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 811-01700
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FRANKLIN GOLD AND PRECIOUS METALS FUND
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(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Address of principal executive offices) (Zip code)
CRAIG S. TYLE, 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: 7/31/07
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ITEM 1. REPORTS TO STOCKHOLDERS.
[GRAPHIC OMITTED]
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JULY 31, 2007
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ANNUAL REPORT AND SHAREHOLDER LETTER SECTOR
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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS
FRANKLIN o Templeton o Mutual Series
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE(R)
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
recognized leader in fixed income investing and
also brings 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 offices in over 25 countries,
Templeton offers investors a truly global
perspective.
MUTUAL Series. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what
it believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work independently
and adhere to different investment approaches,
Franklin, Templeton and Mutual Series funds
typically have distinct portfolios. That's why
our funds can be used to build truly diversified
allocation plans 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, accurate and personal service
that has helped us become one of the most trusted
names in financial services.
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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]
Not part of the annual report
Contents
SHAREHOLDER LETTER ........................................................ 1
ANNUAL REPORT
Franklin Gold and Precious Metals Fund .................................... 3
Performance Summary ....................................................... 8
Your Fund's Expenses ...................................................... 13
Financial Highlights and Statement of Investments ......................... 15
Financial Statements ...................................................... 22
Notes to Financial Statements ............................................. 26
Report of Independent Registered Public Accounting Firm ................... 34
Tax Designation ........................................................... 35
Meeting of Shareholders ................................................... 36
Board Members and Officers ................................................ 39
Shareholder Information ................................................... 43
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Shareholder Letter
Dear Shareholder:
During the 12 months ended July 31, 2007, moderate economic growth was supported
by robust consumer spending and strong corporate profits. However, the pace in
the first half of 2007 was restrained by volatile energy prices, ongoing housing
market weakness and tightening credit due to increasing defaults and
foreclosures in the subprime mortgage market. Core inflation was mostly
contained during the reporting period, although headline, or overall, inflation
rose due to higher food and energy prices. In this environment, a cautious
Federal Reserve Board warned that inflation posed a greater risk to the economy
than recession. The Standard & Poor's 500 Index (S&P 500) had a +16.22% total
return, the Dow Jones Industrial Average returned +20.84% and the NASDAQ
Composite Index returned +22.66% for the 12 months under review. 1
In the enclosed annual report for Franklin Gold and Precious Metals Fund, the
portfolio manager discusses market conditions, investment management decisions
and Fund performance during the period under review. You will also find other
performance data and financial information. Please remember that all securities
markets fluctuate, as do mutual fund share prices.
1. Source: Standard & Poor's Micropal. 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 is one of
the most widely used benchmarks of U.S. equity performance. The Dow Jones
Industrial Average is price weighted based on the average market price of 30
blue chip stocks of companies that are generally industry leaders. The NASDAQ
Composite Index measures all NASDAQ domestic and international based common type
stocks listed on The NASDAQ Stock Market. The index is market value weighted and
includes more than 3,000 companies.
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eDELIVERY DETAILS
Log in at franklintempleton.com and click on eDelivery. Shareholders who are
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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
- -----------------------------------------------------
Not part of the annual report | 1
If you would like more frequent updates, FRANKLINTEMPLETON.COM provides daily
prices, monthly performance figures, portfolio holdings and other information.
You can also access your account, buy and sell shares, read timely articles, and
find helpful financial planning tools. We hope you will take advantage of these
online services.
As always, we recommend investors consult their financial advisors and review
their portfolios to design a long-term strategy and portfolio allocation that
meet their individual needs, goals and risk tolerance. We firmly believe that
most people benefit from professional advice, and that advice is invaluable as
investors navigate changing market environments.
We thank you for investing with Franklin Templeton, welcome your questions and
comments, and look forward to serving your investment needs in the years ahead.
Sincerely,
/s/ Rupert H. Johnson, Jr.
Rupert H. Johnson, Jr.
President and Chief Executive Officer - Investment Management
Franklin Gold and Precious Metals Fund
THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF JULY 31, 2007. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE.
2 | Not part of the annual report
Annual Report
Franklin Gold and Precious Metals Fund
YOUR FUND'S GOALS AND MAIN INVESTMENTS: Franklin Gold and Precious Metals Fund
seeks capital appreciation, with current income as its secondary goal, by
investing at least 80% of its net assets in securities of gold and precious
metals operation companies.
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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
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This annual report for Franklin Gold and Precious Metals Fund covers the fiscal
year ended July 31, 2007.
PERFORMANCE OVERVIEW
Franklin Gold and Precious Metals Fund - Class A delivered a cumulative total
return of +15.94% for the 12 months ended July 31, 2007. The Fund
under-performed the broad Standard & Poor's 500 Index's (S&P 500's) +16.22%
total return, but outperformed the sector-specific FTSE Gold Mines Index's
- -0.41% price return during the same period. 1 You can find the Fund's long-term
performance data in the Performance Summary beginning on page 8.
ECONOMIC AND MARKET OVERVIEW
During the 12 months ended July 31, 2007, the U.S. economy advanced at a
moderate but uneven pace. Although gross domestic product (GDP) grew at 1.1% and
2.1% annualized rates in the third and fourth quarters of 2006 due in part to
strong domestic demand and a healthy increase in exports, the U.S. entered 2007
with a record current account deficit. Corporate profits and government spending
generally remained robust. The struggling housing market grew more fragile with
the abrupt unraveling of the subprime mortgage market. This exacerbated already
weak housing prices and an inventory glut in most of
1. 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 FTSE 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. The indexes are unmanaged. 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 NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 19.
Annual Report | 3
GEOGRAPHIC BREAKDOWN
Based on Total Net Assets as of 7/31/07
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Canada 40.1%
South Africa 23.8%
Australia 11.7%
U.K. 8.6%
U.S. 6.2%
Peru 4.0%
Papua New Guinea 3.3%
Bolivia 0.2%
Russia 0.1%
Short-Term Investments & Other Net Assets 2.0%
the nation's residential real estate markets. GDP growth slowed to an annualized
0.6% rate in first quarter 2007. In the second quarter, however, growth advanced
at an estimated annualized 4.0% rate, supported by federal defense spending,
accelerating exports and declining imports, greater business inventory
investment and increased spending for nonresidential structures.
The unemployment rate decreased from 4.8% at the beginning of the period to 4.6%
in July 2007. 2 Although consumer confidence in July neared a six-year high,
consumer spending slowed toward period-end as worries about the housing slump
and high gasoline prices made individuals more cautious. After a welcome drop in
energy costs during the latter half of 2006, elevated oil prices returned in
2007, reaching a record high on July 31, in response to perceived tight supply
and high demand for oil, refinery maintenance issues, and ongoing geopolitical
tensions in the Middle East and Africa. The core Consumer Price Index (CPI),
which excludes food and energy costs, rose 2.2% for the 12 months ended July 31,
2007, which was the same as the 10-year average. 2
The Federal Reserve Board (Fed) kept the federal funds target rate at 5.25% for
the year under review. At period-end, the Fed was still more concerned with
inflation pressures than an economic slowdown. The 10-year Treasury note yield
fell from 4.99% at the beginning of the period to 4.78% on July 31, 2007.
After stock market sell-offs in late February and mid-March, markets rebounded
in the second quarter of 2007 amid generally strong first quarter corporate
earnings reports. However, volatility picked up again in July when the markets
fluctuated widely almost daily due to investor concerns about the housing
market, lending environment and mixed second quarter earnings reports. The last
full week in July was the worst in five years for many markets, and stock prices
continued to struggle until period-end. The blue chip stocks of the Dow Jones
Industrial Average posted a 12-month total return of +20.84%, the broader S&P
500 returned +16.22%, and the technology-heavy NASDAQ Composite Index returned
+22.66%. 3 Materials, information technology and telecommunication stocks
performed particularly well.
2. Source: Bureau of Labor Statistics.
3. Source: Standard & Poor's Micropal. The Dow Jones Industrial Average is price
weighted based on the average market price of 30 blue chip stocks of companies
that are generally industry leaders. See footnote 1 for a description of the S&P
500. The NASDAQ Composite Index measures all NASDAQ domestic and international
based common type stocks listed on The NASDAQ Stock Market. The index is market
value weighted and includes more than 3,000 companies.
4 | Annual Report
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Platinum Gold Palladium
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7/31/2006 $1,230 $636 $313
8/1/2006 $1,244 $646 $317
8/2/2006 $1,248 $651 $323
8/3/2006 $1,233 $644 $322
8/4/2006 $1,243 $646 $325
8/7/2006 $1,252 $648 $325
8/8/2006 $1,241 $642 $321
8/9/2006 $1,248 $650 $324
8/10/2006 $1,241 $636 $319
8/11/2006 $1,244 $632 $318
8/14/2006 $1,223 $626 $314
8/15/2006 $1,230 $624 $321
8/16/2006 $1,243 $629 $334
8/17/2006 $1,224 $614 $334
8/18/2006 $1,210 $614 $333
8/21/2006 $1,232 $628 $344
8/22/2006 $1,227 $625 $341
8/23/2006 $1,228 $622 $345
8/24/2006 $1,226 $621 $342
8/25/2006 $1,221 $622 $346
8/28/2006 $1,221 $614 $341
8/29/2006 $1,219 $614 $336
8/30/2006 $1,226 $619 $337
8/31/2006 $1,243 $627 $343
9/1/2006 $1,245 $625 $344
9/4/2006 $1,249 $626 $345
9/5/2006 $1,269 $638 $352
9/6/2006 $1,267 $633 $354
9/7/2006 $1,252 $616 $347
9/8/2006 $1,224 $610 $330
9/11/2006 $1,193 $589 $315
9/12/2006 $1,203 $587 $310
9/13/2006 $1,182 $590 $316
9/14/2006 $1,175 $575 $322
9/15/2006 $1,157 $579 $312
9/18/2006 $1,163 $587 $313
9/19/2006 $1,152 $573 $309
9/20/2006 $1,139 $576 $306
9/21/2006 $1,138 $584 $309
9/22/2006 $1,145 $589 $319
9/25/2006 $1,131 $590 $315
9/26/2006 $1,131 $592 $317
9/27/2006 $1,139 $603 $320
9/28/2006 $1,151 $601 $321
9/29/2006 $1,140 $598 $315
10/2/2006 $1,147 $596 $311
10/3/2006 $1,117 $574 $300
10/4/2006 $1,077 $567 $291
10/5/2006 $1,083 $574 $298
10/6/2006 $1,077 $574 $300
10/9/2006 $1,087 $577 $301
10/10/2006 $1,071 $573 $299
10/11/2006 $1,071 $573 $305
10/12/2006 $1,071 $579 $305
10/13/2006 $1,076 $590 $313
10/16/2006 $1,084 $596 $323
10/17/2006 $1,072 $590 $318
10/18/2006 $1,087 $590 $328
10/19/2006 $1,089 $599 $335
10/20/2006 $1,079 $591 $327
10/23/2006 $1,073 $581 $317
10/24/2006 $1,056 $586 $321
10/25/2006 $1,069 $591 $322
10/26/2006 $1,078 $597 $322
10/27/2006 $1,077 $599 $322
10/30/2006 $1,087 $604 $326
10/31/2006 $1,080 $606 $322
11/1/2006 $1,105 $617 $325
11/2/2006 $1,157 $624 $325
11/3/2006 $1,207 $627 $333
11/6/2006 $1,187 $623 $331
11/7/2006 $1,187 $624 $331
11/8/2006 $1,157 $615 $328
11/9/2006 $1,205 $633 $337
11/10/2006 $1,216 $628 $329
11/13/2006 $1,206 $625 $325
11/14/2006 $1,174 $620 $318
11/15/2006 $1,168 $623 $320
11/16/2006 $1,177 $618 $318
11/17/2006 $1,189 $621 $318
11/20/2006 $1,253 $622 $321
11/21/2006 $1,251 $627 $331
11/22/2006 $1,157 $630 $325
11/23/2006 $1,169 $631 $324
11/24/2006 $1,192 $638 $333
11/27/2006 $1,148 $640 $326
11/28/2006 $1,154 $640 $325
11/29/2006 $1,155 $636 $320
11/30/2006 $1,188 $648 $331
12/1/2006 $1,163 $645 $331
12/4/2006 $1,161 $646 $331
12/5/2006 $1,126 $643 $330
12/6/2006 $1,119 $630 $324
12/7/2006 $1,129 $633 $330
12/8/2006 $1,110 $625 $326
12/11/2006 $1,109 $630 $331
12/12/2006 $1,115 $630 $329
12/13/2006 $1,109 $628 $327
12/14/2006 $1,112 $625 $327
12/15/2006 $1,102 $615 $321
12/18/2006 $1,100 $616 $327
12/19/2006 $1,122 $622 $325
12/20/2006 $1,120 $620 $323
12/21/2006 $1,121 $618 $327
12/22/2006 $1,122 $621 $324
12/25/2006 $1,120 $620 $326
12/26/2006 $1,121 $624 $326
12/27/2006 $1,117 $627 $324
12/28/2006 $1,112 $634 $325
12/29/2006 $1,136 $636 $334
1/1/2007 $1,134 $636 $325
1/2/2007 $1,137 $640 $335
1/3/2007 $1,125 $627 $337
1/4/2007 $1,120 $622 $337
1/5/2007 $1,112 $607 $335
1/8/2007 $1,121 $610 $330
1/9/2007 $1,128 $613 $330
1/10/2007 $1,142 $611 $329
1/11/2007 $1,135 $611 $327
1/12/2007 $1,147 $627 $333
1/15/2007 $1,146 $626 $331
1/16/2007 $1,138 $624 $333
1/17/2007 $1,147 $631 $339
1/18/2007 $1,158 $627 $339
1/19/2007 $1,158 $635 $341
1/22/2007 $1,157 $633 $342
1/23/2007 $1,174 $646 $347
1/24/2007 $1,168 $648 $348
1/25/2007 $1,173 $646 $348
1/26/2007 $1,175 $646 $348
1/29/2007 $1,164 $643 $340
1/30/2007 $1,171 $647 $337
1/31/2007 $1,180 $653 $338
2/1/2007 $1,183 $657 $341
2/2/2007 $1,158 $647 $333
2/5/2007 $1,164 $648 $339
2/6/2007 $1,183 $653 $341
2/7/2007 $1,193 $651 $342
2/8/2007 $1,193 $660 $340
2/9/2007 $1,192 $666 $338
2/12/2007 $1,183 $661 $337
2/13/2007 $1,197 $664 $342
2/14/2007 $1,211 $669 $344
2/15/2007 $1,210 $669 $341
2/16/2007 $1,206 $669 $339
2/19/2007 $1,216 $670 $340
2/20/2007 $1,210 $657 $337
2/21/2007 $1,227 $678 $344
2/22/2007 $1,223 $677 $348
2/23/2007 $1,233 $682 $354
2/26/2007 $1,237 $686 $356
2/27/2007 $1,231 $663 $349
2/28/2007 $1,250 $669 $350
3/1/2007 $1,238 $664 $350
3/2/2007 $1,206 $642 $347
3/5/2007 $1,167 $636 $340
3/6/2007 $1,193 $646 $348
3/7/2007 $1,190 $649 $349
3/8/2007 $1,205 $651 $350
3/9/2007 $1,198 $650 $351
3/12/2007 $1,206 $650 $351
3/13/2007 $1,207 $643 $347
3/14/2007 $1,203 $644 $349
3/15/2007 $1,214 $646 $348
3/16/2007 $1,217 $653 $350
3/19/2007 $1,229 $654 $352
3/20/2007 $1,229 $658 $352
3/21/2007 $1,233 $664 $353
3/22/2007 $1,236 $664 $355
3/23/2007 $1,227 $657 $353
3/26/2007 $1,236 $664 $352
3/27/2007 $1,235 $664 $352
3/28/2007 $1,240 $665 $354
3/29/2007 $1,234 $661 $353
3/30/2007 $1,243 $663 $353
4/2/2007 $1,238 $664 $350
4/3/2007 $1,241 $663 $352
4/4/2007 $1,247 $674 $352
4/5/2007 $1,254 $674 $353
4/6/2007 $1,249 $675 $353
4/9/2007 $1,251 $670 $355
4/10/2007 $1,263 $677 $361
4/11/2007 $1,267 $677 $367
4/12/2007 $1,262 $676 $370
4/13/2007 $1,271 $685 $377
4/16/2007 $1,278 $690 $379
4/17/2007 $1,271 $686 $376
4/18/2007 $1,295 $690 $382
4/19/2007 $1,297 $682 $377
4/20/2007 $1,328 $691 $385
4/23/2007 $1,324 $689 $384
4/24/2007 $1,304 $683 $376
4/25/2007 $1,300 $686 $380
4/26/2007 $1,296 $674 $371
4/27/2007 $1,288 $681 $372
4/30/2007 $1,286 $678 $373
5/1/2007 $1,291 $673 $370
5/2/2007 $1,292 $673 $373
5/3/2007 $1,300 $682 $375
5/4/2007 $1,320 $688 $375
5/7/2007 $1,341 $688 $377
5/8/2007 $1,338 $685 $372
5/9/2007 $1,326 $680 $366
5/10/2007 $1,309 $665 $362
5/11/2007 $1,329 $670 $365
5/14/2007 $1,322 $669 $358
5/15/2007 $1,327 $672 $359
5/16/2007 $1,315 $662 $356
5/17/2007 $1,307 $657 $360
5/18/2007 $1,318 $661 $363
5/21/2007 $1,312 $663 $375
5/22/2007 $1,284 $659 $372
5/23/2007 $1,300 $661 $374
5/24/2007 $1,281 $654 $366
5/25/2007 $1,273 $656 $367
5/28/2007 $1,271 $655 $367
5/29/2007 $1,258 $656 $366
5/30/2007 $1,262 $653 $366
5/31/2007 $1,280 $660 $368
6/1/2007 $1,291 $671 $371
6/4/2007 $1,298 $671 $371
6/5/2007 $1,293 $670 $366
6/6/2007 $1,294 $670 $368
6/7/2007 $1,290 $659 $367
6/8/2007 $1,283 $648 $366
6/11/2007 $1,292 $653 $368
6/12/2007 $1,291 $647 $367
6/13/2007 $1,284 $651 $366
6/14/2007 $1,283 $651 $368
6/15/2007 $1,282 $655 $369
6/18/2007 $1,296 $656 $370
6/19/2007 $1,291 $661 $372
6/20/2007 $1,289 $654 $374
6/21/2007 $1,289 $651 $376
6/22/2007 $1,301 $654 $376
6/25/2007 $1,281 $651 $369
6/26/2007 $1,267 $640 $366
6/27/2007 $1,274 $643 $364
6/28/2007 $1,274 $648 $365
6/29/2007 $1,272 $649 $366
7/2/2007 $1,280 $657 $368
7/3/2007 $1,283 $653 $365
7/4/2007 $1,287 $654 $366
7/5/2007 $1,291 $649 $365
7/6/2007 $1,294 $655 $367
7/9/2007 $1,301 $660 $368
7/10/2007 $1,298 $663 $369
7/11/2007 $1,300 $660 $368
7/12/2007 $1,315 $666 $370
7/13/2007 $1,311 $666 $368
7/16/2007 $1,315 $664 $367
7/17/2007 $1,309 $664 $364
7/18/2007 $1,322 $673 $368
7/19/2007 $1,324 $677 $370
7/20/2007 $1,331 $683 $372
7/23/2007 $1,328 $681 $369
7/24/2007 $1,318 $681 $366
7/25/2007 $1,320 $674 $367
7/26/2007 $1,311 $662 $364
7/27/2007 $1,278 $661 $361
7/30/2007 $1,277 $665 $366
7/31/2007 $1,289 $664 $364
For illustrative purposes only; not representative of the Fund's portfolio
composition or performance.
