UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-1700
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FRANKLIN GOLD & PRECIOUS METALS FUND
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(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)
MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: (650) 312-2000
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Date of fiscal year end: 7/31
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Date of reporting period: 7/31/03
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ITEM 1. REPORTS TO STOCKHOLDERS.
JULY 31, 2003
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ANNUAL REPORT AND SHAREHOLDER LETTER SECTOR
FRANKLIN GOLD AND
PRECIOUS METALS FUND
[GRAPHIC OMITTED]
FRANKLIN(R) TEMPLETON(R) INVESTMENTS
Franklin o Templeton o Mutual Series
WANT TO RECEIVE
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FRANKLIN TEMPLETON INVESTMENTS
GAIN FROM OUR PERSPECTIVE
Franklin Templeton's distinct multi-manager structure combines the
specialized expertise of three world-class investment management
groups--Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE
Each of our portfolio management groups operates autonomously, relying on its
own research and staying true to the unique investment disciplines that underlie
its success.
FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a
driving force in fixed income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity investing.
TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in
1954, launched what has become the industry's oldest global fund. Today, with
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.
MUTUAL SERIES. Established in 1949, Mutual Series is dedicated to a unique style
of value investing, searching aggressively for opportunity among undervalued
stocks, arbitrage situations and distressed companies.
TRUE DIVERSIFICATION
Because our management groups work independently and adhere to distinctly
different investment approaches, Franklin, Templeton and Mutual Series funds
typically have a low overlap of securities. That's why our funds can be used to
build truly diversified portfolios covering every major asset class.
RELIABILITY YOU CAN TRUST
At Franklin Templeton Investments, we seek to consistently provide investors
with exceptional risk-adjusted returns over the long term, as well as the
reliable account services that have helped us become one of the most trusted
names in financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
Not part of the annual report
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CONTENTS
Shareholder Letter ............................... 1
ANNUAL REPORT
Franklin Gold and Precious Metals Fund ........... 3
Performance Summary .............................. 6
Financial Highlights &
Statement of Investments ......................... 11
Financial Statements ............................. 17
Notes to Financial Statements .................... 21
Independent Auditors' Report ..................... 26
Tax Designation .................................. 27
Board Members and Officers ....................... 29
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ANNUAL REPORT
FRANKLIN GOLD AND PRECIOUS METALS FUND
YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin Gold and Precious Metals Fund
seeks capital appreciation with current income, by investing at least 80% of
total net assets in securities of companies that mine, process or deal in gold
or other precious metals.
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[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
GEOGRAPHIC DISTRIBUTION
Based on Total Net Assets as of 7/31/03
Canada ........................ 27.0%
South Africa .................. 25.6%
U.S. .......................... 15.2%
Australia ..................... 7.0%
U.K. .......................... 6.6%
Ghana ......................... 6.5%
Peru .......................... 4.3%
Papua New Guinea .............. 1.6%
Short-Term Investments and
Other Net Assets ............ 6.2%
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We are pleased to bring you Franklin Gold and Precious Metals Fund's annual
report, covering the fiscal year ended July 31, 2003.
PERFORMANCE OVERVIEW
Franklin Gold and Precious Metals Fund - Class A delivered a +34.97% cumulative
total return for the 12 months ended July 31, 2003, as shown in the Performance
Summary beginning on page 6. By comparison, the broad Standard & Poor's 500
Composite Index (S&P 500) had a +10.64% total return, and the sector-specific
Financial Times (FT) Gold Mines Index posted a +30.53% price return during the
same period. 1
1.Sources: Standard & Poor's Micropal; Financial Times. The unmanaged S&P 500
consists of 500 stocks chosen for market size, liquidity and industry group
representation. Each stock's weight in the index is proportionate to its market
value. The S&P 500 includes reinvested dividends and is one of the most widely
used benchmarks of U.S. equity performance. The unmanaged FT Gold Mines Index is
an unweighted index that tracks the daily performance of gold mining companies
in South Africa, Australia and North America. This is a price-only index and
does not include dividends. One cannot invest directly in an index, nor is an
index representative of the Fund's portfolio.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL
TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF
INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 15.
Annual Report | 3
[BEGIN SIDEBAR]
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
PORTFOLIO BREAKDOWN
Based on Total Net Assets as of 7/31/03
Long-Life Gold Mines ....................... 59.4%
Medium-Life Gold Mines ..................... 13.7%
Platinum & Palladium ....................... 10.9%
Gold & Diversified Resources ............... 9.4%
Gold Exploration ........................... 0.4%
Short-Term Investments & Other Net Assets .. 6.2%
[END SIDEBAR]
MARKET OVERVIEW
During the year under review, gold and other hard assets attracted increased
institutional and retail investor attention -- even as broader equity markets
began to recover in the latter part of the reporting period. Gold has
underscored its role as an important alternative asset in times of uncertainty
showing low correlation and positive performance relative to the overall market.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
PRECIOUS METALS PRICES (8/1/02-7/31/03) 2
Gold Platinum Palladium
8/1/02 304.65 531.60 320.00
8/2/02 307.35 526.70 319.30
8/9/02 314.55 552.50 323.10
8/16/02 313.95 553.50 318.50
8/23/02 307.05 545.00 324.00
8/30/02 312.75 566.50 324.00
9/6/02 320.25 543.90 334.40
9/13/02 316.85 557.40 341.50
9/20/02 322.15 559.50 330.00
9/27/02 319.95 560.50 317.10
10/4/02 322.25 561.40 318.00
10/11/02 316.75 590.60 323.40
10/18/02 312.85 594.00 322.00
10/25/02 313.85 593.30 313.40
11/1/02 319.75 582.10 311.75
11/8/02 321.55 586.90 305.25
11/15/02 320.55 602.60 294.10
11/22/02 321.05 594.40 274.00
11/29/02 318.15 592.00 262.00
12/6/02 326.25 597.50 251.00
12/13/02 333.15 603.00 239.50
12/20/02 340.75 589.50 229.00
12/27/02 349.25 587.20 234.00
1/3/03 351.25 605.00 241.55
1/10/03 354.75 622.50 267.00
1/17/03 356.55 626.00 258.00
1/24/03 368.25 646.50 264.50
1/31/03 368.15 675.50 260.00
2/7/03 369.75 682.50 251.50
2/14/03 351.55 692.50 253.00
2/21/03 351.35 668.50 250.50
2/28/03 349.95 683.50 241.50
3/7/03 350.75 690.50 240.50
3/14/03 336.35 687.50 232.50
3/21/03 326.05 661.00 231.00
3/28/03 331.85 636.50 192.50
4/4/03 325.55 619.50 175.50
4/11/03 328.05 625.00 172.50
4/18/03 325.95 635.50 151.50
4/25/03 333.25 634.50 151.30
5/2/03 340.95 606.00 154.50
5/9/03 348.55 644.50 154.50
5/16/03 354.75 652.50 158.50
5/23/03 368.75 668.50 182.50
5/30/03 364.45 642.50 183.00
6/6/03 363.75 657.50 178.50
6/13/03 356.65 666.00 187.00
6/20/03 357.38 667.50 177.50
6/27/03 345.25 666.50 176.50
7/4/03 350.85 674.50 185.50
7/11/03 345.20 679.50 174.50
7/18/03 347.25 689.00 166.50
7/25/03 362.75 692.50 167.50
7/31/03 354.35 686.50 178.50
Gold prices began the reporting period at $304 per ounce and continued to rally,
peaking at $381 in February. Gold ended the period at $354, a strong one-year
increase. The effects of war in Iraq, continued economic uncertainty and U.S.
dollar weakness supported gold's strong performance. Platinum also showed
strength during the 12 months under review. Platinum prices began the period at
$532 per ounce, passed the $700 mark and ended the period at $687.
Disappointingly, palladium performance diverged markedly from those of the other
two precious metals, sliding from $320 per ounce on August 1, 2002, to $179 on
July 31, 2003. The price decline reflected lower utilization of palladium in
favor of platinum by automobile manufacturers compared to 2001 levels and
continued concerns over high inventory levels for this industrial metal.
INVESTMENT STRATEGY
Our conservative management style seeks to expose shareholders to the benefits
of diversification by investing globally in the precious metal sector. We like
companies with multiple mines, attractive production profiles, strong reserve
bases and active exploration programs that can drive future reserve and
production growth. While
2. Sources: N.M. Rothschild & Sons, London; Swiss Bank Corp., Zurich; Credit
Swiss, Zurich; Republic National Bank, New York; and Mase Westpac, Sydney.
Amounts shown are based on spot prices quoted in U.S. dollars per troy ounce.
4 | Annual Report
the sector can be volatile, precious metals, such as gold, can be attractive
because they are a hard asset not tied to any particular country or financial
system, which can contribute to the asset's stability in times of economic
uncertainty.
MANAGER'S DISCUSSION
During the year under review, we were pleased with the gold market's
fundamentals, given U.S. dollar weakness, strength in many foreign currencies,
and historically low interest rates. The Fund's performance relative to the FT
Gold Mines Index was helped by a number of holdings not in the benchmark such as
Impala Platinum Holdings and Freeport-McMoRan Copper & Gold. Additionally,
overweighted positions relative to the index in Ashanti Goldfields and Randgold
Resources bolstered performance. As the gold price moved higher, we initiated
positions in several small-cap gold companies, such as Rio Narcea, Oxiana and
Wheaton River Minerals, which contributed to Fund performance.
