold Corp., Canada 9.4%
Impala Platinum Holdings Ltd., South Africa 8.7%
Newmont Mining Corp., United States 8.1%
Stillwater Mining Co., United States 7.0%
AngloGold Ltd., South Africa 6.7%
De Beers Consolidated Mines AG, ADR, South Africa 4.8%
Compania de Minas Buenaventura SA, ADR, Peru 4.6%
Franco-Nevada Mining Corp. Ltd., Canada 4.3%
Placer Dome Inc., Canada 4.3%
</TABLE>
INDUSTRY BREAKDOWN
Based On Total Net Assets 7/31/00
[BAR GRAPH]
<TABLE>
<S> <C>
Long-Life gold Mines ......................................... 43.9%
Platinum ..................................................... 25.6%
Mining Finance Companies ..................................... 11.1%
Gold & Diversified Resources ................................. 7.1%
Medium-Life Gold Mines ....................................... 6.5%
Short-Term Investments & Other Net Assets .................... 5.8%
</TABLE>
During the latter part of the fiscal year, consolidation affected many of the
Fund's holdings. Franco Nevada announced its intentions to merge with Gold
Fields of South Africa. The deal is still awaiting government and shareholder
approval, but, if completed, would in our opinion create one the world's top
five precious metals companies. Newmont Mining announced plans to merge with
Battle Mountain Gold, supporting their position as one of the world's premier,
gold-producing companies. AngloGold has also been an active player in the
consolidation game, acquiring Acacia Resources in late 1999 and, most recently,
entering an agreement with Ashanti Gold Fields for a 50% stake in the Geita
project located in Tanzania.
Looking forward, we are optimistic about gold's prospects, as the supply and
demand fundamentals appear to be improving. Increased discipline from the
world's central banks should help narrow the gap between supply and demand, and
an improving global economy should contribute to robust jewelry sales. However,
improved gold prices may still take some time, as there is still virtually no
sign of inflation or weakness in the dollar, creating limited need for the
financial stability that gold provides as a hedge against uncertainty.
Nonetheless, in our opinion, the lofty valuations of many stocks, and the
possibility of future inflation, validate a philosophy of portfolio
diversification including gold and precious metals.
We appreciate your participation in Franklin Gold and Precious Metals 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 and Precious Metals Fund
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This discussion reflects our views, opinions and portfolio holdings as of July
31, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change depending
on market and economic conditions. Although historical performance is no
guarantee of future results, these insights may help you understand our
investment and management philosophy.
--------------------------------------------------------------------------------
THE PRICE OF GOLD
[GRAPHIC "SPECIAL UPDATE"]
Our reports on Franklin Gold and Precious Metals Fund often refer to the price
of gold bullion and its affects 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, often outperforming
traditional investments. However, in times of stable economic growth,
traditional equity and debt 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 portability and its value as a global currency.
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 used in jewelry. An increase in worldwide demand for jewelry could lead to an
increase in the price of gold bullion, while economic weakness such as recession
may result in lower demand for jewelry. Industrial consumption (electronics) and
investor hoarding also affect demand, and a weaker U.S. dollar could increase
demand for gold bullion in other countries.
During the past six months, many of these factors influenced the price of gold,
which the following graph illustrates:
PRICE OF GOLD
Dollars Per Troy Ounce
7/31/99 - 7/31/00
This line chart shows the price of gold stated in dollars per troy ounce from
7/31/99-7/31/00.
[LINE GRAPH]
<TABLE>
<CAPTION>
DATE PRICE PER TROY OUNCE
---- --------------------
<S> <C>
31-Jul-99 $255.95
02-Aug-99 $255.15
03-Aug-99 $256.25
04-Aug-99 $256.15
05-Aug-99 $255.75
06-Aug-99 $256.15
09-Aug-99 $257.25
10-Aug-99 $257.55
11-Aug-99 $258.95
12-Aug-99 $260.75
13-Aug-99 $260.65
16-Aug-99 $260.05
17-Aug-99 $261.50
18-Aug-99 $259.65
19-Aug-99 $258.50
20-Aug-99 $257.40
23-Aug-99 $254.25
24-Aug-99 $253.25
25-Aug-99 $252.55
26-Aug-99 $252.75
27-Aug-99 $253.75
30-Aug-99 $253.95
31-Aug-99 $255.68
01-Sep-99 $253.85
02-Sep-99 $255.45
03-Sep-99 $254.25
06-Sep-99 $254.70
07-Sep-99 $255.85
08-Sep-99 $256.15
09-Sep-99 $257.25
10-Sep-99 $256.55
13-Sep-99 $256.45
14-Sep-99 $257.25
15-Sep-99 $256.55
16-Sep-99 $256.35
17-Sep-99 $255.25
20-Sep-99 $255.00
21-Sep-99 $260.80
22-Sep-99 $264.55
23-Sep-99 $266.25
24-Sep-99 $268.75
27-Sep-99 $282.78
28-Sep-99 $309.00
29-Sep-99 $301.75
30-Sep-99 $298.75
01-Oct-99 $309.00
04-Oct-99 $317.35
05-Oct-99 $325.50
06-Oct-99 $324.50
07-Oct-99 $322.80
08-Oct-99 $320.15
11-Oct-99 $318.00
12-Oct-99 $318.50
13-Oct-99 $322.00
14-Oct-99 $313.50
15-Oct-99 $315.15
18-Oct-99 $311.50
19-Oct-99 $308.50
20-Oct-99 $305.55
21-Oct-99 $304.95
22-Oct-99 $302.40
25-Oct-99 $298.00
26-Oct-99 $288.75
27-Oct-99 $293.85
28-Oct-99 $299.00
29-Oct-99 $299.20
01-Nov-99 $290.25
02-Nov-99 $291.50
03-Nov-99 $292.40
04-Nov-99 $293.00
05-Nov-99 $290.50
08-Nov-99 $289.75
09-Nov-99 $292.80
10-Nov-99 $298.25
11-Nov-99 $294.00
12-Nov-99 $291.30
15-Nov-99 $291.50
16-Nov-99 $294.13
17-Nov-99 $294.35
18-Nov-99 $294.25
19-Nov-99 $295.00
22-Nov-99 $294.50
23-Nov-99 $297.90
24-Nov-99 $298.25
25-Nov-99 $298.25
26-Nov-99 $297.12
29-Nov-99 $291.00
30-Nov-99 $290.70
01-Dec-99 $289.50
02-Dec-99 $285.00
03-Dec-99 $279.80
06-Dec-99 $276.10
07-Dec-99 $285.75
08-Dec-99 $281.95
09-Dec-99 $277.88