Precious metals generally performed well during the past year. Palladium was the
best performing major metal during the reporting period as it began the period
at $313 per ounce, traded between $292 and $385, and ended the period at $364
per ounce, up 16%. Silver's price rose from $11.43 per ounce to $12.86 per
ounce, a 13% increase. Gold had a modest 5% gain as its price started the period
at $637 per ounce, fell to $567 per ounce in October 2006, and then recovered to
$664 per ounce at period-end. Platinum's price followed a similar path to
gold's, beginning the period at $1,230 per ounce, falling to a low of $1,057 per
ounce in October, and then bouncing back to end the period up 5% at $1,290 per
ounce.
INVESTMENT STRATEGY
We believe that investing in gold and other precious metals offers an excellent
opportunity for diversification in an attractive asset class over the long term.
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 the sector can be volatile, especially over the short
term, precious metals, such as gold, can be attractive because they are a hard
asset not tied to any particular country or financial system.
MANAGER'S DISCUSSION
During the 12 months under review, mergers and acquisitions continued to be a
major theme despite significant sector consolidation over the past few years.
Among the notable events that occurred were Goldcorp's merger with Glamis Gold,
which resulted in the world's third-largest gold company by
PORTFOLIO BREAKDOWN
Based on Total Net Assets as of 7/31/07
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Long Life Gold Mines 52.0%
Platinum & Palladium 17.0%
Medium Life Gold Mines 11.4%
Gold Exploration & Development 10.6%
Gold & Diversified Resources 6.9%
Paper & Forest Products 0.1%
Short-Term Investments & Other Net Assets 2.0%
Annual Report | 5
TOP 10 HOLDINGS
7/31/07
- --------------------------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- --------------------------------------------------------------------------------
Barrick Gold Corp. 7.8%
LONG LIFE GOLD MINES, CANADA
- --------------------------------------------------------------------------------
Impala Platinum Holdings Ltd.,
ord. & ADR 7.6%
PLATINUM & PALLADIUM, SOUTH AFRICA
- --------------------------------------------------------------------------------
Anglo Platinum Ltd., ord. & ADR 6.8%
PLATINUM & PALLADIUM, SOUTH AFRICA
- --------------------------------------------------------------------------------
Newcrest Mining Ltd. 6.4%
- --------------------------------------------------------------------------------
LONG LIFE GOLD MINES, AUSTRALIA
Goldcorp Inc. 4.3%
LONG LIFE GOLD MINES, CANADA
- --------------------------------------------------------------------------------
Compania de Minas Buenaventura SA,
ord. & ADR 4.0%
LONG LIFE GOLD MINES, PERU
- --------------------------------------------------------------------------------
Agnico-Eagle Mines Ltd. 4.0%
LONG LIFE GOLD MINES, CANADA
- --------------------------------------------------------------------------------
AngloGold Ashanti Ltd., ord. & ADR 4.0%
LONG LIFE GOLD MINES, SOUTH AFRICA
- --------------------------------------------------------------------------------
Randgold Resources Ltd., ADR 3.5%
LONG LIFE GOLD MINES, U.K.
- --------------------------------------------------------------------------------
Lihir Gold Ltd. 3.3%
LONG LIFE GOLD MINES,
PAPUA NEW GUINEA
- --------------------------------------------------------------------------------
market capitalization; Iamgold's acquisition of Cambior; and Gold Fields'
purchase of Western Areas. Other mergers during the period included
Freeport-McMoRan Copper & Gold's acquisition of Phelps Dodge, Kinross's
combining with Bema Gold and Lundin Mining's purchase of Rio Narcea. Yamana Gold
also announced plans for a three-way combination with a hostile bid for Meridian
Gold and a conditional friendly merger with Northern Orion.
Among the most significant contributors to the Fund's performance for the year
under review were South African platinum producers Anglo Platinum and Impala
Platinum Holdings, and Australian gold and copper mining company Newcrest
Mining. Other notable contributors included Peru's Compania de Minas
Buenaventura and Canada's Ivanhoe Mines. Ivanhoe Mines is developing a large
copper and gold mine in Mongolia.
The Fund had some detractors from performance during the reporting period,
including Australian gold mining company Bendigo Mining and U.S. gold producer
Newmont Mining. In addition, the Fund's position in Canada's Goldcorp
underperformed following the completion of its merger with Glamis Gold. South
African gold producers AngloGold Ashanti and Gold Fields also hindered the
Fund's performance during the period.
It is important to recognize the effect of currency movements on the Fund's
performance. In general, if the value of the U.S. dollar goes up compared with a
foreign currency, an investment traded in that foreign currency will go down in
value because it will be worth fewer U.S. dollars. This can have a negative
effect on Fund performance. Conversely, when the U.S. dollar weakens in relation
to a foreign currency, an investment traded in that foreign currency will
increase in value, which can contribute to Fund performance. During the review
period, the U.S. dollar appreciated modestly in value relative to the South
African rand, and lost value relative to the Australian dollar, Canadian dollar
and British pound. Given the Fund's substantial investments in Australia, Canada
and the U.K., the Fund experienced a currency gain for the period. However, one
cannot expect the same result in future periods.
6 | Annual Report
Thank you for your continued participation in Franklin Gold and Precious Metals
Fund. We look forward to serving your future investment needs.
[PHOTO OF OMITTED] /s/ Stephen M. Land
Stephen M. Land
Portfolio Manager
Franklin Gold and Precious Metals Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JULY 31, 2007, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR
MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS 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,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE INVESTMENT MANAGER 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 | 7
Performance Summary as of 7/31/07
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
that a shareholder would pay on Fund dividends, capital gain distributions, if
any, or any realized gains on the sale of Fund shares. Total return reflects
reinvestment of the Fund's dividends and capital gain distributions, if any, and
any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
- --------------------------------------------------------------------------------
CLASS A (SYMBOL: FKRCX) CHANGE 7/31/07 7/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$3.06 $ 33.73 $ 30.67
- --------------------------------------------------------------------------------
DISTRIBUTIONS (8/1/06-7/31/07)
- --------------------------------------------------------------------------------
Dividend Income $0.7618
- --------------------------------------------------------------------------------
Long-Term Capital Gain $1.0014
- --------------------------------------------------------------------------------
TOTAL $1.7632
- --------------------------------------------------------------------------------
CLASS B (SYMBOL: FAGPX) CHANGE 7/31/07 7/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$2.98 $ 32.60 $ 29.62
- --------------------------------------------------------------------------------
DISTRIBUTIONS (8/1/06-7/31/07)
- --------------------------------------------------------------------------------
Dividend Income $0.4417
- --------------------------------------------------------------------------------
Long-Term Capital Gain $1.0014
- --------------------------------------------------------------------------------
TOTAL $1.4431
- --------------------------------------------------------------------------------
CLASS C (SYMBOL: FRGOX) CHANGE 7/31/07 7/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$3.00 $ 32.90 $ 29.90
- --------------------------------------------------------------------------------
DISTRIBUTIONS (8/1/06-7/31/07)
- --------------------------------------------------------------------------------
Dividend Income $0.4672
- --------------------------------------------------------------------------------
Long-Term Capital Gain $1.0014
- --------------------------------------------------------------------------------
TOTAL $1.4686
- --------------------------------------------------------------------------------
ADVISOR CLASS (SYMBOL: FGADX) CHANGE 7/31/07 7/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$3.18 $ 34.68 $ 31.50
- --------------------------------------------------------------------------------
DISTRIBUTIONS (8/1/06-7/31/07)
- --------------------------------------------------------------------------------
Dividend Income $0.8527
- --------------------------------------------------------------------------------
Long-Term Capital Gain $1.0014
- --------------------------------------------------------------------------------
TOTAL $1.8541
- --------------------------------------------------------------------------------
8 | Annual Report
Performance Summary (CONTINUED)
PERFORMANCE
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES. CLASS A: 5.75%
MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC)
DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1%
CDSC IN FIRST YEAR ONLY; ADVISOR CLASS: NO SALES CHARGES. THE FUND MAY CHARGE A
2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.C
- ----------------------------------------------------------------------------------------
CLASS A 1-YEAR 5-YEAR 10-YEAR
- ----------------------------------------------------------------------------------------
Cumulative Total Return 1 +15.94% +253.82% +238.18%
- ----------------------------------------------------------------------------------------
Average Annual Total Return 2 +9.28% +27.23% +12.29%
- ----------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $10,928 $33,338 $31,868
- ----------------------------------------------------------------------------------------
Avg. Ann. Total Return (6/30/07) 4 +6.87% +22.28% +11.92%
- ----------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 0.93%
- ----------------------------------------------------------------------------------------
CLASS B 1-YEAR 5-YEAR INCEPTION (1/1/99)
- ----------------------------------------------------------------------------------------
Cumulative Total Return 1 +15.12% +241.00% +364.25%
- ----------------------------------------------------------------------------------------
Average Annual Total Return 2 +11.12% +27.66% +19.59%
- ----------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,112 $33,900 $46,425
- ----------------------------------------------------------------------------------------
Avg. Ann. Total Return (6/30/07) 4 +8.52% +22.62% +19.59%
- ----------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.68%
- ----------------------------------------------------------------------------------------
CLASS C 1-YEAR 5-YEAR 10-YEAR
- ----------------------------------------------------------------------------------------
Cumulative Total Return 1 +15.10% +241.29% +215.07%
- ----------------------------------------------------------------------------------------
Average Annual Total Return 2 +14.10% +27.83% +12.16%
- ----------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,410 $34,129 $31,507
- ----------------------------------------------------------------------------------------
Avg. Ann. Total Return (6/30/07) 4 +11.56% +22.83% +11.80%
- ----------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.68%
- ----------------------------------------------------------------------------------------
ADVISOR CLASS 1-YEAR 5-YEAR 10-YEAR
- ----------------------------------------------------------------------------------------
Cumulative Total Return 1 +16.25% +258.18% +254.30%
- ----------------------------------------------------------------------------------------
Average Annual Total Return 2 +16.25% +29.07% +13.48%
- ----------------------------------------------------------------------------------------
Value of $10,000 Investment 3 $11,625 $35,818 $35,430
- ----------------------------------------------------------------------------------------
Avg. Ann. Total Return (6/30/07) 4 +13.65% +24.02% +13.12%
- ----------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 0.68%
- ----------------------------------------------------------------------------------------
PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND
PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
Annual Report | 9
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 any 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.
AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------
CLASS A 7/31/07
- -------------------------------------
1-Year +9.28%
- -------------------------------------
5-Year +27.23%
- -------------------------------------
10-Year +12.29%
- -------------------------------------
CLASS A (8/1/97-7/31/07)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Franklin Gold and
Precious Metals Fund S&P 500 6 FTSE Gold Mines Index 6
- --------------------------------------------------------------------------------
8/1/1997 $ 9,423 $10,000 $10,000
8/31/1997 $ 9,292 $ 9,440 $ 9,984
9/30/1997 $ 9,712 $ 9,957 $10,784
10/31/1997 $ 8,180 $ 9,625 $ 8,780
11/30/1997 $ 6,829 $10,070 $ 6,913
12/31/1997 $ 6,997 $10,243 $ 7,483
1/31/1998 $ 7,386 $10,356 $ 7,905
2/28/1998 $ 7,353 $11,102 $ 7,617
3/31/1998 $ 7,792 $11,670 $ 8,098
4/30/1998 $ 8,330 $11,788 $ 9,182
5/31/1998 $ 7,179 $11,586 $ 7,687
6/30/1998 $ 6,636 $12,056 $ 7,028
7/31/1998 $ 6,236 $11,928 $ 6,369
8/31/1998 $ 4,985 $10,205 $ 4,961
9/30/1998 $ 6,969 $10,859 $ 7,785
10/31/1998 $ 6,986 $11,741 $ 7,871
11/30/1998 $ 6,852 $12,453 $ 7,461
12/31/1998 $ 6,468 $13,170 $ 6,608
1/31/1999 $ 6,451 $13,720 $ 6,592
2/28/1999 $ 6,317 $13,294 $ 6,162
3/31/1999 $ 6,434 $13,826 $ 6,145
4/30/1999 $ 7,624 $14,361 $ 7,199
5/31/1999 $ 6,652 $14,022 $ 5,857
6/30/1999 $ 7,171 $14,800 $ 6,259
7/31/1999 $ 6,954 $14,338 $ 5,973
8/31/1999 $ 7,238 $14,267 $ 6,350
9/30/1999 $ 8,545 $13,877 $ 7,986
10/31/1999 $ 7,724 $14,755 $ 6,928
11/30/1999 $ 7,850 $15,055 $ 6,619
12/31/1999 $ 8,110 $15,941 $ 6,564
1/31/2000 $ 7,555 $15,140 $ 5,793
2/29/2000 $ 7,227 $14,854 $ 5,976
3/31/2000 $ 7,016 $16,306 $ 5,528
4/30/2000 $ 6,528 $15,815 $ 5,348
5/31/2000 $ 6,755 $15,492 $ 5,510
6/30/2000 $ 7,067 $15,874 $ 5,710
7/31/2000 $ 6,646 $15,626 $ 5,153
8/31/2000 $ 7,311 $16,596 $ 5,217
9/30/2000 $ 6,789 $15,720 $ 4,940
10/31/2000 $ 6,427 $15,653 $ 4,188
11/30/2000 $ 6,848 $14,420 $ 4,417
12/31/2000 $ 7,511 $14,491 $ 4,834
1/31/2001 $ 7,656 $15,004 $ 4,720
2/28/2001 $ 7,997 $13,637 $ 5,054
3/31/2001 $ 7,025 $12,774 $ 4,557
4/30/2001 $ 8,040 $13,766 $ 5,313
5/31/2001 $ 8,662 $13,858 $ 5,495
6/30/2001 $ 8,227 $13,521 $ 5,490
7/31/2001 $ 7,571 $13,388 $ 5,359
8/31/2001 $ 8,057 $12,550 $ 5,702
9/30/2001 $ 7,903 $11,537 $ 6,220
10/31/2001 $ 7,665 $11,757 $ 5,949
11/30/2001 $ 7,758 $12,659 $ 5,710
12/31/2001 $ 8,262 $12,770 $ 5,930
1/31/2002 $ 8,902 $12,583 $ 6,778
2/28/2002 $ 9,717 $12,341 $ 7,450
3/31/2002 $10,505 $12,805 $ 8,214
4/30/2002 $11,075 $12,029 $ 8,761
5/31/2002 $12,345 $11,941 $10,039
6/30/2002 $10,821 $11,090 $ 8,598
7/31/2002 $ 9,007 $10,226 $ 7,274
8/31/2002 $10,164 $10,293 $ 8,283
9/30/2002 $10,181 $ 9,175 $ 8,327
10/31/2002 $ 9,638 $ 9,982 $ 7,573
11/30/2002 $ 9,673 $10,569 $ 7,379
12/31/2002 $11,351 $ 9,949 $ 9,036
1/31/2003 $11,484 $ 9,688 $ 8,995
2/28/2003 $10,669 $ 9,543 $ 8,421
3/31/2003 $10,023 $ 9,635 $ 7,899
4/30/2003 $ 9,863 $10,429 $ 7,816
5/31/2003 $11,324 $10,977 $ 8,711
6/30/2003 $11,678 $11,118 $ 9,163
7/31/2003 $12,157 $11,314 $ 9,495
8/31/2003 $13,945 $11,534 $10,713
9/30/2003 $14,264 $11,412 $10,791
10/31/2003 $15,565 $12,057 $11,666
11/30/2003 $17,354 $12,163 $12,911
12/31/2003 $17,290 $12,801 $12,903
1/31/2004 $15,608 $13,035 $11,287
2/29/2004 $15,991 $13,217 $11,501
3/31/2004 $16,934 $13,017 $12,476
4/30/2004 $13,499 $12,813 $ 9,757
5/31/2004 $14,700 $12,989 $10,752
6/30/2004 $14,344 $13,241 $10,317
7/31/2004 $14,184 $12,803 $10,348
8/31/2004 $15,074 $12,854 $11,255
9/30/2004 $16,249 $12,994 $12,081
10/31/2004 $16,578 $13,192 $12,544
11/30/2004 $17,334 $13,726 $12,936
12/31/2004 $16,344 $14,193 $12,009
1/31/2005 $15,427 $13,845 $11,124
2/28/2005 $16,611 $14,136 $11,881
3/31/2005 $15,863 $13,886 $11,309
4/30/2005 $14,448 $13,623 $10,128
5/31/2005 $14,671 $14,056 $10,238
6/30/2005 $16,068 $14,076 $11,285
7/31/2005 $15,855 $14,600 $10,904
8/31/2005 $16,745 $14,466 $11,417
9/30/2005 $19,807 $14,584 $13,754
10/31/2005 $18,525 $14,340 $12,693
11/30/2005 $20,448 $14,882 $13,840
12/31/2005 $22,978 $14,887 $15,352
1/31/2006 $27,325 $15,282 $18,163
2/28/2006 $24,896 $15,323 $15,847
3/31/2006 $27,190 $15,514 $16,609
4/30/2006 $30,273 $15,722 $18,718
5/31/2006 $27,289 $15,270 $17,185
6/30/2006 $27,674 $15,290 $17,319
7/31/2006 $27,486 $15,384 $16,954
8/31/2006 $28,525 $15,750 $17,376
9/30/2006 $26,043 $16,155 $15,651
10/31/2006 $28,015 $16,682 $16,466
11/30/2006 $30,802 $16,998 $17,914
12/31/2006 $30,262 $17,237 $17,284
1/31/2007 $29,818 $17,497 $16,632
2/28/2007 $30,507 $17,156 $16,642
3/31/2007 $31,141 $17,348 $16,305
4/30/2007 $31,812 $18,116 $16,342
5/31/2007 $31,698 $18,747 $15,905
6/30/2007 $31,377 $18,455 $15,623
7/31/2007 $31,868 $17,880 $16,884
AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------
CLASS B 7/31/07
- -------------------------------------
1-Year +11.12%
- -------------------------------------
5-Year +27.66%
- -------------------------------------
Since Inception (1/1/99) +19.59%
- -------------------------------------
CLASS B (1/1/99-7/31/07)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Franklin Gold and
Precious Metals Fund S&P 500 6 FTSE Gold Mines Index 6
- --------------------------------------------------------------------------------
1/1/1999 $10,000 $10,000 $10,000
1/31/1999 $ 9,961 $10,418 $ 9,975
2/28/1999 $ 9,754 $10,094 $ 9,325
3/31/1999 $ 9,935 $10,498 $ 9,299
4/30/1999 $11,762 $10,905 $10,894
5/31/1999 $10,259 $10,647 $ 8,864
6/30/1999 $11,049 $11,238 $ 9,471
7/31/1999 $10,699 $10,887 $ 9,038
8/31/1999 $11,140 $10,834 $ 9,610
9/30/1999 $13,161 $10,537 $12,085
10/31/1999 $11,878 $11,203 $10,484
11/30/1999 $12,073 $11,431 $10,017
12/31/1999 $12,452 $12,104 $ 9,934
1/31/2000 $11,606 $11,496 $ 8,766
2/29/2000 $11,099 $11,279 $ 9,043
3/31/2000 $10,747 $12,381 $ 8,365
4/30/2000 $10,006 $12,009 $ 8,093
5/31/2000 $10,344 $11,763 $ 8,338
6/30/2000 $10,812 $12,053 $ 8,641
7/31/2000 $10,175 $11,865 $ 7,798
8/31/2000 $11,177 $12,601 $ 7,895
9/30/2000 $10,370 $11,936 $ 7,476
10/31/2000 $ 9,810 $11,886 $ 6,338
11/30/2000 $10,448 $10,949 $ 6,685
12/31/2000 $11,436 $11,003 $ 7,315
1/31/2001 $11,658 $11,393 $ 7,142
2/28/2001 $12,169 $10,355 $ 7,649
3/31/2001 $10,676 $ 9,699 $ 6,896
4/30/2001 $12,208 $10,453 $ 8,040
5/31/2001 $13,165 $10,523 $ 8,316
6/30/2001 $12,497 $10,267 $ 8,308
7/31/2001 $11,475 $10,166 $ 8,110
8/31/2001 $12,222 $ 9,530 $ 8,629
9/30/2001 $11,973 $ 8,760 $ 9,412
10/31/2001 $11,606 $ 8,927 $ 9,002
11/30/2001 $11,737 $ 9,612 $ 8,641
12/31/2001 $12,497 $ 9,696 $ 8,974
1/31/2002 $13,449 $ 9,555 $10,257
2/28/2002 $14,669 $ 9,371 $11,274
3/31/2002 $15,849 $ 9,723 $12,431
4/30/2002 $16,693 $ 9,134 $13,258
5/31/2002 $18,611 $ 9,067 $15,192
6/30/2002 $16,305 $ 8,421 $13,011
7/31/2002 $13,556 $ 7,765 $11,008
8/31/2002 $15,299 $ 7,816 $12,534
9/30/2002 $15,312 $ 6,967 $12,601
10/31/2002 $14,481 $ 7,580 $11,460
11/30/2002 $14,535 $ 8,025 $11,167
12/31/2002 $17,041 $ 7,554 $13,673
1/31/2003 $17,230 $ 7,357 $13,612
2/28/2003 $16,000 $ 7,246 $12,743
3/31/2003 $15,027 $ 7,316 $11,954
4/30/2003 $14,771 $ 7,919 $11,828
5/31/2003 $16,960 $ 8,335 $13,182
6/30/2003 $17,473 $ 8,442 $13,866
7/31/2003 $18,176 $ 8,591 $14,369
8/31/2003 $20,838 $ 8,758 $16,212
9/30/2003 $21,298 $ 8,665 $16,331
10/31/2003 $23,217 $ 9,155 $17,654
11/30/2003 $25,879 $ 9,236 $19,539
12/31/2003 $25,764 $ 9,720 $19,526
1/31/2004 $23,244 $ 9,898 $17,080
2/29/2004 $23,800 $10,036 $17,405
3/31/2004 $25,195 $ 9,884 $18,880
4/30/2004 $20,061 $ 9,729 $14,765
5/31/2004 $21,835 $ 9,863 $16,271
6/30/2004 $21,294 $10,054 $15,612
7/31/2004 $21,050 $ 9,722 $15,659
8/31/2004 $22,350 $ 9,761 $17,033
9/30/2004 $24,070 $ 9,866 $18,282
10/31/2004 $24,545 $10,017 $18,983
11/30/2004 $25,642 $10,422 $19,577
12/31/2004 $24,179 $10,777 $18,174
1/31/2005 $22,811 $10,513 $16,835
2/28/2005 $24,531 $10,734 $17,979
3/31/2005 $23,420 $10,544 $17,114
4/30/2005 $21,307 $10,344 $15,326
5/31/2005 $21,632 $10,673 $15,492
6/30/2005 $23,678 $10,688 $17,077
7/31/2005 $23,353 $11,086 $16,501
8/31/2005 $24,653 $10,985 $17,278
9/30/2005 $29,136 $11,074 $20,813
10/31/2005 $27,227 $10,889 $19,209
11/30/2005 $30,030 $11,300 $20,944
12/31/2005 $33,715 $11,304 $23,231
1/31/2006 $40,087 $11,604 $27,485
2/28/2006 $36,494 $11,635 $23,981
3/31/2006 $39,829 $11,780 $25,135
4/30/2006 $44,316 $11,938 $28,325
5/31/2006 $39,924 $11,595 $26,006
6/30/2006 $40,466 $11,610 $26,208
7/31/2006 $40,154 $11,682 $25,657
8/31/2006 $41,659 $11,959 $26,295
9/30/2006 $38,012 $12,267 $23,685
10/31/2006 $40,859 $12,667 $24,917
11/30/2006 $44,899 $12,907 $27,109
12/31/2006 $44,085 $13,088 $26,156
1/31/2007 $43,437 $13,286 $25,169
2/28/2007 $44,440 $13,027 $25,184
3/31/2007 $45,365 $13,172 $24,675
4/30/2007 $46,340 $13,756 $24,730
5/31/2007 $46,173 $14,235 $24,069
6/30/2007 $45,707 $14,013 $23,642
7/31/2007 $46,425 $13,577 $25,551
10 | Annual Report
Performance Summary (CONTINUED)
CLASS C (8/1/97-7/31/07)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Franklin Gold and
Precious Metals Fund S&P 500 6 FTSE Gold Mines Index 6
- --------------------------------------------------------------------------------
8/1/1997 $10,000 $10,000 $10,000
8/31/1997 $ 9,850 $ 9,440 $ 9,984
9/30/1997 $10,299 $ 9,957 $10,784
10/31/1997 $ 8,646 $ 9,625 $ 8,780
11/30/1997 $ 7,230 $10,070 $ 6,913
12/31/1997 $ 7,397 $10,243 $ 7,483
1/31/1998 $ 7,810 $10,356 $ 7,905
2/28/1998 $ 7,775 $11,102 $ 7,617
3/31/1998 $ 8,241 $11,670 $ 8,098
4/30/1998 $ 8,813 $11,788 $ 9,182
5/31/1998 $ 7,599 $11,586 $ 7,687
6/30/1998 $ 7,016 $12,056 $ 7,028
7/31/1998 $ 6,565 $11,928 $ 6,369
8/31/1998 $ 5,249 $10,205 $ 4,961
9/30/1998 $ 7,334 $10,859 $ 7,785
10/31/1998 $ 7,352 $11,741 $ 7,871
11/30/1998 $ 7,202 $12,453 $ 7,461
12/31/1998 $ 6,800 $13,170 $ 6,608
1/31/1999 $ 6,774 $13,720 $ 6,592
2/28/1999 $ 6,632 $13,294 $ 6,162
3/31/1999 $ 6,756 $13,826 $ 6,145
4/30/1999 $ 8,003 $14,361 $ 7,199
5/31/1999 $ 6,977 $14,022 $ 5,857
6/30/1999 $ 7,517 $14,800 $ 6,259
7/31/1999 $ 7,278 $14,338 $ 5,973
8/31/1999 $ 7,579 $14,267 $ 6,350
9/30/1999 $ 8,940 $13,877 $ 7,986
10/31/1999 $ 8,074 $14,755 $ 6,928
11/30/1999 $ 8,206 $15,055 $ 6,619
12/31/1999 $ 8,464 $15,941 $ 6,564
1/31/2000 $ 7,889 $15,140 $ 5,793
2/29/2000 $ 7,544 $14,854 $ 5,976
3/31/2000 $ 7,314 $16,306 $ 5,528
4/30/2000 $ 6,801 $15,815 $ 5,348
5/31/2000 $ 7,040 $15,492 $ 5,510
6/30/2000 $ 7,358 $15,874 $ 5,710
7/31/2000 $ 6,925 $15,626 $ 5,153
8/31/2000 $ 7,606 $16,596 $ 5,217
9/30/2000 $ 7,066 $15,720 $ 4,940
10/31/2000 $ 6,677 $15,653 $ 4,188
11/30/2000 $ 7,111 $14,420 $ 4,417
12/31/2000 $ 7,791 $14,491 $ 4,834
1/31/2001 $ 7,942 $15,004 $ 4,720
2/28/2001 $ 8,288 $13,637 $ 5,054
3/31/2001 $ 7,276 $12,774 $ 4,557
4/30/2001 $ 8,324 $13,766 $ 5,313
5/31/2001 $ 8,963 $13,858 $ 5,495
