SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
Your Fund's Goal: Franklin Gold Fund seeks capital appreciation with current
income, by investing primarily in securities of companies engaged in mining,
processing or dealing in gold or other precious metals.
- --------------------------------------------------------------------------------
Dear Shareholder,
We are pleased to bring you this semiannual report of Franklin Gold Fund, which
covers the six months ended January 31, 2000. During this time, commodity prices
generally increased appreciably, with the Goldman Sachs Commodity Index (GSCI)
rising 24.31% between August 1, 1999 and January 31, 2000.(1) The period under
review was also characterized by a strong recovery in the price of gold, which
languished near $253 per ounce throughout August, spiked to a high of $326 an
ounce in early October, then settled into the $275 to $300 range for the
remainder of the reporting period.
At the outset, the possibility that European central banks might sell their gold
reserves, coupled with weakness in the Japanese yen and general economic malaise
in the Pacific Rim region, limited the appeal of gold and kept its price near
20-year lows. But by the end of September, gold surged above the $300 mark as
Japan's currency recovered and 15 European central banks agreed to restrict
sales of gold bullion for the next five years.
CONTENTS
Shareholder Letter ....................................................... 1
Special Update ........................................................... 6
Performance Summary ...................................................... 8
Financial Highlights & Statement of Investments .......................... 10
Financial Statements ..................................................... 16
Notes to Financial Statements ............................................ 19
Tax Designation .......................................................... 23
[PYRAMID GRAPH]
(1) Source: Bloomberg. Measured in U.S. dollars and includes reinvested
dividends. The GSCI is comprised of the world's major commodities, including
oil, and precious and base metals.
All portfolio holdings mentioned in the report are listed by their complete
legal titles in the fund's Statement of Investments (SOI), a complete listing of
the fund's portfolio holdings, including dollar value and number of shares or
principal amount. The SOI begins on page 14.
[PIECHART]
GEOGRAPHIC DISTRIBUTION
BASED ON TOTAL NET ASSETS
1/31/00
South Africa 34.3%
United States 23.6%
Canada 19.8%
Australia 5.8%
Other Countries 10.9%
Cash & Short-Term Securities 5.6%
The announcement of this moratorium spurred the largest one-day price increase
in gold in over 10 years, giving gold-mining stocks a significant upward boost.
But the rally did not last. Demand for gold and related jewelry fizzled as
prices rose; inflation fears were not worrisome despite rising interest rates;
and the red-hot stock market maintained its upward trend despite renewed signs
of investor caution.
During the reporting period, prices of other commodities and specialty metals in
which the fund invests, especially platinum and palladium, rose significantly.
On January 28, 2000, palladium reached an all-time high of $485.50 per ounce.
Due to a rise in the prices of gold bullion, other precious metals, and related
mining stocks, Franklin Gold Fund - Class A posted a +8.64% six-month cumulative
total return for the reporting period, as discussed in the Performance Summary
on page 8. Over the same period, the Standard and Poor's(R) 500 Composite Index
(S&P 500(R)) appreciated 5.59%, while the Financial Times Gold Mines Index
declined 3.01%.(2)
(2) Source: Standard & Poor's Micropal.
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 Mines Index is compiled by the Financial Times, Goldman
Sachs & Co., and Wood Mackenzie & Co., Ltd. in conjunction with the Institute of
Actuaries and the Faculty of Actuaries.
Indexes are unmanaged and include reinvested dividends. One cannot invest
directly in an index, nor is an index representative of the fund's portfolio.
We remained geographically diversified across all major gold-producing regions
of the world, and made no major shifts in industry or geographic exposure during
the reporting period. In maintaining our conservative investment strategy, we
focused on quality companies with solid production profiles, low costs, sound
balance sheets and strong management teams. This can be demonstrated by three of
the fund's top holdings: Newmont Mining Corp., Barrick Gold Corp. and AngloGold
Ltd., all of which are large-cap, low-cost gold producers with established
production histories and, in our assessment, excellent management.
AngloGold is a great restructuring story and one of the better performers during
the period. In January, the firm made a successful bid for Australia's Acacia
Resources and became a truly global company. It is now asserting itself as the
largest gold mining company in the world, producing over seven million ounces of
gold per year while acquiring projects in the Americas that we feel will
establish a base from which to further expand in 2000.