Seeking the benefits of geographic and asset diversification, we continued to
maintain the Fund's largest holdings in top-tier gold producers with widely
diversified mine assets and competitive cost profiles. Our two largest positions
at period-end were long-time Fund holdings Barrick Gold and Newmont Mining,
which appreciated during the reporting period. Our positions in platinum group
metals (PGM) companies, most notably Impala Platinum Holdings, added to the
portfolio's diversification and exposure to the PGM market's positive supply and
demand characteristics.
Thank you for your participation in Franklin Gold and Precious Metals Fund. We
look forward to serving your future investment needs.
[PHOTO OMITTED]
STEPHEN M. LAND PIC
/S/ STEPHEN M. LAND
Stephen M. Land
Portfolio Manager
Franklin Gold and Precious Metals Fund
[BEGIN SIDEBAR]
TOP 10 HOLDINGS
7/31/03
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COMPANY % OF TOTAL
INDUSTRY, COUNTRY NET ASSETS
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Barrick Gold Corp. 10.3%
LONG-LIFE GOLD MINES, CANADA
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Newmont Mining Corp. Holding Co. 9.0%
LONG-LIFE GOLD MINES, U.S.
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Ashanti Goldfields Co. Ltd., GDR 6.5%
LONG-LIFE GOLD MINES, GHANA
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Impala Platinum Holdings Ltd.,
ord. & ADR 5.8%
PLATINUM & PALLADIUM, SOUTH AFRICA
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Freeport-McMoRan Copper &
Gold Inc., B 5.7%
GOLD & DIVERSIFIED RESOURCES, U.S.
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AngloGold Ltd., ord. & ADR 5.4%
LONG-LIFE GOLD MINES, SOUTH AFRICA
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Placer Dome Inc. 5.0%
LONG-LIFE GOLD MINES, CANADA
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Anglo American Platinum Corp. Ltd., ADR 4.3%
PLATINUM & PALLADIUM, SOUTH AFRICA
- ------------------------------------------------
Newcrest Mining Ltd. 4.3%
MEDIUM-LIFE GOLD MINES, AUSTRALIA
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Compania de Minas
Buenaventura SA, ord. & ADR 4.2%
LONG-LIFE GOLD MINES, PERU
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[END SIDEBAR]
THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
JULY 31, 2003, THE END OF THE REPORTING PERIOD. OUR STRATEGIES AND THE FUND'S
PORTFOLIO COMPOSITION WILL CHANGE DEPENDING ON MARKET AND ECONOMIC CONDITIONS.
THESE OPINIONS MAY NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A
PARTICULAR SECURITY. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT
OF ANY MARKET, STATE, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE
FROM SOURCES CONSIDERED RELIABLE, BUT THE ADVISOR MAKES NO REPRESENTATION OR
WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR
INVESTMENT MANAGEMENT PHILOSOPHY.
Annual Report | 5
PERFORMANCE SUMMARY AS OF 7/31/03
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table and graphs do not reflect any taxes
due on Fund dividends, capital gain distributions, if any, or any realized gains
on the sale of Fund shares. Total return reflects the Fund's dividend income,
capital gain distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
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CLASS A CHANGE 7/31/03 7/31/02
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Net Asset Value (NAV) +$3.45 $13.73 $10.28
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DISTRIBUTIONS (8/1/02-7/31/03)
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Dividend Income $0.1145
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CLASS B CHANGE 7/31/03 7/31/02
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Net Asset Value (NAV) +$3.34 $13.45 $10.11
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DISTRIBUTIONS (8/1/02-7/31/03)
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Dividend Income $0.0842
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CLASS C CHANGE 7/31/03 7/31/02
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Net Asset Value (NAV) +$3.40 $13.58 $10.18
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DISTRIBUTIONS (8/1/02-7/31/03)
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Dividend Income $0.0619
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ADVISOR CLASS CHANGE 7/31/03 7/31/02
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Net Asset Value (NAV) +$3.55 $14.08 $10.53
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DISTRIBUTIONS (8/1/02-7/31/03)
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Dividend Income $0.1383
6 | Past performance does not guarantee future results.|Annual Report
PERFORMANCE SUMMARY (CONTINUED)
PERFORMANCE
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CLASS A 1-YEAR 5-YEAR 10-YEAR
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +34.97% +94.95% +9.01%
- ----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +27.17% +12.93% +0.27%
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Value of $10,000 Investment 3 $12,717 $18,366 $10,276
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Avg. Ann. Total Return (6/30/03) 4 +1.75% +10.64% +0.82%
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CLASS B 1-YEAR 3-YEAR INCEPTION (1/1/99)
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Cumulative Total Return 1 +34.08% +78.64% +81.76%
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Average Annual Total Return 2 +30.08% +20.65% +13.66%
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Value of $10,000 Investment 3 $13,008 $17,564 $17,976
- ----------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (6/30/03) 4 +3.17% +16.62% +12.93%
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CLASS C 1-YEAR 5-YEAR INCEPTION (5/1/95)
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Cumulative Total Return 1 +34.16% +88.65% +4.98%
- ----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 +31.87% +13.29% +0.47%
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Value of $10,000 Investment 3 $13,187 $18,664 $10,394
- ----------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (6/30/03) 4 +5.28% +10.94% 0.00%
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ADVISOR CLASS 5 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 +35.38% +98.26% +14.68%
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Average Annual Total Return 2 +35.38% +14.67% +1.38%
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Value of $10,000 Investment 3 $13,538 $19,826 $11,468
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Avg. Ann. Total Return (6/30/03) 4 +8.21% +12.67% +1.93%
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ONGOING MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE
RECENT RETURNS MAY DIFFER FROM THOSE SHOWN. 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 MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
Annual Report|Past performance does not guarantee future results.| 7
PERFORMANCE SUMMARY (CONTINUED)
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, Fund expenses,
account fees and reinvested distributions. The indexes are unmanaged, differ
from the Fund in composition and do not pay management fees or expenses. One
cannot invest directly in an index.
[BEGIN SIDEBAR]
AVERAGE ANNUAL TOTAL RETURN
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CLASS A 7/31/03
- ---------------------------------------
1-Year +27.17%
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5-Year +12.93%
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10-Year +0.27%
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[END SIDEBAR]
