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: 7/31/08
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Item 1. Reports to Stockholders.
(GRAPHIC)
JULY 31, 2008
ANNUAL REPORT AND SHARE HOLDER LETTER
SECTOR
FRANKLIN GOLD AND PRECIOUS METALS FUND
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(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO)
FRANKLIN - Templeton - Mutual Series
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.
This annual report for Franklin Gold and Precious Metals Fund covers the fiscal
year ended July 31, 2008.
PERFORMANCE OVERVIEW
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.
Franklin Gold and Precious Metals Fund - Class A delivered a cumulative total
return of +14.76% for the 12 months ended July 31, 2008. The Fund outperformed
the broad Standard & Poor's 500 Index's (S&P 500's) -11.09% total return, but
underperformed the sector-specific FTSE Gold Mines Index's +17.69% 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
For the year ended July 31, 2008, the U.S. economy contended with record-high
oil prices, the worst housing market contraction in decades, lingering effects
of the ongoing credit crisis and dollar devaluation. Rising joblessness, the
waning pace of consumer spending and multi-year lows for consumer and business
confidence also weighed on the economy. Economic growth, as measured by gross
domestic product (GDP), began the reporting period at a 4.8% annualized rate in
the third quarter of 2007. In the fourth quarter, GDP declined sharply to -0.2%
annualized before rebounding at annualized rates of 0.9% and an upwardly revised
3.3% in the first and second quarters of 2008. A weaker U.S. dollar compared
with most foreign currencies over the past 12 months contributed to increased
export demand, which helped the
(1.) Source: (C) 2008 Morningstar. All Rights Reserved. The information
contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted
to be accurate, complete or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information. 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 7/31/08
(BAR CHART)
Canada 39.3%
South Africa 23.2%
Australia 13.6%
U.K. 11.3%
Peru 4.2%
U.S. 3.6%
Papua New Guinea 2.5%
Russia 0.1%
Short-Term Investments & Other Net Assets 2.2%
manufacturing sector. Also supporting the economy were a buildup in inventories,
expanding government spending and a boost to household finances from a $168
billion government stimulus package. Although tax rebate checks lifted spending
temporarily, retail sales remained weak and new vehicle sales hit a 15-year low.
The U.S. labor market contracted, and the unemployment rate rose from 4.7% at
the beginning of the period to 5.7% in July 2008, the highest level since
2004.(2) Volatile oil prices soared to an all-time trading high of $146 per
barrel in early July 2008 but eased to $124 by period-end. Many other commodity
prices -- including coal, natural gas, precious metals, raw materials and
agricultural commodities -- also neared or surpassed all-time highs due to
increased worldwide demand and institutional investors seeking alternatives to
stocks and corporate bonds. For the 12 months ended July 31, 2008, the core
Consumer Price Index (CPI), which excludes food and energy costs, rose 2.5%,
which was higher than its 10-year average rate.(2)
Seeking to stimulate the sagging economy without stoking inflation, the Federal
Reserve Board (Fed) made seven cuts to its key federal funds target rate during
the period, lowering it 325 basis points, from 5.25% to a four-year low of
2.00%. This marked the end, at least temporarily, of an eight-month period
during which the Fed made its most aggressive series of rate cuts in two
decades. In this uncertain environment, U.S. Treasury prices fluctuated, and the
10-year Treasury note yield fell from 4.78% at the beginning of the period to
3.99% on July 31, 2008.
U.S. stock markets endured heightened volatility and lost ground during this
challenging period. For the 12 months under review, the blue chip stocks of the
Dow Jones Industrial Average had a total return of -11.71%, the broader S&P 500
a -11.09% total return, and the technology-heavy NASDAQ Composite Index a -8.00%
return.(3) The energy, consumer staples and materials sectors performed
relatively well. Small-capitalization stocks generally performed better than
large caps, and growth stocks fared better than their value counterparts.
(2.) Source: Bureau of Labor Statistics.
(3.) Source: (C) 2008 Morningstar. 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
PRECIOUS METALS PRICES (8/1/07-7/31/08)*
(PERFORMANCE GRAPH)
PLATINUM GOLD PALLADIUM
--------- --------- ---------
8/1/2007 $1,285.00 $ 666.90 $364.00
8/2/2007 $1,284.25 $ 665.55 $363.00
8/3/2007 $1,290.50 $ 673.00 $365.00
8/6/2007 $1,289.50 $ 672.01 $363.00
8/7/2007 $1,284.00 $ 672.40 $361.00
8/8/2007 $1,286.00 $ 674.80 $363.00
8/9/2007 $1,267.50 $ 662.10 $360.00
8/10/2007 $1,274.50 $ 672.80 $355.50
8/13/2007 $1,279.00 $ 669.50 $357.00
8/14/2007 $1,272.00 $ 669.20 $351.50
8/15/2007 $1,263.00 $ 667.60 $347.00
8/16/2007 $1,239.00 $ 652.01 $335.50
8/17/2007 $1,231.50 $ 657.80 $329.00
8/20/2007 $1,247.75 $ 657.11 $327.75
8/21/2007 $1,241.50 $ 657.30 $322.50
8/22/2007 $1,237.25 $ 660.80 $321.50
8/23/2007 $1,242.75 $ 660.38 $325.50
8/24/2007 $1,248.25 $ 668.20 $329.25
8/27/2007 $1,250.75 $ 667.60 $327.25
8/28/2007 $1,253.75 $ 662.50 $328.00
8/29/2007 $1,268.25 $ 667.60 $331.00
8/30/2007 $1,259.50 $ 665.30 $329.25
8/31/2007 $1,267.50 $ 673.40 $332.00
9/3/2007 $1,271.00 $ 672.52 $330.50
9/4/2007 $1,274.75 $ 681.65 $333.50
9/5/2007 $1,272.00 $ 681.80 $331.00
9/6/2007 $1,289.50 $ 695.41 $335.00
9/7/2007 $1,288.50 $ 701.00 $335.00
9/10/2007 $1,291.00 $ 703.10 $334.00
9/11/2007 $1,302.00 $ 712.50 $334.50
9/12/2007 $1,301.00 $ 711.60 $334.00
9/13/2007 $1,296.00 $ 708.30 $332.75
9/14/2007 $1,296.50 $ 707.60 $329.00
9/17/2007 $1,300.50 $ 717.90 $330.00
9/18/2007 $1,306.00 $ 723.50 $333.00
9/19/2007 $1,306.50 $ 721.40 $331.75
9/20/2007 $1,325.25 $ 733.26 $338.00
9/21/2007 $1,326.50 $ 731.50 $339.00
9/24/2007 $1,341.00 $ 730.60 $340.50
9/25/2007 $1,347.00 $ 731.70 $338.50
9/26/2007 $1,345.50 $ 728.80 $341.00
9/27/2007 $1,359.00 $ 734.43 $343.50
9/28/2007 $1,385.50 $ 743.60 $348.00
10/1/2007 $1,388.50 $ 747.20 $357.50
10/2/2007 $1,349.00 $ 731.60 $349.50
10/3/2007 $1,357.00 $ 727.90 $357.00
10/4/2007 $1,362.50 $ 738.00 $366.50
10/5/2007 $1,376.25 $ 742.70 $365.00
10/8/2007 $1,361.00 $ 733.30 $361.25
10/9/2007 $1,368.50 $ 737.90 $362.50
10/10/2007 $1,386.00 $ 741.10 $374.00
10/11/2007 $1,406.00 $ 747.88 $375.50
10/12/2007 $1,408.00 $ 749.10 $375.50
10/15/2007 $1,425.00 $ 759.40 $373.00
10/16/2007 $1,415.50 $ 760.50 $369.75
10/17/2007 $1,428.50 $ 754.82 $369.00
10/18/2007 $1,451.50 $ 768.20 $371.00
10/19/2007 $1,441.75 $ 765.20 $367.00
10/22/2007 $1,433.50 $ 754.20 $358.00
10/23/2007 $1,446.50 $ 759.80 $360.75
10/24/2007 $1,441.50 $ 763.95 $359.50
10/25/2007 $1,448.50 $ 769.30 $365.00
10/26/2007 $1,458.00 $ 785.20 $373.00
10/29/2007 $1,461.00 $ 791.80 $372.50
10/30/2007 $1,435.25 $ 782.10 $369.50
10/31/2007 $1,447.50 $ 796.59 $370.00
11/1/2007 $1,448.00 $ 787.30 $371.50
11/2/2007 $1,459.00 $ 807.00 $374.75
11/5/2007 $1,460.25 $ 806.50 $371.00