6/30/2001 $ 8,510 $13,521 $ 5,490
7/31/2001 $ 7,817 $13,388 $ 5,359
8/31/2001 $ 8,324 $12,550 $ 5,702
9/30/2001 $ 8,155 $11,537 $ 6,220
10/31/2001 $ 7,906 $11,757 $ 5,949
11/30/2001 $ 7,995 $12,659 $ 5,710
12/31/2001 $ 8,506 $12,770 $ 5,930
1/31/2002 $ 9,159 $12,583 $ 6,778
2/28/2002 $ 9,994 $12,341 $ 7,450
3/31/2002 $10,792 $12,805 $ 8,214
4/30/2002 $11,372 $12,029 $ 8,761
5/31/2002 $12,678 $11,941 $10,039
6/30/2002 $11,100 $11,090 $ 8,598
7/31/2002 $ 9,232 $10,226 $ 7,274
8/31/2002 $10,420 $10,293 $ 8,283
9/30/2002 $10,429 $ 9,175 $ 8,327
10/31/2002 $ 9,867 $ 9,982 $ 7,573
11/30/2002 $ 9,903 $10,569 $ 7,379
12/31/2002 $11,611 $ 9,949 $ 9,036
1/31/2003 $11,738 $ 9,688 $ 8,995
2/28/2003 $10,899 $ 9,543 $ 8,421
3/31/2003 $10,242 $ 9,635 $ 7,899
4/30/2003 $10,069 $10,429 $ 7,816
5/31/2003 $11,556 $10,977 $ 8,711
6/30/2003 $11,911 $11,118 $ 9,163
7/31/2003 $12,386 $11,314 $ 9,495
8/31/2003 $14,201 $11,534 $10,713
9/30/2003 $14,511 $11,412 $10,791
10/31/2003 $15,815 $12,057 $11,666
11/30/2003 $17,621 $12,163 $12,911
12/31/2003 $17,547 $12,801 $12,903
1/31/2004 $15,829 $13,035 $11,287
2/29/2004 $16,213 $13,217 $11,501
3/31/2004 $17,154 $13,017 $12,476
4/30/2004 $13,663 $12,813 $ 9,757
5/31/2004 $14,879 $12,989 $10,752
6/30/2004 $14,504 $13,241 $10,317
7/31/2004 $14,339 $12,803 $10,348
8/31/2004 $15,226 $12,854 $11,255
9/30/2004 $16,405 $12,994 $12,081
10/31/2004 $16,716 $13,192 $12,544
11/30/2004 $17,474 $13,726 $12,936
12/31/2004 $16,469 $14,193 $12,009
1/31/2005 $15,537 $13,845 $11,124
2/28/2005 $16,716 $14,136 $11,881
3/31/2005 $15,957 $13,886 $11,309
4/30/2005 $14,513 $13,623 $10,128
5/31/2005 $14,732 $14,056 $10,238
6/30/2005 $16,131 $14,076 $11,285
7/31/2005 $15,911 $14,600 $10,904
8/31/2005 $16,789 $14,466 $11,417
9/30/2005 $19,841 $14,584 $13,754
10/31/2005 $18,553 $14,340 $12,693
11/30/2005 $20,463 $14,882 $13,840
12/31/2005 $22,972 $14,887 $15,352
1/31/2006 $27,319 $15,282 $18,163
2/28/2006 $24,867 $15,323 $15,847
3/31/2006 $27,145 $15,514 $16,609
4/30/2006 $30,202 $15,722 $18,718
5/31/2006 $27,210 $15,270 $17,185
6/30/2006 $27,576 $15,290 $17,319
7/31/2006 $27,374 $15,384 $16,954
8/31/2006 $28,390 $15,750 $17,376
9/30/2006 $25,910 $16,155 $15,651
10/31/2006 $27,841 $16,682 $16,466
11/30/2006 $30,605 $16,998 $17,914
12/31/2006 $30,042 $17,237 $17,284
1/31/2007 $29,582 $17,497 $16,632
2/28/2007 $30,253 $17,156 $16,642
3/31/2007 $30,865 $17,348 $16,305
4/30/2007 $31,497 $18,116 $16,342
5/31/2007 $31,373 $18,747 $15,905
6/30/2007 $31,038 $18,455 $15,623
7/31/2007 $31,507 $17,880 $16,884
AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------
CLASS C 7/31/07
- -------------------------------------
1-Year +14.10%
- -------------------------------------
5-Year +27.83%
- -------------------------------------
10-Year +12.16%
- -------------------------------------
ADVISOR CLASS (8/1/97-7/31/07)
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Franklin Gold and
Precious Metals Fund S&P 500 6 FTSE Gold Mines Index 6
- --------------------------------------------------------------------------------
8/1/1997 $10,000 $10,000 $10,000
8/31/1997 $ 9,860 $ 9,440 $ 9,984
9/30/1997 $10,315 $ 9,957 $10,784
10/31/1997 $ 8,670 $ 9,625 $ 8,780
11/30/1997 $ 7,262 $10,070 $ 6,913
12/31/1997 $ 7,434 $10,243 $ 7,483
1/31/1998 $ 7,857 $10,356 $ 7,905
2/28/1998 $ 7,831 $11,102 $ 7,617
3/31/1998 $ 8,297 $11,670 $ 8,098
4/30/1998 $ 8,879 $11,788 $ 9,182
5/31/1998 $ 7,663 $11,586 $ 7,687
6/30/1998 $ 7,082 $12,056 $ 7,028
7/31/1998 $ 6,754 $11,928 $ 6,369
8/31/1998 $ 5,405 $10,205 $ 4,961
9/30/1998 $ 7,562 $10,859 $ 7,785
10/31/1998 $ 7,588 $11,741 $ 7,871
11/30/1998 $ 7,438 $12,453 $ 7,461
12/31/1998 $ 7,031 $13,170 $ 6,608
1/31/1999 $ 7,013 $13,720 $ 6,592
2/28/1999 $ 6,870 $13,294 $ 6,162
3/31/1999 $ 7,004 $13,826 $ 6,145
4/30/1999 $ 8,299 $14,361 $ 7,199
5/31/1999 $ 7,245 $14,022 $ 5,857
6/30/1999 $ 7,817 $14,800 $ 6,259
7/31/1999 $ 7,585 $14,338 $ 5,973
8/31/1999 $ 7,906 $14,267 $ 6,350
9/30/1999 $ 9,336 $13,877 $ 7,986
10/31/1999 $ 8,433 $14,755 $ 6,928
11/30/1999 $ 8,585 $15,055 $ 6,619
12/31/1999 $ 8,855 $15,941 $ 6,564
1/31/2000 $ 8,254 $15,140 $ 5,793
2/29/2000 $ 7,894 $14,854 $ 5,976
3/31/2000 $ 7,661 $16,306 $ 5,528
4/30/2000 $ 7,131 $15,815 $ 5,348
5/31/2000 $ 7,382 $15,492 $ 5,510
6/30/2000 $ 7,724 $15,874 $ 5,710
7/31/2000 $ 7,266 $15,626 $ 5,153
8/31/2000 $ 7,993 $16,596 $ 5,217
9/30/2000 $ 7,427 $15,720 $ 4,940
10/31/2000 $ 7,032 $15,653 $ 4,188
11/30/2000 $ 7,490 $14,420 $ 4,417
12/31/2000 $ 8,213 $14,491 $ 4,834
1/31/2001 $ 8,377 $15,004 $ 4,720
2/28/2001 $ 8,751 $13,637 $ 5,054
3/31/2001 $ 7,683 $12,774 $ 4,557
4/30/2001 $ 8,797 $13,766 $ 5,313
5/31/2001 $ 9,490 $13,858 $ 5,495
6/30/2001 $ 9,016 $13,521 $ 5,490
7/31/2001 $ 8,286 $13,388 $ 5,359
8/31/2001 $ 8,824 $12,550 $ 5,702
9/30/2001 $ 8,660 $11,537 $ 6,220
10/31/2001 $ 8,404 $11,757 $ 5,949
11/30/2001 $ 8,505 $12,659 $ 5,710
12/31/2001 $ 9,055 $12,770 $ 5,930
1/31/2002 $ 9,760 $12,583 $ 6,778
2/28/2002 $10,652 $12,341 $ 7,450
3/31/2002 $11,517 $12,805 $ 8,214
4/30/2002 $12,146 $12,029 $ 8,761
5/31/2002 $13,546 $11,941 $10,039
6/30/2002 $11,883 $11,090 $ 8,598
7/31/2002 $ 9,891 $10,226 $ 7,274
8/31/2002 $11,160 $10,293 $ 8,283
9/30/2002 $11,188 $ 9,175 $ 8,327
10/31/2002 $10,587 $ 9,982 $ 7,573
11/30/2002 $10,634 $10,569 $ 7,379
12/31/2002 $12,478 $ 9,949 $ 9,036
1/31/2003 $12,630 $ 9,688 $ 8,995
2/28/2003 $11,726 $ 9,543 $ 8,421
3/31/2003 $11,032 $ 9,635 $ 7,899
4/30/2003 $10,851 $10,429 $ 7,816
5/31/2003 $12,468 $10,977 $ 8,711
6/30/2003 $12,858 $11,118 $ 9,163
7/31/2003 $13,391 $11,314 $ 9,495
8/31/2003 $15,359 $11,534 $10,713
9/30/2003 $15,711 $11,412 $10,791
10/31/2003 $17,147 $12,057 $11,666
11/30/2003 $19,116 $12,163 $12,911
12/31/2003 $19,053 $12,801 $12,903
1/31/2004 $17,206 $13,035 $11,287
2/29/2004 $17,627 $13,217 $11,501
3/31/2004 $18,680 $13,017 $12,476
4/30/2004 $14,881 $12,813 $ 9,757
5/31/2004 $16,220 $12,989 $10,752
6/30/2004 $15,828 $13,241 $10,317
7/31/2004 $15,656 $12,803 $10,348
8/31/2004 $16,641 $12,854 $11,255
9/30/2004 $17,943 $12,994 $12,081
10/31/2004 $18,306 $13,192 $12,544
11/30/2004 $19,139 $13,726 $12,936
12/31/2004 $18,057 $14,193 $12,009
1/31/2005 $17,049 $13,845 $11,124
2/28/2005 $18,354 $14,136 $11,881
3/31/2005 $17,539 $13,886 $11,309
4/30/2005 $15,965 $13,623 $10,128
5/31/2005 $16,224 $14,056 $10,238
6/30/2005 $17,778 $14,076 $11,285
7/31/2005 $17,548 $14,600 $10,904
8/31/2005 $18,536 $14,466 $11,417
9/30/2005 $21,923 $14,584 $13,754
10/31/2005 $20,503 $14,340 $12,693
11/30/2005 $22,633 $14,882 $13,840
12/31/2005 $25,436 $14,887 $15,352
1/31/2006 $30,264 $15,282 $18,163
2/28/2006 $27,574 $15,323 $15,847
3/31/2006 $30,119 $15,514 $16,609
4/30/2006 $33,534 $15,722 $18,718
5/31/2006 $30,235 $15,270 $17,185
6/30/2006 $30,680 $15,290 $17,319
7/31/2006 $30,477 $15,384 $16,954
8/31/2006 $31,638 $15,750 $17,376
9/30/2006 $28,890 $16,155 $15,651
10/31/2006 $31,077 $16,682 $16,466
11/30/2006 $34,182 $16,998 $17,914
12/31/2006 $33,591 $17,237 $17,284
1/31/2007 $33,100 $17,497 $16,632
2/28/2007 $33,877 $17,156 $16,642
3/31/2007 $34,592 $17,348 $16,305
4/30/2007 $35,327 $18,116 $16,342
5/31/2007 $35,225 $18,747 $15,905
6/30/2007 $34,868 $18,455 $15,623
7/31/2007 $35,430 $17,880 $16,884
AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------
ADVISOR CLASS 7/31/07
- -------------------------------------
1-Year +16.25%
- -------------------------------------
5-Year +29.07%
- -------------------------------------
10-Year +13.48%
- -------------------------------------
Annual Report | 11
Performance Summary (CONTINUED)
ENDNOTES
INVESTING IN A FUND THAT CONCENTRATES 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. IN ADDITION, THE FUND IS SUBJECT
TO THE RISKS OF CURRENCY FLUCTUATION AND POLITICAL UNCERTAINTY ASSOCIATED WITH
FOREIGN INVESTING. INVESTMENTS IN DEVELOPING MARKETS INVOLVE HEIGHTENED RISKS
RELATED TO THE SAME FACTORS, IN ADDITION TO THOSE ASSOCIATED WITH THEIR
RELATIVELY SMALL SIZE AND LESSER LIQUIDITY. THE FUND'S PROSPECTUS ALSO INCLUDES
A DESCRIPTION OF THE MAIN INVESTMENT RISKS.
CLASS A: Prior to 8/3/98, these shares were offered at a lower initial
sales charge; thus actual total returns may differ.
CLASS B: These shares have higher annual fees and expenses than Class A
shares.
CLASS C: Prior to 1/1/04, these shares were offered with an initial
sales charge; thus actual total returns would have differed.
These shares have higher annual fees and expenses than Class A
shares.
ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.
1. Cumulative total return represents the change in value of an investment over
the periods indicated.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated.
3. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated.
4. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.
5. Figures are as stated in the Fund's prospectus current as of the date of this
report.
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 FTSE 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.
12 | Annual Report
Your Fund's Expenses
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
Annual Report | 13
Your Fund's Expenses (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
- -------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 2/1/07 VALUE 7/31/07 PERIOD* 2/1/07-7/31/07
- -------------------------------------------------------------------------------------------------------
Actual $1,000 $1,068.80 $4.92
- -------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,020.03 $4.81
- -------------------------------------------------------------------------------------------------------
CLASS B
- -------------------------------------------------------------------------------------------------------
Actual $1,000 $1,065.00 $8.70
- -------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,016.36 $8.50
- -------------------------------------------------------------------------------------------------------
CLASS C
- -------------------------------------------------------------------------------------------------------
Actual $1,000 $1,065.10 $8.65
- -------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,016.41 $8.45
- -------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- -------------------------------------------------------------------------------------------------------
Actual $1,000 $1,070.40 $3.59
- -------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,021.32 $3.51
- -------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio for each class (A: 0.96%;
B: 1.70%; C: 1.69%; and Advisor: 0.70%), multiplied by the average account value
over the period, multiplied by 181/365 to reflect the one-half year period.