Barrick Gold continues to deliver strong growth in production and reserves.
Barrick produced almost 3.7 million ounces in 1999 and expects to produce over 5
million ounces by 2003 as two new projects come online.
Newmont Mining, which continues to be a core holding of the fund, reduced its
cash costs (direct cost of mining excluding depreciation and expansion capital)
in the last half of 1999, and has plans to reduce them even further in 2000.
TOP 10 HOLDINGS
1/31/00
<TABLE>
<CAPTION>
COMPANY, % OF TOTAL
COUNTRY NET ASSETS
- ----------------------------------------------------------------------------------
<S> <C>
Newmont Mining Corp.,
United States 9.6%
Barrick Gold Corp.,
Canada 9.1%
Impala Platinum Holdings Ltd.,
South Africa 9.0%
Anglo American Platinum
Corp. Ltd., ADR,
South Africa 9.0%
Stillwater Mining Co.,
United States 8.5%
AngloGold Ltd.,
South Africa 7.2%
De Beers Consolidated
Mines AG, ADR,
South Africa 4.9%
Franco-Nevada Mining
Corp. Ltd.,
Canada 4.9%
Compania de Minas
Buenaventura SA, ADR,
Peru 4.1%
Rio Tinto PLC,
United Kingdom 3.9%
</TABLE>
[BARCHART]
INDUSTRY BREAKDOWN
BASED ON TOTAL NET ASSETS
1/31/00
<TABLE>
<S> <C>
Long-Life Gold Mines 43.0%
Platinum 26.5%
Mining Finance Companies 11.6%
Gold & Diversified Resources 7.7%
Medium-Life Gold Mines 5.6%
Cash & Short-Term Securities 5.6%
</TABLE>
Due to rising platinum and palladium prices, the shares of companies producing
both metals provided excellent returns for the fund over the six-month period.
Impala Platinum Holdings Ltd., Anglo American Platinum Corp., and Stillwater
Mining Co. all performed remarkably in this regard. With the 2000 outlook for
platinum looking quite strong, we believe Impala, Anglo American, and Stillwater
should have another year of impressive results. Reflecting the importance we
assign to diversification, other non-gold holdings during the reporting period
included diamond producer De Beers Consolidated Mines AG ADR, poly-metallic
producer Rio Tinto PLC (copper, aluminum, coal and industrial minerals), and
Franco-Nevada Corp. Ltd. (base and precious metals, oil and gas), which merged
with sister company Euro Nevada Mining in September 1999.
Looking forward, we expect markets to be volatile during the remainder of 2000,
but believe that supply and demand fundamentals for gold appear to be improving,
and that the price of gold bullion could trend higher throughout the year.
Increased discipline by the world's central banks should help narrow any
overhang between supply and demand, and we expect jewelry demand to rise thanks
to an improving global economy. In our opinion, the current environment of
looming inflation and lofty stock market valuations validates a philosophy of
portfolio diversification. Gold continues to be insurance for a broad-based
portfolio, because it is an asset that cannot be tied to any financial system,
giving it stability during times of crisis and providing excellent
diversification against the overall market. However, as discussed in the
prospectus, investing in gold and other precious metals is subject to special
risks, including those related to fluctuations in the price of gold and other
precious metals, and the currency fluctuation and political uncertainty
associated with foreign investing and developing markets.
We appreciate your participation in Franklin Gold Fund and welcome any comments
or suggestions you may have.
Sincerely,
/s/ R. Martin Wiskemann
R. Martin Wiskemann
/s/ Stephen M. Land
Stephen M. Land
Portfolio Managers
Franklin Gold Fund
This discussion reflects our views, opinions and portfolio holdings as of
January 31, 2000, the end of the reporting period. However, market and economic
conditions are changing constantly, which may 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.