11/6/2007 $1,476.00 $ 825.00 $378.00
11/7/2007 $1,457.00 $ 831.09 $376.50
11/8/2007 $1,461.00 $ 833.59 $372.50
11/9/2007 $1,433.00 $ 832.00 $373.00
11/12/2007 $1,386.50 $ 793.50 $365.00
11/13/2007 $1,413.50 $ 802.00 $372.50
11/14/2007 $1,441.50 $ 811.95 $372.75
11/15/2007 $1,423.50 $ 788.45 $368.00
11/16/2007 $1,448.25 $ 786.30 $361.50
11/19/2007 $1,450.25 $ 781.75 $357.50
11/20/2007 $1,468.00 $ 803.20 $362.50
11/21/2007 $1,459.50 $ 800.32 $354.50
11/22/2007 $1,469.25 $ 804.53 $351.50
11/23/2007 $1,480.75 $ 823.80 $357.50
11/26/2007 $1,465.00 $ 824.60 $354.50
11/27/2007 $1,452.00 $ 812.59 $349.50
11/28/2007 $1,439.50 $ 804.83 $345.00
11/29/2007 $1,437.00 $ 793.07 $343.00
11/30/2007 $1,439.00 $ 783.75 $348.00
12/3/2007 $1,461.00 $ 794.30 $346.25
12/4/2007 $1,471.00 $ 801.70 $348.50
12/5/2007 $1,463.50 $ 795.15 $348.00
12/6/2007 $1,465.00 $ 802.42 $347.50
12/7/2007 $1,454.50 $ 794.80 $344.50
12/10/2007 $1,465.25 $ 808.53 $347.00
12/11/2007 $1,460.00 $ 796.98 $345.50
12/12/2007 $1,476.00 $ 813.48 $348.50
12/13/2007 $1,469.00 $ 797.62 $346.00
12/14/2007 $1,477.00 $ 794.49 $353.50
12/17/2007 $1,499.00 $ 793.35 $355.50
12/18/2007 $1,508.00 $ 802.88 $358.50
12/19/2007 $1,520.00 $ 802.19 $358.50
12/20/2007 $1,513.50 $ 796.38 $354.00
12/21/2007 $1,529.00 $ 811.72 $355.25
12/24/2007 $1,527.00 $ 811.80 $357.00
12/25/2007 $1,519.50 $ 807.00 $358.50
12/26/2007 $1,540.50 $ 824.50 $365.00
12/27/2007 $1,535.50 $ 825.58 $363.00
12/28/2007 $1,539.00 $ 840.50 $365.00
12/31/2007 $1,526.00 $ 833.92 $368.75
1/2/2008 $1,542.50 $ 857.55 $373.25
1/3/2008 $1,549.25 $ 864.93 $373.00
1/4/2008 $1,541.00 $ 859.60 $365.50
1/7/2008 $1,523.00 $ 858.16 $370.00
1/8/2008 $1,550.50 $ 878.16 $376.50
1/9/2008 $1,554.00 $ 878.80 $375.50
1/10/2008 $1,553.00 $ 893.30 $376.50
1/11/2008 $1,564.50 $ 895.40 $378.00
1/14/2008 $1,577.50 $ 904.13 $378.50
1/15/2008 $1,570.50 $ 888.10 $379.75
1/16/2008 $1,559.25 $ 877.03 $373.50
1/17/2008 $1,560.50 $ 877.76 $369.25
1/18/2008 $1,559.00 $ 883.17 $369.50
1/21/2008 $1,539.00 $ 865.00 $361.50
1/22/2008 $1,550.50 $ 892.34 $368.50
1/23/2008 $1,557.50 $ 890.32 $364.00
1/24/2008 $1,610.50 $ 912.85 $373.50
1/25/2008 $1,682.75 $ 913.95 $380.50
1/28/2008 $1,726.50 $ 928.97 $389.00
1/29/2008 $1,717.25 $ 923.76 $389.00
1/30/2008 $1,700.50 $ 929.40 $387.00
1/31/2008 $1,738.50 $ 925.99 $392.75
2/1/2008 $1,771.00 $ 905.48 $412.00
2/4/2008 $1,798.00 $ 903.58 $425.50
2/5/2008 $1,772.50 $ 888.17 $416.00
2/6/2008 $1,813.50 $ 900.60 $419.00
2/7/2008 $1,848.75 $ 910.51 $423.00
2/8/2008 $1,893.00 $ 922.99 $439.00
2/11/2008 $1,939.00 $ 923.50 $440.50
2/12/2008 $1,911.50 $ 906.39 $426.50
2/13/2008 $1,977.50 $ 906.60 $434.50
2/14/2008 $2,011.00 $ 908.20 $439.25
2/15/2008 $2,084.50 $ 902.50 $443.75
2/18/2008 $2,110.00 $ 905.20 $470.50
2/19/2008 $2,156.50 $ 927.80 $488.50
2/20/2008 $2,140.50 $ 944.10 $493.25
2/21/2008 $2,168.50 $ 946.10 $511.00
2/22/2008 $2,165.50 $ 945.20 $513.50
2/25/2008 $2,152.50 $ 939.60 $521.75
2/26/2008 $2,148.50 $ 948.15 $534.50
2/27/2008 $2,127.50 $ 957.84 $551.00
2/28/2008 $2,139.00 $ 970.74 $580.00
2/29/2008 $2,158.00 $ 974.17 $564.50
3/3/2008 $2,232.50 $ 983.70 $578.00
3/4/2008 $2,225.00 $ 964.01 $545.50
3/5/2008 $2,250.50 $ 989.80 $548.75
3/6/2008 $2,161.50 $ 978.99 $513.00
3/7/2008 $2,022.00 $ 973.20 $488.50
3/10/2008 $2,025.00 $ 972.84 $471.50
3/11/2008 $2,044.00 $ 973.30 $489.00
3/12/2008 $2,068.00 $ 982.93 $504.00
3/13/2008 $2,092.00 $ 994.83 $505.00
3/14/2008 $2,071.50 $1,002.95 $506.00
3/17/2008 $1,950.50 $1,002.70 $467.50
3/18/2008 $1,952.50 $ 982.24 $476.50
3/19/2008 $1,906.50 $ 944.20 $456.50
3/20/2008 $1,858.50 $ 910.20 $443.00
3/21/2008 $1,855.00 $ 919.50 $434.25
3/24/2008 $1,884.50 $ 915.30 $430.00
3/25/2008 $1,982.50 $ 938.78 $450.50
3/26/2008 $1,996.00 $ 954.17 $454.00
3/27/2008 $2,035.00 $ 947.20 $445.00
3/28/2008 $2,025.00 $ 931.05 $443.50
3/31/2008 $1,996.00 $ 916.88 $438.50
4/1/2008 $1,915.00 $ 882.70 $440.25
4/2/2008 $1,952.00 $ 904.35 $441.00
4/3/2008 $1,986.50 $ 902.90 $437.50
4/4/2008 $2,015.50 $ 913.79 $441.50
4/7/2008 $2,030.50 $ 920.00 $452.50
4/8/2008 $2,020.50 $ 914.90 $452.00
4/9/2008 $2,023.00 $ 934.00 $457.00
4/10/2008 $2,019.50 $ 928.99 $462.00
4/11/2008 $2,009.00 $ 925.30 $467.75
4/14/2008 $1,963.00 $ 924.45 $455.00
4/15/2008 $1,976.50 $ 927.91 $454.50
4/16/2008 $2,022.50 $ 944.59 $454.00
4/17/2008 $2,051.50 $ 938.80 $458.00
4/18/2008 $2,051.00 $ 917.09 $458.50
4/21/2008 $2,014.00 $ 916.74 $453.00
4/22/2008 $2,023.50 $ 915.90 $454.00
4/23/2008 $1,996.00 $ 904.25 $444.50
4/24/2008 $1,960.00 $ 886.13 $437.50
4/25/2008 $1,957.00 $ 886.30 $440.50
4/28/2008 $1,970.50 $ 893.26 $434.75
4/29/2008 $1,927.00 $ 870.50 $421.50
4/30/2008 $1,927.50 $ 877.55 $421.50
5/1/2008 $1,866.00 $ 852.70 $408.50
5/2/2008 $1,901.00 $ 856.45 $417.50
5/5/2008 $1,924.00 $ 874.20 $421.00
5/6/2008 $1,958.00 $ 876.40 $431.50
5/7/2008 $1,959.50 $ 868.75 $421.50
5/8/2008 $2,020.50 $ 881.85 $434.50
5/9/2008 $2,089.00 $ 884.85 $443.00
5/12/2008 $2,102.50 $ 882.68 $440.00
5/13/2008 $2,049.50 $ 866.95 $434.75
5/14/2008 $2,036.00 $ 864.00 $434.75
5/15/2008 $2,083.00 $ 881.65 $435.50
5/16/2008 $2,125.50 $ 902.40 $446.75
5/19/2008 $2,152.50 $ 905.20 $446.50
5/20/2008 $2,147.50 $ 919.25 $445.00
5/21/2008 $2,198.00 $ 932.55 $459.00
5/22/2008 $2,163.00 $ 921.85 $452.00
5/23/2008 $2,166.50 $ 925.10 $452.00
5/26/2008 $2,186.00 $ 929.10 $453.00
5/27/2008 $2,115.85 $ 906.45 $440.25
5/28/2008 $2,069.00 $ 900.85 $436.75
5/29/2008 $1,996.50 $ 877.90 $424.25
5/30/2008 $2,009.00 $ 886.50 $435.50
6/2/2008 $2,006.00 $ 891.42 $435.00
6/3/2008 $2,004.00 $ 880.55 $433.25
6/4/2008 $1,993.00 $ 880.90 $427.00
6/5/2008 $2,008.00 $ 877.20 $428.00
6/6/2008 $2,076.00 $ 902.25 $433.00
6/9/2008 $2,049.50 $ 892.90 $427.25
6/10/2008 $1,990.50 $ 867.00 $425.25
6/11/2008 $2,032.50 $ 880.35 $428.00
6/12/2008 $2,026.75 $ 868.20 $440.00
6/13/2008 $2,034.00 $ 871.55 $449.75
6/16/2008 $2,046.70 $ 882.40 $462.25
6/17/2008 $2,062.00 $ 882.75 $460.50
6/18/2008 $2,092.50 $ 894.35 $470.75
6/19/2008 $2,048.00 $ 898.47 $473.75
6/20/2008 $2,056.90 $ 902.30 $473.50
6/23/2008 $2,039.10 $ 883.80 $468.75
6/24/2008 $2,021.00 $ 889.60 $467.25
6/25/2008 $2,012.50 $ 886.38 $465.00
6/26/2008 $2,065.00 $ 917.30 $468.50
6/27/2008 $2,062.00 $ 927.80 $468.25
6/30/2008 $2,069.00 $ 925.40 $463.00
7/1/2008 $2,079.00 $ 939.63 $468.75
7/2/2008 $2,075.50 $ 945.15 $466.50
7/3/2008 $2,027.50 $ 934.45 $463.25
7/4/2008 $2,014.00 $ 933.25 $455.75
7/7/2008 $1,974.15 $ 925.85 $448.25
7/8/2008 $1,951.00 $ 919.63 $442.50
7/9/2008 $1,968.50 $ 928.57 $445.75
7/10/2008 $2,006.50 $ 947.66 $449.50
7/11/2008 $2,033.00 $ 964.20 $453.25
7/14/2008 $2,022.00 $ 972.60 $451.75
7/15/2008 $1,979.50 $ 977.50 $445.25
7/16/2008 $1,929.00 $ 959.95 $429.00
7/17/2008 $1,891.00 $ 957.43 $422.50
7/18/2008 $1,852.50 $ 955.00 $416.50
7/21/2008 $1,847.00 $ 965.55 $414.75
7/22/2008 $1,808.50 $ 946.40 $405.00
7/23/2008 $1,752.00 $ 920.85 $383.50
7/24/2008 $1,717.00 $ 928.05 $388.75
7/25/2008 $1,756.00 $ 929.85 $384.75
7/28/2008 $1,775.00 $ 930.63 $390.75
7/29/2008 $1,753.00 $ 918.90 $386.00
7/30/2008 $1,734.50 $ 906.10 $376.00
7/31/2008 $1,760.50 $ 914.07 $382.00
* Amounts shown are based on spot prices quoted in U.S. dollars per troy
ounce. For illustrative purposes only; not representative of the Fund's
portfolio composition or performance.