14 | Annual Report
Franklin Gold and Precious Metals Fund
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------
YEAR ENDED JULY 31,
CLASS A 2007 2006 2005 2004 2003
---------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 30.67 $ 17.81 $ 15.94 $ 13.74 $ 10.28
---------------------------------------------------------------
Income from investment operations a:
Net investment income b ............................. 0.11 0.15 0.04 0.05 0.13
Net realized and unrealized gains (losses) .......... 4.71 12.87 1.84 2.25 3.44
---------------------------------------------------------------
Total from investment operations ....................... 4.82 13.02 1.88 2.30 3.57
---------------------------------------------------------------
Less distributions from:
Net investment income ............................... (0.76) (0.16) (0.01) (0.10) (0.11)
Net realized gains .................................. (1.00) -- -- -- --
---------------------------------------------------------------
Total distributions .................................... (1.76) (0.16) (0.01) (0.10) (0.11)
---------------------------------------------------------------
Redemption fees ........................................ -- d -- d -- d -- d --
---------------------------------------------------------------
Net asset value, end of year ........................... $ 33.73 $ 30.67 $ 17.81 $ 15.94 $ 13.74
===============================================================
Total return c ......................................... 15.94% 73.36% 11.78% 16.68% 34.97%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................................... 0.93% e 0.92% e 0.96% e 0.96% e 1.09%
Net investment income .................................. 0.33% 0.57% 0.21% 0.26% 1.05%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $1,011,344 $885,176 $439,628 $394,292 $306,283
Portfolio turnover rate ................................ 7.20% 10.96% 11.33% 8.11% 6.59%
a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.
b Based on average daily shares outstanding.
c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable.
d Amount rounds to less than $0.01 per share.
e Benefit of expense reduction rounds to less than 0.01%.
Annual Report |
The accompanying notes are an integral part of these financial statements. | 15
Franklin Gold and Precious Metals Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
---------------------------------------------------------------
YEAR ENDED JULY 31,
CLASS B 2007 2006 2005 2004 2003
---------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 29.62 $ 17.24 $ 15.54 $ 13.46 $ 10.11
---------------------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ...................... (0.12) (0.04) (0.09) (0.08) 0.02
Net realized and unrealized gains (losses) .......... 4.54 12.44 1.79 2.21 3.41
---------------------------------------------------------------
Total from investment operations ....................... 4.42 12.40 1.70 2.13 3.43
---------------------------------------------------------------
Less distributions from:
Net investment income ............................... (0.44) (0.02) -- (0.05) (0.08)
Net realized gains .................................. (1.00) -- -- -- --
---------------------------------------------------------------
Total distributions .................................... (1.44) (0.02) -- (0.05) (0.08)
---------------------------------------------------------------
Redemption fees ........................................ -- d -- d -- d -- d --
---------------------------------------------------------------
Net asset value, end of year ........................... $ 32.60 $ 29.62 $ 17.24 $ 15.54 $ 13.46
===============================================================
Total return c ......................................... 15.12% 71.95% 10.94% 15.81% 34.08%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................................... 1.68% e 1.67% e 1.70% e 1.71% e 1.85%
Net investment income (loss) ........................... (0.41)% (0.19)% (0.53)% (0.49)% 0.29%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $ 62,386 $ 60,423 $ 41,270 $ 37,738 $ 26,278
Portfolio turnover rate ................................ 7.20% 10.96% 11.33% 8.11% 6.59%
a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.
b Based on average daily shares outstanding.
c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable.
d Amount rounds to less than $0.01 per share.
e Benefit of expense reduction rounds to less than 0.01%.
16 | The accompanying notes are an integral part of these financial statements.
| Annual Report
Franklin Gold and Precious Metals Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
---------------------------------------------------------------
YEAR ENDED JULY 31,
CLASS C 2007 2006 2005 2004 2003
---------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 29.90 $ 17.40 $ 15.69 $ 13.59 $ 10.18
---------------------------------------------------------------
Income from investment operations a:
Net investment income (loss) b ...................... (0.13) (0.05) (0.09) (0.09) 0.04
Net realized and unrealized gains (losses) .......... 4.60 12.58 1.80 2.23 3.43
---------------------------------------------------------------
Total from investment operations ....................... 4.47 12.53 1.71 2.14 3.47
---------------------------------------------------------------
Less distributions from:
Net investment income ............................... (0.47) (0.03) -- (0.04) (0.06)
Net realized gains .................................. (1.00) -- -- -- --
---------------------------------------------------------------
Total distributions .................................... (1.47) (0.03) -- (0.04) (0.06)
---------------------------------------------------------------
Redemption fees ........................................ -- d -- d -- d -- d --
---------------------------------------------------------------
Net asset value, end of year ........................... $ 32.90 $ 29.90 $ 17.40 $ 15.69 $ 13.59
===============================================================
Total return c ......................................... 15.10% 72.04% 10.96% 15.77% 34.16%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................................... 1.68% e 1.67% e 1.71% e 1.71% e 1.82%
Net investment income (loss) ........................... (0.41)% (0.19)% (0.54)% (0.49)% 0.32%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $ 240,424 $217,371 $114,315 $101,962 $ 65,729
Portfolio turnover rate ................................ 7.20% 10.96% 11.33% 8.11% 6.59%
a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.
b Based on average daily shares outstanding.
c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable.
d Amount rounds to less than $0.01 per share.
e Benefit of expense reduction rounds to less than 0.01%.
Annual Report |
The accompanying notes are an integral part of these financial statements. | 17
Franklin Gold and Precious Metals Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
---------------------------------------------------------------
YEAR ENDED JULY 31,
ADVISOR CLASS 2007 2006 2005 2004 2003
---------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 31.50 $ 18.28 $ 16.36 $ 14.08 $ 10.53
---------------------------------------------------------------
Income from investment operations a:
Net investment income b ............................. 0.19 0.22 0.08 0.08 0.09
Net realized and unrealized gains (losses) .......... 4.84 13.20 1.89 2.33 3.60
---------------------------------------------------------------
Total from investment operations ....................... 5.03 13.42 1.97 2.41 3.69
---------------------------------------------------------------
Less distributions from:
Net investment income ............................... (0.85) (0.20) (0.05) (0.13) (0.14)
Net realized gains .................................. (1.00) -- -- -- --
---------------------------------------------------------------
Total distributions .................................... (1.85) (0.20) (0.05) (0.13) (0.14)
---------------------------------------------------------------
Redemption fees ........................................ -- c -- c -- c -- c --
---------------------------------------------------------------
Net asset value, end of year ........................... $ 34.68 $ 31.50 $ 18.28 $ 16.36 $ 14.08
===============================================================
Total return ........................................... 16.25% 73.68% 12.09% 16.91% 35.38%
RATIOS TO AVERAGE NET ASSETS
Expenses ............................................... 0.68% d 0.67% d 0.71% d 0.71% d 0.85%
Net investment income .................................. 0.58% 0.82% 0.46% 0.51% 1.29%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $ 65,120 $ 60,213 $ 34,519 $ 35,351 $ 21,223
Portfolio turnover rate ................................ 7.20% 10.96% 11.33% 8.11% 6.59%
a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.
b Based on average daily shares outstanding.
c Amount rounds to less than $0.01 per share.
d Benefit of expense reduction rounds to less than 0.01%.
18 | The accompanying notes are an integral part of these financial statements.
| Annual Report
Franklin Gold and Precious Metals Fund
STATEMENT OF INVESTMENTS, JULY 31, 2007
- ------------------------------------------------------------------------------------------------------------------------------------
COUNTRY SHARES/WARRANTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS 98.0%
GOLD AND DIVERSIFIED RESOURCES 6.9%
Anglo American PLC ...................................................... United Kingdom 233,051 $ 13,748,450
Anglo American PLC, ADR ................................................. United Kingdom 519,571 15,239,017
a,b First Uranium Corp., 144A ............................................... Canada 544,800 5,085,957
Freeport-McMoRan Copper & Gold Inc., B .................................. United States 113,211 10,639,570
a Mvelaphanda Resources Ltd. .............................................. South Africa 2,650,000 20,285,317
Oxiana Ltd. ............................................................. Australia 8,882,655 28,240,318
a,b Polymetal, GDR, 144A .................................................... Russia 250,000 1,532,500
-------------
94,771,129
-------------
GOLD EXPLORATION AND DEVELOPMENT 10.6%
a Apex Silver Mines Ltd. .................................................. Bolivia 200,000 3,356,000
a,b Aurizon Mines Ltd., 144A ................................................ Canada 1,800,000 6,950,980
a AXMIN Inc. .............................................................. Canada 500,000 445,215
a,b AXMIN Inc., 144A ........................................................ Canada 2,000,000 1,780,860
a Banro Corp. ............................................................. Canada 350,000 3,723,404
a Bendigo Mining Ltd. ..................................................... Australia 13,648,795 3,897,239
a,b Bendigo Mining Ltd., 144A ............................................... Australia 5,000,000 1,427,686
a Centamin Egypt Ltd. ..................................................... Australia 1,000,000 1,199,738
a,b Centamin Egypt Ltd., 144A ............................................... Australia 5,000,000 5,998,688
a European Minerals Corp. ................................................. Canada 1,050,000 1,436,873
a,b European Minerals Corp., 144A ........................................... Canada 10,600,000 14,505,577
a,b European Minerals Corp., wts., 144A, 4/11/10 ............................ Canada 5,300,000 2,980,598
a Gabriel Resources Ltd. .................................................. Canada 500,000 1,968,319
a,b Gabriel Resources Ltd., 144A ............................................ Canada 1,500,000 5,904,958
a Great Basin Gold Ltd. ................................................... Canada 2,000,000 5,680,008
a,b International Minerals Corp., 144A ...................................... Canada 700,000 3,864,467
a,b International Minerals Corp., wts., 144A, 5/19/08 ....................... Canada 350,000 150,905
a Ivanhoe Mines Ltd. ...................................................... Canada 490,000 7,072,828
a,b Ivanhoe Mines Ltd., 144A ................................................ Canada 918,600 13,259,387
a,b Jinshan Gold Mines Inc., 144A ........................................... Canada 5,595,000 11,799,372
a Metallica Resources Inc. ................................................ Canada 500,000 2,371,356
a,b Metallica Resources Inc., 144A .......................................... Canada 988,998 4,690,533
a,b Metallica Resources Inc., wts., 144A, 12/11/08 .......................... Canada 494,499 1,001,142
a Miramar Mining Corp. .................................................... Canada 1,330,000 6,370,138
a Nautilus Minerals Inc. .................................................. Canada 1,278,000 4,743,537
a Nautilus Minerals Inc., wts., 2/15/09 ................................... Canada 639,000 --
a Nevsun Resources Ltd. ................................................... Canada 877,000 2,153,660
a NovaGold Resources Inc. ................................................. Canada 200,000 3,000,000
a Pan Australian Resources Ltd. ........................................... Australia 25,600,000 14,946,809
a,b Pan Australian Resources Ltd., 144A ..................................... Australia 5,000,000 2,919,299
a Shore Gold Inc. ......................................................... Canada 375,000 1,673,072
a Sino Gold Mining Ltd. ................................................... Australia 1,100,000 5,344,234
---------------
146,616,882
---------------
LONG LIFE GOLD MINES 52.0%
Agnico-Eagle Mines Ltd. ................................................. Canada 1,300,000 55,302,000
a Alamos Gold Inc. ........................................................ Canada 1,246,400 7,827,238
a,b Alamos Gold Inc., 144A .................................................. Canada 400,000 2,511,951
AngloGold Ashanti Ltd. .................................................. South Africa 62,530 2,621,473
Annual Report | 19
Franklin Gold and Precious Metals Fund
STATEMENT OF INVESTMENTS, JULY 31, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
COUNTRY SHARES/WARRANTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS (CONTINUED)
LONG LIFE GOLD MINES (CONTINUED)
AngloGold Ashanti Ltd., ADR ............................................. South Africa 1,241,327 $ 52,334,346
Barrick Gold Corp. ...................................................... Canada 3,271,283 107,625,211
a,b Centerra Gold Inc., 144A ................................................ Canada 1,384,800 9,111,722
Compania de Minas Buenaventura SA ....................................... Peru 100,593 4,007,169
Compania de Minas Buenaventura SA, ADR .................................. Peru 1,288,986 51,443,431
a Gammon Gold Inc. ........................................................ Canada 2,114,500 23,822,561
Gold Fields Ltd. ........................................................ South Africa 697,191 11,390,849
Gold Fields Ltd., ADR ................................................... South Africa 854,528 14,116,803
Goldcorp Inc. ........................................................... Canada 1,260,625 32,020,749
Goldcorp Inc. (USD Traded) .............................................. Canada 2,329,865 59,201,870
a Goldcorp Inc., wts., 6/09/11 ............................................ Canada 9,125 96,647
a Harmony Gold Mining Co. Ltd. ............................................ South Africa 1,443,000 19,732,046
a Harmony Gold Mining Co. Ltd., ADR ....................................... South Africa 600,000 8,304,000
a Highland Gold Mining Ltd. ............................................... United Kingdom 524,000 1,160,283
a Lihir Gold Ltd. ......................................................... Papua New Guinea 17,447,142 45,505,477
a Meridian Gold Inc. ...................................................... United States 1,006,500 28,413,495
a Meridian Gold Inc. (CAD Traded) ......................................... United States 513,760 14,518,572
Newcrest Mining Ltd. .................................................... Australia 4,150,828 88,095,157
Newmont Mining Corp. .................................................... United States 720,714 30,089,810
Randgold Resources Ltd., ADR ............................................ United Kingdom 2,127,600 48,722,040
---------------
717,974,900
---------------
MEDIUM LIFE GOLD MINES 11.4%
a Eldorado Gold Corp. ..................................................... Canada 2,645,000 12,023,854
a,b GBS Gold International Inc., 144A ....................................... Canada 2,000,000 4,911,426
a Golden Star Resources Ltd. .............................................. Canada 750,000 2,748,617
a Golden Star Resources Ltd. (USD Traded) ................................. Canada 700,000 2,604,000
b Hochschild Mining PLC, 144A ............................................. United Kingdom 1,850,000 13,585,830
IAMGOLD Corp. ........................................................... Canada 1,282,000 10,574,187
Kingsgate Consolidated Ltd. ............................................. Australia 2,105,148 8,899,841
a Kinross Gold Corp. ...................................................... Canada 3,513,012 45,439,653
a SEMAFO Inc. ............................................................. Canada 4,725,000 7,883,119
a,b SEMAFO Inc., 144A ....................................................... Canada 3,000,000 5,005,155
Yamana Gold Inc. ........................................................ Canada 1,630,940 18,053,615
b Yamana Gold Inc., 144A .................................................. Canada 2,300,000 25,459,743
a Yukon-Nevada Gold Corp. ................................................. Canada 650,000 785,922
---------------
157,974,962
---------------
PAPER & FOREST PRODUCTS 0.1%
a Mondi Ltd. .............................................................. United Kingdom 25,610 219,807
a Mondi PLC ............................................................... United Kingdom 64,025 561,550
---------------
781,357
---------------
20 | Annual Report
Franklin Gold and Precious Metals Fund
STATEMENT OF INVESTMENTS, JULY 31, 2007 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------------
COUNTRY SHARES/WARRANTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS (CONTINUED)
PLATINUM & PALLADIUM 17.0%
Anglo Platinum Ltd. ..................................................... South Africa 110,000 $ 15,126,263
Anglo Platinum Ltd., ADR ................................................ South Africa 571,138 79,245,397
a Eastern Platinum Ltd. ................................................... Canada 3,100,000 7,351,204
Impala Platinum Holdings Ltd. ........................................... South Africa 2,050,000 59,916,493
Impala Platinum Holdings Ltd., ADR ...................................... South Africa 1,542,400 45,269,440
Lonmin PLC .............................................................. United Kingdom 350,000 24,913,704
a Stillwater Mining Co. ................................................... United States 253,246 2,304,539
---------------
234,127,040
---------------
TOTAL COMMON STOCKS AND WARRANTS (COST $641,933,019) 1,352,246,270
---------------
SHORT TERM INVESTMENT (COST $20,744,575) 1.5%
MONEY MARKET FUND 1.5%
c Franklin Institutional Fiduciary Trust Money Market Portfolio, 5.00% .... United States 20,744,575 20,744,575
---------------
TOTAL INVESTMENTS (COST $662,677,594) 99.5% ............................. 1,372,990,845
OTHER ASSETS, LESS LIABILITIES 0.5% ..................................... 6,283,114
---------------
NET ASSETS 100.0% ....................................................... $1,379,273,959
===============
CURRENCY ABBREVIATIONS
CAD - Canadian Dollar
USD - U.S. Dollar
SELECTED PORTFOLIO ABBREVIATIONS
ADR - American Depository Receipt
GDR - Global Depository Receipt
a Non-income producing for the twelve months ended July 31, 2007.
b Security was purchased pursuant to Rule 144A under the Securities Act of 1933
and may be sold in transactions exempt from registration only to qualified
institutional buyers or in a public offering registered under the Securities Act
of 1933. These securities have been deemed liquid under guidelines approved by
the Fund's Board of Trustees. At July 31, 2007, the aggregate value of these
securities was $144,438,736, representing 10.47% of net assets.
c See Note 8 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio. The rate shown is the annualized seven-day yield at
period end.