10-Dec-99 $278.95
13-Dec-99 $280.28
14-Dec-99 $279.95
15-Dec-99 $282.78
16-Dec-99 $281.95
17-Dec-99 $283.60
20-Dec-99 $284.15
21-Dec-99 $287.48
22-Dec-99 $287.05
23-Dec-99 $286.95
24-Dec-99 $287.63
27-Dec-99 $287.75
28-Dec-99 $289.55
29-Dec-99 $290.45
30-Dec-99 $288.05
31-Dec-99 $288.00
03-Jan-00 $289.00
04-Jan-00 $282.25
05-Jan-00 $280.00
06-Jan-00 $281.10
07-Jan-00 $281.75
10-Jan-00 $281.48
11-Jan-00 $283.25
12-Jan-00 $282.35
13-Jan-00 $284.25
14-Jan-00 $284.20
17-Jan-00 $285.50
18-Jan-00 $288.65
19-Jan-00 $289.63
20-Jan-00 $288.50
21-Jan-00 $289.10
24-Jan-00 $287.60
25-Jan-00 $287.05
26-Jan-00 $286.00
27-Jan-00 $286.85
28-Jan-00 $283.25
31-Jan-00 $283.50
01-Feb-00 $282.63
02-Feb-00 $284.75
03-Feb-00 $287.45
04-Feb-00 $310.30
07-Feb-00 $302.75
08-Feb-00 $301.75
09-Feb-00 $306.75
10-Feb-00 $315.00
11-Feb-00 $310.95
14-Feb-00 $308.15
15-Feb-00 $301.75
16-Feb-00 $302.50
17-Feb-00 $300.50
18-Feb-00 $305.00
21-Feb-00 $305.50
22-Feb-00 $304.40
23-Feb-00 $300.00
24-Feb-00 $298.50
25-Feb-00 $292.60
28-Feb-00 $291.75
29-Feb-00 $292.20
01-Mar-00 $289.75
02-Mar-00 $288.50
03-Mar-00 $288.80
06-Mar-00 $287.63
07-Mar-00 $293.25
08-Mar-00 $288.13
09-Mar-00 $291.20
10-Mar-00 $289.00
13-Mar-00 $290.70
14-Mar-00 $288.88
15-Mar-00 $288.85
16-Mar-00 $286.50
17-Mar-00 $284.60
20-Mar-00 $286.88
21-Mar-00 $289.63
22-Mar-00 $287.88
23-Mar-00 $286.28
24-Mar-00 $285.00
27-Mar-00 $280.30
28-Mar-00 $279.40
29-Mar-00 $276.40
30-Mar-00 $276.75
31-Mar-00 $279.08
03-Apr-00 $278.20
04-Apr-00 $284.45
05-Apr-00 $281.50
06-Apr-00 $280.50
07-Apr-00 $280.00
10-Apr-00 $282.00
11-Apr-00 $281.80
12-Apr-00 $282.05
13-Apr-00 $281.60
14-Apr-00 $282.60
17-Apr-00 $281.38
18-Apr-00 $281.30
19-Apr-00 $280.70
20-Apr-00 $280.00
21-Apr-00 $280.00
24-Apr-00 $279.80
25-Apr-00 $278.40
26-Apr-00 $275.88
27-Apr-00 $277.05
28-Apr-00 $273.55
01-May-00 $273.35
02-May-00 $274.95
03-May-00 $278.25
04-May-00 $279.95
05-May-00 $278.95
08-May-00 $276.73
09-May-00 $277.25
10-May-00 $277.75
11-May-00 $275.95
12-May-00 $276.15
15-May-00 $275.45
16-May-00 $275.65
17-May-00 $273.35
18-May-00 $273.35
19-May-00 $274.25
22-May-00 $275.65
23-May-00 $274.25
24-May-00 $273.55
25-May-00 $270.30
26-May-00 $272.25
29-May-00 $272.15
30-May-00 $273.20
31-May-00 $272.10
01-Jun-00 $272.80
02-Jun-00 $281.15
05-Jun-00 $285.45
06-Jun-00 $289.00
07-Jun-00 $286.70
08-Jun-00 $284.45
09-Jun-00 $283.85
12-Jun-00 $286.80
13-Jun-00 $285.75
14-Jun-00 $291.75
15-Jun-00 $289.85
16-Jun-00 $289.25
19-Jun-00 $286.25
20-Jun-00 $286.15
21-Jun-00 $286.15
22-Jun-00 $285.65
23-Jun-00 $283.15
26-Jun-00 $284.00
27-Jun-00 $286.05
28-Jun-00 $292.65
29-Jun-00 $289.25
30-Jun-00 $289.53
03-Jul-00 $288.35
04-Jul-00 $288.05
05-Jul-00 $284.25
06-Jul-00 $283.65
07-Jul-00 $283.65
10-Jul-00 $283.95
11-Jul-00 $282.55
12-Jul-00 $280.60
13-Jul-00 $280.25
14-Jul-00 $281.30
17-Jul-00 $283.60
18-Jul-00 $282.65
19-Jul-00 $279.15
20-Jul-00 $280.25
21-Jul-00 $280.35
24-Jul-00 $279.25
25-Jul-00 $279.05
26-Jul-00 $279.75
27-Jul-00 $278.50
28-Jul-00 $278.38
31-Jul-00 $277.25
</TABLE>
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CLASS A: Subject to the current, maximum 5.75% initial sales charge. Prior to
8/3/98, Fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective 5/1/94, the Fund implemented a Rule 12b-1
plan, which affects subsequent performance. Past expense reductions by the
Fund's manager increased the Fund's 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: 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.
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ONE-YEAR PERFORMANCE SUMMARY
AS OF 7/31/00
One-year total return represents the change in value of an investment for the
period indicated and does not include sales charges. 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 operating expenses for
each class. Past distributions are not indicative of future trends. All total
returns include reinvested distributions at net asset value.
<TABLE>
<S> <C> <C>
CLASS A
One-Year Total Return -4.42%
Net Asset Value (NAV) $7.90 (7/31/00) $8.30 (7/31/99)
Change in NAV -$0.40
Distributions (8/1/99 - 7/31/00) Dividend Income $0.0388
CLASS B
One-Year Total Return -4.90%
Net Asset Value (NAV) $7.82 (7/31/00) $8.26 (7/31/99)
Change in NAV -$0.44
Distributions (8/1/99 - 7/31/00) Dividend Income $0.0413
CLASS C
One-Year Total Return -4.85%
Net Asset Value (NAV) $7.83 (7/31/00) $8.23 (7/31/99)
Change in NAV -$0.40
Distributions (8/1/99 - 7/31/00) Dividend Income $0.001
ADVISOR CLASS
One-Year Total Return -4.21%
Net Asset Value (NAV) $8.09 (7/31/00) $8.49 (7/31/99)
Change in NAV -$0.40
Distributions (8/1/99 - 7/31/00) Dividend Income $0.0504
</TABLE>
Past performance does not guarantee future results.
ADDITIONAL PERFORMANCE
AS OF 6/30/00
<TABLE>
<CAPTION>
INCEPTION
CLASS A 1-YEAR 5-YEAR 10-YEAR (5/19/69)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) -1.46% -34.54% -15.74% +152.98%
Average Annual Total Return(2) -7.10% -9.20% -2.28% +2.83%
Value of $10,000 Investment(3) $9,290 $6,172 $7,944 $23,835
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS B 1-YEAR (1/1/99)
-----------------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return(1) -2.14% +8.12%
Average Annual Total Return(2) -6.04% +2.74%
Value of $10,000 Investment(3) $9,396 $10,412
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 1-YEAR 5-YEAR (5/1/95)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) -2.11% -36.84% -37.63%
Average Annual Total Return(2) -4.10% -8.97% -8.91%
Value of $10,000 Investment(3) $9,590 $6,252 $6,175
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
ADVISOR CLASS(4) 1-YEAR 5-YEAR 10-YEAR (5/19/69)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) -1.19% -31.66% -12.04% +164.09%
Average Annual Total Return(2) -1.19% -7.33% -1.27% +3.17%
Value of $10,000 Investment(3) $9,881 $6,834 $8,796 $26,409
</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.