PORTFOLIO BREAKDOWN
Based on Total Net Assets as of 7/31/08
Long Life Gold Mines 54.7%
Platinum & Palladium 14.7%
Medium Life Gold Mines 14.4%
Gold & Diversified Resources 8.0%
Gold Exploration & Development 6.0%
Short-Term Investments & Other Net Assets 2.2%
Precious metals' prices were up strongly during most of the past year, but
retreated toward period-end as demand waned and the U.S. dollar's value rose
slightly after years of declines. Gold, platinum and silver had very similar
returns for the 12-month period ended July 31, 2008. Gold was up 38% for the
period as it began at $664 per ounce, moved up steadily to an all-time high of
$1,002 per ounce in March 2008, then declined to $914 per ounce by the end of
July 2008. Platinum started at $1,289 per ounce, traded steadily higher until
mid-January when prices accelerated due to concerns over electric power
shortages in South Africa and reached a high of $2,250 per ounce on March 5.
Prices began to decline toward period-end and closed just over $1,760 per ounce,
up 37%. Silver followed a similar path to gold with prices rising from $13 per
ounce at the beginning of the period, hitting a $21 high on March 5 and ending
the period at $18, a 38% increase. On the other hand, palladium was more
volatile as it started the period at $364 per ounce, fell to $321 in August
2007, surged to $580 in February 2008 and then dropped to $382, ending the
period with a modest 4% gain.
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.
Annual Report | 5
TOP 10 HOLDINGS
7/31/08
% OF TOTAL
COMPANY SECTOR/INDUSTRY, COUNTRY NET ASSETS
- -------------------------------- ----------
Newcrest Mining Ltd. 8.6%
LONG LIFE GOLD MINES, AUSTRALIA
Impala Platinum Holdings Ltd., ord. & ADR 8.1%
PLATINUM & PALLADIUM, SOUTH AFRICA
Goldcorp Inc. 7.7%
LONG LIFE GOLD MINES, CANADA
Barrick Gold Corp. 7.0%
LONG LIFE GOLD MINES, CANADA
Randgold Resources Ltd., ADR 6.3%
LONG LIFE GOLD MINES, U.K.
AngloGold Ashanti Ltd., ord. & ADR 5.6%
LONG LIFE GOLD MINES, SOUTH AFRICA
Anglo Platinum Ltd., ord. & ADR 5.0%
PLATINUM & PALLADIUM, SOUTH AFRICA
Yamana Gold Inc., ord. & 144A 4.8%
MEDIUM LIFE GOLD MINES, CANADA
Compania de Minas Buenaventura SA, ord. & ADR 4.1%
LONG LIFE GOLD MINES, PERU
Agnico-Eagle Mines Ltd. 3.9%
LONG LIFE GOLD MINES, CANADA
MANAGER'S DISCUSSION
During the year under review, mergers and acquisitions continued to be a
significant theme for the mining industry. Miramar Mining was acquired by
Newmont Mining. Yamana Gold completed its acquisition of Meridian Gold. New Gold
completed a three-way merger with Metallica Resources and Peak Gold. At the end
of the period, Kinross Gold announced a friendly offer to acquire Aurelian
Resources, a gold exploration company with a significant discovery in Ecuador.
Another theme was the ongoing reduction in gold hedge positions by major
producers. Newcrest Mining, Sino Gold Mining and AngloGold Ashanti all raised
additional equity during the period to have the financial flexibility to
dramatically reduce their hedge positions, which increased their exposure to
gold price movements. This activity signified these companies' positive outlook
on the price of gold and created additional demand for the commodity.
Finally, the theme of rising costs continued to be a major challenge for the
industry. Companies struggled with escalating costs as higher oil prices, tight
labor conditions and rising costs of consumables such as truck tires, explosives
and steel grinding material pressured profit margins.
Among the most significant contributors to Fund performance during the reporting
period were Randgold Resources, which owns mining and exploration operations in
Mali and five other African nations; Canada-based Barrick Gold, the world's
leading gold producer; and Goldcorp, a Canadian gold mining company with 17
operations across the globe, most of which are in lower-risk North American Free
Trade Agreement (NAFTA) countries. Other notable contributors included South
African platinum producer Impala Platinum Holdings; Australian gold and copper
mining company Newcrest Mining; Canada's Kinross Gold; Canadian gold, silver,
copper and zinc producer Agnico-Eagle Mines; Canada's Meridian Gold (acquired by
Yamana Gold); and Peru's Compania de Minas Buenaventura, which extracts metals
in the form of silver-lead, silver-gold, zinc, and lead-gold-copper
concentrates.
The Fund also had some detractors from performance during the fiscal year.
Shares of gold companies with significant exposure to South Africa, including
AngloGold Ashanti, Gold Fields and Harmony Gold Mining, declined during the
period due to concerns over electric power availability and increased scrutiny
on mine safety. Other detractors for the review period included OZ Minerals and
Fresnillo. The merger of Oxiana with Zinifex created OZ Minerals, a diversified
mining company based in Australia with a focus
6 | Annual Report
on zinc, copper and gold. Fresnillo, the world's largest primary silver producer
and Mexico's second-largest gold producer, was listed on the London stock
exchange with an initial public offering in March 2008.
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 increases compared with
a foreign currency, an investment traded in that foreign currency will decrease
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. For the 12 months
ended July 31, 2008, the U.S. dollar fell in value relative to most currencies.
As a result, the Fund's performance was positively affected by the Fund's
predominant investment in securities with non-U.S. currency exposure. However,
one cannot expect the same result in future periods.
Thank you for your continued participation in Franklin Gold and Precious Metals
Fund. We look forward to serving your future investment needs.
(PHOTO OF STEPHEN M. LAND)
/s/ Stephen M. Land
Stephen M. Land, CFA
Portfolio Manager
Franklin Gold and Precious Metals Fund
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JULY 31, 2008, 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 7/31/08
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 7/31/08 7/31/07
- ------------------------------------- ------ -------- -------
Net Asset Value (NAV) +$1.28 $35.01 $33.73
DISTRIBUTIONS (8/1/07-7/31/08)
Dividend Income $1.9717
Short-Term Capital Gain $0.0841
Long-Term Capital Gain $1.7811
TOTAL $3.8369
CLASS B (SYMBOL: FAGPX) CHANGE 7/31/08 7/31/07
- ------------------------------------- ------ -------- -------
Net Asset Value (NAV) +$1.13 $33.73 $32.60
DISTRIBUTIONS (8/1/07-7/31/08)
Dividend Income $1.6943
Short-Term Capital Gain $0.0841
Long-Term Capital Gain $1.7811
TOTAL $3.5595
CLASS C (SYMBOL: FRGOX) CHANGE 7/31/08 7/31/07
- ------------------------------------- ------ -------- -------
Net Asset Value (NAV) +$1.13 $34.03 $32.90
DISTRIBUTIONS (8/1/07-7/31/08)
Dividend Income $1.7317
Short-Term Capital Gain $0.0841
Long-Term Capital Gain $1.7811
TOTAL $3.5969
ADVISOR CLASS (SYMBOL: FGADX) CHANGE 7/31/08 7/31/07
- ------------------------------------- ------ -------- -------
Net Asset Value (NAV) +$1.43 $36.11 $34.68
DISTRIBUTIONS (8/1/07-7/31/08)
Dividend Income $2.0599
Short-Term Capital Gain $0.0841
Long-Term Capital Gain $1.7811
TOTAL $3.9251
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.