THE PRICE OF GOLD
[SPECIAL UPDATE GRAPHIC]
Our reports on Franklin Gold 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 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:
The Price of Gold per Ounce
7/31/99 - 1/31/00
[PRICE OF GOLD LINEGRAPH]
DATE VALUE*
---- -------
07/31/99 255.950
08/06/99 256.150
08/13/99 260.650
08/20/99 257.400
08/27/99 253.750
09/03/99 254.250
09/10/99 256.550
09/17/99 255.250
09/24/99 268.750
10/01/99 309.000
10/08/99 320.150
10/15/99 315.150
10/22/99 302.400
10/29/99 299.200
11/05/99 290.500
11/12/99 291.300
11/19/99 295.000
11/26/99 297.120
12/03/99 279.800
12/10/99 278.950
12/17/99 283.600
12/24/99 287.625
12/31/99 288.000
01/07/00 281.750
01/14/00 284.200
01/21/00 289.100
01/31/00 283.500
* U.S. dollars per troy oz.
SIX-MONTH PERFORMANCE SUMMARY AS OF 1/31/2000
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.
<TABLE>
<CAPTION>
<S> <C> <C>
CLASS A
Six-Month Total Return 8.64%
Net Asset Value (NAV) (7/31/99) $8.30 (1/31/00) $8.98
Change in NAV +$0.68
Distributions (7/31/99 - 1/31/00) Dividend Income $0.0388
CLASS B
Six-Month Total Return 8.47%
Net Asset Value (NAV) (7/31/99) $8.26 (1/31/00) $8.92
Change in NAV +$0.66
Distributions (7/31/99 - 1/31/00) Dividend Income $0.0413
CLASS C
Six-Month Total Return 8.40%
Net Asset Value (NAV) (7/31/99) $8.23 (1/31/00) $8.92
Change in NAV +$0.69
Distributions (7/31/99 - 1/31/00) Dividend Income $0.0010
ADVISOR CLASS
Six-Month Total Return 8.82%
Net Asset Value (NAV) (7/31/99) $8.49 (1/31/00) $9.19
Change in NAV +$0.70
Distributions (7/31/99 - 1/31/00) Dividend Income $0.0504
</TABLE>
CLASS A: Subject to the current, maximum 5.75% initial sales charge. Prior to
August 3, 1998, fund shares were offered at a lower initial sales charge; thus
actual total returns may differ. Effective May 1, 1994, the fund implemented a
Rule 12b-1 plan, which affects subsequent performance. Past expense reductions
by the fund's manager increased 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.
Past performance does not guarantee future results.
ADDITIONAL PERFORMANCE
AS OF QUARTER ENDED 12/31/99
<TABLE>
<CAPTION>
INCEPTION
CLASS A 1-YEAR 5-YEAR 10-YEAR (5/19/69)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) 25.39% -25.66% -16.45% 190.33%
Average Annual Total Return(2) 18.20% -6.87% -2.36% 3.34%
Value of $10,000 Investment(3) $11,820 $ 7,004 $ 7,873 $27,354
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS B 1-YEAR (1/1/99)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return(1) 24.52% 24.52%
Average Annual Total Return(2) 20.52% 20.52%
Value of $10,000 Investment(3) $12,052 $12,052
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 1-YEAR 3-YEAR (5/1/95)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) 24.46% -27.10% -28.26%
Average Annual Total Return(2) 22.19% -10.29% -7.06%
Value of $10,000 Investment(3) $12,219 $ 7,219 $ 7,103
</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) 25.95% -22.48% -12.87% 202.78%
Average Annual Total Return(2) 25.95% -4.96% -1.37% 3.68%
Value of $10,000 Investment(3) $12,595 $ 7,752 $ 8,713 $ 30,278
</TABLE>
- ----------
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, 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. 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 120-1 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),
cumulative and average annual total returns for Advisor Class shares were
-22.28% and -8.06%, 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" on the Internet at
www.franklintempleton.com or call Franklin Templeton at 1-800/342-5236.
Past performance does not guarantee future results.