Annual Report |
The accompanying notes are an integral part of these financial statements. | 21
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2007
Assets:
Investments in securities:
Cost - Unaffiliated issuers ........................... $ 641,933,019
Cost - Sweep Money Fund (Note 8) ...................... 20,744,575
----------------
Total cost of investments ............................. $ 662,677,594
================
Value - Unaffiliated issuers .......................... $ 1,352,246,270
Value - Sweep Money Fund (Note 8) ..................... 20,744,575
----------------
Total value of investments ............................ 1,372,990,845
Foreign currency, at value (cost $4,134,819) ............. 4,445,002
Receivables:
Investment securities sold ............................ 942,192
Capital shares sold ................................... 4,267,618
Dividends ............................................. 252,728
----------------
Total assets ....................................... 1,382,898,385
----------------
Liabilities:
Payables:
Capital shares redeemed ............................... 2,032,169
Affiliates ............................................ 1,087,186
Unaffiliated transfer agent fees ...................... 412,935
Accrued expenses and other liabilities ................... 92,136
----------------
Total liabilities .................................. 3,624,426
----------------
Net assets, at value ............................ $ 1,379,273,959
================
Net assets consist of:
Paid-in capital .......................................... $ 645,722,070
Distributions in excess of net investment income ......... (25,605,202)
Net unrealized appreciation (depreciation) ............... 710,624,883
Accumulated net realized gain (loss) ..................... 48,532,208
----------------
Net assets, at value ............................ $ 1,379,273,959
================
22 | The accompanying notes are an integral part of these financial statements.
| Annual Report
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
July 31, 2007
CLASS A:
Net assets, at value ........................................... $ 1,011,344,037
================
Shares outstanding ............................................. 29,988,118
================
Net asset value per share a .................................... $ 33.73
================
Maximum offering price per share (net asset value / 94.25% ..... $ 35.79
================
CLASS B:
Net assets, at value ........... .............................. $ 62,385,954
================
Shares outstanding ............................................. 1,913,491
================
Net asset value and maximum offering price per share a ......... $ 32.60
================
CLASS C:
Net assets, at value ........................................... $ 240,423,604
================
Shares outstanding ............................................. 7,307,438
================
Net asset value and maximum offering price per share a ......... $ 32.90
================
ADVISOR CLASS:
Net assets, at value ........................................... $ 65,120,364
================
Shares outstanding ............................................. 1,877,838
================
Net asset value and maximum offering price per share a ............ $ 34.68
================
a Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable, and redemption fees retained by the Fund.
Annual Report |
The accompanying notes are an integral part of these financial statements. | 23
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended July 31, 2007
Investment income:
Dividends (net of foreign taxes $381,853)
Unaffiliated issuers ................................................................ $ 15,457,387
Sweep Money Fund (Note 8) ........................................................... 816,786
Interest ............................................................................... 86,377
--------------
Total investment income .......................................................... 16,360,550
--------------
Expenses:
Management fees (Note 3a) .............................................................. 6,100,652
Distribution fees: (Note 3c)
Class A ............................................................................. 2,376,474
Class B ............................................................................. 609,423
Class C ............................................................................. 2,233,524
Transfer agent fees (Note 3e) .......................................................... 2,150,560
Custodian fees (Note 4) ................................................................ 142,992
Reports to shareholders ................................................................ 141,887
Registration and filing fees ........................................................... 147,172
Professional fees ...................................................................... 46,582
Trustees' fees and expenses ............................................................ 24,409
Other .................................................................................. 35,495
--------------
Total expenses ................................................................... 14,009,170
Expense reductions (Note 4) ...................................................... (511)
--------------
Net expenses .................................................................. 14,008,659
--------------
Net investment income ...................................................... 2,351,891
--------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ......................................................................... 55,316,115
Foreign currency transactions ....................................................... (189,556)
--------------
Net realized gain (loss) ...................................................... 55,126,559
--------------
Net change in unrealized appreciation (depreciation) on:
Investments ......................................................................... 128,746,597
Translation of assets and liabilities denominated in foreign currencies ............. 209,362
--------------
Net change in unrealized appreciation (depreciation) .......................... 128,955,959
--------------
Net realized and unrealized gain (loss) ................................................... 184,082,518
--------------
Net increase (decrease) in net assets resulting from operations ........................... $ 186,434,409
==============
24 | The accompanying notes are an integral part of these financial statements.
| Annual Report
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------
YEAR ENDED JULY 31,
2007 2006
--------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income ..................................................................... $ 2,351,891 $ 3,771,921
Net realized gain (loss) from investments and foreign currency transactions ............... 55,126,559 48,399,030
Net change in unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies ............................... 128,955,959 402,987,896
--------------------------------
Net increase (decrease) in net assets resulting from operations ..................... 186,434,409 455,158,847
--------------------------------
Distributions to shareholders from:
Net investment income:
Class A ................................................................................ (21,865,871) (3,754,217)
Class B ................................................................................ (871,751) (41,971)
Class C ................................................................................ (3,276,068) (219,065)
Advisor Class .......................................................................... (1,644,592) (348,876)
Net realized gains:
Class A ................................................................................ (28,740,740) --
Class B ................................................................................ (1,976,377) --
Class C ................................................................................ (7,022,535) --
Advisor Class .......................................................................... (1,931,389) --
--------------------------------
Total distributions to shareholders .......................................................... (67,329,323) (4,364,129)
--------------------------------
Capital share transactions: (Note 2)
Class A ................................................................................ 38,685,399 131,599,625
Class B ................................................................................ (3,698,184) (9,105,554)
Class C ................................................................................ 2,733,961 18,714,595
Advisor Class .......................................................................... (744,605) 1,411,854
--------------------------------
Total capital share transactions ............................................................. 36,976,571 142,620,520
--------------------------------
Redemption fees .............................................................................. 8,785 36,012
--------------------------------
Net increase (decrease) in net assets .................................................. 156,090,442 593,451,250
Net assets:
Beginning of year ............................................................................ 1,223,183,517 629,732,267
--------------------------------
End of year .................................................................................. $1,379,273,959 $1,223,183,517
================================
Distributions in excess of net investment income included in net assets:
End of year .................................................................................. $ (25,605,202) $ (54,761)
================================
Annual Report |
The accompanying notes are an integral part of these financial statements. | 25
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 amended, (the 1940 Act) as a non-diversified,
open-end investment company. 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.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
Securities listed on a securities exchange or on the NASDAQ National Market
System are valued at the last quoted sale price or the official closing price of
the day, respectively. Over-the-counter securities and listed securities for
which there is no reported sale are valued within the range of the most recent
quoted bid and ask prices. Securities that trade in multiple markets or on
multiple exchanges are valued according to the broadest and most representative
market. Investments in open-end mutual funds are valued at the closing net asset
value.
Foreign securities are valued as of the close of trading on the foreign stock
exchange on which the security is primarily traded, or the NYSE, whichever is
earlier. If no sale is reported at that time, the foreign security will be
valued within the range of the most recent quoted bid and ask prices. The value
is then converted into its U.S. dollar equivalent at the foreign exchange rate
in effect at the close of the NYSE on the day that the value of the foreign
security is determined.
The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. The investment manager monitors price movements
following the close of trading in foreign stock markets through a series of
country specific market proxies (such as baskets of American Depository
Receipts, futures contracts and exchange traded funds). These price movements
are measured against established trigger thresholds for each specific market
proxy to assist in determining if an event has occurred. If such an event
occurs, the securities may be valued using fair value procedures, which may
include the use of independent pricing services. All security valuation
procedures are approved by the Fund's Board of Trustees.
26 | Annual Report
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. Occasionally, events may impact the availability or reliability of foreign
exchange rates used to convert the U.S. dollar equivalent value. If such an
event occurs, the foreign exchange rate will be valued at fair value using
procedures established and approved by the Fund's Board of Trustees.
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 on the
Statement of Operations.
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. FOREIGN CURRENCY CONTRACTS
When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate at a future date. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.
The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities.
D. INCOME TAXES
No provision has been made for U.S. income taxes because it is the Fund's policy
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute to shareholders substantially all of its taxable income and net
realized gains.
Foreign securities held by the Fund may be subject to foreign taxation on
dividend and interest income received. Foreign taxes, if any, are recorded based
on the tax regulations and rates that exist in the foreign markets in which the
Fund invests.
Annual Report | 27
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. 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 is
recorded on the ex-dividend date except that certain dividends from foreign
securities are recognized as soon as the Fund is notified of the ex-dividend
date. Distributions to shareholders are recorded on the ex-dividend date and are
determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted in the United States of
America. These differences may be permanent or temporary. Permanent differences
are reclassified among capital accounts to reflect their tax character. These
reclassifications have no impact on net assets or the results of operations.
Temporary differences are not reclassified, as they may reverse in subsequent
periods.
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. Differences in per share
distributions, by class, are generally due to differences in class specific
expenses.
F. 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.
G. REDEMPTION FEES
A short term trading redemption fee will be imposed, with some exceptions, on
any fund shares that are redeemed or exchanged within seven calendar days
following their purchase date. The redemption fee is 2% of the amount redeemed.
Such fees are retained by the Fund and accounted for as an addition to paid-in
capital.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and trustees are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. 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. Currently, the Fund expects the
risk of loss to be remote.
28 | Annual Report
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
At July 31, 2007, there were an unlimited number of shares authorized (no par
value). Transactions in the Fund's shares were as follows:
----------------------------------------------------------
YEAR ENDED JULY 31,
2007 2006
----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------
CLASS A SHARES:
Shares sold ...................... 9,952,865 $ 321,030,285 20,483,273 $ 563,514,264
Shares issued in reinvestment of
distributions ................. 1,337,299 43,208,127 141,714 3,284,924
Shares redeemed .................. (10,163,730) (325,553,013) (16,446,287) (435,199,563)
----------------------------------------------------------
Net increase (decrease) .......... 1,126,434 $ 38,685,399 4,178,700 $ 131,599,625
==========================================================
CLASS B SHARES:
Shares sold ...................... 166,415 $ 5,219,309 387,494 $ 9,874,058
Shares issued in reinvestment of
distributions ................. 79,582 2,498,087 1,657 37,296
Shares redeemed .................. (372,167) (11,415,580) (743,854) (19,016,908)
----------------------------------------------------------
Net increase (decrease) .......... (126,170) $ (3,698,184) (354,703) $ (9,105,554)
==========================================================
CLASS C SHARES:
Shares sold ...................... 1,657,798 $ 52,788,963 3,176,553 $ 84,980,636
Shares issued in reinvestment of
distributions ................. 268,875 8,515,298 7,924 180,030
Shares redeemed .................. (1,887,994) (58,570,300) (2,484,486) (66,446,071)
----------------------------------------------------------
Net increase (decrease) .......... 38,679 $ 2,733,961 699,991 $ 18,714,595
==========================================================
ADVISOR CLASS SHARES:
Shares sold ...................... 404,725 $ 13,568,522 378,725 $ 10,812,774
Shares issued in reinvestment of
distributions ................. 92,530 3,068,310 12,611 299,758
Shares redeemed .................. (531,240) (17,381,437) (367,540) (9,700,678)
----------------------------------------------------------
Net increase (decrease) .......... (33,985) $ (744,605) 23,796 $ 1,411,854
==========================================================
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Fund are also officers and/or directors of the following
subsidiaries:
- --------------------------------------------------------------------------------
SUBSIDIARY 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
Annual Report | 29
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. MANAGEMENT FEES
The Fund pays an investment management fee to Advisers based on the month-end
net assets of the Fund as follows:
- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.625% Up to and including $100 million
0.500% Over $100 million, up to and including $250 million
0.450% Over $250 million, up to and including $10 billion
0.440% Over $10 billion, up to and including $12.5 billion
0.420% Over $12.5 billion, up to and including $15 billion
0.400% In excess of $15 billion
B. ADMINISTRATIVE FEES
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.
C. DISTRIBUTION FEES
The Fund's Board of Trustees has adopted distribution plans for each share
class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under
the 1940 Act. Under the Fund's Class A reimbursement distribution plan, the Fund
reimburses Distributors for costs incurred in connection with the servicing,
sale and distribution of the Fund's shares up to the maximum annual plan rate.
Under the Class A reimbursement distribution plan, costs exceeding the maximum
for the current plan year cannot be reimbursed in subsequent periods.
In addition, under the Fund's Class B and C compensation distribution plans, the
Fund pays Distributors for costs incurred in connection with the servicing, sale
and distribution of the Fund's shares up to the maximum annual plan rate for
each class.
The maximum annual plan rates, based on the average daily net assets, for each
class, are as follows:
Class A ....................................................... 0.25%
Class B ....................................................... 1.00%
Class C ....................................................... 1.00%
D. SALES CHARGES/UNDERWRITING AGREEMENTS
Distributors has advised the Fund of the following commission transactions
related to the sales and redemptions of the Fund's shares for the year:
Sales charges retained net of commissions
paid to unaffiliated broker/dealers ........................ $ 497,267
Contingent deferred sales charges retained .................... $ 88,627
30 | Annual Report
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
E. TRANSFER AGENT FEES
For the year ended July 31, 2007, the Fund paid transfer agent fees of
$2,150,560, of which $1,157,498 was retained by Investor Services.