CLASS A 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------- ------- -------- ------------------
Cumulative Total Return(1) +14.76% +200.85% +486.53%
Average Annual Total Return(2) +8.16% +23.17% +18.64%
Value of $10,000 Investment(3) $10,816 $ 28,351 $ 55,255
Avg. Ann. Total Return (6/30/08)(4) +25.75% +27.58% +19.51%
Total Annual Operating Expenses(5) 0.93%
CLASS B 1-YEAR 5-YEAR INCEPTION (1/1/99)
- ------------------------------------- ------- -------- ------------------
Cumulative Total Return(1) +13.91% +189.71% +432.79%
Average Annual Total Return(2) +9.91% +23.54% +19.08%
Value of $10,000 Investment(3) $10,991 $ 28,771 $ 53,279
Avg. Ann. Total Return (6/30/08)(4) +28.45% +27.97% +20.98%
Total Annual Operating Expenses(5) 1.67%
CLASS C 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------- ------- -------- ------------------
Cumulative Total Return(1) +13.89% +189.72% +446.57%
Average Annual Total Return(2) +12.89% +23.71% +18.51%
Value of $10,000 Investment(3) $11,289 $ 28,972 $ 54,657
Avg. Ann. Total Return (6/30/08)(4) +31.43% +28.11% +19.34%
Total Annual Operating Expenses(5) 1.67%
ADVISOR CLASS 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------- ------- -------- ------------------
Cumulative Total Return(1) +15.05% +204.41% +503.53%
Average Annual Total Return(2) +15.05% +24.94% +19.69%
Value of $10,000 Investment(3) $11,505 $ 30,441 $ 60,353
Avg. Ann. Total Return (6/30/08)(4) +33.77% +29.40% +20.74%
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 7/31/08
- ------- -------
1-Year +8.16%
5-Year +23.17%
10-Year +18.64%
CLASS A (8/1/98-7/31/08)
(PERFORMANCE GRAPH)
FRANKLIN GOLD
AND PRECIOUS FTSE GOLD
METALS FUND - S&P 500 MINES
DATE CLASS A INDEX INDEX
- ------------- ------------- ------- ---------
8/1/1998 $ 9,421 $10,000 $10,000
8/31/1998 $ 7,531 $ 8,554 $ 7,790
9/30/1998 $10,529 $ 9,102 $12,224
10/31/1998 $10,554 $ 9,843 $12,359
11/30/1998 $10,353 $10,439 $11,715
12/31/1998 $ 9,771 $11,041 $10,376
1/31/1999 $ 9,746 $11,502 $10,350
2/28/1999 $ 9,543 $11,145 $ 9,676
3/31/1999 $ 9,721 $11,591 $ 9,649
4/30/1999 $11,518 $12,040 $11,302
5/31/1999 $10,050 $11,755 $ 9,230
6/30/1999 $10,834 $12,408 $ 9,827
7/31/1999 $10,505 $12,020 $ 9,378
8/31/1999 $10,936 $11,961 $ 9,971
9/30/1999 $12,910 $11,633 $12,538
10/31/1999 $11,670 $12,369 $10,878
11/30/1999 $11,860 $12,621 $10,393
12/31/1999 $12,252 $13,364 $10,307
1/31/2000 $11,413 $12,693 $ 9,096
2/29/2000 $10,918 $12,452 $ 9,383
3/31/2000 $10,600 $13,671 $ 8,679
4/30/2000 $ 9,863 $13,259 $ 8,398
5/31/2000 $10,206 $12,987 $ 8,651
6/30/2000 $10,676 $13,307 $ 8,966
7/31/2000 $10,041 $13,099 $ 8,091
8/31/2000 $11,045 $13,913 $ 8,192
9/30/2000 $10,257 $13,178 $ 7,757
10/31/2000 $ 9,710 $13,123 $ 6,576
11/30/2000 $10,346 $12,088 $ 6,936
12/31/2000 $11,348 $12,147 $ 7,590
1/31/2001 $11,567 $12,578 $ 7,411
2/28/2001 $12,082 $11,431 $ 7,936
3/31/2001 $10,614 $10,707 $ 7,155
4/30/2001 $12,146 $11,539 $ 8,342
5/31/2001 $13,087 $11,617 $ 8,629
6/30/2001 $12,430 $11,334 $ 8,621
7/31/2001 $11,438 $11,222 $ 8,415
8/31/2001 $12,172 $10,520 $ 8,953
9/30/2001 $11,940 $ 9,670 $ 9,766
10/31/2001 $11,580 $ 9,855 $ 9,340
11/30/2001 $11,721 $10,611 $ 8,966
12/31/2001 $12,483 $10,704 $ 9,200
1/31/2002 $13,449 $10,547 $10,642
2/28/2002 $14,680 $10,344 $11,698
3/31/2002 $15,871 $10,733 $12,898
4/30/2002 $16,732 $10,082 $13,756
5/31/2002 $18,651 $10,008 $15,763
6/30/2002 $16,348 $ 9,295 $13,501
7/31/2002 $13,608 $ 8,571 $11,422
8/31/2002 $15,355 $ 8,627 $13,005
9/30/2002 $15,382 $ 7,689 $13,075
10/31/2002 $14,561 $ 8,366 $11,891
11/30/2002 $14,614 $ 8,858 $11,587
12/31/2002 $17,149 $ 8,338 $14,188
1/31/2003 $17,349 $ 8,119 $14,124
2/28/2003 $16,119 $ 7,997 $13,222
3/31/2003 $15,142 $ 8,075 $12,404
4/30/2003 $14,901 $ 8,740 $12,273
5/31/2003 $17,109 $ 9,201 $13,677
6/30/2003 $17,644 $ 9,319 $14,387
7/31/2003 $18,366 $ 9,483 $14,909
8/31/2003 $21,068 $ 9,668 $16,822
9/30/2003 $21,550 $ 9,565 $16,944
10/31/2003 $23,516 $10,107 $18,318
11/30/2003 $26,218 $10,195 $20,273
12/31/2003 $26,121 $10,730 $20,260
1/31/2004 $23,580 $10,928 $17,723
2/29/2004 $24,158 $11,079 $18,059
3/31/2004 $25,583 $10,912 $19,590
4/30/2004 $20,394 $10,741 $15,321
5/31/2004 $22,209 $10,888 $16,776
6/30/2004 $21,671 $11,099 $16,199
7/31/2004 $21,429 $10,732 $16,248
8/31/2004 $22,774 $10,775 $17,673
9/30/2004 $24,548 $10,891 $18,969
10/31/2004 $25,046 $11,058 $19,697
11/30/2004 $26,188 $11,506 $20,313
12/31/2004 $24,693 $11,897 $18,857
1/31/2005 $23,307 $11,607 $17,467
2/28/2005 $25,096 $11,851 $18,655
3/31/2005 $23,966 $11,641 $17,757
4/30/2005 $21,828 $11,420 $15,903
5/31/2005 $22,164 $11,783 $16,075
6/30/2005 $24,276 $11,800 $17,719
7/31/2005 $23,953 $12,239 $17,121
8/31/2005 $25,298 $12,127 $17,927
9/30/2005 $29,924 $12,226 $21,596
10/31/2005 $27,988 $12,022 $19,931
11/30/2005 $30,893 $12,476 $21,732
12/31/2005 $34,715 $12,481 $24,105
1/31/2006 $41,282 $12,811 $28,518
2/28/2006 $37,613 $12,846 $24,883
3/31/2006 $41,079 $13,006 $26,080
4/30/2006 $45,736 $13,181 $29,390
5/31/2006 $41,228 $12,801 $26,984
6/30/2006 $41,810 $12,819 $27,193
7/31/2006 $41,525 $12,898 $26,621
8/31/2006 $43,096 $13,205 $27,283
9/30/2006 $39,346 $13,545 $24,575
10/31/2006 $42,324 $13,986 $25,854
11/30/2006 $46,535 $14,252 $28,128
12/31/2006 $45,719 $14,452 $27,140
1/31/2007 $45,048 $14,671 $26,115
2/28/2007 $46,090 $14,384 $26,131
3/31/2007 $47,047 $14,545 $25,602
4/30/2007 $48,061 $15,189 $25,659
5/31/2007 $47,889 $15,719 $24,974
6/30/2007 $47,404 $15,458 $24,531
7/31/2007 $48,146 $14,979 $26,511
8/31/2007 $45,662 $15,203 $25,273
9/30/2007 $55,842 $15,772 $31,358
10/31/2007 $62,896 $16,023 $34,939
11/30/2007 $57,270 $15,353 $32,865
12/31/2007 $57,417 $15,246 $32,852
1/31/2008 $62,420 $14,332 $36,097
2/29/2008 $68,133 $13,866 $38,247
3/31/2008 $61,489 $13,806 $33,492
4/30/2008 $58,443 $14,479 $30,525
5/31/2008 $62,546 $14,666 $32,657
6/30/2008 $63,256 $13,430 $35,054
7/31/2008 $55,255 $13,317 $31,203
AVERAGE ANNUAL TOTAL RETURN
CLASS B 7/31/08
- ------------------------ -------
1-Year +9.91%
5-Year +23.54%
Since Inception (1/1/99) +19.08%
CLASS B (1/1/99-7/31/08)
(PERFORMANCE GRAPH)
FRANKLIN GOLD
AND PRECIOUS FTSE GOLD
METALS FUND - S&P 500 MINES
DATE CLASS B INDEX INDEX
- ------------- ------------- ------- ---------
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 $10,893
5/31/1999 $10,259 $10,647 $ 8,896
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 $12,084
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 $12,382 $ 8,365