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
CLASS A (8/1/93-7/31/03)
Franklin Gold &
Precious Metals Fund - Financial Times
Date Class A S&P 500 Index 6 Gold Mines Index 6
8/1/93 9,427.00 10,000.00 10,000.00
8,468.00 10,379.00 9,288.00
7,720.00 10,299.00 8,287.00
8,631.00 10,512.00 9,747.00
8,474.00 10,412.00 9,532.00
9,680.00 10,538.00 10,994.00
9,510.00 10,897.00 10,694.00
9,072.00 10,601.00 9,995.00
9,169.00 10,140.00 10,056.00
8,762.00 10,270.00 9,369.00
8,951.00 10,437.00 9,656.00
8,869.00 10,182.00 9,436.00
7/31/94 9,095.00 10,516.00 9,691.00
9,560.00 10,946.00 10,288.00
10,336.00 10,679.00 11,483.00
9,841.00 10,918.00 10,652.00
8,844.00 10,520.00 9,335.00
9,222.00 10,676.00 9,762.00
7,846.00 10,953.00 8,093.00
8,288.00 11,379.00 8,550.00
9,106.00 11,714.00 9,535.00
9,179.00 12,059.00 9,533.00
9,063.00 12,540.00 9,393.00
9,125.00 12,831.00 9,523.00
7/31/95 9,380.00 13,256.00 9,635.00
9,393.00 13,289.00 9,745.00
9,436.00 13,850.00 9,811.00
8,384.00 13,800.00 8,513.00
9,001.00 14,404.00 9,325.00
9,104.00 14,682.00 9,454.00
10,556.00 15,181.00 11,392.00
10,582.00 15,322.00 11,561.00
10,614.00 15,470.00 11,531.00
10,744.00 15,697.00 11,496.00
11,152.00 16,100.00 11,744.00
9,749.00 16,162.00 9,963.00
7/31/96 9,535.00 15,447.00 9,860.00
9,912.00 15,773.00 10,036.00
9,320.00 16,660.00 9,149.00
9,346.00 17,119.00 9,277.00
9,274.00 18,412.00 9,265.00
9,199.00 18,047.00 9,009.00
8,790.00 19,174.00 8,390.00
9,850.00 19,325.00 9,424.00
8,770.00 18,533.00 8,088.00
8,215.00 19,637.00 7,256.00
8,638.00 20,831.00 7,757.00
8,105.00 21,764.00 6,882.00
7/31/97 7,966.00 23,495.00 6,987.00
7,854.00 22,179.00 6,976.00
8,210.00 23,392.00 7,535.00
6,914.00 22,611.00 6,135.00
5,772.00 23,658.00 4,831.00
5,915.00 24,065.00 5,229.00
6,244.00 24,329.00 5,523.00
6,216.00 26,084.00 5,322.00
6,587.00 27,419.00 5,658.00
7,042.00 27,696.00 6,416.00
6,069.00 27,220.00 5,372.00
5,609.00 28,325.00 4,911.00
7/31/98 5,271.00 28,024.00 4,451.00
4,214.00 23,978.00 3,467.00
5,891.00 25,515.00 5,440.00
5,905.00 27,589.00 5,501.00
5,793.00 29,261.00 5,214.00
5,467.00 30,946.00 4,618.00
5,453.00 32,240.00 4,607.00
5,340.00 31,237.00 4,307.00
5,439.00 32,487.00 4,295.00
6,445.00 33,744.00 5,031.00
5,623.00 32,948.00 4,094.00
6,062.00 34,776.00 4,374.00
7/31/99 5,878.00 33,691.00 4,174.00
6,119.00 33,523.00 4,438.00
7,224.00 32,604.00 5,581.00
6,529.00 34,668.00 4,841.00
6,636.00 35,372.00 4,626.00
6,855.00 37,455.00 4,587.00
6,386.00 35,575.00 4,048.00
6,109.00 34,903.00 4,176.00
5,931.00 38,316.00 3,863.00
5,518.00 37,163.00 3,738.00
5,711.00 36,401.00 3,850.00
5,974.00 37,300.00 3,990.00
7/31/00 5,618.00 36,718.00 3,601.00
6,180.00 38,998.00 3,646.00
5,739.00 36,939.00 3,452.00
5,433.00 36,784.00 2,927.00
5,789.00 33,886.00 3,087.00
6,349.00 34,052.00 3,378.00
6,472.00 35,260.00 3,299.00
6,760.00 32,048.00 3,532.00
5,939.00 30,020.00 3,185.00
6,796.00 32,349.00 3,713.00
7,322.00 32,566.00 3,841.00
6,955.00 31,774.00 3,837.00
7/31/01 6,400.00 31,463.00 3,746.00
6,811.00 29,497.00 3,985.00
6,681.00 27,116.00 4,347.00
6,479.00 27,634.00 4,157.00
6,558.00 29,754.00 3,991.00
6,984.00 30,016.00 4,145.00
7,525.00 29,577.00 4,737.00
8,214.00 29,006.00 5,207.00
8,880.00 30,097.00 5,741.00
9,362.00 28,273.00 6,123.00
10,436.00 28,067.00 7,016.00
9,147.00 26,068.00 6,010.00
7/31/02 7,614.00 24,038.00 5,084.00
8,592.00 24,194.00 5,789.00
8,606.00 21,567.00 5,819.00
8,147.00 23,462.00 5,292.00
8,177.00 24,842.00 5,157.00
9,595.00 23,384.00 6,314.00
9,707.00 22,773.00 6,286.00
9,019.00 22,432.00 5,884.00
8,472.00 22,647.00 5,520.00
8,338.00 24,513.00 5,462.00
9,573.00 25,802.00 6,087.00
9,872.00 26,133.00 6,403.00
7/31/03 10,276.00 26,593.00 6,635.00
[BEGIN SIDEBAR]
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------------------
CLASS B 7/31/03
- ---------------------------------------
1-Year +30.08%
- ---------------------------------------
3-Year +20.65%
- ---------------------------------------
Since Inception (1/1/99) +13.66%
- ---------------------------------------
[END SIDEBAR]
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
CLASS B (1/1/99-7/31/03)
Franklin Gold &
Precious Metals Fund - Financial Times
Date Class B S&P 500 Index 6 Gold Mines Index 6
1/1/99 10,000.00 10,000.00 10,000.00
9,961.00 10,418.00 9,975.00
9,754.00 10,094.00 9,326.00
9,935.00 10,498.00 9,300.00
11,762.00 10,904.00 10,893.00
10,259.00 10,647.00 8,864.00
11,049.00 11,238.00 9,471.00
10,699.00 10,887.00 9,038.00
11,140.00 10,833.00 9,610.00
13,161.00 10,536.00 12,084.00
11,878.00 11,203.00 10,483.00
12,073.00 11,430.00 10,016.00
12,452.00 12,103.00 9,933.00
11,606.00 11,496.00 8,766.00
2/29/00 11,099.00 11,278.00 9,043.00
10,747.00 12,381.00 8,365.00
10,006.00 12,009.00 8,093.00
10,344.00 11,763.00 8,337.00
10,812.00 12,053.00 8,640.00
10,175.00 11,865.00 7,797.00
11,177.00 12,602.00 7,894.00
10,370.00 11,937.00 7,475.00
9,810.00 11,886.00 6,337.00
10,448.00 10,950.00 6,685.00
11,436.00 11,003.00 7,315.00
11,658.00 11,394.00 7,142.00
12,169.00 10,356.00 7,649.00
10,676.00 9,700.00 6,896.00
4/30/01 12,208.00 10,453.00 8,040.00
13,165.00 10,523.00 8,316.00
12,497.00 10,268.00 8,309.00
11,475.00 10,167.00 8,111.00
12,222.00 9,532.00 8,629.00
11,973.00 8,762.00 9,413.00
11,606.00 8,930.00 9,002.00
11,737.00 9,615.00 8,641.00
12,497.00 9,699.00 8,975.00
13,449.00 9,558.00 10,257.00
14,669.00 9,373.00 11,275.00
15,849.00 9,726.00 12,432.00
16,693.00 9,136.00 13,258.00
18,611.00 9,069.00 15,193.00
6/30/02 16,305.00 8,424.00 13,012.00
13,556.00 7,768.00 11,009.00
15,299.00 7,818.00 12,534.00
15,312.00 6,969.00 12,601.00
14,481.00 7,582.00 11,459.00
14,535.00 8,027.00 11,166.00
17,041.00 7,556.00 13,673.00
17,230.00 7,359.00 13,611.00
16,000.00 7,249.00 12,741.00
15,027.00 7,318.00 11,953.00
14,771.00 7,921.00 11,827.00
16,960.00 8,338.00 13,180.00
17,473.00 8,445.00 13,864.00
7/31/03 17,976.00 8,593.00 14,367.00
8 | Past performance does not guarantee future results.|Annual Report
PERFORMANCE SUMMARY (CONTINUED)
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
CLASS C (5/1/95-7/31/03)
Franklin Gold &
Precious Metals Fund - Financial Times
Date Class C S&P 500 Index 6 Gold Mines Index 6
5/1/95 9,901.00 10,000.00 10,000.00
9,717.00 10,399.00 9,853.00
9,777.00 10,640.00 9,990.00
10,044.00 10,992.00 10,107.00
10,051.00 11,020.00 10,223.00
10,091.00 11,485.00 10,292.00
8,963.00 11,444.00 8,930.00
9,617.00 11,945.00 9,782.00
9,715.00 12,175.00 9,917.00
11,253.00 12,589.00 11,950.00
11,280.00 12,706.00 12,128.00
11,301.00 12,828.00 12,096.00
11,433.00 13,017.00 12,059.00
11,855.00 13,352.00 12,319.00
10,362.00 13,402.00 10,452.00
10,126.00 12,810.00 10,343.00
10,521.00 13,080.00 10,528.00
9,890.00 13,815.00 9,597.00
9,911.00 14,197.00 9,732.00
9,828.00 15,268.00 9,719.00
9,743.00 14,966.00 9,451.00
9,307.00 15,900.00 8,802.00
10,415.00 16,026.00 9,886.00
9,263.00 15,369.00 8,484.00
8,673.00 16,285.00 7,612.00
5/31/97 9,116.00 17,275.00 8,137.00
8,540.00 18,049.00 7,219.00
8,392.00 19,483.00 7,330.00
8,267.00 18,392.00 7,318.00
8,643.00 19,398.00 7,904.00
7,256.00 18,750.00 6,436.00
6,067.00 19,619.00 5,067.00
6,207.00 19,956.00 5,485.00
6,554.00 20,176.00 5,794.00
6,525.00 21,630.00 5,583.00
6,916.00 22,738.00 5,936.00
7,396.00 22,967.00 6,731.00
6,377.00 22,572.00 5,635.00
5,888.00 23,489.00 5,152.00
5,510.00 23,240.00 4,669.00
4,405.00 19,884.00 3,637.00
6,155.00 21,159.00 5,707.00
6,170.00 22,879.00 5,770.00
6,044.00 24,265.00 5,470.00
5,707.00 25,663.00 4,845.00
5,685.00 26,736.00 4,832.00
5,566.00 25,904.00 4,518.00
5,670.00 26,940.00 4,505.00
6,716.00 27,983.00 5,277.00
5/31/99 5,855.00 27,322.00 4,294.00