FRANKLIN GOLD FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JULY 31,
JANUARY 31, 2000 -----------------------------------------------------------
(UNAUDITED)(c) 1999(c) 1998 1997 1996 1995
-------------- ------- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C> <C>
(for a share outstanding throughout the period)
Net asset value, beginning of period ........... $8.30 $7.48 $11.44 $14.65 $15.07 $14.88
----- ----- ------ ------ ------ ------
Income from investment operations:
Net investment income ......................... .04 .07 .10 .07 .21 .18
Net realized and unrealized gains (losses) .... .68 .79 (3.96) (2.37) .01 .27
----- ----- ------ ------ ------ ------
Total from investment operations ............... .72 .86 (3.86) (2.30) .22 .45
----- ----- ------ ------ ------ ------
Less distributions from:
Net investment income ......................... (.04) (.04) (.10) (.09) (.13) (.20)
In excess of net investment income ............ -- -- -- -- -- (.06)
Net realized gains ............................ -- -- -- (.82) (.51) --
----- ----- ------ ------ ------ ------
Total distributions ............................ (.04) (.04) (.10) (.91) (.64) (.26)
----- ----- ------ ------ ------ ------
Net asset value, end of period ................. $8.98 $8.30 $ 7.48 $11.44 $14.65 $15.07
----- ----- ------ ------ ------ ------
Total return(a) ................................ 8.64% 11.51% (33.83)% (16.45)% 1.65% 3.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .............. $197,839 $205,889 $189,591 $291,544 $364,032 $391,966
Ratios to average net assets:
Expenses ...................................... 1.22%(b) 1.31% 1.19% 1.05% .95% .95%
Net investment income ......................... .84%(b) .85% 1.05% .55% .99% 1.20%
Portfolio turnover rate ........................ 1.50% 4.29% 6.09% 16.05% 28.74% 6.36%
</TABLE>
(a) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
(b) Annualized.
(c) Based on average shares outstanding.
FRANKLIN GOLD FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS B
-------
SIX MONTHS ENDED
JANUARY 31, 2000 PERIOD ENDED
(UNAUDITED) (d) JULY 31, 1999 (c),(d)
--------------- ---------------------
PER SHARE OPERATING PERFORMANCE
<S> <C> <C>
(for a share outstanding throughout the period)
Net asset value, beginning of period $8.26 $7.72
----- -----
Income from investment operations:
Net investment loss (.02) (.04)
Net realized and unrealized gains .72 .58
----- -----
Total from investment operations .70 .54
Less distributions from net investment income (.04) --
----- -----
Net asset value, end of period $8.92 $8.26
===== =====
Total return (a) 8.47% 6.99%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $3,409 $1,217
Ratios to average net assets:
Expenses 1.98%(b) 2.10%(b)
Net investment income (.46)%(b) (.84)%(b)
Portfolio turnover rate 1.50% 4.29%
</TABLE>
a Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
b Annualized.
c For the period January 1, 1999 (effective date) to July 31, 1999.
d Based on average shares outstanding.
FRANKLIN GOLD FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 2000 YEAR ENDED JULY 31,
-------------------
(UNAUDITED)(d) 1999(d) 1998 1997 1996 1995(c,d)
-------------- ------- ---- ---- ---- ---------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.23 $ 7.43 $ 11.37 $ 14.61 $ 15.05 $ 15.02
-------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) -- .01 .03 (.02) .12 .12
Net realized and unrealized gains (losses) .69 .80 (3.93) (2.38) (.02) .09
-------- ------- ------- ------- ------- -------
Total from investment operations .69 .81 (3.90) (2.40) .10 .21
-------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income -- (e) (.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 $ 8.92 $ 8.23 $ 7.43 $ 11.37 $ 14.61 $ 15.05
======== ======= ======= ======= ======= =======
Total return (a) 8.40% 10.85% (34.35)% (17.18)% .81% 1.45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $ 26,364 $23,473 $20,353 $20,783 $12,977 $ 3,104
Ratios to average net assets:
Expenses 1.98%(b) 2.07% 1.96% 1.83% 1.74% 1.73%(b)
Net investment income (loss) (.02)%(b) .08% .25% (.16)% .16% .33%(b)
Portfolio turnover rate 1.50% 4.29% 6.09% 16.05% 28.74% 6.36%
</TABLE>
a Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
b Annualized.
c For the period May 1, 1995 (effective date) to July 31, 1995.
d Based on average shares outstanding.
e The fund made an income distribution of $.001.