4/30/2000 $10,006 $12,010 $ 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 $12,602 $ 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 $11,002 $ 7,315
1/31/2001 $11,658 $11,393 $ 7,142
2/28/2001 $12,169 $10,354 $ 7,649
3/31/2001 $10,676 $ 9,698 $ 6,896
4/30/2001 $12,208 $10,452 $ 8,040
5/31/2001 $13,165 $10,522 $ 8,316
6/30/2001 $12,497 $10,266 $ 8,308
7/31/2001 $11,475 $10,165 $ 8,110
8/31/2001 $12,222 $ 9,528 $ 8,629
9/30/2001 $11,973 $ 8,759 $ 9,412
10/31/2001 $11,606 $ 8,926 $ 9,002
11/30/2001 $11,737 $ 9,611 $ 8,641
12/31/2001 $12,497 $ 9,695 $ 8,866
1/31/2002 $13,449 $ 9,553 $10,257
2/28/2002 $14,669 $ 9,369 $11,274
3/31/2002 $15,849 $ 9,721 $12,431
4/30/2002 $16,693 $ 9,132 $13,258
5/31/2002 $18,611 $ 9,065 $15,192
6/30/2002 $16,305 $ 8,419 $13,011
7/31/2002 $13,556 $ 7,763 $11,008
8/31/2002 $15,299 $ 7,814 $12,534
9/30/2002 $15,312 $ 6,965 $12,601
10/31/2002 $14,481 $ 7,578 $11,460
11/30/2002 $14,535 $ 8,024 $11,167
12/31/2002 $17,041 $ 7,552 $13,673
1/31/2003 $17,230 $ 7,354 $13,612
2/28/2003 $16,000 $ 7,244 $12,743
3/31/2003 $15,027 $ 7,314 $11,954
4/30/2003 $14,771 $ 7,917 $11,828
5/31/2003 $16,960 $ 8,334 $13,182
6/30/2003 $17,473 $ 8,440 $13,866
7/31/2003 $18,176 $ 8,589 $14,369
8/31/2003 $20,838 $ 8,756 $16,212
9/30/2003 $21,298 $ 8,664 $16,331
10/31/2003 $23,217 $ 9,154 $17,654
11/30/2003 $25,879 $ 9,235 $19,539
12/31/2003 $25,764 $ 9,719 $19,526
1/31/2004 $23,244 $ 9,898 $17,080
2/29/2004 $23,800 $10,035 $17,405
3/31/2004 $25,195 $ 9,884 $18,880
4/30/2004 $20,061 $ 9,728 $14,765
5/31/2004 $21,835 $ 9,862 $16,168
6/30/2004 $21,294 $10,053 $15,612
7/31/2004 $21,050 $ 9,720 $15,659
8/31/2004 $22,350 $ 9,759 $17,033
9/30/2004 $24,070 $ 9,865 $18,282
10/31/2004 $24,545 $10,016 $18,983
11/30/2004 $25,642 $10,421 $19,577
12/31/2004 $24,179 $10,775 $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 $11,085 $16,501
8/31/2005 $24,653 $10,984 $17,278
9/30/2005 $29,136 $11,073 $20,813
10/31/2005 $27,227 $10,889 $19,209
11/30/2005 $30,030 $11,301 $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 $11,611 $26,208
7/31/2006 $40,154 $11,682 $25,657
8/31/2006 $41,659 $11,960 $26,295
9/30/2006 $38,012 $12,268 $23,685
10/31/2006 $40,859 $12,668 $24,917
11/30/2006 $44,899 $12,909 $27,109
12/31/2006 $44,085 $13,090 $26,156
1/31/2007 $43,437 $13,288 $25,169
2/28/2007 $44,440 $13,028 $25,184
3/31/2007 $45,365 $13,174 $24,675
4/30/2007 $46,340 $13,757 $24,730
5/31/2007 $46,173 $14,237 $24,069
6/30/2007 $45,707 $14,001 $23,642
7/31/2007 $46,424 $13,567 $25,551
8/31/2007 $44,029 $13,770 $24,357
9/30/2007 $53,847 $14,285 $30,222
10/31/2007 $60,648 $14,512 $33,673
11/30/2007 $55,226 $13,906 $31,674
12/31/2007 $55,370 $13,809 $31,662
1/31/2008 $60,193 $12,981 $34,789
2/29/2008 $65,700 $12,559 $36,861
3/31/2008 $59,295 $12,505 $32,279
4/30/2008 $56,359 $13,114 $29,419
5/31/2008 $60,316 $13,284 $31,474
6/30/2008 $61,004 $12,164 $33,784
7/31/2008 $53,279 $12,062 $30,072
10 | Annual Report
Performance Summary (CONTINUED)
CLASS C (8/1/98-7/31/08)
(PERFORMANCE GRAPH)
FRANKLIN GOLD
AND PRECIOUS FTSE GOLD
METALS FUND - S&P 500 MINES
DATE CLASS C INDEX INDEX
- ------------- ------------- ------- ---------
8/1/1998 $10,000 $10,000 $10,000
8/31/1998 $ 7,995 $ 8,554 $ 7,790
9/30/1998 $11,171 $ 9,102 $12,224
10/31/1998 $11,198 $ 9,843 $12,359
11/30/1998 $10,969 $10,439 $11,715
12/31/1998 $10,358 $11,041 $10,376
1/31/1999 $10,318 $11,502 $10,350
2/28/1999 $10,102 $11,145 $ 9,676
3/31/1999 $10,291 $11,591 $ 9,649
4/30/1999 $12,190 $12,040 $11,302
5/31/1999 $10,627 $11,755 $ 9,230
6/30/1999 $11,449 $12,408 $ 9,827
7/31/1999 $11,085 $12,020 $ 9,378
8/31/1999 $11,543 $11,961 $ 9,971
9/30/1999 $13,618 $11,633 $12,538
10/31/1999 $12,298 $12,369 $10,878
11/30/1999 $12,500 $12,621 $10,393
12/31/1999 $12,892 $13,364 $10,307
1/31/2000 $12,016 $12,693 $ 9,096
2/29/2000 $11,491 $12,452 $ 9,383
3/31/2000 $11,140 $13,671 $ 8,679
4/30/2000 $10,359 $13,259 $ 8,398
5/31/2000 $10,723 $12,987 $ 8,651
6/30/2000 $11,208 $13,307 $ 8,966
7/31/2000 $10,548 $13,099 $ 8,091
8/31/2000 $11,585 $13,913 $ 8,192
9/30/2000 $10,763 $13,178 $ 7,757
10/31/2000 $10,170 $13,123 $ 6,576
11/30/2000 $10,831 $12,088 $ 6,936
12/31/2000 $11,866 $12,147 $ 7,590
1/31/2001 $12,096 $12,578 $ 7,411
2/28/2001 $12,624 $11,431 $ 7,936
3/31/2001 $11,082 $10,707 $ 7,155
4/30/2001 $12,678 $11,539 $ 8,342
5/31/2001 $13,652 $11,617 $ 8,629
6/30/2001 $12,962 $11,334 $ 8,621
7/31/2001 $11,907 $11,222 $ 8,415
8/31/2001 $12,678 $10,520 $ 8,953
9/30/2001 $12,421 $ 9,670 $ 9,766
10/31/2001 $12,042 $ 9,855 $ 9,340
11/30/2001 $12,178 $10,611 $ 8,966
12/31/2001 $12,956 $10,704 $ 9,200
1/31/2002 $13,951 $10,547 $10,642
2/28/2002 $15,222 $10,344 $11,698
3/31/2002 $16,437 $10,733 $12,898
4/30/2002 $17,321 $10,082 $13,756
5/31/2002 $19,310 $10,008 $15,763
6/30/2002 $16,907 $ 9,295 $13,501
7/31/2002 $14,061 $ 8,571 $11,422
8/31/2002 $15,871 $ 8,627 $13,005
9/30/2002 $15,885 $ 7,689 $13,075
10/31/2002 $15,028 $ 8,366 $11,891
11/30/2002 $15,084 $ 8,858 $11,587
12/31/2002 $17,684 $ 8,338 $14,188
1/31/2003 $17,879 $ 8,119 $14,124
2/28/2003 $16,601 $ 7,997 $13,222
3/31/2003 $15,601 $ 8,075 $12,404
4/30/2003 $15,337 $ 8,740 $12,273
5/31/2003 $17,601 $ 9,201 $13,677
6/30/2003 $18,143 $ 9,319 $14,387
7/31/2003 $18,865 $ 9,483 $14,909
8/31/2003 $21,630 $ 9,668 $16,822
9/30/2003 $22,102 $ 9,565 $16,944
10/31/2003 $24,089 $10,107 $18,318
11/30/2003 $26,839 $10,195 $20,273
12/31/2003 $26,727 $10,730 $20,260
1/31/2004 $24,110 $10,928 $17,723
2/29/2004 $24,695 $11,079 $18,059
3/31/2004 $26,128 $10,912 $19,590
4/30/2004 $20,811 $10,741 $15,321
5/31/2004 $22,662 $10,888 $16,776
6/30/2004 $22,092 $11,099 $16,199
7/31/2004 $21,841 $10,732 $16,248
8/31/2004 $23,191 $10,775 $17,673
9/30/2004 $24,987 $10,891 $18,969
10/31/2004 $25,460 $11,058 $19,697
11/30/2004 $26,616 $11,506 $20,313
12/31/2004 $25,084 $11,897 $18,857
1/31/2005 $23,665 $11,607 $17,467
2/28/2005 $25,460 $11,851 $18,655
3/31/2005 $24,305 $11,641 $17,757
4/30/2005 $22,105 $11,420 $15,903
5/31/2005 $22,440 $11,783 $16,075
6/30/2005 $24,569 $11,800 $17,719
7/31/2005 $24,235 $12,239 $17,121
8/31/2005 $25,572 $12,127 $17,927
9/30/2005 $30,221 $12,226 $21,596
10/31/2005 $28,258 $12,022 $19,931
11/30/2005 $31,168 $12,476 $21,732
12/31/2005 $34,990 $12,481 $24,105
1/31/2006 $41,611 $12,811 $28,518
2/28/2006 $37,875 $12,846 $24,883
3/31/2006 $41,346 $13,006 $26,080
4/30/2006 $46,002 $13,181 $29,390
5/31/2006 $41,444 $12,801 $26,984
6/30/2006 $42,001 $12,819 $27,193