6,308.00 28,839.00 4,588.00
6,108.00 27,939.00 4,379.00
6,360.00 27,799.00 4,655.00
7,503.00 27,038.00 5,854.00
6,776.00 28,749.00 5,079.00
6,887.00 29,333.00 4,853.00
7,103.00 31,060.00 4,812.00
6,621.00 29,501.00 4,247.00
6,331.00 28,944.00 4,381.00
6,138.00 31,774.00 4,052.00
5,708.00 30,818.00 3,921.00
5,908.00 30,186.00 4,039.00
6,175.00 30,932.00 4,186.00
5,812.00 30,449.00 3,777.00
6,383.00 32,340.00 3,824.00
5,930.00 30,633.00 3,621.00
5,604.00 30,504.00 3,070.00
5,967.00 28,100.00 3,238.00
6,538.00 28,238.00 3,544.00
6,665.00 29,240.00 3,460.00
6,956.00 26,576.00 3,706.00
6,106.00 24,894.00 3,341.00
6,985.00 26,826.00 3,895.00
7,522.00 27,006.00 4,029.00
6/30/01 7,142.00 26,349.00 4,025.00
6,561.00 26,091.00 3,929.00
6,985.00 24,461.00 4,180.00
6,844.00 22,487.00 4,560.00
6,635.00 22,916.00 4,361.00
6,710.00 24,674.00 4,186.00
7,139.00 24,891.00 4,348.00
7,687.00 24,527.00 4,969.00
8,387.00 24,054.00 5,462.00
9,057.00 24,959.00 6,023.00
9,544.00 23,446.00 6,423.00
10,640.00 23,275.00 7,360.00
9,315.00 21,618.00 6,304.00
7,748.00 19,934.00 5,333.00
8,745.00 20,063.00 6,072.00
8,752.00 17,884.00 6,105.00
8,280.00 19,456.00 5,551.00
8,311.00 20,600.00 5,409.00
9,744.00 19,391.00 6,624.00
9,851.00 18,885.00 6,594.00
9,147.00 18,602.00 6,173.00
8,596.00 18,780.00 5,791.00
8,450.00 20,328.00 5,730.00
9,698.00 21,397.00 6,385.00
9,996.00 21,671.00 6,717.00
7/31/03 10,394.00 22,052.00 6,960.00
[BEGIN SIDEBAR]
AVERAGE ANNUAL TOTAL RETURN
- ---------------------------------------
CLASS C 7/31/03
- ---------------------------------------
1-Year +31.87%
- ---------------------------------------
5-Year +13.29%
- ---------------------------------------
Since Inception (5/1/95) +0.47%
- ---------------------------------------
[END SIDEBAR]
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
ADVISOR CLASS (8/1/93-7/31/03) 5
Franklin Gold &
Precious Metals Fund - Financial Times
Date Advisor Class S&P 500 Index 6 Gold Mines Index 6
8/1/93 10,000.00 10,000.00 10,000.00
8,983.00 10,379.00 9,288.00
8,190.00 10,299.00 8,287.00
9,156.00 10,512.00 9,747.00
8,990.00 10,412.00 9,532.00
10,269.00 10,538.00 10,994.00
10,088.00 10,897.00 10,694.00
9,624.00 10,601.00 9,995.00
9,727.00 10,140.00 10,056.00
9,295.00 10,270.00 9,369.00
9,495.00 10,437.00 9,656.00
9,409.00 10,182.00 9,436.00
7/31/94 9,648.00 10,516.00 9,691.00
10,141.00 10,946.00 10,288.00
10,965.00 10,679.00 11,483.00
10,440.00 10,918.00 10,652.00
9,383.00 10,520.00 9,335.00
9,784.00 10,676.00 9,762.00
8,324.00 10,953.00 8,093.00
8,794.00 11,379.00 8,550.00
9,661.00 11,714.00 9,535.00
9,739.00 12,059.00 9,533.00
9,615.00 12,540.00 9,393.00
9,682.00 12,831.00 9,523.00
7/31/95 9,953.00 13,256.00 9,635.00
9,966.00 13,289.00 9,745.00
10,011.00 13,850.00 9,811.00
8,895.00 13,800.00 8,513.00
9,549.00 14,404.00 9,325.00
9,659.00 14,682.00 9,454.00
11,198.00 15,181.00 11,392.00
11,226.00 15,322.00 11,561.00
11,261.00 15,470.00 11,531.00
11,399.00 15,697.00 11,496.00
11,832.00 16,100.00 11,744.00
10,343.00 16,162.00 9,963.00
7/31/96 10,116.00 15,447.00 9,860.00
10,516.00 15,773.00 10,036.00
9,887.00 16,660.00 9,149.00
9,915.00 17,119.00 9,277.00
9,839.00 18,412.00 9,265.00
9,759.00 18,047.00 9,009.00
9,447.00 19,174.00 8,390.00
10,585.00 19,325.00 9,424.00
9,425.00 18,533.00 8,088.00
8,830.00 19,637.00 7,256.00
9,291.00 20,831.00 7,757.00
8,708.00 21,764.00 6,882.00
7/31/97 8,565.00 23,495.00 6,987.00
8,445.00 22,179.00 6,976.00
8,834.00 23,392.00 7,535.00
7,425.00 22,611.00 6,135.00
6,219.00 23,658.00 4,831.00
6,367.00 24,065.00 5,229.00
6,729.00 24,329.00 5,523.00
6,706.00 26,084.00 5,322.00
7,106.00 27,419.00 5,658.00
7,604.00 27,696.00 6,416.00
6,563.00 27,220.00 5,372.00
6,065.00 28,325.00 4,911.00
7/31/98 5,784.00 28,024.00 4,451.00
4,629.00 23,978.00 3,467.00
6,476.00 25,515.00 5,440.00
6,499.00 27,589.00 5,501.00
6,369.00 29,261.00 5,214.00
6,021.00 30,946.00 4,618.00
6,006.00 32,240.00 4,607.00
5,883.00 31,237.00 4,307.00
5,998.00 32,487.00 4,295.00
7,107.00 33,744.00 5,031.00
6,204.00 32,948.00 4,094.00
6,694.00 34,776.00 4,374.00
7/31/99 6,495.00 33,691.00 4,174.00
6,771.00 33,523.00 4,438.00
7,995.00 32,604.00 5,581.00
7,222.00 34,668.00 4,841.00
7,352.00 35,372.00 4,626.00
7,583.00 37,455.00 4,587.00
7,067.00 35,575.00 4,048.00
6,760.00 34,903.00 4,176.00
6,560.00 38,316.00 3,863.00
6,106.00 37,163.00 3,738.00
6,322.00 36,401.00 3,850.00
6,614.00 37,300.00 3,990.00
7/31/00 6,221.00 36,718.00 3,601.00
6,844.00 38,998.00 3,646.00
6,360.00 36,939.00 3,452.00
6,021.00 36,784.00 2,927.00
6,413.00 33,886.00 3,087.00
7,032.00 34,052.00 3,378.00
7,173.00 35,260.00 3,299.00
7,493.00 32,048.00 3,532.00
6,579.00 30,020.00 3,185.00
7,533.00 32,349.00 3,713.00
8,126.00 32,566.00 3,841.00
7,720.00 31,774.00 3,837.00
7/31/01 7,094.00 31,463.00 3,746.00
7,556.00 29,497.00 3,985.00
7,415.00 27,116.00 4,347.00
7,196.00 27,634.00 4,157.00
7,282.00 29,754.00 3,991.00
7,754.00 30,016.00 4,145.00
8,357.00 29,577.00 4,737.00
9,121.00 29,006.00 5,207.00
9,861.00 30,097.00 5,741.00
10,399.00 28,273.00 6,123.00
11,597.00 28,067.00 7,016.00
10,174.00 26,068.00 6,010.00
7/31/02 8,469.00 24,038.00 5,084.00
9,555.00 24,194.00 5,789.00
9,578.00 21,567.00 5,819.00
9,064.00 23,462.00 5,292.00
9,104.00 24,842.00 5,157.00
10,683.00 23,384.00 6,314.00
10,813.00 22,773.00 6,286.00
10,040.00 22,432.00 5,884.00
9,445.00 22,647.00 5,520.00
9,291.00 24,513.00 5,462.00
10,675.00 25,802.00 6,087.00
11,009.00 26,133.00 6,403.00
7/31/03 11,468.00 26,593.00 6,635.00
[BEGIN SIDEBAR]
- ---------------------------------------
ADVISOR CLASS 5 7/31/03
- ---------------------------------------
1-Year +35.38%
- ---------------------------------------
5-Year +14.67%
- ---------------------------------------
10-Year +1.38%
- ---------------------------------------
[END SIDEBAR]
Annual Report|Past performance does not guarantee future results.| 9
PERFORMANCE SUMMARY (CONTINUED)
ENDNOTES
INVESTING IN A NON-DIVERSIFIED FUND CONCENTRATING IN THE PRECIOUS METALS SECTOR
INVOLVES SPECIAL RISKS, INCLUDING THOSE RELATED TO FLUCTUATIONS IN THE PRICE OF
GOLD AND OTHER PRECIOUS METALS AND INCREASED SUSCEPTIBILITY TO ADVERSE ECONOMIC
AND REGULATORY DEVELOPMENTS AFFECTING THE SECTOR. THE FUND MAY ALSO INVEST IN
FOREIGN COMPANIES, INCLUDING IN DEVELOPING MARKETS, WHICH CAN INVOLVE EXPOSURE
TO CURRENCY VOLATILITY AND POLITICAL ECONOMIC AND REGULATORY UNCERTAINTY. THESE
AND OTHER RISKS ARE DISCUSSED MORE FULLY IN THE FUND'S PROSPECTUS.
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.
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; are available to a
limited class of investors.
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 any current, applicable,
maximum sales charge(s).
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include any current, applicable, maximum
sales charge(s).
4. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.
5. Effective 1/2/97, the Fund began offering Advisor Class shares, which do not
have sales charges or a Rule 12b-1 plan. Performance quotations for this class
reflect the following methods of calculation: (a) For periods prior to 1/2/97, a
restated figure is used based upon the Fund's Class A performance, excluding the
effect of Class A's maximum initial sales charge, but reflecting the effect of
the Class A Rule 12b-1 fees; and (b) for periods after 1/1/97, actual Advisor
Class performance is used reflecting 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 +17.52% and +1.88%.
6. Sources: Standard & Poor's Micropal; Financial Times. The S&P 500 consists of
500 stocks chosen for market size, liquidity and industry group representation.