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. Effective 1/1/97, the Fund began offering Advisor Class shares, which do not
have sales charges nor Rule 12b-1 plans. Performance quotations for this class
reflect the following methods of calculation: (a) For periods prior to 1/1/97, a
restated figure is used based upon the Fund's Class A performance, excluding the
effect of Class A's maximum initial sales charge and including the effect of the
Class A Rule 12b-1 fees; and (b) for periods after 1/1/97, an actual Advisor
Class figure is used reflecting a deduction of all charges and fees applicable
to that class. Since 1/2/97 (commencement of sales), the cumulative and average
annual total returns of Advisor Class shares were -32.21% and -10.53%
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.
--------------------------------------------------------------------------------
For updated performance figures, see "Prices and Performance" at
franklintempleton.com, or call Franklin Templeton at 1-800/342-5236.
Past performance does not guarantee future results.
AVERAGE ANNUAL TOTAL RETURN 7/31/00
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------
<S> <C>
1-Year -9.95%
5-Year -10.81%
10-Year -3.53%
Since Inception (5/19/69) +2.62%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN 7/31/00
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------
<S> <C>
1-Year -8.69%
Since Inception (1/1/99) -1.43%
</TABLE>
TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown. It includes the current, applicable, maximum sales charge(s), Fund
expenses, account fees and reinvested distributions. The unmanaged indexes
differ from the Fund in composition, do not pay management fees or expenses and
include reinvested dividends. One cannot invest directly in an index.
CLASS A (8/1/90 - 7/31/00)
The following line graph compares the performance of the Franklin Gold and
Precious Metals Fund Class A shares to that of the S&P 500 and the Financial
Times Gold Mines Index based on a $10,000 investment from 8/1/90 to 7/31/00.*
[LINE GRAPH]
<TABLE>
<CAPTION>
FRANKLIN GOLD AND
PRECIOUS METALS FINANCIAL TIMES
DATE FUND - CLASS A S&P 500 GOLD MINES INDEX
---- ----------------- ------- ----------------
<S> <C> <C> <C>
08/01/1990 $ 9,424 $10,000 $10,000
08/31/1990 $ 9,150 $ 9,096 $10,481
09/30/1990 $ 8,875 $ 8,653 $10,843
10/31/1990 $ 8,018 $ 8,616 $ 9,271
11/30/1990 $ 7,785 $ 9,172 $ 8,655
12/31/1990 $ 8,205 $ 9,428 $ 8,352
01/31/1991 $ 7,460 $ 9,839 $ 7,358
02/28/1991 $ 8,255 $10,543 $ 7,439
03/31/1991 $ 8,099 $10,798 $ 7,477
04/30/1991 $ 8,149 $10,824 $ 7,677
05/31/1991 $ 8,454 $11,290 $ 9,562
06/30/1991 $ 8,850 $10,773 $11,178
07/31/1991 $ 9,057 $11,275 $10,049
08/31/1991 $ 8,180 $11,543 $ 8,077
09/30/1991 $ 8,408 $11,350 $ 8,406
10/31/1991 $ 8,971 $11,502 $ 8,882
11/30/1991 $ 9,185 $11,038 $ 9,260
12/31/1991 $ 8,689 $12,301 $ 7,569
01/31/1992 $ 8,726 $12,072 $ 7,796
02/29/1992 $ 8,414 $12,228 $ 7,034
03/31/1992 $ 8,181 $11,990 $ 6,532
04/30/1992 $ 8,014 $12,342 $ 5,829
05/31/1992 $ 8,508 $12,403 $ 5,851
06/30/1992 $ 8,533 $12,218 $ 4,976
07/31/1992 $ 8,445 $12,718 $ 4,911
08/31/1992 $ 8,048 $12,457 $ 4,290
09/30/1992 $ 7,784 $12,603 $ 4,009
10/31/1992 $ 7,152 $12,645 $ 3,955
11/30/1992 $ 6,690 $13,075 $ 3,803
12/31/1992 $ 6,922 $13,236 $ 3,452
01/31/1993 $ 6,952 $13,347 $ 4,036
02/28/1993 $ 7,509 $13,529 $ 6,352
03/31/1993 $ 8,370 $13,814 $ 6,870
04/30/1993 $ 9,366 $13,480 $ 8,085
05/31/1993 $10,532 $13,840 $ 9,952
06/30/1993 $10,654 $13,880 $10,287
07/31/1993 $11,711 $13,825 $10,937
08/31/1993 $10,519 $14,349 $10,158
09/30/1993 $ 9,590 $14,238 $ 9,062
10/31/1993 $10,722 $14,533 $10,659
11/30/1993 $10,527 $14,395 $10,425
12/31/1993 $12,025 $14,569 $12,022
01/31/1994 $11,814 $15,064 $11,694
02/28/1994 $11,270 $14,656 $10,930
03/31/1994 $11,391 $14,017 $10,996
04/30/1994 $10,885 $14,196 $10,245
05/31/1994 $11,119 $14,429 $10,559
06/30/1994 $11,017 $14,076 $10,318
07/31/1994 $11,298 $14,537 $10,597
08/31/1994 $11,875 $15,133 $11,250
09/30/1994 $12,839 $14,764 $12,557
10/31/1994 $12,224 $15,096 $11,647
11/30/1994 $10,987 $14,547 $10,207
12/31/1994 $11,456 $14,762 $10,674
01/31/1995 $ 9,747 $15,145 $ 8,849
02/28/1995 $10,296 $15,735 $ 9,349
03/31/1995 $11,311 $16,199 $10,426
04/30/1995 $11,403 $16,676 $10,423
05/31/1995 $11,258 $17,343 $10,271
06/30/1995 $11,335 $17,745 $10,413
07/31/1995 $11,652 $18,334 $10,535