7/31/2006 $41,695 $12,898 $26,621
8/31/2006 $43,242 $13,205 $27,283
9/30/2006 $39,464 $13,545 $24,575
10/31/2006 $42,406 $13,986 $25,854
11/30/2006 $46,616 $14,252 $28,128
12/31/2006 $45,758 $14,452 $27,140
1/31/2007 $45,058 $14,671 $26,115
2/28/2007 $46,079 $14,384 $26,131
3/31/2007 $47,012 $14,545 $25,602
4/30/2007 $47,975 $15,189 $25,659
5/31/2007 $47,785 $15,719 $24,974
6/30/2007 $47,275 $15,458 $24,531
7/31/2007 $47,990 $14,979 $26,511
8/31/2007 $45,481 $15,203 $25,273
9/30/2007 $55,589 $15,772 $31,358
10/31/2007 $62,561 $16,023 $34,939
11/30/2007 $56,946 $15,353 $32,865
12/31/2007 $57,050 $15,246 $32,852
1/31/2008 $61,965 $14,332 $36,097
2/29/2008 $67,603 $13,866 $38,247
3/31/2008 $60,969 $13,806 $33,492
4/30/2008 $57,918 $14,479 $30,525
5/31/2008 $61,949 $14,666 $32,657
6/30/2008 $62,608 $13,430 $35,054
7/31/2008 $54,657 $13,317 $31,203
AVERAGE ANNUAL TOTAL RETURN
CLASS C 7/31/08
- ------- -------
1-Year +12.89%
5-Year +23.71%
10-Year +18.51%
ADVISOR CLASS (8/1/98-7/31/08)
(PERFORMANCE GRAPH)
FRANKLIN GOLD
AND PRECIOUS FTSE GOLD
METALS FUND - S&P 500 MINES
DATE CLASS INDEX INDEX
- ------------- ------------- ------- ---------
8/1/1998 $10,000 $10,000 $10,000
8/31/1998 $ 8,003 $ 8,554 $ 7,790
9/30/1998 $11,196 $ 9,102 $12,224
10/31/1998 $11,235 $ 9,843 $12,359
11/30/1998 $11,012 $10,439 $11,715
12/31/1998 $10,410 $11,041 $10,376
1/31/1999 $10,383 $11,502 $10,350
2/28/1999 $10,172 $11,145 $ 9,676
3/31/1999 $10,370 $11,591 $ 9,649
4/30/1999 $12,288 $12,040 $11,302
5/31/1999 $10,727 $11,755 $ 9,230
6/30/1999 $11,574 $12,408 $ 9,827
7/31/1999 $11,230 $12,020 $ 9,378
8/31/1999 $11,706 $11,961 $ 9,971
9/30/1999 $13,822 $11,633 $12,538
10/31/1999 $12,486 $12,369 $10,878
11/30/1999 $12,711 $12,621 $10,393
12/31/1999 $13,111 $13,364 $10,307
1/31/2000 $12,220 $12,693 $ 9,096
2/29/2000 $11,688 $12,452 $ 9,383
3/31/2000 $11,343 $13,671 $ 8,679
4/30/2000 $10,558 $13,259 $ 8,398
5/31/2000 $10,930 $12,987 $ 8,651
6/30/2000 $11,436 $13,307 $ 8,966
7/31/2000 $10,757 $13,099 $ 8,091
8/31/2000 $11,835 $13,913 $ 8,192
9/30/2000 $10,997 $13,178 $ 7,757
10/31/2000 $10,412 $13,123 $ 6,576
11/30/2000 $11,090 $12,088 $ 6,936
12/31/2000 $12,160 $12,147 $ 7,590
1/31/2001 $12,403 $12,578 $ 7,411
2/28/2001 $12,957 $11,431 $ 7,936
3/31/2001 $11,376 $10,707 $ 7,155
4/30/2001 $13,024 $11,539 $ 8,342
5/31/2001 $14,051 $11,617 $ 8,629
6/30/2001 $13,348 $11,334 $ 8,621
7/31/2001 $12,268 $11,222 $ 8,415
8/31/2001 $13,065 $10,520 $ 8,953
9/30/2001 $12,822 $ 9,670 $ 9,766
10/31/2001 $12,443 $ 9,855 $ 9,340
11/30/2001 $12,592 $10,611 $ 8,966
12/31/2001 $13,407 $10,704 $ 9,200
1/31/2002 $14,450 $10,547 $10,642
2/28/2002 $15,772 $10,344 $11,698
3/31/2002 $17,051 $10,733 $12,898
4/30/2002 $17,983 $10,082 $13,756
5/31/2002 $20,055 $10,008 $15,763
6/30/2002 $17,594 $ 9,295 $13,501
7/31/2002 $14,645 $ 8,571 $11,422
8/31/2002 $16,523 $ 8,627 $13,005
9/30/2002 $16,564 $ 7,689 $13,075
10/31/2002 $15,674 $ 8,366 $11,891
11/30/2002 $15,744 $ 8,858 $11,587
12/31/2002 $18,474 $ 8,338 $14,188
1/31/2003 $18,699 $ 8,119 $14,124
2/28/2003 $17,362 $ 7,997 $13,222
3/31/2003 $16,334 $ 8,075 $12,404
4/30/2003 $16,066 $ 8,740 $12,273
5/31/2003 $18,460 $ 9,201 $13,677
6/30/2003 $19,037 $ 9,319 $14,387
7/31/2003 $19,826 $ 9,483 $14,909
8/31/2003 $22,741 $ 9,668 $16,822
9/30/2003 $23,262 $ 9,565 $16,944
10/31/2003 $25,388 $10,107 $18,318
11/30/2003 $28,303 $10,195 $20,273
12/31/2003 $28,209 $10,730 $20,260
1/31/2004 $25,475 $10,928 $17,723
2/29/2004 $26,098 $11,079 $18,059
3/31/2004 $27,657 $10,912 $19,590
4/30/2004 $22,032 $10,741 $15,321
5/31/2004 $24,015 $10,888 $16,776
6/30/2004 $23,435 $11,099 $16,199
7/31/2004 $23,179 $10,732 $16,248
8/31/2004 $24,639 $10,775 $17,673
9/30/2004 $26,566 $10,891 $18,969
10/31/2004 $27,104 $11,058 $19,697
11/30/2004 $28,337 $11,506 $20,313
12/31/2004 $26,734 $11,897 $18,857
1/31/2005 $25,243 $11,607 $17,467
2/28/2005 $27,175 $11,851 $18,655
3/31/2005 $25,967 $11,641 $17,757
4/30/2005 $23,638 $11,420 $15,903
5/31/2005 $24,021 $11,783 $16,075
6/30/2005 $26,322 $11,800 $17,719
7/31/2005 $25,981 $12,239 $17,121
8/31/2005 $27,445 $12,127 $17,927
9/30/2005 $32,459 $12,226 $21,596
10/31/2005 $30,357 $12,022 $19,931
11/30/2005 $33,510 $12,476 $21,732
12/31/2005 $37,660 $12,481 $24,105
1/31/2006 $44,808 $12,811 $28,518
2/28/2006 $40,826 $12,846 $24,883
3/31/2006 $44,593 $13,006 $26,080
4/30/2006 $49,650 $13,181 $29,390
5/31/2006 $44,765 $12,801 $26,984
6/30/2006 $45,424 $12,819 $27,193
7/31/2006 $45,123 $12,898 $26,621
8/31/2006 $46,842 $13,205 $27,283
9/30/2006 $42,774 $13,545 $24,575
10/31/2006 $46,011 $13,986 $25,854
11/30/2006 $50,610 $14,252 $28,128
12/31/2006 $49,734 $14,452 $27,140
1/31/2007 $49,008 $14,671 $26,115
2/28/2007 $50,157 $14,384 $26,131
3/31/2007 $51,216 $14,545 $25,602
4/30/2007 $52,305 $15,189 $25,659
5/31/2007 $52,154 $15,719 $24,974
6/30/2007 $51,624 $15,458 $24,531
7/31/2007 $52,456 $14,979 $26,511
8/31/2007 $49,749 $15,203 $25,273
9/30/2007 $60,851 $15,772 $31,358
10/31/2007 $68,550 $16,023 $34,939
11/30/2007 $62,439 $15,353 $32,865
12/31/2007 $62,609 $15,246 $32,852
1/31/2008 $68,072 $14,332 $36,097
2/29/2008 $74,338 $13,866 $38,247
3/31/2008 $67,103 $13,806 $33,492
4/30/2008 $63,778 $14,479 $30,525
5/31/2008 $68,273 $14,666 $32,657
6/30/2008 $69,058 $13,430 $35,054
7/31/2008 $60,353 $13,317 $31,203
AVERAGE ANNUAL TOTAL RETURN
ADVISOR CLASS 7/31/08
- ------------- -------
1-Year +15.05%
5-Year +24.94%
10-Year +19.69%
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. Source: (C) 2008 Morningstar. 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:
- - Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
- - 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 2/1/08 VALUE 7/31/08 PERIOD* 2/1/08-7/31/08
- ------- ----------------- -------------- ----------------------
Actual $1,000 $ 885.20 $4.22
Hypothetical (5% return before expenses) $1,000 $1,020.39 $4.52
CLASS B
Actual $1,000 $ 882.10 $7.72
Hypothetical (5% return before expenses) $1,000 $1,016.66 $8.27
CLASS C
Actual $1,000 $ 882.10 $7.72
Hypothetical (5% return before expenses) $1,000 $1,016.66 $8.27
ADVISOR CLASS
Actual $1,000 $ 886.60 $3.05
Hypothetical (5% return before expenses) $1,000 $1,021.63 $3.27
* Expenses are calculated using the most recent six-month expense ratio,
annualized for each class (A: 0.90%; B: 1.65%; C: 1.65%; and Advisor:
0.65%), multiplied by the average account value over the period, multiplied
by 182/366 to reflect the one-half year period.