FRANKLIN GOLD FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
ADVISOR CLASS
------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JULY 31,
JANUARY 31, 2000 -----------------------------
(UNAUDITED)(d) 1999(d) 1998 1997(c)
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period $8.49 $7.61 $11.43 $13.12
----- ----- ------ ------
Income from investment operations:
Net investment income .04 .08 .14 .07
Net realized and unrealized gains (losses) .71 .85 (3.84) (1.67)
----- ----- ------ ------
Total from investment operations .75 .93 (3.70) (1.60)
Less distributions from net investment income (.05) (.05) (.12) (.09)
----- ----- ------ ------
Net asset value, end of period $9.19 $8.49 $7.61 $11.43
----- ----- ------ ------
Total return (a) 8.82% 12.30% (32.46)% (12.24)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $3,704 $3,204 $2,207 $3,211
Ratios to average net assets:
Expenses .98%(b) 1.08% .96% .83%(b)
Net investment income .94%(b) .98% 1.30% .80%(b)
Portfolio turnover rate 1.50% 4.29% 6.09% 16.05%
</TABLE>
(a) Total return is not annualized for periods less than one year.
(b) Annualized.
(c) For the period January 2, 1997 (effective date) to July 31, 1997.
(d) Based on average shares outstanding.
See notes to financial statements.
FRANKLIN GOLD FUND
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES/
COUNTRY WARRANTS VALUE
------- -------- -----
<S> <C> <C> <C>
COMMON STOCKS 94.4%
GOLD & DIVERSIFIED RESOURCES 7.7%
(a) Freeport-McMoRan Copper & Gold Inc., A United States 308,011 $ 4,928,176
Orogen Minerals Ltd., GDR Australia 54,000 547,573
Rio Tinto PLC United Kingdom 477,401 8,929,602
Teck Corp., B Canada 382,100 3,322,838
------------
17,728,189
------------
LONG LIFE GOLD MINES 43.0%
AngloGold Ltd. South Africa 235,535 11,428,701
AngloGold Ltd., ADR South Africa 218,822 5,251,728
Ashanti Goldfields Co. Ltd., GDR Ghana 933,050 2,565,888
Barrick Gold Corp. Canada 1,282,249 20,996,827
Compania de Minas Buenaventura SA, ADR Peru 456,993 8,568,619
Compania de Minas Buenaventura SA, B Peru 100,593 939,502
Gold Fields Ltd. South Africa 774,999 3,168,525
Gold Fields Ltd., ADR South Africa 639,528 2,558,112
Harmony Gold Mining Co. Ltd. South Africa 473,000 2,653,387
Homestake Mining Co. United States 1,174,194 7,779,035
(a) Lihir Gold Ltd. Australia 1,049,600 522,119
(a) Lihir Gold Ltd., ADR, 144A Australia 50,000 559,375
Newmont Mining Corp. United States 1,087,745 22,162,804
Placer Dome Inc. Canada 933,820 8,404,380
(a) TVX Gold Inc. Canada 997,000 736,276
Western Areas Ltd. South Africa 357,979 1,191,278
Western Areas Ltd., ADR South Africa 23,523 78,280
------------
99,564,836
------------
MEDIUM LIFE GOLD MINES 5.6%
(a) Battle Mountain Canada Inc. Canada 583,600 1,087,528
(a) Newcrest Mining Ltd. Australia 1,065,050 2,628,646
(a) Niugini Mining Ltd. Australia 133,750 134,773
(a) Niugini Mining Ltd., ADR Australia 610,000 614,664
Normandy Mining Ltd. Australia 5,352,451 3,550,072
Sons of Gwalia Ltd. Australia 1,575,500 4,822,928
------------
12,838,611
------------
MINING FINANCE COMPANIES 11.6%
Anglo American PLC United Kingdom 64,025 3,640,426
Anglo American PLC, ADR United Kingdom 10,000 567,500
De Beers Consolidated Mines AG, ADR South Africa 435,600 11,434,500
Franco-Nevada Mining Corp. Ltd. Canada 778,614 11,285,040
------------
26,927,466
------------
PLATINUM 26.5%
Anglo American Platinum Corp. Ltd., ADR South Africa 690,138 20,779,054
Impala Platinum Holdings Ltd. South Africa 240,000 10,496,791
Impala Platinum Holdings Ltd., ADR South Africa 237,800 10,400,570
(a) Stillwater Mining Co. United States 550,050 19,595,532
------------
61,271,947
------------
TOTAL COMMON STOCKS (COST $242,088,276) 218,331,049
------------
</TABLE>
FRANKLIN GOLD FUND
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(b)REPURCHASE AGREEMENT 3.7%
Joint Repurchase Agreement, 5.689%, 2/01/00,
(Maturity Value $8,686,409) (COST $8,685,037) $8,685,037 $ 8,685,037
Banc of America Securities LLC
Barclays Capital Inc.