08/31/1995 $11,668 $18,380 $10,657
09/30/1995 $11,722 $19,156 $10,728
10/31/1995 $10,415 $19,087 $ 9,308
11/30/1995 $11,181 $19,925 $10,196
12/31/1995 $11,310 $20,309 $10,337
01/31/1996 $13,113 $21,000 $12,457
02/29/1996 $13,145 $21,195 $12,643
03/31/1996 $13,185 $21,398 $12,610
04/30/1996 $13,346 $21,713 $12,570
05/31/1996 $13,853 $22,273 $12,841
06/30/1996 $12,111 $22,358 $10,895
07/31/1996 $11,844 $21,370 $10,782
08/31/1996 $12,313 $21,820 $10,975
09/30/1996 $11,577 $23,049 $10,005
10/31/1996 $11,610 $23,685 $10,145
11/30/1996 $11,521 $25,476 $10,131
12/31/1996 $11,427 $24,971 $ 9,852
01/31/1997 $10,920 $26,532 $ 9,175
02/28/1997 $12,236 $26,739 $10,305
03/31/1997 $10,894 $25,640 $ 8,843
04/30/1997 $10,206 $27,171 $ 7,934
05/31/1997 $10,730 $28,825 $ 8,481
06/30/1997 $10,068 $30,117 $ 7,525
07/31/1997 $ 9,895 $32,514 $ 7,640
08/31/1997 $ 9,757 $30,693 $ 7,628
09/30/1997 $10,198 $32,375 $ 8,239
10/31/1997 $ 8,589 $31,294 $ 6,708
11/30/1997 $ 7,171 $32,743 $ 5,282
12/31/1997 $ 7,347 $33,306 $ 5,717
01/31/1998 $ 7,756 $33,676 $ 6,039
02/28/1998 $ 7,721 $36,104 $ 5,819
03/31/1998 $ 8,182 $37,952 $ 6,186
04/30/1998 $ 8,747 $38,336 $ 7,015
05/31/1998 $ 7,539 $37,676 $ 5,873
06/30/1998 $ 6,968 $39,206 $ 5,369
07/31/1998 $ 6,548 $38,786 $ 4,866
08/31/1998 $ 5,235 $33,178 $ 3,790
09/30/1998 $ 7,318 $35,305 $ 5,948
10/31/1998 $ 7,336 $38,175 $ 6,014
11/30/1998 $ 7,196 $40,488 $ 5,700
12/31/1998 $ 6,792 $42,820 $ 5,049
01/31/1999 $ 6,774 $44,610 $ 5,036
02/28/1999 $ 6,633 $43,223 $ 4,708
03/31/1999 $ 6,756 $44,952 $ 4,695
04/30/1999 $ 8,006 $46,691 $ 5,500
05/31/1999 $ 6,985 $45,589 $ 4,475
06/30/1999 $ 7,531 $48,120 $ 4,781
07/31/1999 $ 7,302 $46,618 $ 4,563
08/31/1999 $ 7,601 $46,385 $ 4,851
09/30/1999 $ 8,973 $45,114 $ 6,101
10/31/1999 $ 8,111 $47,970 $ 5,293
11/30/1999 $ 8,243 $48,944 $ 5,057
12/31/1999 $ 8,516 $51,827 $ 5,015
01/31/2000 $ 7,933 $49,225 $ 4,426
02/29/2000 $ 7,588 $48,295 $ 4,565
03/31/2000 $ 7,368 $53,018 $ 4,223
04/30/2000 $ 6,855 $51,422 $ 4,086
05/31/2000 $ 7,094 $50,368 $ 4,209
06/30/2000 $ 7,421 $51,607 $ 4,362
07/31/2000 $ 6,979 $50,802 $ 3,937
</TABLE>
*Source: Standard and Poor's Micropal.
CLASS B (1/1/99 - 7/31/00)
The following line graph compares the performance of the Franklin Gold and
Precious Metals Fund Class B shares to that of the S&P 500 and the Financial
Times Gold Mines Index based on a $10,000 investment from 1/1/99 to 7/31/00.*
[LINE GRAPH]
<TABLE>
<CAPTION>
FRANKLIN GOLD AND
PRECIOUS METALS FINANCIAL TIMES
DATE FUND - CLASS B S&P 500 GOLD MINES INDEX
---- ----------------- ------- ----------------
<S> <C> <C> <C>
01/01/1999 $10,000 $10,000 $10,000
01/31/1999 $ 9,961 $10,418 $ 9,975
02/28/1999 $ 9,754 $10,094 $ 9,325
03/31/1999 $ 9,935 $10,498 $ 9,299
04/30/1999 $11,762 $10,904 $10,894
05/31/1999 $10,259 $10,647 $ 8,864
06/30/1999 $11,049 $11,238 $ 9,471
07/31/1999 $10,699 $10,887 $ 9,038
08/31/1999 $11,140 $10,833 $ 9,610
09/30/1999 $13,161 $10,536 $12,085
10/31/1999 $11,878 $11,203 $10,484
11/30/1999 $12,073 $11,430 $10,017
12/31/1999 $12,452 $12,103 $ 9,934
01/31/2000 $11,606 $11,496 $ 8,766
02/29/2000 $11,099 $11,278 $ 9,043
03/31/2000 $10,747 $12,381 $ 8,365
04/30/2000 $10,006 $12,009 $ 8,093
05/31/2000 $10,344 $11,763 $ 8,338
06/30/2000 $10,812 $12,052 $ 8,641
07/31/2000 $ 9,775 $11,864 $ 7,798
</TABLE>
*Source: Standard and Poor's Micropal.
Past performance does not guarantee future results.
CLASS C (5/1/95 - 7/31/00)
The following line graph compares the performance of the Franklin Gold and
Precious Metals Fund Class C shares to that of the S&P 500 and the Financial
Times Gold Mines Index based on a $10,000 investment from 5/1/95 to 7/31/00.*
[LINE GRAPH]
<TABLE>
<CAPTION>
FRANKLIN GOLD AND
PRECIOUS METALS FINANCIAL TIMES
DATE FUND - CLASS C S&P 500 GOLD MINES INDEX
---- ----------------- ------- ----------------
<S> <C> <C> <C>
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
08/31/1999 $ 6,360 $27,816 $ 4,654
09/30/1999 $ 7,503 $27,054 $ 5,853
10/31/1999 $ 6,776 $28,766 $ 5,078
11/30/1999 $ 6,887 $29,350 $ 4,852
12/31/1999 $ 7,103 $31,079 $ 4,811
01/31/2000 $ 6,621 $29,519 $ 4,246
02/29/2000 $ 6,331 $28,961 $ 4,380
03/31/2000 $ 6,138 $31,794 $ 4,052
04/30/2000 $ 5,708 $30,837 $ 3,920
05/31/2000 $ 5,908 $30,204 $ 4,038
06/30/2000 $ 6,175 $30,947 $ 4,185
07/31/2000 $ 5,812 $30,465 $ 3,777
</TABLE>
*Source: Standard and Poor's Micropal.