4. EXPENSE OFFSET ARRANGEMENT
The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the year ended July 31, 2007, the
custodian fees were reduced as noted in the Statement of Operations.
5. INCOME TAXES
The tax character of distributions paid during the years ended July 31, 2007 and
2006, was as follows:
-------------------------------
2007 2006
-------------------------------
Distributions paid from:
Ordinary income .......................... $ 27,658,282 $ 4,364,129
Long term capital gain ................... 39,671,041 --
-------------------------------
$ 67,329,323 $ 4,364,129
-------------------------------
At July 31, 2007, the cost of investments, net unrealized appreciation
(depreciation), undistributed ordinary income and undistributed long term
capital gains for income tax purposes were as follows:
Cost of investments ......................................... $ 723,111,653
================
Unrealized appreciation ..................................... $ 665,895,580
Unrealized depreciation ..................................... (16,016,388)
----------------
Net unrealized appreciation (depreciation) .................. $ 649,879,192
================
Undistributed ordinary income ............................... $ 38,275,529
Undistributed long term capital gains ....................... 45,085,536
----------------
Distributable earnings ...................................... $ 83,361,065
================
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions and passive foreign
investment company shares.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of foreign currency transactions and wash
sales.
Annual Report | 31
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short term securities) for the
year ended July 31, 2007, aggregated $92,245,660 and $97,802,047, respectively.
7. CONCENTRATION OF RISK
Investing in foreign securities may include certain risks and considerations not
typically associated with investing in U.S. securities, such as fluctuating
currency values and changing local and regional economic, political and social
conditions, which may result in greater market volatility. In addition, certain
foreign securities may not be as liquid as U.S. securities.
8. 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 and administrative
fees paid by the Sweep Money Fund.
9. REGULATORY AND LITIGATION MATTERS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), relating to certain practices in the mutual fund industry,
including late trading, market timing and marketing support payments to
securities dealers who sell fund shares ("marketing support"), Franklin
Resources, Inc. and certain of its subsidiaries (collectively, the "Company"),
entered into settlements with certain of those regulators and governmental
entities. Specifically, the Company entered into settlements with the SEC, among
others, concerning market timing and marketing support.
On June 23, 2006, the SEC approved the proposed plan of distribution for the
marketing support settlement, and disbursement of the settlement monies to the
designated funds, in accordance with the terms and conditions of that settlement
and plan, was completed in September 2006.
On June 6, 2007, the SEC posted for public comment the proposed plan of
distribution for the market timing settlement. Once the SEC approves the final
plan of distribution, disbursements of settlement monies will be made promptly
to individuals who were shareholders of the designated funds during the relevant
period, in accordance with the terms and conditions of the settlement and plan.
32 | Annual Report
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. REGULATORY AND LITIGATION MATTERS (CONTINUED)
In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and employees, have been named in private lawsuits (styled as
shareholder class actions, or as derivative actions on behalf of either the
named funds or Franklin Resources, Inc.). The lawsuits relate to the industry
practices referenced above.
The Company and fund management believe that the claims made in each of the
private lawsuits referenced above are without merit and intend to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. If it is determined that the Company bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Fund, it is
committed to making the Fund or its shareholders whole, as appropriate.
10. NEW ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" ("FIN 48"), which clarifies the
accounting for uncertainty in tax positions taken or expected to be taken in a
tax return. FIN 48 provides guidance on the measurement, recognition,
classification and disclosure of tax positions, along with accounting for the
related interest and penalties. FIN 48 is effective for fiscal years beginning
after December 15, 2006, and is to be applied to all open tax years as of the
date of effectiveness. On December 22, 2006, the Securities and Exchange
Commission extended the implementation date to no later than the last net asset
value calculation in the first semi-annual reporting period in 2007. The Fund
believes the adoption of FIN 48 will have no material impact on its financial
statements.
In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement"
("SFAS 157"), which defines fair value, establishes a framework for measuring
fair value, and expands disclosures about fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. The Fund believes the adoption of SFAS 157
will have no material impact on its financial statements.
Annual Report | 33
Franklin Gold and Precious Metals Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS 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, 2007, 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 five years in the
period then ended, 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 the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 2007 by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
September 20, 2007
34 | Annual Report
Franklin Gold and Precious Metals Fund
TAX DESIGNATION (UNAUDITED)
Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund
designates the maximum amount allowable but no less than $51,535,569 as a long
term capital gain dividend for the fiscal year ended July 31, 2007.
Under Section 871(k)(2)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $3,506,907 as a short term capital gain dividend for
purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the
fiscal year ended July 31, 2007.
Under Section 854(b)(2) of the Code, the Fund designates 6.97% of the ordinary
income dividends as income qualifying for the dividends received deduction for
the fiscal year ended July 31, 2007.
Under Section 854(b)(2) of the Code, the Fund designates the maximum amount
allowable but no less than $16,285,477 as qualified dividends for purposes of
the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
July 31, 2007. In January 2008, shareholders will receive Form 1099-DIV which
will include their share of qualified dividends distributed during the calendar
year 2007. Shareholders are advised to check with their tax advisors for
information on the treatment of these amounts on their individual income tax
returns.
Under Section 871(k)(1)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $816,786 as interest related dividends for purposes
of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year
ended July 31, 2007.
At July 31, 2007, more than 50% of the Franklin Gold and Precious Metals Fund
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 elects to treat foreign taxes paid as allowed under
Section 853 of the Code. This election will allow shareholders of record in
December 2007, to treat their proportionate share of foreign taxes paid by the
Fund as having been paid directly by them. The shareholder shall consider these
amounts as foreign taxes paid in the tax year in which they receive the Fund
distribution.
The foreign tax information will be disclosed in the January 2008, semi-annual
report of the Fund. In addition, in January 2008, shareholders will receive Form
1099-DIV which will include their share of taxes withheld and foreign source
income distributed during the calendar year 2007.
Annual Report | 35
Franklin Gold and Precious Metals Fund
MEETING OF SHAREHOLDERS, MARCH 21, 2007
A Special Meeting of Shareholders of the Franklin Gold and Precious Metals Fund
(the "Fund") was held at the Fund's offices, One Franklin Parkway, San Mateo,
California on March 21, 2007. The purpose of the meeting was to elect Trustees
of the Fund and to vote on the following Proposals and Sub-Proposals: to approve
an Amended and Restated Agreement and Declaration of Trust; and to approve
amendments to certain of the Fund's fundamental investment restrictions
(including six (6) Sub-Proposals). At the meeting, the following persons were
elected by the shareholders to serve as Independent Trustees of the Fund: Harris
J. Ashton, Robert F. Carlson, Sam Ginn, Edith E. Holiday, Frank W. T. LaHaye,
Frank A. Olson, Larry D. Thompson and John B. Wilson. Charles B. Johnson and
Gregory E. Johnson were elected by the shareholders to serve as Interested
Trustees. Shareholders also approved the Amended and Restated Agreement and
Declaration of Trust, and amendments to certain of the Fund's fundamental
investment restrictions (including six (6) Sub-Proposals). No other business was
transacted at the meeting.
The results of the voting at the meeting are as follows:
Proposal 1. The Election of Trustees:
- ------------------------------------------------------------------------------------------------------
% OF % OF % OF % OF
OUTSTANDING VOTED OUTSTANDING VOTED
NAME FOR SHARES SHARES WITHHELD SHARES SHARES
- ------------------------------------------------------------------------------------------------------
Harris J. Ashton ............ 22,057,722.918 53.544% 97.675% 525,051.644 1.274% 2.325%
Robert F. Carlson ........... 22,053,830.843 53.534% 97.658% 528,943.719 1.284% 2.342%
Sam Ginn .................... 22,065,985.755 53.564% 97.712% 516,788.807 1.254% 2.288%
Edith E. Holiday ............ 21,883,947.030 53.122% 96.905% 698,827.532 1.696% 3.095%
Frank W. T. LaHaye .......... 21,899,482.885 53.160% 96.974% 683,291.677 1.658% 3.026%
Frank A. Olson .............. 21,878,047.893 53.107% 96.879% 704,726.669 1.711% 3.121%
Larry D. Thompson ........... 22,074,782.371 53.585% 97.751% 507,992.191 1.233% 2.249%
John B. Wilson .............. 21,922,707.585 53.216% 97.077% 660,066.977 1.602% 2.923%
Charles B. Johnson .......... 21,910,341.075 53.186% 97.022% 672,433.487 1.632% 2.978%
Gregory E. Johnson .......... 22,071,138.312 53.576% 97.734% 511,636.250 1.242% 2.266%
Proposal 2. To approve an Amended and Restated Agreement and Declaration of
Trust:
- ----------------------------------------------------------------------
% OF % OF
OUTSTANDING VOTED
SHARES VOTED SHARES SHARES
- ----------------------------------------------------------------------
For ....................... 16,341,862.697 39.669% 72.364%
Against ................... 507,512.889 1.232% 2.248%
Abstain ................... 569,260.976 1.382% 2.520%
Broker Non-Votes .......... 5,164,138.000 12.536% 22.868%
- ----------------------------------------------------------------------
TOTAL ..................... 22,582,774.562 54.819% 100.000%
- ----------------------------------------------------------------------
36 | Annual Report
Franklin Gold and Precious Metals Fund
MEETING OF SHAREHOLDERS, MARCH 21, 2007 (CONTINUED)
Proposal 3. To approve amendments to certain of the Fund's fundamental
investment restrictions (includes six (6) Sub-Proposals):
(a) To amend the Fund's fundamental investment restriction regarding borrowing:
- ----------------------------------------------------------------------
% OF % OF
OUTSTANDING VOTED
SHARES VOTED SHARES SHARES
- ----------------------------------------------------------------------
For ....................... 15,724,535.092 38.170% 69.630%
Against ................... 804,614.047 1.953% 3.563%
Abstain ................... 889,487.423 2.160% 3.939%
Broker Non-Votes .......... 5,164,138.000 12.536% 22.868%
- ----------------------------------------------------------------------
TOTAL ..................... 22,582,774.562 54.819% 100.000%
- ----------------------------------------------------------------------
(b) To amend the Fund's fundamental investment restriction regarding lending:
- ----------------------------------------------------------------------
% OF % OF
OUTSTANDING VOTED
SHARES VOTED SHARES SHARES
- ----------------------------------------------------------------------
For ....................... 15,735,350.957 38.197% 69.678%
Against ................... 804,048.246 1.951% 3.560%
Abstain ................... 879,237.359 2.135% 3.894%
Broker Non-Votes .......... 5,164,138.000 12.536% 22.868%
- ----------------------------------------------------------------------
TOTAL ..................... 22,582,774.562 54.819% 100.000%
- ----------------------------------------------------------------------
(c) To amend the Fund's fundamental investment restriction regarding investments
in real estate:
- ----------------------------------------------------------------------
% OF % OF
OUTSTANDING VOTED
SHARES VOTED SHARES SHARES
- ----------------------------------------------------------------------
For ....................... 15,713,981.053 38.145% 69.584%
Against ................... 1,005,951.337 2.442% 4.454%
Abstain ................... 698,704.172 1.696% 3.094%
Broker Non-Votes .......... 5,164,138.000 12.536% 22.868%
- ----------------------------------------------------------------------
TOTAL ..................... 22,582,774.562 54.819% 100.000%
- ----------------------------------------------------------------------
(d) To amend the Fund's fundamental investment restriction regarding investments
in commodities:
- ----------------------------------------------------------------------
% OF % OF
OUTSTANDING VOTED
SHARES VOTED SHARES SHARES
- ----------------------------------------------------------------------
For ....................... 15,771,128.509 38.283% 69.837%
Against ................... 753,830.352 1.830% 3.338%
Abstain ................... 893,677.701 2.170% 3.957%
Broker Non-Votes .......... 5,164,138.000 12.536% 22.868%
- ----------------------------------------------------------------------
TOTAL ..................... 22,582,774.562 54.819% 100.000%
- ----------------------------------------------------------------------
Annual Report | 37
Franklin Gold and Precious Metals Fund
MEETING OF SHAREHOLDERS, MARCH 21, 2007 (CONTINUED)
(e) To amend the Fund's fundamental investment restriction regarding issuing
senior securities:
- ----------------------------------------------------------------------
% OF % OF
OUTSTANDING VOTED
SHARES VOTED SHARES SHARES
- ----------------------------------------------------------------------
For ....................... 15,680,757.123 38.064% 69.436%
Against ................... 805,834.649 1.956% 3.568%
Abstain ................... 932,044.790 2.263% 4.128%
Broker Non-Votes .......... 5,164,138.000 12.536% 22.868%
- ----------------------------------------------------------------------
TOTAL ..................... 22,582,774.562 54.819% 100.000%
- ----------------------------------------------------------------------
(f) To amend the Fund's fundamental investment restriction regarding industry
concentration:
- ----------------------------------------------------------------------
% OF % OF
OUTSTANDING VOTED
SHARES VOTED SHARES SHARES
- ----------------------------------------------------------------------
For ....................... 15,998,469.429 38.835% 70.843%
Against ................... 695,200.979 1.688% 3.078%
Abstain ................... 724,966.154 1.760% 3.211%
Broker Non-Votes .......... 5,164,138.000 12.536% 22.868%
- ----------------------------------------------------------------------
TOTAL ..................... 22,582,774.562 54.819% 100.000%
- ----------------------------------------------------------------------
38 | Annual Report
Franklin Gold and Precious Metals Fund
BOARD MEMBERS AND OFFICERS
The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Fund, principal occupations
during the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Generally, each board member
serves until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1982 140 Director, Bar-S Foods
One Franklin Parkway (meat packing 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).
- ----------------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (1928) Trustee Since March 2007 121 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, senior member and past President, Board of Administration, California Public Employees Retirement Systems
(CALPERS); and FORMERLY, member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of
California; and Chief Counsel, California Department of Transportation.
- ----------------------------------------------------------------------------------------------------------------------------------
SAM GINN (1937) Trustee Since March 2007 121 Director, Chevron
One Franklin Parkway Corporation (global energy
San Mateo, CA 94403-1906 company) and ICO Global
Communications (Holdings)
Limited (satellite
company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC (wireless company); Chairman of the Board and Chief
Executive Officer, AirTouch Communications (cellular communications) (1993-1998) and Pacific Telesis Groups (telephone holding
company) (1988-1994).
- ----------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Trustee Since 2003 140 Director, Hess Corporation
One Franklin Parkway (formerly Amerada Hess
San Mateo, CA 94403-1906 Corporation) (exploration
and refining of oil
and gas), H.J. Heinz
Company (processed foods
and allied products), RTI
International Metals, Inc.
(manufacture and distri-
bution of titanium),
Canadian National Railway
(railroad) and White
Mountains Insurance Group,
Ltd. (holding company).
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 | 39
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------------------
FRANK W. T. LAHAYE (1929) Trustee Since 1968 121 Director, Center for
One Franklin Parkway Creative Land Recycling
San Mateo, CA 94403-1906 (brownfield redevelopment).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
- ----------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Trustee Since 2005 140 Director, Hess Corporation
One Franklin Parkway (formerly Amerada Hess
San Mateo, CA 94403-1906 Corporation) (exploration
and refining of oil
and gas) and Sentient Jet
(private jet service).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer (1977-1999));
and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation.
- ----------------------------------------------------------------------------------------------------------------------------------
LARRY D. THOMPSON (1945) Trustee Since March 2007 140 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (1997-2001); Senior Fellow of The Brookings
Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S.