14 | Annual Report
Franklin Gold and Precious Metals Fund
FINANCIAL HIGHLIGHTS
YEAR ENDED JULY 31,
--------------------------------------------------------
2008 2007 2006 2005 2004
---------- ---------- -------- -------- --------
CLASS A
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............... $ 33.73 $ 30.67 $ 17.81 $ 15.94 $ 13.74
---------- ---------- -------- -------- --------
Income from investment operations(a):
Net investment income(b) ...................... 0.03 0.11 0.15 0.04 0.05
Net realized and unrealized gains (losses) .... 5.09 4.71 12.87 1.84 2.25
---------- ---------- -------- -------- --------
Total from investment operations ................. 5.12 4.82 13.02 1.88 2.30
---------- ---------- -------- -------- --------
Less distributions from:
Net investment income ......................... (1.97) (0.76) (0.16) (0.01) (0.10)
Net realized gains ............................ (1.87) (1.00) -- -- --
---------- ---------- -------- -------- --------
Total distributions .............................. (3.84) (1.76) (0.16) (0.01) (0.10)
---------- ---------- -------- -------- --------
Redemption fees(c) ............................... -- -- -- -- --
---------- ---------- -------- -------- --------
Net asset value, end of year ..................... $ 35.01 $ 33.73 $ 30.67 $ 17.81 $ 15.94
========== ========== ======== ======== ========
Total return(d) .................................. 14.76% 15.94% 73.36% 11.78% 16.68%
RATIOS TO AVERAGE NET ASSETS
Expenses(e) ...................................... 0.89% 0.93% 0.92% 0.96% 0.96%
Net investment income ............................ 0.08% 0.33% 0.57% 0.21% 0.26%
SUPPLEMENTAL DATA
Net assets, end of year (000's) .................. $1,310,889 $1,011,344 $885,176 $439,628 $394,292
Portfolio turnover rate .......................... 4.48% 7.20% 10.96% 11.33% 8.11%
(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 repurchases 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) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(e) Benefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Annual Report | 15
Franklin Gold and Precious Metals Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED JULY 31,
---------------------------------------------------
2008 2007 2006 2005 2004
------- ------- ------- ------- -------
CLASS B
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............... $ 32.60 $ 29.62 $ 17.24 $ 15.54 $ 13.46
------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income (loss)(b) ............... (0.23) (0.12) (0.04) (0.09) (0.08)
Net realized and unrealized gains (losses) .... 4.92 4.54 12.44 1.79 2.21
------- ------- ------- ------- -------
Total from investment operations ................. 4.69 4.42 12.40 1.70 2.13
------- ------- ------- ------- -------
Less distributions from:
Net investment income ......................... (1.69) (0.44) (0.02) -- (0.05)
Net realized gains ............................ (1.87) (1.00) -- -- --
------- ------- ------- ------- -------
Total distributions .............................. (3.56) (1.44) (0.02) -- (0.05)
------- ------- ------- ------- -------
Redemption fees(c) ............................... -- -- -- -- --
------- ------- ------- ------- -------
Net asset value, end of year ..................... $ 33.73 $ 32.60 $ 29.62 $ 17.24 $ 15.54
======= ======= ======= ======= =======
Total return(d) .................................. 13.91% 15.12% 71.95% 10.94% 15.81%
RATIOS TO AVERAGE NET ASSETS
Expenses(e) ...................................... 1.64% 1.68% 1.67% 1.70% 1.71%
Net investment income (loss) ..................... (0.67)% (0.41)% (0.19)% (0.53)% (0.49)%
SUPPLEMENTAL DATA
Net assets, end of year (000's) .................. $60,872 $62,386 $60,423 $41,270 $37,738
Portfolio turnover rate .......................... 4.48% 7.20% 10.96% 11.33% 8.11%
(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 repurchases 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) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(e) Benefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
16 | Annual Report
Franklin Gold and Precious Metals Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED JULY 31,
--------------------------------------------------------
2008 2007 2006 2005 2004
-------- -------- -------- -------- --------
CLASS C
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............... $ 32.90 $ 29.90 $ 17.40 $ 15.69 $ 13.59
-------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income (loss)(b) ............... (0.25) (0.13) (0.05) (0.09) (0.09)
Net realized and unrealized gains (losses) .... 4.98 4.60 12.58 1.80 2.23
-------- -------- -------- -------- --------
Total from investment operations ................. 4.73 4.47 12.53 1.71 2.14
-------- -------- -------- -------- --------
Less distributions from:
Net investment income ......................... (1.73) (0.47) (0.03) -- (0.04)
Net realized gains ............................ (1.87) (1.00) -- -- --
-------- -------- -------- -------- --------
Total distributions .............................. (3.60) (1.47) (0.03) -- (0.04)
-------- -------- -------- -------- --------
Redemption fees(c) ............................... -- -- -- -- --
-------- -------- -------- -------- --------
Net asset value, end of year ..................... $ 34.03 $ 32.90 $ 29.90 $ 17.40 $ 15.69
======== ======== ======== ======== ========
Total return(d) .................................. 13.89% 15.10% 72.04% 10.96% 15.77%
RATIOS TO AVERAGE NET ASSETS
Expenses(e) ...................................... 1.64% 1.68% 1.67% 1.71% 1.71%
Net investment income (loss) ..................... (0.67)% (0.41)% (0.19)% (0.54)% (0.49)%
SUPPLEMENTAL DATA
Net assets, end of year (000's) .................. $319,641 $240,424 $217,371 $114,315 $101,962
Portfolio turnover rate .......................... 4.48% 7.20% 10.96% 11.33% 8.11%
(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 repurchases 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) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(e) Benefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Annual Report | 17
Franklin Gold and Precious Metals Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED JULY 31,
------------------------------------------------
2008 2007 2006 2005 2004
-------- ------- ------- ------- -------
ADVISOR CLASS
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............... $ 34.68 $ 31.50 $ 18.28 $ 16.36 $ 14.08
-------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income(b) ...................... 0.11 0.19 0.22 0.08 0.08
Net realized and unrealized gains (losses) .... 5.25 4.84 13.20 1.89 2.33
-------- ------- ------- ------- -------
Total from investment operations ................. 5.36 5.03 13.42 1.97 2.41
-------- ------- ------- ------- -------
Less distributions from:
Net investment income ......................... (2.06) (0.85) (0.20) (0.05) (0.13)
Net realized gains ............................ (1.87) (1.00) -- -- --
-------- ------- ------- ------- -------
Total distributions .............................. (3.93) (1.85) (0.20) (0.05) (0.13)
-------- ------- ------- ------- -------
Redemption fees(c) ............................... -- -- -- -- --
-------- ------- ------- ------- -------
Net asset value, end of year ..................... $ 36.11 $ 34.68 $ 31.50 $ 18.28 $ 16.36
======== ======= ======= ======= =======
Total return ..................................... 15.05% 16.25% 73.68% 12.09% 16.91%
RATIOS TO AVERAGE NET ASSETS
Expenses(d) ...................................... 0.64% 0.68% 0.67% 0.71% 0.71%
Net investment income ............................ 0.33% 0.58% 0.82% 0.46% 0.51%
SUPPLEMENTAL DATA
Net assets, end of year (000's) .................. $115,322 $65,120 $60,213 $34,519 $35,351
Portfolio turnover rate .......................... 4.48% 7.20% 10.96% 11.33% 8.11%
(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 repurchases 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%.
The accompanying notes are an integral part of these financial statements.
18 | Annual Report
Franklin Gold and Precious Metals Fund
STATEMENT OF INVESTMENTS, JULY 31, 2008
SHARES/
COUNTRY WARRANTS VALUE
---------------- ---------- ---------------
COMMON STOCKS AND WARRANTS 97.8%
GOLD AND DIVERSIFIED RESOURCES 8.0%
Anglo American PLC................................... United Kingdom 233,051 $ 13,494,688
Anglo American PLC, ADR.............................. United Kingdom 239,571 6,842,148
(a) First Uranium Corp. ................................. Canada 300,600 1,614,866
(a,b) First Uranium Corp., 144A............................ Canada 544,800 2,926,744
(b) Franco-Nevada Corp., 144A............................ Canada 685,400 14,266,335
(a) Fresnillo PLC........................................ United Kingdom 600,000 4,698,169
(a,b) Fresnillo PLC, 144A.................................. United Kingdom 4,036,100 31,603,802
(a) Hecla Mining Co...................................... United States 1,200,000 11,016,000
Hochschild Mining PLC................................ United Kingdom 500,000 3,047,863
(b) Hochschild Mining PLC, 144A.......................... United Kingdom 2,100,000 12,801,025
(a) Mvelaphanda Resources Ltd. .......................... South Africa 2,650,000 18,243,474
OZ Minerals Ltd. .................................... Australia 8,882,655 16,722,486
(a,b) Polymetal, GDR, 144A................................. Russia 250,000 1,990,000
Royal Gold Inc. ..................................... United States 150,000 5,352,000
---------------
144,619,600
---------------
GOLD EXPLORATION AND DEVELOPMENT 6.0%
(a) AXMIN Inc. .......................................... Canada 500,000 107,443
(a,b) AXMIN Inc. .......................................... Canada 2,000,000 429,771
(a) Banro Corp. ......................................... Canada 350,000 1,367,455
(a) Bendigo Mining Ltd. ................................. Australia 13,648,795 3,019,188
(a,b) Bendigo Mining Ltd., 144A............................ Australia 5,000,000 1,106,028
(a) Centamin Egypt Ltd. ................................. Australia 7,500,000 8,058,215
(a,b) Centamin Egypt Ltd., 144A............................ Australia 5,000,000 5,372,143
(a) Gabriel Resources Ltd. .............................. Canada 1,500,000 3,985,153
(a,b) Gabriel Resources Ltd., 144A......................... Canada 1,500,000 3,985,153
(a) Great Basin Gold Ltd. ............................... Canada 2,000,000 6,974,018
(a) International Minerals Corp. ........................ Canada 700,000 3,404,962
(a) Ivanhoe Mines Ltd. .................................. Canada 490,000 5,532,721
(a,b) Ivanhoe Mines Ltd. .................................. Canada 918,600 10,372,159
(a,c) Mineral Deposits Ltd. ............................... Australia 6,092,798 5,046,932
(a) Nautilus Minerals Inc. .............................. Canada 1,000,000 1,572,573
(a,b) Nautilus Minerals Inc., 144A......................... Canada 1,278,000 2,009,748
(a,b) Nautilus Minerals Inc., wts., 144A, 2/15/09.......... Canada 639,000 --
(a) Nevsun Resources Ltd. ............................... Canada 877,000 1,293,485
(a) NovaGold Resources Inc. ............................. Canada 650,000 5,629,000
(a) Orezone Resources Inc. .............................. Canada 7,000,000 5,950,000
(a,b) Orsu Metals Corp., 144A.............................. Canada 10,600,000 6,626,294
(a,b) Orsu Metals Corp., wts., 144A, 4/11/10............... Canada 5,300,000 983,591
(a) PanAust Ltd. ........................................ Australia 30,600,000 23,907,136
(a) Shore Gold Inc. ..................................... Canada 800,000 1,250,244
---------------
107,983,412
---------------
LONG LIFE GOLD MINES 54.7%
Agnico-Eagle Mines Ltd. ............................. Canada 1,300,000 71,045,000
(a) Alamos Gold Inc. .................................... Canada 1,596,400 11,460,774
(a,b) Alamos Gold Inc., 144A............................... Canada 400,000 2,871,655
AngloGold Ashanti Ltd. .............................. South Africa 78,911 2,595,226
AngloGold Ashanti Ltd., ADR.......................... South Africa 2,984,723 97,930,359
Annual Report | 19
Franklin Gold and Precious Metals Fund
STATEMENT OF INVESTMENTS, JULY 31, 2008 (CONTINUED)
SHARES/
COUNTRY WARRANTS VALUE
---------------- ---------- ---------------
COMMON STOCKS AND WARRANTS (CONTINUED)
LONG LIFE GOLD MINES (CONTINUED)
Barrick Gold Corp. .................................. Canada 2,976,283 $ 126,045,585