ADVISOR CLASS** (8/1/90 - 7/31/00)
The following line graph compares the performance of the Franklin Gold and
Precious Metals Fund Advisor Class shares to that of the S&P 500 and the
Financial Times Gold Mines Index based on a $10,000 investment from 8/1/90 to
7/31/00.*,**
[LINE GRAPH]
<TABLE>
<CAPTION>
FRANKLIN GOLD AND
PRECIOUS METALS FUND FINANCIAL TIMES
DATE ADVISOR CLASS S&P 500 GOLD MINES INDEX
---- ----------------- ------- ----------------
<S> <C> <C> <C>
08/01/1990 $10,000 $10,000 $10,000
08/31/1990 $ 9,709 $ 9,096 $10,481
09/30/1990 $ 9,418 $ 8,653 $10,843
10/31/1990 $ 8,508 $ 8,616 $ 9,271
11/30/1990 $ 8,260 $ 9,172 $ 8,655
12/31/1990 $ 8,707 $ 9,428 $ 8,352
01/31/1991 $ 7,917 $ 9,839 $ 7,358
02/28/1991 $ 8,761 $10,543 $ 7,439
03/31/1991 $ 8,595 $10,798 $ 7,477
04/30/1991 $ 8,647 $10,824 $ 7,677
05/31/1991 $ 8,972 $11,290 $ 9,562
06/30/1991 $ 9,392 $10,773 $11,178
07/31/1991 $ 9,610 $11,275 $10,049
08/31/1991 $ 8,680 $11,543 $ 8,077
09/30/1991 $ 8,922 $11,350 $ 8,406
10/31/1991 $ 9,519 $11,502 $ 8,882
11/30/1991 $ 9,746 $11,038 $ 9,260
12/31/1991 $ 9,220 $12,301 $ 7,569
01/31/1992 $ 9,259 $12,072 $ 7,796
02/29/1992 $ 8,928 $12,228 $ 7,034
03/31/1992 $ 8,681 $11,990 $ 6,532
04/30/1992 $ 8,504 $12,342 $ 5,829
05/31/1992 $ 9,028 $12,403 $ 5,851
06/30/1992 $ 9,054 $12,218 $ 4,976
07/31/1992 $ 8,961 $12,718 $ 4,911
08/31/1992 $ 8,540 $12,457 $ 4,290
09/30/1992 $ 8,260 $12,603 $ 4,009
10/31/1992 $ 7,590 $12,645 $ 3,955
11/30/1992 $ 7,099 $13,075 $ 3,803
12/31/1992 $ 7,345 $13,236 $ 3,452
01/31/1993 $ 7,377 $13,347 $ 4,036
02/28/1993 $ 7,968 $13,529 $ 6,352
03/31/1993 $ 8,881 $13,814 $ 6,870
04/30/1993 $ 9,937 $13,480 $ 8,085
05/31/1993 $11,175 $13,840 $ 9,952
06/30/1993 $11,304 $13,880 $10,287
07/31/1993 $12,426 $13,825 $10,937
08/31/1993 $11,162 $14,349 $10,158
09/30/1993 $10,176 $14,238 $ 9,062
10/31/1993 $11,377 $14,533 $10,659
11/30/1993 $11,170 $14,395 $10,425
12/31/1993 $12,760 $14,569 $12,022
01/31/1994 $12,535 $15,064 $11,694
02/28/1994 $11,958 $14,656 $10,930
03/31/1994 $12,086 $14,017 $10,996
04/30/1994 $11,550 $14,196 $10,245
05/31/1994 $11,798 $14,429 $10,559
06/30/1994 $11,691 $14,076 $10,318
07/31/1994 $11,989 $14,537 $10,597
08/31/1994 $12,601 $15,133 $11,250
09/30/1994 $13,625 $14,764 $12,557
10/31/1994 $12,972 $15,096 $11,647
11/30/1994 $11,659 $14,547 $10,207
12/31/1994 $12,157 $14,762 $10,674
01/31/1995 $10,343 $15,145 $ 8,849
02/28/1995 $10,927 $15,735 $ 9,349
03/31/1995 $12,004 $16,199 $10,426
04/30/1995 $12,101 $16,676 $10,423
05/31/1995 $11,948 $17,343 $10,271
06/30/1995 $12,030 $17,745 $10,413
07/31/1995 $12,367 $18,334 $10,535
08/31/1995 $12,383 $18,380 $10,657
09/30/1995 $12,440 $19,156 $10,728
10/31/1995 $11,053 $19,087 $ 9,308
11/30/1995 $11,865 $19,925 $10,196
12/31/1995 $12,002 $20,309 $10,337
01/31/1996 $13,915 $21,000 $12,457
02/29/1996 $13,950 $21,195 $12,643
03/31/1996 $13,993 $21,398 $12,610
04/30/1996 $14,164 $21,713 $12,570
05/31/1996 $14,702 $22,273 $12,841
06/30/1996 $12,852 $22,358 $10,895
07/31/1996 $12,570 $21,370 $10,782
08/31/1996 $13,067 $21,820 $10,975
09/30/1996 $12,286 $23,049 $10,005
10/31/1996 $12,320 $23,685 $10,145
11/30/1996 $12,225 $25,476 $10,131
12/31/1996 $12,126 $24,971 $ 9,852
01/31/1997 $11,738 $26,532 $ 9,175
02/28/1997 $13,153 $26,739 $10,305
03/31/1997 $11,711 $25,640 $ 8,843
04/30/1997 $10,972 $27,171 $ 7,934
05/31/1997 $11,545 $28,825 $ 8,481
06/30/1997 $10,820 $30,117 $ 7,525
07/31/1997 $10,643 $32,514 $ 7,640
08/31/1997 $10,494 $30,693 $ 7,628
09/30/1997 $10,977 $32,375 $ 8,239
10/31/1997 $ 9,226 $31,294 $ 6,708
11/30/1997 $ 7,727 $32,743 $ 5,282
12/31/1997 $ 7,911 $33,306 $ 5,717
01/31/1998 $ 8,361 $33,676 $ 6,039
02/28/1998 $ 8,333 $36,104 $ 5,819
03/31/1998 $ 8,829 $37,952 $ 6,186
04/30/1998 $ 9,448 $38,336 $ 7,015
05/31/1998 $ 8,155 $37,676 $ 5,873
06/30/1998 $ 7,537 $39,206 $ 5,369
07/31/1998 $ 7,187 $38,786 $ 4,866
08/31/1998 $ 5,752 $33,178 $ 3,790
09/30/1998 $ 8,047 $35,305 $ 5,948
10/31/1998 $ 8,075 $38,175 $ 6,014
11/30/1998 $ 7,914 $40,488 $ 5,700
12/31/1998 $ 7,481 $42,820 $ 5,049
01/31/1999 $ 7,463 $44,610 $ 5,036
02/28/1999 $ 7,310 $43,223 $ 4,708
03/31/1999 $ 7,453 $44,952 $ 4,695
04/30/1999 $ 8,831 $46,691 $ 5,500
05/31/1999 $ 7,709 $45,589 $ 4,475
06/30/1999 $ 8,318 $48,120 $ 4,781
07/31/1999 $ 8,071 $46,618 $ 4,563
08/31/1999 $ 8,413 $46,385 $ 4,851
09/30/1999 $ 9,934 $45,114 $ 6,101
10/31/1999 $ 8,973 $47,970 $ 5,293
11/30/1999 $ 9,135 $48,944 $ 5,057
12/31/1999 $ 9,423 $51,827 $ 5,015
01/31/2000 $ 8,782 $49,225 $ 4,426
02/29/2000 $ 8,400 $48,295 $ 4,565
03/31/2000 $ 8,151 $53,018 $ 4,223
04/30/2000 $ 7,587 $51,422 $ 4,086
05/31/2000 $ 7,855 $50,368 $ 4,209
06/30/2000 $ 8,218 $51,607 $ 4,362
07/31/2000 $ 7,732 $50,802 $ 3,937
</TABLE>
*Source: Standard and Poor's Micropal.
**Effective 1/1/97, the Fund began offering Advisor Class shares, which do not
have sales charges nor Rule 12b-1 plans. Performance quotations for this class
reflect the following methods of calculation: (a) For periods prior to 1/1/97, a
restated figure is used based upon the Fund's Class A performance, excluding the
effect of Class A's maximum initial sales charge and including the effect of the
Class A Rule 12b-1 fees; and (b) for periods after 1/1/97, an actual Advisor
Class figure is used reflecting a deduction of all charges and fees applicable
to that class.