Department of Justice (2001-2003).
- ----------------------------------------------------------------------------------------------------------------------------------
JOHN B. WILSON (1959) Trustee Since 2006 121 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit
boards; and FORMERLY, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial
Officer and Executive Vice President - Finance Strategy, Staples, Inc. (office supplies) (1992-1996); Executive Vice President -
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting
firm) (1986-1990).
- ----------------------------------------------------------------------------------------------------------------------------------
INTERESTED BOARD MEMBERS AND OFFICERS
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (1933) 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, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Templeton Worldwide,
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 42 of the investment companies in Franklin Templeton Investments.
- ----------------------------------------------------------------------------------------------------------------------------------
40 | Annual Report
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------------------
**GREGORY E. JOHNSON (1961) Trustee Since March 2007 91 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; Director,
Templeton Asset Management Ltd.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of
Franklin Resources, Inc. and of 33 of the investment companies in Franklin Templeton Investments.
- ----------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice
Vice President President - AML
- AML Compliance since
Compliance 2006
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and
of 46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources,
Inc. (1994-2001).
- ----------------------------------------------------------------------------------------------------------------------------------
LAURA FERGERSON (1962) Treasurer Since 2004 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 30 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Director and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004); Assistant Treasurer of most of
the investment companies in Franklin Templeton Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC
(1997-2003).
- ----------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2002 Not Applicable Not Applicable
500 East Broward Blvd. President and
Suite 2100 Chief Executive
Fort Lauderdale, FL 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 some of the other
subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- ----------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and director of one of the subsidiaries of Franklin
Resources, Inc.; and officer of 46 of the investment companies in Franklin Templeton Investments.
- ----------------------------------------------------------------------------------------------------------------------------------
RUPERT H. JOHNSON, JR. (1940) President President since Not Applicable Not Applicable
One Franklin Parkway and Chief 2001 and Chief
San Mateo, CA 94403-1906 Executive 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.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, 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 44 of the investment companies in Franklin
Templeton Investments.
- ----------------------------------------------------------------------------------------------------------------------------------
Annual Report | 41
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------------------
KAREN L. SKIDMORE (1952) Vice President Since 2006 Not Applicable Not Applicable
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 30 of the investment companies in Franklin
Templeton Investments.
- ----------------------------------------------------------------------------------------------------------------------------------
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman &
Sterling, LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
- ----------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of 46 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc. (1999-2004); and Partner, McGladrey & Pullen, LLP (1979-1987 and
1991-2004).
- ----------------------------------------------------------------------------------------------------------------------------------
* 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 manager or affiliated
investment managers.
** Charles B. Johnson is considered to be an interested person of the Fund under
the federal securities laws due to his position as officer and director and
major shareholder of Franklin Resources, Inc. (Resources), which is the parent
company of the Fund's investment manager and distributor. Gregory E. Johnson is
considered to be an interested person of the Fund under the federal securities
laws due to his position as an officer and director of Resources.
Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is
possible that after this date, information about officers may change.
Note 3: Prior to July 31, 2007, Harmon E. Burns, S. Joseph Fortunato, Rupert H.
Johnson, Jr. and Gordon S. Macklin ceased to be trustees of the Trust.
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 HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED JOHN B. WILSON AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. WILSON QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS CHIEF FINANCIAL OFFICER
OF STAPLES, INC. FROM 1992 TO 1996. MR. WILSON HAS BEEN A MEMBER AND CHAIRMAN OF
THE FUND'S AUDIT COMMITTEE SINCE 2006. AS A RESULT OF SUCH BACKGROUND AND
EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. WILSON 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. WILSON IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
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.
42 | Annual Report
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT
At a meeting held April 17, 2007, the Board of Trustees (Board), including a
majority of non-interested or independent Trustees, approved renewal of the
investment management agreement for the Fund. In reaching this decision, the
Board took into account information furnished throughout the year at regular
Board meetings, as well as information prepared specifically in connection with
the annual renewal review process. Information furnished and discussed
throughout the year included investment performance reports and related
financial information for the Fund, as well as periodic reports on shareholder
services, legal, compliance, pricing, brokerage commissions and execution and
other services provided by the Investment Manager (Manager) and its affiliates.
Information furnished specifically in connection with the renewal process
included a report for the Fund prepared by Lipper, Inc. (Lipper), an independent
organization, as well as a Fund profitability analysis report prepared by
management. The Lipper report compared the Fund's investment performance and
expenses with those of other mutual funds deemed comparable to the Fund as
selected by Lipper. The Fund profitability analysis report discussed the
profitability to Franklin Templeton Investments from its overall U.S. fund
operations, as well as on an individual fund-by-fund basis. Included with such
profitability analysis report was information on a fund-by-fund basis listing
portfolio managers and other accounts they manage, as well as information on
management fees charged by the Manager and its affiliates including management's
explanation of differences where relevant and a three-year expense analysis with
an explanation for any increase in expense ratios. Additional material
accompanying such report was a memorandum prepared by management describing
project initiatives and capital investments relating to the services provided to
the Fund by the Franklin Templeton Investments organization, as well as a
memorandum relating to economies of scale and a comparative analysis concerning
transfer agent fees charged the Fund.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel. In approving
continuance of the investment management agreement for the Fund, the Board,
including a majority of independent Trustees, determined that the existing
management fee structure was fair and reasonable and that continuance of the
investment management agreement was in the best interests of the Fund and its
shareholders. While attention was given to all information furnished, the
following discusses some primary factors relevant to the Board's decision.
NATURE, EXTENT AND QUALITY OF SERVICES. The Board was satisfied with the nature
and quality of the overall services provided by the Manager and its affiliates
to the Fund and its shareholders. In addition to investment performance and
expenses discussed later, the Board's opinion was based, in part, upon periodic
reports furnished them showing that the investment policies and restrictions for
the Fund were consistently complied with as well as other reports periodically
furnished the Board covering matters such as the compliance of portfolio
managers and other management personnel with the code of ethics adopted
throughout the Franklin Templeton fund complex, the adherence to fair value
pricing procedures established by the
Annual Report | 43
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
Board, and the accuracy of net asset value calculations. The Board also noted
the extent of benefits provided Fund shareholders from being part of the
Franklin Templeton family of funds, including the right to exchange investments
between the same class of funds without a sales charge, the ability to reinvest
Fund dividends into other funds and the right to combine holdings in other funds
to obtain a reduced sales charge. Favorable consideration was given to
management's continuous efforts and expenditures in establishing back-up systems
and recovery procedures to function in the event of a natural disaster, it being
noted that such systems and procedures had functioned smoothly during the
Florida hurricanes and blackouts experienced in recent years. Among other
factors taken into account by the Board were the Manager's best execution
trading policies, including a favorable report by an independent portfolio
trading analytical firm. Consideration was also given to the experience of the
Fund's portfolio management team, the number of accounts managed and general
method of compensation. In this latter respect, the Board noted that a primary
factor in management's determination of a portfolio manager's bonus compensation
was the relative investment performance of the funds he or she managed and that
a portion of such bonus was required to be invested in a predesignated list of
funds within such person's fund management area so as to be aligned with the
interests of Fund shareholders. The Board also took into account the quality of
transfer agent and shareholder services provided Fund shareholders by an
affiliate of the Manager, noting continuing expenditures by management to
increase and improve the scope of such services, periodic favorable reports on
such service conducted by third parties, the high industry ranking given to the
Franklin Templeton website, and the firsthand experience of individual Board
members who deal with the shareholder services department in their capacities as
shareholders in one or more of the various Franklin Templeton funds.
INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment
performance of the Fund in view of its importance to shareholders. While
consideration was given to performance reports and discussions with portfolio
managers at Board meetings during the year, particular attention in assessing
such performance was given to the Lipper report furnished for the agreement
renewal. The Lipper report prepared for the Fund showed the investment
performance of its Class A shares during the year ended January 31, 2007, as
well as the previous 10 years ended that date in comparison to a performance
universe consisting of all retail and institutional gold-oriented funds as
selected by Lipper. The Board noted that the Fund's total return for the
one-year period was in the middle quintile of such universe and on an annualized
basis was in the second-highest quintile of such universe for the previous
three- and 10-year periods, and the second-lowest quintile of such universe
during the previous five-year period. The Board was satisfied with such
comparative performance.
COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the
management fees and total expense ratios of the Fund compared with those of a
group of other funds selected by Lipper as its appropriate Lipper expense group
under the Lipper report. Prior to making such comparison, the Board relied upon
a survey showing that the scope of management
44 | Annual Report
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
advisory services covered under the Fund's investment management agreement was
similar to those provided by fund managers to other mutual fund groups. In
reviewing comparative costs, emphasis was given to the Fund's management fee in
comparison with the contractual investment management fee that would have been
charged by other funds within its Lipper expense group assuming they were the
same size as the Fund, as well as the actual total expenses of the Fund in
comparison with those of its Lipper expense group. The Lipper contractual
investment management fee analysis includes administrative charges as being part
of a management fee, and total expenses, for comparative consistency, are shown
by Lipper for fund Class A shares. The results of such expense comparisons
showed that both the contractual investment management fee rate for the Fund, as
well as its actual total expenses were in the least expensive quintile of its
Lipper expense group. The Board was satisfied with the management fee and total
expenses of the Fund in comparison to its expense group as shown in the Lipper
report.
MANAGEMENT PROFITABILITY. The Board also considered the level of profits
realized by the Manager and its affiliates in connection with the operation of
the Fund. In this respect, the Board reviewed the Fund profitability analysis
that addresses the overall profitability of Franklin Templeton's U.S. fund
business, as well as its profits in providing management and other services to
the Fund. Specific attention was given to the methodology followed in allocating
costs to the Fund, it being recognized that allocation methodologies are
inherently subjective and various allocation methodologies may each be
reasonable while producing different results. In this respect, the Board noted
that, while being continuously refined and reflecting changes in the Manager's
own cost accounting, the allocation methodology was consistent with that
followed in profitability report presentations for the Fund made in prior years
and that the Fund's independent registered public accounting firm had been
engaged by the Manager to perform certain procedures on a biennial basis,
specified and approved by the Manager and the Fund's Board solely for their
purposes and use in reference to the profitability analysis. In reviewing and
discussing such analysis, management discussed with the Board its belief that
costs incurred in establishing the infrastructure necessary for the type of
mutual fund operations conducted by the Manager and its affiliates may not be
fully reflected in the expenses allocated to the Fund in determining its
profitability, as well as the fact that the level of profits, to a certain
extent, reflected operational cost savings and efficiencies initiated by
management. The Board also took into account management's expenditures in
improving shareholder services provided the Fund, as well as the need to meet
additional regulatory and compliance requirements resulting from the
Sarbanes-Oxley Act and recent SEC requirements. In addition, the Board
considered a third-party study comparing the profitability of the Manager's
parent on an overall basis as compared to other publicly held managers broken
down to show profitability from management operations exclusive of distribution
expenses, as well as profitability including distribution expenses. The Board
also considered the extent to which the Manager and its affiliates might derive
ancillary benefits from fund operations, including its interest in a joint
venture entity that financed up-front commissions paid to brokers/dealers who
sold fund Class B shares prior to February 2005, when the offering of such
shares was discontinued, as well as potential benefits resulting from allocation
Annual Report | 45
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
of fund brokerage and the use of "soft" commission dollars to pay for research.
Based upon its consideration of all these factors, the Board determined that the
level of profits realized by the Manager and its affiliates from providing
services to the Fund was not excessive in view of the nature, quality and extent
of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Fund grows larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. The Board also noted that
economies of scale are shared with a fund and its shareholders through
management fee breakpoints so that as a fund grows in size, its effective
management fee rate declines. The fee structure under the Fund's investment
management agreement provides an initial fee of 0.625% on the first $100 million
of assets; 0.50% on the next $150 million of assets and 0.45% on assets in
excess of $250 million, with breakpoints continuing thereafter at the $10
billion asset level. The Fund had assets of approximately $1.3 billion on
December 31, 2006, and the independent Trustees took into account management's
position that the existing fee schedule was low and reflected anticipated
economies of scale as shown in the favorable effective management fee and
expense comparisons within its Lipper expense group. The Board believed that to
the extent any economies of scale may be realized by the Manager and its
affiliates, the schedule of fees under the investment management agreement
provides a sharing of benefits with the Fund and its shareholders.
PROXY VOTING POLICIES AND PROCEDURES
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 online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/527-7678 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.
46 | Annual Report
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION (CONTINUED)
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
Annual Report | 47
This page intentionally left blank.
Literature Request
LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN (R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. To ensure the highest quality of
service, we may monitor, record and access telephone calls to or from our
service departments. These calls can be identified by the presence of a regular
beeping tone.
FRANKLIN TEMPLETON FUNDS
INTERNATIONAL
Mutual European Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund 1
GLOBAL
Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund 1
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small Cap Growth Fund II 2
Franklin Small-Mid Cap Growth Fund
VALUE
Franklin Balance Sheet Investment Fund 1
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 1
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund
BLEND
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Global Real Estate Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio (R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund 4
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund 5
Franklin Income Fund
Franklin Limited Maturity U.S. Government Securities Fund 4
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 4
Templeton Global Bond Fund
Templeton Income Fund
TAX-FREE INCOME 6
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 7
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California 8
Colorado
Connecticut
Florida 8
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 7
Michigan 7
Minnesota 7
Missouri
New Jersey
New York 8
North Carolina
Ohio 7
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust 9
1. The fund is open only to existing shareholders and select retirement plans.
2. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
3. 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.
4. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
5. Effective 10/1/06, Franklin's AGE High Income Fund changed its name to
Franklin High Income Fund. The fund's investment goal and strategy remained the
same.
6. For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.
7. The fund invests primarily in insured municipal securities.
8. 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).
9.The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
05/07 Not part of the annual report
[LOGO](R)
FRANKLIN TEMPLETON
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
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
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 A2007 09/07
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 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal 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 is John B. Wilson and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $29,972 for the fiscal year ended July 31, 2007 and $31,327 for the fiscal
year ended July 31, 2006.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of their financial
statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning.
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning were $46,000 for the fiscal year ended
July 31, 2007 and $0 for the fiscal year ended July 31, 2006. The services for
which these fees were paid included tax compliance and advice.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended July 31, 2007 and
$565 for the fiscal year ended July 31, 2006. The services for which these fees
were paid included review of materials provided to the fund Board in connection
with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not reported
in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended July 31, 2007
and $175,296 for the fiscal year ended July 31, 2006. The services for which
these fees were paid included review of materials provided to the fund Board in
connection with the investment management contract renewal process.
(e) (1) The registrant's audit committee is directly responsible for approving
the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the
Fund by the auditors;
(iii)pre-approval of all non-audit related services to be provided to the
registrant by the auditors to the registrant's investment adviser or to any
entity that controls, is controlled by or is under common control with the
registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $46,000 for the fiscal year ended July 31, 2007 and $175,861 for
the fiscal year ended July 31, 2006.
(h) The registrant's audit committee of the board has considered whether the
provision of non-audit services that were rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal accountant's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 6. SCHEDULE OF INVESTMENTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES. N/A
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.
ITEM 11. 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 12. EXHIBITS.
(a) (1) Code of Ethics
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, 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 AND PRECIOUS METALS FUND
By /S/JIMMY D. GAMBILL
---------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date September 27, 2007
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
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date September 27, 2007
By /S/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Financial Officer
Date September 27, 2007