Bear Stearns & Co. Inc.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Paine Webber Inc.
Paribas Corp.
Societe Generale
Warburg Dillon Read LLC
Collateralized by U.S. Treasury Bills and Notes
------------
TOTAL INVESTMENTS (COST $250,773,313) 98.1% 227,016,086
OTHER ASSETS, LESS LIABILITIES 1.9% 4,299,737
------------
NET ASSETS 100.0% $231,315,823
------------
</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, 2000, all repurchase
agreements had been entered into on that date.
See notes to financial statements.
FRANKLIN GOLD FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities:
Cost $250,773,313
------------
Value 227,016,086
Receivables:
Investment securities sold 2,889,055
Capital shares sold 2,563,588
------------
Total assets 232,468,729
------------
Liabilities:
Payables:
Capital shares redeemed 608,766
Affiliates 314,812
Shareholders 202,803
Other liabilities 26,525
------------
Total liabilities 1,152,906
------------
Net assets, at value $231,315,823
------------
Net assets consist of:
Undistributed net investment income $ 757,091
Net unrealized depreciation (23,756,568)
Accumulated net realized loss (43,117,532)
Capital shares 297,432,832
------------
Net assets, at value $231,315,823
------------
CLASS A:
Net asset value per share* ($197,839,149 / 22,020,782 shares outstanding) $8.98
------------
Maximum offering price per share ($8.98 / 94.25%) $9.53
------------
CLASS B:
Net asset value and maximum offering price per share*
($3,409,100 / 382,096 shares outstanding) $8.92
------------
CLASS C:
Net asset value per share* ($26,363,689 / 2,954,188 shares outstanding) $8.92
------------
Maximum offering price per share ($8.92 / 99%) $9.01
------------
ADVISOR CLASS:
Net asset value and maximum offering price per share ($3,703,885 / 402,832
shares outstanding) $9.19
------------
</TABLE>
* Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN GOLD FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Investment income:
<S> <C>
(net of foreign taxes and fees of $144,529)
Dividends ............................................................................. $ 2,265,480
Interest .............................................................................. 308,876
-----------
Total investment income .......................................................... 2,574,356
-----------
Expenses:
Management fees (Note 3) .............................................................. 690,649
Distribution fees (Note 3)
Class A ............................................................................ 263,787
Class B ............................................................................ 12,934
Class C ............................................................................ 133,049
Transfer agent fees (Note 3) .......................................................... 380,752
Custodian fees ........................................................................ 29,405
Reports to shareholders ............................................................... 64,460
Registration and filing fees .......................................................... 34,213
Professional fees ..................................................................... 17,532
Directors' fees and expenses .......................................................... 7,416
Other ................................................................................. 10,990
-----------
Total expenses ................................................................... 1,645,187
-----------
Net investment income ............................................................ 929,169
-----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ........................................................................ 3,335,181
Foreign currency transactions ...................................................... (29,958)
-----------
Net realized gain ................................................................ 3,305,223
Net unrealized appreciation (depreciation) on:
Investments ........................................................................ 16,416,311
Translation of assets and liabilities denominated in foreign currencies ............ (628)
-----------
Net unrealized appreciation ...................................................... 16,415,683
-----------
Net realized and unrealized gain ........................................................ 19,720,906
-----------
Net increase in net assets resulting from operations .................................... $20,650,075
===========
</TABLE>
See notes to financial statements.