AVERAGE ANNUAL TOTAL RETURN 7/31/00
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------
<S> <C>
1-Year -6.71%
5-Year -10.54%
Since Inception (5/1/95) -9.82%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN 7/31/00
<TABLE>
<CAPTION>
ADVISOR CLASS**
---------------------------------------------
<S> <C>
1-Year -4.21%
5-Year -8.96%
10-Year -2.54%
Since Inception (5/19/69) +2.96%
</TABLE>
*Sources: Standard and Poor's Micropal; Financial Times.
**Effective 1/1/97, the Fund began offering Advisor Class shares, which do not
have sales charges nor Rule 12b-1 plans. Performance quotations for this class
reflect the following methods of calculation: (a) For periods prior to 1/1/97, a
restated figure is used based upon the Fund's Class A performance, excluding the
effect of Class A's maximum initial sales charge and including the effect of the
Class A Rule 12b-1 fees; and (b) for periods after 1/1/97, an actual Advisor
Class figure is used reflecting a deduction of all charges and fees applicable
to that class.
Past performance does not guarantee future results.
FRANKLIN GOLD AND PRECIOUS METALS FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------
YEAR ENDED JULY 31,
------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 8.30 $ 7.48 $ 11.44 $ 14.65 $ 15.07
------------------------------------------------------------------------
Income from investment operations:
Net investment income(a).................... .10 .07 .10 .07 .21
Net realized and unrealized gains (losses).. (.46) .79 (3.96) (2.37) .01
------------------------------------------------------------------------
Total from investment operations ............ (.36) .86 (3.86) (2.30) .22
------------------------------------------------------------------------
Less distributions from:
Net investment income ...................... (.04) (.04) (.10) (.09) (.13)
Net realized gains ......................... -- -- -- (.82) (.51)
------------------------------------------------------------------------
Total distributions ......................... (.04) (.04) (.10) (.91) (.64)
------------------------------------------------------------------------
Net asset value, end of year ................ $ 7.90 $ 8.30 $ 7.48 $ 11.44 $ 14.65
========================================================================
Total return(b).............................. (4.42)% 11.51% (33.83)% (16.45)% 1.65%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $156,236 $205,889 $189,591 $291,544 $364,032
Ratios to average net assets:
Expenses ................................... 1.34% 1.31% 1.19% 1.05% .95%
Net investment income ...................... 1.17% .85% 1.05% .55% .99%
Portfolio turnover rate ..................... 3.53% 4.29% 6.09% 16.05% 28.74%
</TABLE>
(a) Based on average shares outstanding effective year ended July 31, 1999.
(b) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
FRANKLIN GOLD AND PRECIOUS METALS FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS B
------------------------
YEAR ENDED JULY 31,
------------------------
2000 1999(C)
------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 8.26 $ 7.72
------------------------
Income from investment operations:
Net investment income (loss)(a) ............ .01 (.04)
Net realized and unrealized gains (losses) . (.41) .58
------------------------
Total from investment operations ............ (.40) .54
Less distributions from net investment income (.04) --
------------------------
Net asset value, end of year ................ $ 7.82 $ 8.26
------------------------
Total return(b) ............................. (4.90)% 6.99%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $ 2,779 $ 1,217
Ratios to average net assets:
Expenses ................................... 2.10% 2.10%(d)
Net investment income ...................... .17% (.84)%(d)
Portfolio turnover rate ..................... 3.53% 4.29%
</TABLE>
(a) Based on average shares outstanding effective year ended July 31, 1999.
(b) Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
(c) For the period January 1, 1999 (effective date) to July 31, 1999.
(d) Annualized
FRANKLIN GOLD AND PRECIOUS METALS FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------------------------------
YEAR ENDED JULY 31,
----------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 8.23 $ 7.43 $ 11.37 $ 14.61 $ 15.05
----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss)(a) ............ .03 .01 .03 (.02) .12
Net realized and unrealized gains (losses) . (.43) .80 (3.93) (2.38) (.02)
----------------------------------------------------------------------------
Total from investment operations ............ (.40) .81 (3.90) (2.40) .10
----------------------------------------------------------------------------
Less distributions from:
Net investment income ...................... --(c) (.01) (.04) (.02) (.03)
Net realized gains ......................... -- -- -- (.82) (.51)
----------------------------------------------------------------------------
Total distributions ......................... -- (.01) (.04) (.84) (.54)
----------------------------------------------------------------------------
Net asset value, end of year ................ $ 7.83 $ 8.23 $ 7.43 $ 11.37 $ 14.61
============================================================================
Total return(b) ............................. (4.85)% 10.85% (34.35)% (17.18)% .81%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $ 20,721 $ 23,473 $ 20,353 $ 20,783 $ 12,977
Ratios to average net assets:
Expenses ................................... 2.10% 2.07% 1.96% 1.83% 1.74%
Net investment income (loss) ............... .36% .08% .25% (.16)% .16%
Portfolio turnover rate ..................... 3.53% 4.29% 6.09% 16.05% 28.74%
</TABLE>
(a) Based on average shares outstanding effective year ended July 31, 1999.
(b) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
(c) Includes distributions of net investment income in the amount of $.001.
FRANKLIN GOLD AND PRECIOUS METALS FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
ADVISOR CLASS
-----------------------------------------------------
YEAR ENDED JULY 31,
-----------------------------------------------------
2000 1999 1998 1997(C)
-----------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 8.49 $ 7.61 $ 11.43 $ 13.12
-----------------------------------------------------
Income from investment operations:
Net investment income(a) ................... .11 .08 .14 .07
Net realized and unrealized gains (losses) . (.46) .85 (3.84) (1.67)
-----------------------------------------------------
Total from investment operations ............ (.35) .93 (3.70) (1.60)
Less distributions from net investment income (.05) (.05) (.12) (.09)
-----------------------------------------------------
Net asset value, end of year ................ $ 8.09 $ 8.49 $ 7.61 $ 11.43
=====================================================
Total return(b) ............................. (4.21)% 12.30% (32.46)% (12.24)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $ 3,715 $ 3,204 $ 2,207 $ 3,211
Ratios to average net assets:
Expenses ................................... 1.10% 1.08% .96% .83%(d)
Net investment income ...................... 1.24% .98% 1.30% .80%(d)
Portfolio turnover rate ..................... 3.53% 4.29% 6.09% 16.05%
</TABLE>
(a) Based on average shares outstanding effective year ended July 31, 1999.
(b) Total return is not annualized for periods of less than one year.
(c) For the period January 2, 1997 (effective date) to July 31, 1997.
(d) Annualized
See notes to financial statements.