Each stock's weight in the index is proportionate to its market value. The S&P
500 includes reinvested dividends and is one of the most widely used benchmarks
of U.S. equity performance. The Financial Times Gold Mines Index is an
unweighted index that tracks the daily performance of gold mining companies in
South Africa, Australia and North America. This is a price-only index and does
not include dividends.
10 | Past performance does not guarantee future results.|Annual Report
FRANKLIN GOLD AND PRECIOUS METALS FUND
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------
YEAR ENDED JULY 31,
-------------------------------------------------------------
CLASS A 2003 2002 2001 2000 1999
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ......................... $10.28 $ 8.88 $7.90 $8.30 $7.48
-------------------------------------------------------------
Income from investment operations:
Net investment income a ................................... .13 .13 .25 .10 .07
Net realized and unrealized gains (losses) ................ 3.44 1.52 .84 (.46) .79
-------------------------------------------------------------
Total from investment operations ........................... 3.57 1.65 1.09 (.36) .86
-------------------------------------------------------------
Less distributions from net investment income .............. (.11) (.25) (.11) (.04) (.04)
-------------------------------------------------------------
Net asset value, end of year ............................... $13.74 $10.28 $8.88 $7.90 $8.30
-------------------------------------------------------------
Total return b ............................................. 34.97% 18.97% 13.91% (4.42)% 11.51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............................ $306,283 $200,627 $164,004 $156,236 $205,889
Ratios to average net assets:
Expenses .................................................. 1.09% 1.13% 1.32% 1.34% 1.31%
Net investment income ..................................... 1.05% 1.18% 2.86% 1.17% .85%
Portfolio turnover rate .................................... 6.59% 12.77% 7.31% 3.53% 4.29%
<FN>
aBased on average shares outstanding.
bTotal return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
</FN>
Annual Report | 11
FRANKLIN GOLD AND PRECIOUS METALS FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
----------------------------------------------------------
YEAR ENDED JULY 31,
----------------------------------------------------------
CLASS B 2003 2002 2001 2000 1999 C
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ........................ $10.11 $ 8.76 $7.82 $8.26 $7.72
----------------------------------------------------------
Income from investment operations:
Net investment income (loss) a ........................... .02 .01 .17 .01 (.04)
Net realized and unrealized gains (losses) ............... 3.41 1.55 .83 (.41) .58
----------------------------------------------------------
Total from investment operations .......................... 3.43 1.56 1.00 (.40) .54
----------------------------------------------------------
Less distributions from net investment income ............. (.08) (.21) (.06) (.04) --
----------------------------------------------------------
Net asset value, end of year .............................. $13.46 $10.11 $8.76 $7.82 $8.26
----------------------------------------------------------
Total return b ............................................ 34.08% 18.14% 12.78% (4.90)% 6.99%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................... $26,278 $10,964 $4,037 $2,779 $1,217
Ratios to average net assets:
Expenses ................................................. 1.85% 1.89% 2.08% 2.10% 2.10% d
Net investment income (loss) ............................. .29% .12% 1.88% .17% (.84)% d
Portfolio turnover rate ................................... 6.59% 12.77% 7.31% 3.53% 4.29%
<FN>
aBased on average shares outstanding.
bTotal return does not reflect the contingent deferred sales charge, and is not
annualized for periods less than one year.
cFor the period January 1, 1999 (effective date) to July 31, 1999.
dAnnualized.
</FN>
12 | Annual Report
FRANKLIN GOLD AND PRECIOUS METALS FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
---------------------------------------------------------
YEAR ENDED JULY 31,
---------------------------------------------------------
CLASS C 2003 2002 2001 2000 1999
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ....................... $10.18 $ 8.80 $7.83 $8.23 $7.43
---------------------------------------------------------
Income from investment operations:
Net investment income a ................................. .04 .04 .18 .03 .01
Net realized and unrealized gains (losses) .............. 3.43 1.53 .83 (.43) .80
---------------------------------------------------------
Total from investment operations ......................... 3.47 1.57 1.01 (.40) .81
---------------------------------------------------------
Less distributions from net investment income ............ (.06) (.19) (.04) -- c (.01)
---------------------------------------------------------
Net asset value, end of year ............................. $13.59 $10.18 $8.80 $7.83 $8.23
---------------------------------------------------------
Total return b ........................................... 34.16% 18.09% 12.89% (4.85)% 10.85%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .......................... $65,729 $38,219 $22,220 $20,721 $23,473
Ratios to average net assets:
Expenses ................................................ 1.82% 1.88% 2.07% 2.10% 2.07%
Net investment income ................................... .32% .35% 2.11% .36% .08%
Portfolio turnover rate .................................. 6.59% 12.77% 7.31% 3.53% 4.29%
<FN>
aBased on average shares outstanding.
bTotal return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
cIncludes distributions from net investment income in the amount of $.001.
</FN>
Annual Report | 13
FRANKLIN GOLD AND PRECIOUS METALS FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
---------------------------------------------------------
YEAR ENDED JULY 31,
---------------------------------------------------------
ADVISOR CLASS 2003 2002 2001 2000 1999
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ....................... $10.53 $ 9.09 $8.09 $8.49 $7.61
---------------------------------------------------------
Income from investment operations:
Net investment income a ................................. .09 .15 .28 .11 .08
Net realized and unrealized gains (losses) .............. 3.60 1.56 .85 (.46) .85
---------------------------------------------------------
Total from investment operations ......................... 3.69 1.71 1.13 (.35) .93
---------------------------------------------------------
Less distributions from net investment income ............ (.14) (.27) (.13) (.05) (.05)
---------------------------------------------------------
Net asset value, end of year ............................. $14.08 $10.53 $9.09 $8.09 $8.49
---------------------------------------------------------
Total return ............................................. 35.38% 19.38% 14.04% (4.21)% 12.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .......................... $21,223 $5,573 $3,574 $3,715 $3,204
Ratios to average net assets:
Expenses ................................................ .85% .90% 1.08% 1.10% 1.08%
Net investment income ................................... 1.29% 1.29% 3.15% 1.24% .98%
Portfolio turnover rate .................................. 6.59% 12.77% 7.31% 3.53% 4.29%
<FN>
aBased on average shares outstanding.
</FN>
14 | See notes to financial statements.|Annual Report
FRANKLIN GOLD AND PRECIOUS METALS FUND
STATEMENT OF INVESTMENTS, JULY 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------
SHARES/
COUNTRY WARRANTS VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS 93.8%
GOLD AND DIVERSIFIED RESOURCES 9.4%
Anglo American PLC ..................................................... United Kingdom 256,100 $ 4,450,154
Anglo American PLC, ADR ................................................ United Kingdom 420,479 7,358,382
Freeport-McMoRan Copper & Gold Inc., B ................................. United States 897,011 24,030,924
Rio Tinto PLC .......................................................... United Kingdom 170,401 3,533,472
a Sociedad Minera El Brocal SA ........................................... Peru 1,006 1,087
-------------
39,374,019
GOLD EXPLORATION .4%
a Gabriel Resources Ltd. ................................................. Canada 648,000 1,058,335
a Nevsun Resources Ltd. .................................................. Canada 267,000 703,405
-------------
1,761,740
-------------
LONG LIFE GOLD MINES 59.4%
a African Rainbow Minerals Gold Ltd. ..................................... South Africa 1,215,000 10,846,839
Agnico-Eagle Mines Ltd. ................................................ Canada 650,000 7,806,500
AngloGold Ltd. ......................................................... South Africa 182,530 5,995,610
AngloGold Ltd., ADR .................................................... South Africa 498,617 16,469,319
a Ashanti Goldfields Co. Ltd., GDR, Reg S ................................ Ghana 3,392,450 27,377,071
Barrick Gold Corp. ..................................................... Canada 2,511,371 42,994,672
Compania de Minas Buenaventura SA ...................................... Peru 100,593 1,687,899
Compania de Minas Buenaventura SA, ADR ................................. Peru 483,993 16,092,767
Gold Fields Ltd. ....................................................... South Africa 704,999 8,483,079
Gold Fields Ltd., ADR .................................................. South Africa 389,528 4,666,545
Harmony Gold Mining Co. Ltd. ........................................... South Africa 1,283,000 15,990,122
Lihir Gold Ltd. ........................................................ Papua New Guinea 7,066,841 6,045,633
Lihir Gold Ltd., ADR, 144A ............................................. Papua New Guinea 50,000 872,550
a Meridian Gold Inc. ..................................................... Canada 578,760 7,274,314
Newmont Mining Corp. ................................................... United States 1,048,914 37,865,795
a Oxiana Ltd. ............................................................ Australia 6,750,000 3,062,276
Placer Dome Inc. ....................................................... Canada 1,696,455 20,917,290
a Randgold Resources Ltd., ADR ........................................... United Kingdom 637,000 12,542,530
a Western Areas Ltd. ..................................................... South Africa 402,225 2,021,136
a Western Areas Ltd., ADR ................................................ South Africa 26,430 132,808
-------------
249,144,755
-------------
MEDIUM LIFE GOLD MINES 13.7%
a Apollo Gold Corp. ...................................................... Canada 450,000 894,727
a Glamis Gold Ltd. ....................................................... Canada 456,000 5,745,600
Kingsgate Consolidated Ltd. ............................................ Australia 1,405,148 3,141,837
a Kinross Gold Corp. ..................................................... Canada 2,030,012 13,088,947
Newcrest Mining Ltd. ................................................... Australia 3,165,050 18,071,700
a Rio Narcea Gold Mines Ltd. ............................................. Canada 850,000 1,345,997
Sons of Gwalia Ltd. .................................................... Australia 2,630,500 5,029,246
a Wheaton River Minerals Ltd. ............................................ Canada 5,250,000 7,269,661
a Wheaton River Minerals Ltd., wts., 5/30/07 ............................. Canada 1,312,500 745,606
a,c Yamana Resources Inc. Subscription Receipts .......................... Canada 2,300,000 2,008,876
-------------
57,342,197
-------------
Annual Report | 15
FRANKLIN GOLD AND PRECIOUS METALS FUND
STATEMENT OF INVESTMENTS, JULY 31, 2003 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
SHARES/
COUNTRY WARRANTS VALUE
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS (CONT.)