FRANKLIN GOLD FUND
Financial Statements (continued)
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
AND THE YEAR ENDED JULY 31, 1999
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2000 JULY 31, 1999
---------------- --------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................................. $ 929,169 $ 1,744,375
Net realized gain (loss) from investments and foreign
currency transactions .......................................... 3,305,223 (13,405,569)
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies ...... 16,415,683 37,357,830
------------ ------------
Net increase in net assets resulting from operations ........ 20,650,075 25,696,636
Distributions to shareholders from:
Net investment income:
Class A ......................................................... (889,378) (994,385)
Class B ......................................................... (13,722) --
Class C ......................................................... (2,900) (19,664)
Advisor Class ................................................... (20,202) (17,446)
------------ ------------
Total distributions to shareholders .................................. (926,202) (1,031,495)
Capital share transactions: (Note 2)
Class A ......................................................... (25,531,879) (5,492,992)
Class B ......................................................... 2,165,606 1,189,301
Class C ......................................................... 1,048,732 795,260
Advisor Class ................................................... 126,292 475,000
------------ ------------
Total capital share transactions ..................................... (22,191,249) (3,033,431)
Net increase (decrease) in net assets ....................... (2,467,376) 21,631,710
Net assets:
Beginning of period .................................................. 233,783,199 212,151,489
------------ ------------
End of period ........................................................ $231,315,823 $233,783,199
------------ ------------
Undistributed net investment income included in net assets:
End of period ........................................................ $ 757,091 $ 754,124
============ ============
</TABLE>
See notes to financial statements.
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.
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 Fund's name will change to Franklin Gold and Precious Metals Fund.
These changes are subject to shareholder approval.
The following summarizes the Fund's significant accounting policies.
a. SECURITY VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Directors.
b. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
c. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
FRANKLIN GOLD FUND
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
e. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
The Fund offers four classes of shares: Class A, Class B, Class C, and Advisor
Class. 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 January 31, 2000, there were 100 million shares authorized ($.10 par value),
of which 45 million shares were designated as Class A, 20 million shares as
Class B, 25 million shares as Class C, and 10 million shares as Advisor Class.
Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2000 JULY 31, 1999*
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES:
<S> <C> <C> <C> <C>
Shares sold 36,551,729 $339,671,645 71,612,581 $581,834,944
Shares issued in reinvestment
of distributions 82,131 762,992 103,621 845,529
Shares redeemed (39,431,307) (365,966,516) (72,253,290) (588,173,465)
---------- ------------ -------- ------------
Net decrease (2,797,447) $(25,531,879) (537,088) $ (5,492,992)
---------- ------------ -------- ------------
CLASS B SHARES:
Shares sold 295,114 $ 2,731,668 172,893 $ 1,399,669
Shares issued in reinvestment
of distributions 1,260 11,640 -- --
Shares redeemed (61,625) (577,702) (25,546) (210,368)
---------- ------------ -------- ------------
Net increase 234,749 $ 2,165,606 147,347 $ 1,189,301
---------- ------------ -------- ------------
CLASS C SHARES:
Shares sold 1,324,139 $ 12,470,684 2,001,528 $ 15,981,839
Shares issued in reinvestment of distributions 280 2,591 2,095 17,030
Shares redeemed (1,221,449) (11,424,543) (1,892,631) (15,203,609)
---------- ------------ -------- ------------
Net increase 102,970 $ 1,048,732 110,992 $ 795,260
---------- ------------ -------- ------------
ADVISOR CLASS SHARES:
Shares sold 233,165 $ 2,224,316 1,513,061 $ 12,233,785
Shares issued in reinvestment of distributions 1,890 17,971 1,703 14,155
Shares redeemed (209,620) (2,115,995) (1,427,475) (11,772,940)
---------- ------------ -------- ------------
Net increase 25,435 $ 126,292 87,289 $ 475,000
---------- ------------ -------- ------------
</TABLE>
* For the period January 1, 1999 (effective date) to July 31, 1999 for Class B
shares.
FRANKLIN GOLD FUND
Notes to Financial Statements (unaudited) (continued)
3. TRANSACTIONS WITH AFFILIATES
Certain officers and directors of the Fund are also officers and/or directors of
Franklin Advisers Inc. (Advisers), Franklin/Templeton Distributors Inc.
(Distributors), Franklin Templeton Services Inc. (FT Services) and
Franklin/Templeton Investor Services Inc. (Investor Services), the Fund's
investment manager, principal underwriter, administrative manager and transfer
agent, respectively.
The Fund pays an investment management fee to Advisers based on the net assets
of the Fund as follows:
ANNUALIZED
FEE RATE MONTH-END NET ASSETS
-------- --------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% In excess of $250 million
Under an agreement with Advisers, FT Services provides administrative services
to the Fund. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Fund.
The Fund reimburses Distributors up to .25%, 1.00%, and 1.00% per year of the
average daily net assets of Class A, Class B, and Class C, respectively, for
costs incurred in marketing the Fund's shares.