FRANKLIN GOLD AND PRECIOUS METALS FUND
STATEMENT OF INVESTMENTS, JULY 31, 2000
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 94.2%
GOLD & DIVERSIFIED RESOURCES 7.1%
(a)Freeport-McMoRan Copper & Gold Inc., A United States 308,011 $ 2,637,344
Orogen Minerals Ltd., GDR Australia 54,000 515,888
Rio Tinto PLC United Kingdom 477,401 7,643,163
Teck Corp., B Canada 382,100 2,301,730
------------
13,098,125
------------
LONG LIFE GOLD MINES 43.9%
AngloGold Ltd. South Africa 144,270 5,458,824
AngloGold Ltd. South Africa 91,265 3,612,846
AngloGold Ltd., ADR South Africa 158,822 3,146,661
(a)Ashanti Goldfields Co. Ltd., GDR Ghana 933,050 2,332,625
Barrick Gold Corp. Canada 1,082,249 17,248,343
Compania de Minas Buenaventura SA, ADR Peru 456,993 7,540,385
Compania de Minas Buenaventura SA, B Peru 100,593 837,237
Gold Fields Ltd. South Africa 774,999 2,705,038
Gold Fields Ltd., ADR South Africa 639,528 2,318,289
Harmony Gold Mining Co. Ltd. South Africa 773,000 3,969,369
Homestake Mining Co. United States 1,174,194 6,384,680
(a)Lihir Gold Ltd. Australia 1,300,622 527,141
(a)Lihir Gold Ltd., ADR, 144A Australia 50,000 407,813
Newmont Mining Corp. United States 837,745 14,869,974
Placer Dome Inc. Canada 933,820 7,937,470
(a)TVX Gold Inc. Canada 159,400 336,878
Western Areas Ltd. South Africa 357,979 771,285
Western Areas Ltd., ADR South Africa 23,523 47,046
------------
80,451,904
------------
MEDIUM LIFE GOLD MINES 6.5%
(a)Battle Mountain Canada Inc. Canada 583,600 1,036,987
(a)Newcrest Mining Ltd. Australia 1,365,050 3,300,552
Normandy Mining Ltd. Australia 4,352,451 2,494,862
Sons of Gwalia Ltd. Australia 1,575,500 5,163,121
------------
11,995,522
------------
MINING FINANCE COMPANIES 11.1%
Anglo American PLC United Kingdom 64,025 3,047,303
Anglo American PLC, ADR United Kingdom 10,000 470,000
De Beers Consolidated Mines AG, ADR South Africa 380,600 8,872,738
Franco-Nevada Mining Corp. Ltd. Canada 783,614 7,964,039
------------
20,354,080
------------
PLATINUM 25.6%
Anglo American Platinum Corp. Ltd., ADR South Africa 601,138 18,034,140
Impala Platinum Holdings Ltd. South Africa 225,000 8,577,277
Impala Platinum Holdings Ltd., ADR South Africa 192,800 7,422,800
(a)Stillwater Mining Co. United States 492,550 12,929,437
------------
46,963,654
------------
TOTAL LONG TERM INVESTMENTS (COST $221,956,613) 172,863,285
------------
</TABLE>
FRANKLIN GOLD AND PRECIOUS METALS FUND
STATEMENT OF INVESTMENTS, JULY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
SHARES VALUE
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT TERM INVESTMENTS 4.9%
(b)Franklin Institutional Fiduciary Trust Money Market Portfolio (COST $9,027,040).... 9,027,040 $ 9,027,040
------------
TOTAL INVESTMENTS (COST $230,983,653) 99.1% ....................................... 181,890,325
OTHER ASSETS, LESS LIABILITIES .9% ................................................ 1,560,884
------------
NET ASSETS 100.0% ................................................................. $183,451,209
============
</TABLE>
(a) Non-income producing
(b) See Note 3 regarding investment in the "Sweep Money Fund."
See notes to financial statements.
FRANKLIN GOLD AND PRECIOUS METALS FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2000
<TABLE>
<S> <C>
Assets:
Investments in securities:
Cost ................................................ $ 230,983,653
=============
Value ............................................... 181,890,325
Receivables:
Investment securities sold .......................... 4,534,897
Capital shares sold ................................. 351,010
-------------
Total assets ..................................... 186,776,232
-------------
Liabilities:
Payables:
Capital shares redeemed ............................. 2,876,904
Affiliates .......................................... 241,186
Shareholders ........................................ 166,011
Other liabilities .................................... 40,922
-------------
Total liabilities ................................ 3,325,023
-------------
Net assets, at value ............................ $ 183,451,209
=============
Net assets consist of:
Undistributed net investment income .................. $ 2,234,111
Net unrealized depreciation ..........................
Accumulated net realized loss ........................
Capital shares ....................................... 277,059,188
-------------
Net assets, at value ............................ $ 183,451,209
=============
</TABLE>
See notes to financial statements.
FRANKLIN GOLD AND PRECIOUS METALS FUND
Financial Statements (continued)
STATEMENT OF ASSETS AND LIABILITIES (CONT.)
JULY 31, 2000
<TABLE>
<S> <C>
CLASS A:
Net assets, at value .............................................. $156,236,375
============
Shares outstanding ................................................ 19,771,870
============
Net asset value per share* ........................................ $ 7.90
============
Maximum offering price per share
(net asset value per share/94.25%) ............................... $ 8.38
============
CLASS B:
Net assets, at value .............................................. $ 2,778,959
============
Shares outstanding ................................................ 355,574
============
Net asset value and maximum offering price per share* ............. $ 7.82
============
CLASS C:
Net assets, at value .............................................. $ 20,721,250
============
Shares outstanding ................................................ 2,647,702
============
Net asset value per share* ........................................ $ 7.83
============
Maximum offering price per share
(net asset value per share/99.00%) ............................... $ 7.91
============
ADVISOR CLASS:
Net assets, at value .............................................. $ 3,714,625
============
Shares outstanding ................................................ 459,014
------------
Net asset value and maximum offering price per share .............. $ 8.09
============
</TABLE>
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN GOLD AND PRECIOUS METALS FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2000
<TABLE>
<S> <C>
Investment income:
(net of foreign taxes and fees of $285,381)
Dividends .............................................................. $ 5,339,727
Interest ............................................................... 409,456
-----------
Total investment income ............................................ 5,749,183
-----------
Expenses:
Management fees (Note 3) ............................................... 1,235,379
Distribution fees (Note 3)
Class A ............................................................... 476,675
Class B ............................................................... 28,380
Class C ............................................................... 246,797
Transfer agent fees (Note 3) ........................................... 941,561
Custodian fees ......................................................... 57,669
Reports to shareholders ................................................ 131,800
Registration and filing fees ........................................... 64,910
Professional fees (Note 3) ............................................. 73,949
Trustees' fees and expenses ............................................ 14,457
Other .................................................................. 17,478
-----------
Total expenses ..................................................... 3,289,055
-----------
Net investment income ............................................. 2,460,128
-----------
Realized and unrealized gains (losses):
Net realized loss from:
Investments ........................................................... (326,007)
Foreign currency transactions ......................................... (53,908)
-----------
Net realized loss .................................................. (379,915)
Net unrealized depreciation on:
Investments ........................................................... (8,919,790)
Translation of assets and liabilities denominated in
foreign currencies ................................................... (1,287)
-----------
Net unrealized depreciation ........................................ (8,921,077)
-----------
Net realized and unrealized loss ........................................ (9,300,992)
-----------
Net decrease in net assets resulting from operations .................... $(6,840,864)
===========
</TABLE>
See notes to financial statements.