PLATINUM & PALLADIUM 10.9%
Anglo American Platinum Corp. Ltd., ADR ............................... South Africa 571,138 $ 18,182,483
Impala Platinum Holdings Ltd. ......................................... South Africa 194,000 12,299,586
Impala Platinum Holdings Ltd., ADR .................................... South Africa 385,600 12,223,506
a North American Palladium Ltd. ......................................... Canada 377,500 1,351,039
a Stillwater Mining Co. ................................................. United States 290,550 1,583,498
-------------
45,640,112
-------------
TOTAL COMMON STOCKS AND WARRANTS (COST $302,859,362) .................. 393,262,823
-------------
SHORT TERM INVESTMENTS (COST $28,138,887) 6.7%
b Franklin Institutional Fiduciary Trust Money Market Portfolio ......... United States 28,138,887 28,138,887
-------------
TOTAL INVESTMENTS (COST $330,998,249) 100.5% .......................... 421,401,710
OTHER ASSETS, LESS LIABILITIES (0.5)% ................................. (1,887,769)
-------------
NET ASSETS 100.0% ..................................................... $419,513,941
-------------
aNon-income producing.
bSee Note 6 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio.
cSee Note 7 regarding restricted securities.
16 | See notes to financial statements.|Annual Report
FRANKLIN GOLD AND PRECIOUS METALS FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2003
Assets:
Investments in securities:
Cost .................................................... $330,998,249
-------------
Value ................................................... 421,401,710
Cash ..................................................... 136,699
Foreign currency, at value and cost ...................... 2,082,372
Receivables:
Capital shares sold ..................................... 1,133,781
Dividends ............................................... 80,731
Other Assets ............................................ 30,028
-------------
Total assets ........................................ 424,865,321
-------------
Liabilities:
Payables:
Investment securities purchased ......................... 4,056,049
Capital shares redeemed ................................. 632,188
Affiliates .............................................. 433,880
Shareholders ............................................ 134,807
Other liabilities ........................................ 94,456
-------------
Total liabilities ................................... 5,351,380
-------------
Net assets, at value .............................. $419,513,941
-------------
Net assets consist of:
Undistributed net investment income ...................... $ 2,900,602
Net unrealized appreciation (depreciation) ............... 90,436,146
Accumulated net realized gain (loss) ..................... (50,903,351)
Capital shares ........................................... 377,080,544
-------------
Net assets, at value .............................. $419,513,941
-------------
Annual Report | 17
FRANKLIN GOLD AND PRECIOUS METALS FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
July 31, 2003
CLASS A:
Net assets, at value ............................................................ $306,283,189
-------------
Shares outstanding .............................................................. 22,287,701
-------------
Net asset value per share a ..................................................... $13.74
-------------
Maximum offering price per share (Net asset value per share (DIVIDE) 94.25%) ... $14.58
-------------
CLASS B:
Net assets, at value ............................................................ $ 26,278,484
-------------
Shares outstanding .............................................................. 1,952,776
-------------
Net asset value and maximum offering price per share a .......................... $13.46
-------------
CLASS C:
Net assets, at value ............................................................ $ 65,729,328
-------------
Shares outstanding .............................................................. 4,838,352
-------------
Net asset value per share a ..................................................... $13.59
-------------
Maximum offering price per share (Net asset value per share (DIVIDE) 99%) ....... $13.73
-------------
ADVISOR CLASS:
Net assets, at value ............................................................ $ 21,222,940
-------------
Shares outstanding .............................................................. 1,506,818
-------------
Net asset value and maximum offering price per share ............................ $14.08
-------------
aRedemption price is equal to net asset value less any applicable contingent
deferred sales charge.
18 | See notes to financial statements.|Annual Report
FRANKLIN GOLD AND PRECIOUS METALS FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended July 31, 2003
Investment income:
(net of foreign taxes of $ 181,626)
Dividends .............................................................. $ 7,247,868
-----------
Expenses:
Management fees (Note 3) ............................................... 1,703,634
Distribution fees (Note 3)
Class A ............................................................... 615,102
Class B ............................................................... 192,861
Class C ............................................................... 507,883
Transfer agent fees (Note 3) ........................................... 832,148
Custodian fees ......................................................... 105,119
Reports to shareholders ................................................ 83,724
Registration and filing fees ........................................... 78,528
Professional fees ...................................................... 34,805
Trustees' fees and expenses ............................................ 14,810
Other .................................................................. 23,557
-----------
Total expenses .................................................... 4,192,171
-----------
Net investment income ........................................... 3,055,697
-----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ........................................................... (4,585,114)
Foreign currency transactions ......................................... (244,300)
-----------
Net realized gain (loss) ........................................ (4,829,414)
-----------
Net unrealized appreciation (depreciation) on:
Investments ........................................................... 97,993,218
Translation of assets and liabilities denominated in foreign currencies 32,685
-----------
Net unrealized appreciation (depreciation) ...................... 98,025,903
-----------
Net realized and unrealized gain (loss) ................................. 93,196,489
-----------
Net increase (decrease) in net assets resulting from operations ......... $96,252,186
-----------
Annual Report|See notes to financial statements.| 19
FRANKLIN GOLD AND PRECIOUS METALS FUND
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended July 31, 2003 and 2002
2003 2002
----------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) ...................................................... $ 3,055,697 $ 2,590,921
Net realized gain (loss) from investments and foreign currency transactions ....... (4,829,414) 1,823,354
Net unrealized appreciation (depreciation) on investments and translation of assets
and liabilities denominated in foreign currency .................................. 98,025,903 21,474,326
----------------------------------
Net increase (decrease) in net assets resulting from operations ............... 96,252,186 25,888,601
Distributions to shareholders from:
Net investment income:
Class A .......................................................................... (2,293,660) (4,689,881)
Class B .......................................................................... (118,232) (115,973)
Class C .......................................................................... (251,973) (493,762)
Advisor Class .................................................................... (72,571) (106,486)
----------------------------------
Total distributions to shareholders ................................................ (2,736,436) (5,406,102)
Capital share transactions: (Note 2)
Class A .......................................................................... 35,230,740 17,103,299
Class B .......................................................................... 10,718,114 7,174,484
Class C .......................................................................... 13,422,528 15,144,140
Advisor Class .................................................................... 11,243,440 1,644,966
----------------------------------
Total capital share transactions ................................................... 70,614,822 41,066,889
Net increase (decrease) in net assets ......................................... 164,130,572 61,549,388
Net assets:
Beginning of year .................................................................. 255,383,369 193,833,981
----------------------------------
End of year ........................................................................ $419,513,941 $255,383,369
----------------------------------
Undistributed net investment income included in net assets:
End of year ........................................................................ $ 2,900,602 $ 2,615,614
----------------------------------
20 | See notes to financial statements.|Annual Report
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 and income by investing at least 80% of
total net assets in securities of companies that mine, process or deal in gold
or other precious metals.
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.
Annual Report | 21
FRANKLIN GOLD AND PRECIOUS METALS FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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 expenses during the reporting period. Actual results could differ from those
estimates.
F. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Funds. Additionally, in the normal course of business, the Fund
enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience the Fund expects the
risk of loss to be remote.
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, contingent
deferred sales charges, distribution fees, voting rights on matters affecting a
single class and its exchange privilege.