Distributors paid net commissions on sales of Fund shares, and received
contingent deferred sales charges for the period of $136,820 and $27,308,
respectively.
The Fund paid transfer agent fees of $380,752, of which $316,828 was paid to
Investor Services.
Included in professional fees are legal fees of $2,216 that were paid to a law
firm in which a partner is an officer of the fund.
4. INCOME TAXES
At July 31, 1999, the Fund had tax basis capital losses of $43,942,389, which
may be carried over to offset future capital gains. Such losses expire as
follows:
Capital loss carryovers expiring in:
2005 $ 6,513,315
2006 8,665,097
2007 28,763,977
-----------
$43,942,389
===========
At July 31, 1999, the Fund had deferred capital losses and deferred currency
losses occurring subsequent to October 31, 1998 of $2,480,366 and $2,421,
respectively. For tax purposes, such losses will be reflected in the year ending
July 31, 2000.
FRANKLIN GOLD FUND
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES (CONT.)
At January 31, 2000, the net unrealized depreciation based on the cost of
investments for income tax purposes of $250,785,427 was as follows:
Unrealized appreciation $ 63,423,281
Unrealized depreciation (87,192,622)
------------
Net unrealized depreciation $(23,769,341)
------------
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions. Net realized
capital gains 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
period ended January 31, 2000, aggregated $3,541,364 and $24,000,283,
respectively.
6. CREDIT FACILITY
Certain Franklin Templeton Funds, including the Franklin Gold Fund, are
participants in a $750 million senior unsecured credit agreement for temporary
or emergency purposes. The termination date of the agreement is March 1, 2000.
Interest is calculated on the Fund's borrowings at market rates. At January 31,
2000, the Fund had not utilized this credit facility.
FRANKLIN GOLD FUND
Tax Designation
At January 31, 2000, more than 50% of the Franklin Gold Fund's total assets were
invested in securities of foreign issuers. In most instances, foreign taxes were
withheld from dividends paid to the fund on these investments. The Fund intends
to make an election under Section 853 of the Internal Revenue Code. This
election will allow shareholders to treat their proportionate share of foreign
taxes paid by the Fund as having been paid directly by them.
The following table provides a breakdown by country of foreign source income and
foreign taxes paid, as designated by the Fund, to Class A, Class B, Class C and
Advisor Class shareholders in December 1999.
<TABLE>
<CAPTION>
CLASS A CLASS B
------- -------
FOREIGN TAXES FOREIGN SOURCE FOREIGN TAXES FOREIGN SOURCE
COUNTRY WITHHELD PER SHARE INCOME PER SHARE WITHHELD PER SHARE INCOME PER SHARE
- ------- ------------------ ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Australia $0.0007 $0.0088 $0.0007 $0.0101
Canada 0.0031 0.0086 0.0031 0.0098
Ghana 0.0004 0.0017 0.0004 0.0020
Peru 0.0000 0.0011 0.0000 0.0013
South Africa 0.0003 0.0342 0.0003 0.0388
United Kingdom 0.0019 0.0062 0.0019 0.0071
------- ------- ------- -------
TOTAL $0.0064 $0.0606 $0.0064 $0.0691
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
CLASS C ADVISOR CLASS
------- -------------
FOREIGN TAXES FOREIGN SOURCE FOREIGN TAXES FOREIGN SOURCE
COUNTRY WITHHELD PER SHARE INCOME PER SHARE WITHHELD PER SHARE INCOME PER SHARE
- ------- ------------------ ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Australia $0.0007 $0.0018 $0.0007 $0.0111
Canada 0.0031 0.0017 0.0031 0.0107
Ghana 0.0004 0.0003 0.0004 0.0022
Peru 0.0000 0.0002 0.0000 0.0014
South Africa 0.0003 0.0071 0.0003 0.0429
United Kingdom 0.0019 0.0013 0.0019 0.0078
------- ------- ------- -------
TOTAL $0.0064 $0.0124 $0.0064 $0.0761
======= ======= ======= =======
</TABLE>
In January 2000, shareholders received Form 1099-DIV, which included their share
of taxes withheld and foreign source income distributed during the calendar year
1999. Shareholders are advised to check with their tax advisors for information
on the treatment of these amounts on their individual income tax returns.
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