FRANKLIN GOLD AND PRECIOUS METALS FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JULY 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
--------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................... $ 2,460,128 $ 1,744,375
Net realized loss from investments and foreign currency transactions .... (379,915) (13,405,569)
Net unrealized appreciation (depreciation) on investments and translation
of assets and liabilities denominated in foreign currencies ........... (8,921,077) 37,357,830
--------------------------------
Net increase (decrease) in net assets resulting from operations .. (6,840,864) 25,696,636
Distributions to shareholders from:
Net investment income:
Class A ................................................................. (889,365) (994,385)
Class B ................................................................. (13,767) --
Class C ................................................................. (2,899) (19,664)
Advisor Class ............................................................. (20,202) (17,446)
--------------------------------
Total distributions to shareholders ....................................... (926,233) (1,031,495)
Capital share transactions: (Note 2)
Class A .................................................................. (43,478,186) (5,492,992)
Class B .................................................................. 1,945,421 1,189,301
Class C .................................................................. (1,612,481) 795,260
Advisor Class ............................................................ 580,353 475,000
--------------------------------
Total capital share transactions .......................................... (42,564,893) (3,033,431)
Net increase (decrease) in net assets ............................ (50,331,990) 21,631,710
Net assets:
Beginning of year ......................................................... 233,783,199 212,151,489
--------------------------------
End of year ............................................................... $ 183,451,209 $ 233,783,199
================================
Undistributed net investment income included in net assets:
End of year ............................................................... $ 2,234,111 $ 754,124
================================
</TABLE>
See notes to financial statements.
FRANKLIN GOLD AND PRECIOUS METALS FUND
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Gold and Precious Metals Fund (the Fund) is registered under the
Investment Company Act of 1940 as a non-diversified, open-end investment
company. The Fund seeks capital growth.
On October 22, 1999, the Board of Directors approved an Agreement and Plan of
Reorganization (the Agreement) whereby the Fund would be reorganized and its
domicile changed from a California corporation to a Delaware business trust. The
Board of Directors also approved a proposal to change the Fund's 1940 Act
sub-classification from diversified to non-diversified. In connection with these
changes, the Trust's name was changed to Franklin Gold and Precious Metals Fund,
formerly known as Franklin Gold Fund. On March 14, 2000, shareholders of the
Fund approved the agreement.
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. Restricted securities and 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 Trustees.
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 AND PRECIOUS METALS 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. SHARES OF BENEFICIAL INTEREST
The Fund offers four classes of shares: Class A, Class B, Class C, and Advisor
Class. 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, 2000, there were an unlimited number of shares authorized ($.10 par
value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 2000 JULY 31, 1999(a)
--------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares sold .................................. 65,782,433 $ 592,799,041 71,612,581 $ 581,834,944
Shares issued in reinvestment of distributions 82,129 762,978 103,621 845,529
Shares redeemed .............................. (70,910,921) (637,040,205) (72,253,290) (588,173,465)
--------------------------------------------------------------------
Net decrease ................................. (5,046,359) $ (43,478,186) (537,088) $ (5,492,992)
====================================================================
CLASS B SHARES:
Shares sold .................................. 373,919 $ 3,404,150 172,893 $ 1,399,669
Shares issued in reinvestment of distributions 1,265 11,685 -- --
Shares redeemed .............................. (166,957) (1,470,414) (25,546) (210,368)
--------------------------------------------------------------------
Net increase ................................. 208,227 $ 1,945,421 147,347 $ 1,189,301
====================================================================
CLASS C SHARES:
Shares sold .................................. 2,032,445 $ 18,577,847 2,001,528 $ 15,981,839
Shares issued in reinvestment of distributions 280 2,590 2,095 17,030
Shares redeemed .............................. (2,236,241) (20,192,918) (1,892,631) (15,203,609)
--------------------------------------------------------------------
Net increase (decrease) ...................... (203,516) $ (1,612,481) 110,992 $ 795,260
====================================================================
ADVISOR CLASS SHARES:
Shares sold .................................. 423,344 $ 3,968,237 1,513,061 $ 12,233,785
Shares issued in reinvestment of distributions 1,890 17,972 1,703 14,155
Shares redeemed .............................. (343,617) (3,405,856) (1,427,475) (11,772,940)
--------------------------------------------------------------------
Net increase ................................. 81,617 $ 580,353 87,289 $ 475,000
====================================================================
</TABLE>
(a) For the period January 1, 1999 (effective date) to July 31, 1999 for Class B
shares.
FRANKLIN GOLD AND PRECIOUS METALS FUND
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees 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 may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund) which is managed by Advisers.
The Fund pays an investment management fee to Advisers based on the net assets
of the Fund as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE MONTH-END NET ASSETS
--------------------------------------------------------------------
<S> <C>
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% In excess of $250 million
</TABLE>
Management fees were reduced on assets invested in the Sweep Money Fund.
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 $196,803 and $41,207,
respectively.
The Fund paid transfer agent fees of $941,561, of which $668,965 was paid to
Investor Services.
Included in professional fees are legal fees of $43,620 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.
4. INCOME TAXES
At July 31, 2000, the Fund had tax basis capital losses of $46,696,407, which
may be carried over to offset future capital gains. Such losses expire as
follows:
<TABLE>
<CAPTION>
Capital loss carryovers expiring in:
<S> <C>
2005 ............................. $ 6,513,315
2006 ............................. 8,665,097
2007 ............................. 28,763,977
2008 ............................. 2,754,018
-----------
$46,696,407
===========
</TABLE>
FRANKLIN GOLD AND PRECIOUS METALS FUND
Notes to Financial Statements (continued)
4. INCOME TAXES (CONT.)
At July 31, 2000, the Fund had deferred currency losses occurring subsequent to
October 31, 1999 of $28,177. For tax purposes, such losses will be reflected in
the year ending July 31, 2001.
At July 31, 2000, the net unrealized depreciation based on the cost of
investments for income tax purposes of $231,036,008 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 41,731,855
Unrealized depreciation (90,877,538)
------------
Net unrealized depreciation $(49,145,683)
============
</TABLE>
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions. Net realized
capital losses differ for financial statement and tax purposes primarily due to
differing treatment of foreign currency transactions and wash sales.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended July 31, 2000 aggregated $7,562,219 and $44,491,613, respectively.
FRANKLIN GOLD AND PRECIOUS METALS FUND
Independent Auditors' Report
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
FRANKLIN GOLD AND PRECIOUS METALS 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 and Precious Metals
Fund (the "Fund") at July 31, 2000, 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 accounting principles generally accepted in the
United States. 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 auditing standards generally accepted in the
United States 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, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
September 11, 2000
FRANKLIN GOLD AND PRECIOUS METALS FUND
Tax Designation
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
16.45% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended July 31, 2000.
At July 31, 2000, more than 50% of the 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. The Fund intends to make
an election under Section 853 of the Internal Revenue Code. This election will
allow record date shareholders of the December 2000 distribution, to treat their
proportionate share of foreign taxes paid by the Fund as having been paid
directly by them.
The foreign tax information will be disclosed in the January 31, 2001
semi-annual report of the Fund. In addition, in January 2001, shareholders will
receive Form 1099-DIV which will include their share of taxes withheld and
foreign source income distributed during the calendar year 2000.
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