At July 31, 2003, there were an unlimited number of shares authorized ($.10 par
value). Transactions in the Fund's shares were as follows:
------------------------------------------------------------
YEAR ENDED JULY 31,
------------------------------------------------------------
2003 2002
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------
CLASS A SHARES:
Shares sold ....................... 16,656,770 $ 203,119,760 18,731,599 $ 207,653,383
Shares issued on reinvestment of
distributions .................... 184,327 2,003,492 437,179 3,930,232
Shares redeemed ................... (14,078,537) (169,892,512) (18,116,790) (194,480,316)
------------------------------------------------------------
Net increase (decrease) ........... 2,762,560 $ 35,230,740 1,051,988 $ 17,103,299
------------------------------------------------------------
CLASS B SHARES:
Shares sold ....................... 1,491,869 $ 17,975,850 993,236 $ 11,460,161
Shares issued on reinvestment of
distributions .................... 10,078 107,837 11,659 103,535
Shares redeemed ................... (633,983) (7,365,573) (380,652) (4,389,212)
------------------------------------------------------------
Net increase (decrease) ........... 867,964 $ 10,718,114 624,243 $ 7,174,484
------------------------------------------------------------
22 | Annual Report
FRANKLIN GOLD AND PRECIOUS METALS FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
------------------------------------------------------------
YEAR ENDED JULY 31,
------------------------------------------------------------
2003 2002
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------
CLASS C SHARES:
Shares sold ....................... 2,475,924 $ 30,074,772 2,619,992 $ 30,838,020
Shares issued on reinvestment of
distributions .................... 18,783 202,855 42,511 380,477
Shares redeemed ................... (1,410,209) (16,855,099) (1,432,981) (16,074,357)
------------------------------------------------------------
Net increase (decrease) ........... 1,084,498 $ 13,422,528 1,229,522 $ 15,144,140
------------------------------------------------------------
ADVISOR CLASS SHARES:
Shares sold ....................... 1,354,547 $ 16,005,126 275,782 $ 3,304,827
Shares issued on reinvestment of
distributions .................... 6,238 69,364 10,615 97,554
Shares redeemed ................... (383,473) (4,831,050) (150,243) (1,757,415)
------------------------------------------------------------
Net increase (decrease) ........... 977,312 $ 11,243,440 136,154 $ 1,644,966
------------------------------------------------------------
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Fund are also officers and/or directors of
the following entities:
- --------------------------------------------------------------------------------------------
ENTITY AFFILIATION
- --------------------------------------------------------------------------------------------
Franklin Advisers Inc. (Advisers) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin/Templeton Distributors Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services LLC (Investor Services) Transfer agent
The Fund pays an investment management fee to Advisers based on the net assets
of the Fund as follows:
- ---------------------------------------------------------------------------
ANNUALIZED FEE RATE AVERAGE MONTHLY 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 $646,077 and $130,418,
respectively.
The Fund paid transfer agent fees of $832,148, of which $610,417 was paid to
Investor Services.
Annual Report | 23
FRANKLIN GOLD AND PRECIOUS METALS FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
At July 31, 2003, the cost of investments, net unrealized appreciation
(depreciation) and undistributed ordinary income for income tax purposes were as
follows:
Cost of investments .............................. $331,397,105
--------------
Unrealized appreciation .......................... 110,004,788
Unrealized depreciation .......................... (20,000,183)
--------------
Net unrealized appreciation (depreciation) ....... $ 90,004,605
--------------
Distributable earnings-- ordinary income ......... $ 2,900,602
--------------
The tax character of distributions paid during the years ended July 31, 2002 and
2003, was as follows:
--------------------------
2003 2002
--------------------------
Distributions paid from:
Ordinary income ....................... $2,736,436 $5,406,102
--------------------------
At July 31, 2003, the Fund had tax basis capital losses of $45,700,262, which
may be carried over to offset future capital gains. Such losses expire as
follows:
Capital loss carryovers expiring in:
2005 .............................................. $ 4,474,120
2006 .............................................. 8,665,097
2007 .............................................. 28,763,977
2008 .............................................. 2,754,018
2009 .............................................. 1,043,050
------------
$45,700,262
------------
At July 31, 2003, the Fund had deferred capital and currency losses occurring
subsequent to October 31, 2002 of $4,586,240 and $217,993 respectively. For tax
purposes, such losses will be reflected in the year ending July 31, 2004.
Net investment income differs for financial statement and tax purposes primarily
due to differing treatment of foreign currency transactions and passive foreign
investment company shares.
Net realized losses differ for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions, wash sales and
losses realized subsequent to October 31, 2002 on the sales of securities and
foreign currencies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended July 31, 2003 aggregated $77,717,089 and $20,858,777, respectively.
24 | Annual Report
FRANKLIN GOLD AND PRECIOUS METALS FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Advisers. Management fees paid by the Fund are reduced on assets invested in the
Sweep Money Fund, in an amount not to exceed the management fees paid by the
Sweep Money Fund. For the year ended July 31, 2003, the Fund earned $231,898 of
dividend income from investment in the Sweep Money Fund.
7. RESTRICTED SECURITIES
At July 31, 2003, investments in securities included issues that are restricted
or illiquid. Restricted securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may also be considered
illiquid if it lacks a readily available market or if its valuation has not
changed for a certain period of time. At July 31, 2003, the Fund held
investments in restricted and illiquid securities that were valued under
approved methods by the Trustees, as follows:
- ------------------------------------------------------------------------------------------------
NUMBER ACQUISITION
OF SHARES ISSUER DATE COST VALUE
- ------------------------------------------------------------------------------------------------
2,300,000 Yamana Resources Inc.
Subscription Receipts ............. 7/29/03 $1,992,564 $2,008,876
----------------------------
TOTAL RESTRICTED SECURITIES (.48% OF NET ASSETS) ... $1,992,564 $2,008,876
----------------------------
Annual Report | 25
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, 2003, 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 of America. 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 of America, which require that we plan and perform the audits
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, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
September 4, 2003
26 | Annual Report
FRANKLIN GOLD AND PRECIOUS METALS FUND
TAX DESIGNATION (UNAUDITED)
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
11.62% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended July 31, 2003.
Under Section 854(b)(2) of the Internal Revenue Code (Code), the Fund hereby
designates up to a maximum of $3,380,489 as qualified dividends for purposes of
the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
July 31, 2003. In January 2004, shareholders will receive Form 1099-DIV which
will include their share of qualified dividends distributed during the calendar
year 2003. Shareholders are advised to check with their tax advisors for
information on the treatment of these amounts on their individual income tax
returns.
At July 31, 2003, 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 2003 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, 2004
semi-annual report of the Fund. In addition, in January 2004, shareholders will
receive Form 1099-DIV which will include their share of taxes withheld and
foreign source income distributed during the calendar year 2003.
- --------------------------------------------------------------------------------
2002 FOREIGN TAX CREDIT INFORMATION (FOR INFORMATIONAL PURPOSES ONLY)
At July 31, 2002, 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. As shown in the table
below, the Fund designated to shareholders the foreign source income and foreign
taxes paid, pursuant to Section 853 of the Internal Revenue Code. This
designation allowed shareholders of record on November 29, 2002, to treat their
proportionate share of foreign taxes paid by the Fund as having been paid
directly by them. The shareholder considered these amounts as foreign taxes paid
in the tax year in which they received the Fund distribution.
Annual Report | 27
FRANKLIN GOLD AND PRECIOUS METALS FUND
TAX DESIGNATION (UNAUDITED) (CONTINUED)
The following table provides a breakdown by country of foreign taxes paid and
foreign source income as designated by the Fund, to Class A, Class B, and Class
C, and Advisor class shareholders.
- ----------------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C
FOREIGN TAX FOREIGN SOURCE FOREIGN TAX FOREIGN SOURCE FOREIGN TAX FOREIGN SOURCE
COUNTRY PAID PER SHARE NCOME PER SHARE PAID PER SHARE INCOME PER SHARE PAID PER SHARE INCOME PER SHARE
- ----------------------------------------------------------------------------------------------------------------------------
Australia ....... $0.0012 $0.0049 $0.0012 $0.0036 $0.0012 $0.0026
Canada .......... 0.0025 0.0087 0.0025 0.0064 0.0025 0.0047
Peru ............ 0.0000 0.0019 0.0000 0.0014 0.0000 0.0010
South Africa .... 0.0000 0.0789 0.0000 0.0581 0.0000 0.0428
United Kingdom .. 0.0021 0.0108 0.0021 0.0079 0.0021 0.0058
-------------------------------------------------------------------------------------------------------
Total ........... $0.0058 $0.1052 $0.0058 $0.0774 $0.0058 $0.0569
-------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------
ADVISOR CLASS
FOREIGN TAX FOREIGN SOURCE
COUNTRY PAID PER SHARE INCOME PER SHARE
- ---------------------------------------------------------------------------
Australia .............................. $0.0012 $0.0059
Canada ................................. 0.0025 0.0105
Peru ................................... 0.0000 0.0023
South Africa ........................... 0.0000 0.0954
United Kingdom ......................... 0.0021 0.0130
----------------------------
Total .................................. $0.0058 $0.1271
In January 2003, shareholders received Form 1099-DIV which included their share
of taxes withheld and foreign source income distributed during the calendar year
2002. Shareholders are advised to check with their tax advisors for information
on the treatment of these amounts on their 2002 individual income tax returns.
28 | Annual Report
BOARD MEMBERS AND OFFICERS
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Trust, principal occupations during the
past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Each board member will serve until
that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
NUMBER OF
PORTFOLIOS IN FUND
LENGTH OF COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------
Frank H. Abbott, III (82) Trustee Since 1968 113 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Abbott Corporation (an investment company); and FORMERLY, Director, MotherLode Gold Mines
Consolidated (gold mining) (until 1996) and Vacu-Dry Co. (food processing) (until 1996).
- -----------------------------------------------------------------------------------------------------------------------
Harris J. Ashton (71) Trustee Since 1982 140 Director, Bar-S Foods (meat packing
One Franklin Parkway company).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and
President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers)
(until 1998).
- -----------------------------------------------------------------------------------------------------------------------
S. Joseph Fortunato (71) Trustee Since 1989 141 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY,, member of the law firm of Pitney, Hardin, Kipp & Szuch.
- -----------------------------------------------------------------------------------------------------------------------
Edith E. Holiday (51) Trustee Since April 2003 90 Director, Amerada Hess Corporation
One Franklin Parkway (exploration and refining of oil and
San Mateo, CA 94403-1906 gas); Hercules Incorporated (chemicals,
fibers and resins); Beverly Enterprises,
Inc. (health care); H.J. Heinz Company
(processed foods and allied products);
RTI International Metals, Inc.
(manufacture and distribution of
titanium); and Canadian National Railway
(railroad).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and
Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and
Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison-United States Treasury
Department (1988-1989).
- -----------------------------------------------------------------------------------------------------------------------
Annual Report | 29
NUMBER OF
PORTFOLIOS IN FUND
LENGTH OF COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (74) Trustee Since 1968 113 Director, The California Center
One Franklin Parkway for Land Recycling (redevelopment).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company
(venture capital).
- ------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (75) Trustee Since 1997 140 Director, White Mountains Insurance
One Franklin Parkway Group, Ltd. (holding company); Martek
San Mateo, CA 94403-1906 Biosciences Corporation; MedImmune,
Inc. (biotechnology); Overstock.com
(Internet services); and Spacehab, Inc.
(aerospace services); and formerly,
Director, MCI Communication Corporation
(subsequently known as MCI WorldCom,
Inc. and WorldCom, Inc.) (communications
services) (1988-2002).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River
Corporation (financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and
President, National Association of Securities Dealers, Inc.
(1970-1987).
- ------------------------------------------------------------------------------------------------------------------------
INTERESTED BOARD MEMBERS AND OFFICERS
NUMBER OF
PORTFOLIOS IN FUND
LENGTH OF COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------
**HARMON E. BURNS (58) Trustee and Trustee since 38 None
One Franklin Parkway Vice President 1993 and Vice
San Mateo, CA 94403-1906 President
since 1986
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director,
Franklin Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment
Advisory Services, Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries
of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (70) Trustee and Trustee since 140 None
One Franklin Parkway Chairman of 1976 and
San Mateo, CA 94403-1906 the Board Chairman of the
Board since 1993
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Chief Executive Officer, Member - Office of the Chairman and Director, Franklin Resources, Inc.;
Vice President, Franklin Templeton Distributors, Inc.; Director, Fiduciary Trust Company International; and officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 46
of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------
30 | Annual Report
NUMBER OF
PORTFOLIOS IN FUND
LENGTH OF COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. (62) Trustee, Trustee since 123 None
One Franklin Parkway President and 1982, President
San Mateo, CA 94403-1906 Chief since 2001 and
Executive Chief Executive
Officer - Officer -
Investment Investment
Management Management
since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director,
Franklin Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services,
Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may
be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin
Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (43) Vice President Since 1995 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin Mutual Advisers, LLC;
Executive Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice President and
Chief Operating Officer, Templeton Investment Counsel, LLC; President and Director, Franklin Advisers, Inc.; Executive
Vice President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief
Financial Officer, Franklin Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or
director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the
investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (55) Senior Vice Since 2002 Not Applicable None
500 East Broward Blvd. President and
Suite 2100 Chief
Fort Lauderdale, FL Executive
33394-3091 Officer -
Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the
investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (56) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin
Resources, Inc.; officer of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY, President,
Chief Executive Officer and Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust
(until 2000).
- ------------------------------------------------------------------------------------------------------------------------
Annual Report | 31
NUMBER OF
PORTFOLIOS IN FUND
LENGTH OF COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (55) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President and Deputy General Counsel, Franklin Resources, Inc.; Senior Vice President, Templeton Worldwide, Inc.;
officer of some of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior
Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange
Commission (1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of
Massachusetts) (until 1979).
- ------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (66) Vice President Since 2002 Not Applicable Director, FTI Banque, Arch
600 Fifth Avenue - AML Chemicals, Inc. and Lingnan
Rockefeller Center Compliance Foundation.
New York, NY 10048-0772
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Chief Banking Officer and Director, Fiduciary Trust Company International; and officer and/or director,
as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 47 of the investment companies
in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------
KIMBERLEY H. MONASTERIO (39) Treasurer and Treasurer since Not Applicable None
One Franklin Parkway Chief Financial 2000 and Chief
San Mateo, CA 94403-1906 Officer Financial Officer
since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; and officer of 51 of the investment companies in Franklin
Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------
32 | Annual Report
NUMBER OF
PORTFOLIOS IN FUND
LENGTH OF COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (66) Vice President Since 2000 Not Applicable None
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of
some of the subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia)
Limited (until 2000); and Director, Templeton Asset Management Ltd. (until 1999).
- ------------------------------------------------------------------------------------------------------------------------
*We base the number of portfolios on each separate series of the U.S. registered
investment companies within the Franklin Templeton Investments fund complex.
These portfolios have a common investment adviser or affiliated investment
advisers.
**Charles B. Johnson and Rupert H. Johnson, Jr. are considered interested
persons of the Fund under the federal securities laws due to their positions as
officers and directors and major shareholders of Franklin Resources Inc.
(Resources), which is the parent company of the Fund's adviser and distributor.
Harmon E. Burns is considered an interested person of the Fund under the federal
securities laws due to his position as officer and director of Resources.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAVE DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE FUND'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
THE FUND HAS ESTABLISHED PROXY VOTING POLICIES AND PROCEDURES ("POLICIES") THAT
THE FUND USES TO DETERMINE HOW TO VOTE PROXIES RELATING TO PORTFOLIO SECURITIES.
SHAREHOLDERS MAY VIEW THE FUND'S COMPLETE POLICIES ON-LINE AT
FRANKLINTEMPLETON.COM. ATLTERNATIVELY, SHAREHOLDERS MAY REQUEST COPIES OF THE
POLICIES FREE OF CHARGE BY CALLING THE PROXY GROUP COLLECT AT 1-954-847-2268 OR
BY SENDING A WRITTEN REQUEST TO: FRANKLIN TEMPLETON COMPANIES, LLC, 500 EAST
BROWARD BOULEVARD, SUITE 1500, FORT LAUDERDALE, FL 33394, ATTENTION: PROXY
GROUP.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
Annual Report | 33
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LITERATURE REQUEST
For a brochure and prospectus, which contains more complete information,
including charges and expenses, call Franklin Templeton Investments at
1-800/DIAL BEN (R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, telephone
calls to or from our service departments may be monitored, recorded and
accessed. These calls can be identified by the presence of a regular beeping
tone.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1
VALUE
Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 3
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 4
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin's AGE High Income Fund
Franklin Federal Money Fund 5, 6
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 7
Franklin Income Fund
Franklin Money Fund 5, 6
Franklin Short-Intermediate
U.S. Government Securities Fund 5
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 5
Templeton Global Bond Fund
TAX-FREE INCOME 8
Double Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 9
Tax-Exempt Money Fund 5,6
STATE-SPECIFIC TAX-FREE INCOME 8
Alabama
Arizona
California 10
Colorado
Connecticut
Florida 10
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 9
Michigan 9
Minnesota 9
Missouri
New Jersey
New York 10
North Carolina
Ohio 9
Oregon
Pennsylvania
Tennessee
Virginia
VARIABLE INSURANCE PRODUCTS FUNDS
Franklin Templeton Variable Insurance
Products Trust 11
1. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
2. The fund is only open to existing shareholders as well as select retirement
plans.
3. Effective June 30, 2003, the fund reopened to all new investors.
4. Upon reaching approximately $350 million in assets, the fund will close to
all investors.
5. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
6. No assurance exists that the fund's $1.00 per share price will be maintained.
It is possible to lose money by investing in the fund.
7. The fund is a continuously offered, closed-end fund. Shares may be purchased
daily; there is no daily redemption. However, each quarter, pending board
approval, the fund will authorize the repurchase of 5%-25% of the outstanding
number of shares. Investors may tender all or a portion of their shares during
the tender period.
8. For investors subject to the alternative minimum tax, a small portion of
these dividends may be taxable. Distributions of capital gains are generally
taxable.
9. Portfolio of insured municipal securities.
10. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
limited-term, intermediate-term and money market portfolios (CA and NY).
11. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
09/03 Not part of the annual report
[GRAPHIC OMITTED]
FRANKLIN(R) TEMPLETON(R) INVESTMENTS
One Franklin Parkway
San Mateo, CA 94403-1906
WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at franklintempleton.com. See
inside for details.
ANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN GOLD AND
PRECIOUS METALS FUND
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN (R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
This report must be preceded or accompanied by the current Franklin Gold and
Precious Metals Fund prospectus, which contains more complete information
including charges and expenses.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
132 A2003 09/03
ITEM 2. CODE OF ETHICS.
(A) THE REGISTRANT HAS ADOPTED A CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL
EXECUTIVE OFFICERS AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER.
(C) N/A
(D) N/A
(F) PURSUANT TO ITEM 10(A), THE REGISTRANT IS ATTACHING AS AN EXHIBIT A COPY OF
ITS CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL EXECUTIVE OFFICERS FINANCIAL
AND ACCOUNTING OFFICER.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(A)(1) THE REGISTRANT HAS AN AUDIT COMMITTEE FINANCIAL EXPERT SERVING ON ITS
AUDIT COMMITTEE.
(2) THE AUDIT COMMITTEE FINANCIAL EXPERT IF FRANK W.T. LAHAYE AND HE IS
"INDEPENDENT" AS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 9. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 10. EXHIBITS.
(A) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS
(B)(1) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
KIMBERLEY H. MONASTERIO, CHIEF FINANCIAL OFFICER
(B(2) CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
KIMBERLEY H. MONASTERIO, CHIEF FINANCIAL OFFICER
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN GOLD & PRECIOUS METALS FUND
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date September 30, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date September 30, 2003
By /s/Kimberley H. Monasterio
Chief Financial Officer
Date September 30, 2003