a) Centerra Gold Inc.................................... Canada 155,900 791,834
(a,b) Centerra Gold Inc., 144A............................. Canada 1,384,800 7,033,561
Compania de Minas Buenaventura SA.................... Peru 201,186 5,442,972
Compania de Minas Buenaventura SA, ADR............... Peru 2,577,972 69,373,227
(a) Gammon Gold Inc. .................................... Canada 2,614,500 26,814,075
Gold Fields Ltd. .................................... South Africa 697,191 8,408,491
Gold Fields Ltd., ADR................................ South Africa 2,454,528 28,987,976
Goldcorp Inc. ....................................... Canada 1,260,625 46,974,843
Goldcorp Inc. (USD Traded)........................... Canada 2,459,865 91,875,958
(a) Goldcorp Inc., wts., 6/09/11......................... Canada 9,125 115,867
(a) Harmony Gold Mining Co. Ltd. ........................ South Africa 1,443,000 15,786,347
(a) Harmony Gold Mining Co. Ltd., ADR.................... South Africa 950,000 10,269,500
(a) Lihir Gold Ltd. ..................................... Papua New Guinea 17,947,142 45,950,712
Newcrest Mining Ltd. ................................ Australia 5,585,928 155,006,838
Newmont Mining Corp. ................................ United States 1,025,714 49,193,243
Randgold Resources Ltd., ADR......................... United Kingdom 2,227,600 114,008,568
---------------
987,982,611
---------------
MEDIUM LIFE GOLD MINES 14.4%
(a) Aurizon Mines Ltd. .................................. Canada 1,800,000 8,403,985
(a) Eldorado Gold Corp. ................................. Canada 3,245,000 26,497,558
(a,b) GBS Gold International Inc., 144A.................... Canada 2,000,000 2,363,743
(a) Golden Star Resources Ltd. .......................... Canada 750,000 1,802,110
(a) Golden Star Resources Ltd. (USD Traded).............. Canada 700,000 1,771,000
IAMGOLD Corp. ....................................... Canada 1,282,000 8,552,510
(a,b) Jinshan Gold Mines Inc., 144A........................ Canada 5,595,000 12,569,350
(a) Kingsgate Consolidated Ltd. ......................... Australia 2,105,148 11,294,982
Kinross Gold Corp. .................................. Canada 3,603,012 65,704,467
(a) New Gold Inc. ....................................... Canada 1,340,098 7,984,565
(a,b) New Gold Inc., wts., 12/11/08........................ Canada 494,499 1,135,058
(a) SEMAFO Inc. ......................................... Canada 4,725,000 6,461,223
(a,b) SEMAFO Inc., 144A.................................... Canada 3,000,000 4,102,364
(a) Sino Gold Mining Ltd. ............................... Australia 3,100,000 14,881,953
(b) Sino Gold Mining Ltd., 144A.......................... Australia 413,333 1,984,259
Yamana Gold Inc. .................................... Canada 1,899,527 23,497,149
Yamana Gold Inc. (USD Traded)........................ Canada 2,779,193 34,366,657
(b) Yamana Gold Inc., 144A............................... Canada 2,300,000 28,441,102
---------------
261,814,035
---------------
PLATINUM & PALLADIUM 14.7%
Anglo Platinum Ltd. ................................. South Africa 124,000 16,312,453
Anglo Platinum Ltd., ADR............................. South Africa 571,138 74,662,015
(a) Eastern Platinum Ltd. ............................... Canada 6,585,100 12,156,514
Impala Platinum Holdings Ltd. ....................... South Africa 2,825,000 94,668,598
Impala Platinum Holdings Ltd., ADR................... South Africa 1,542,400 50,822,080
Lonmin PLC........................................... United Kingdom 350,000 16,825,195
---------------
265,446,855
---------------
20 | Annual Report
Franklin Gold and Precious Metals Fund
STATEMENT OF INVESTMENTS, JULY 31, 2008 (CONTINUED)
SHARES/
COUNTRY WARRANTS VALUE
---------------- ---------- ---------------
TOTAL COMMON STOCKS AND WARRANTS (COST $934,584,767). $ 1,767,846,513
---------------
SHORT TERM INVESTMENTS (COST $43,229,399) 2.4%
MONEY MARKET FUND 2.4%
(d) Franklin Institutional Fiduciary Trust Money
Market Portfolio, 2.20%.............................. United States 43,229,399 43,229,399
---------------
TOTAL INVESTMENTS (COST $977,814,166) 100.2%......... 1,811,075,912
OTHER ASSETS, LESS LIABILITIES (0.2)%................ (4,352,226)
---------------
NET ASSETS 100.0%.................................... $ 1,806,723,686
===============
CURRENCY ABBREVIATION
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, 2008.
(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, 2008, the
aggregate value of these securities was $143,036,897, representing 7.92% of
net assets.
(c) A portion or all of the security purchased on a delayed delivery basis. See
Note 1(c).
(d) See Note 7 regarding investments in the Franklin Institutional Fiduciary
Trust Money Market Portfolio. The rate shown is the annualized seven-day
yield at period end.
The accompanying notes are an integral part of these financial statements.
Annual Report | 21
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2008
Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................. $ 934,584,767
Cost - Sweep Money Fund (Note 7) ........................ 43,229,399
--------------
Total cost of investments ............................... $ 977,814,166
==============
Value - Unaffiliated issuers ............................ $1,767,846,513
Value - Sweep Money Fund (Note 7) ....................... 43,229,399
--------------
Total value of investments .............................. 1,811,075,912
Foreign currency, at value (cost $3,181) ................... 3,147
Receivables:
Capital shares sold ..................................... 6,099,857
Dividends ............................................... 285,682
--------------
Total assets ......................................... 1,817,464,598
==============
Liabilities:
Payables:
Investment securities purchased ......................... 2,068,878
Capital shares redeemed ................................. 6,869,253
Affiliates .............................................. 1,439,472
Accrued expenses and other liabilities ..................... 363,309
--------------
Total liabilities .................................... 10,740,912
--------------
Net assets, at value .............................. $1,806,723,686
==============
Net assets consist of:
Paid-in capital ............................................ $1,069,558,620
Distributions in excess of net investment income ........... (95,856,094)
Net unrealized appreciation (depreciation) ................. 833,263,200
Accumulated net realized gain (loss) ....................... (242,040)
--------------
Net assets, at value .............................. $1,806,723,686
==============
The accompanying notes are an integral part of these financial statements.
22 | Annual Report
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
July 31, 2008
CLASS A:
Net assets, at value ....................................... $1,310,888,953
==============
Shares outstanding ......................................... 37,443,912
==============
Net asset value per share(a) ............................... $ 35.01
==============
Maximum offering price per share (net asset value per
share / 94.25%) ......................................... $ 37.15
==============
CLASS B:
Net assets, at value ....................................... $ 60,871,896
==============
Shares outstanding ......................................... 1,804,919
==============
Net asset value and maximum offering price per share(a) .... $ 33.73
==============
CLASS C:
Net assets, at value ....................................... $ 319,640,858
==============
Shares outstanding ......................................... 9,393,690
==============
Net asset value and maximum offering price per share(a) .... $ 34.03
==============
ADVISOR CLASS:
Net assets, at value ....................................... $ 115,321,979
==============
Shares outstanding ......................................... 3,193,452
==============
Net asset value and maximum offering price per share(a) .... $ 36.11
==============
(a) Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable, and redemption fees retained by the Fund.
The accompanying notes are an integral part of these financial statements.
Annual Report | 23
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended July 31, 2008
Investment income:
Dividends: (net of foreign taxes of $440,443)
Unaffiliated issuers .................................... $ 15,781,546
Sweep Money Fund (Note 7) ............................... 1,323,427
Interest ................................................... 255,426
--------------
Total investment income .............................. 17,360,399
--------------
Expenses:
Management fees (Note 3a) .................................. 8,256,191
Distribution fees: (Note 3c)
Class A ................................................. 3,245,358
Class B ................................................. 675,969
Class C ................................................. 3,182,851
Transfer agent fees (Note 3e) .............................. 2,243,970
Custodian fees (Note 4) .................................... 232,299
Reports to shareholders .................................... 225,624
Registration and filing fees ............................... 191,141
Professional fees .......................................... 113,292
Trustees' fees and expenses ................................ 92,744
Other ...................................................... 104,080
--------------
Total expenses ....................................... 18,563,519
Expense reductions (Note 4) .......................... (1,369)
--------------
Net expenses ...................................... 18,562,150
--------------
Net investment income (loss) .................... (1,201,751)
--------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................. 40,552,480
Foreign currency transactions ........................... (512,612)
--------------
Net realized gain (loss) ....................... 40,039,868
--------------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................. 122,948,496
Translation of assets and liabilities denominated in
foreign currencies ................................... (310,179)
--------------
Net change in unrealized appreciation
(depreciation) .............................. 122,638,317
--------------
Net realized and unrealized gain (loss) ....................... 162,678,185
--------------
Net increase (decrease) in net assets resulting from
operations ................................................. $ 161,476,434
==============
The accompanying notes are an integral part of these financial statements.
24 | Annual Report
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31,
-------------------------------
2008 2007
-------------- --------------
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................ $ (1,201,751) $ 2,351,891
Net realized gain (loss) from investments and foreign currency transactions .......... 40,039,868 55,126,559
Net change in unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies .......................... 122,638,317 128,955,959
-------------- --------------
Net increase (decrease) in net assets resulting from operations ................... 161,476,434 186,434,409
-------------- --------------
Distributions to shareholders from:
Net investment income:
Class A ........................................................................... (59,606,649) (21,865,871)
Class B ........................................................................... (2,968,742) (871,751)
Class C ........................................................................... (13,239,503) (3,276,068)
Advisor Class ..................................................................... (4,264,295) (1,644,592)
Net realized gains:
Class A ........................................................................... (56,393,008) (28,740,740)
Class B ........................................................................... (3,268,164) (1,976,377)
Class C ........................................................................... (14,261,659) (7,022,535)
Advisor Class ..................................................................... (3,861,237) (1,931,389)
-------------- --------------
Total distributions to shareholders ..................................................... (157,863,257) (67,329,323)
-------------- --------------
Capital share transactions: (Note 2)
Class A ........................................................................... 292,702,634 38,685,399
Class B ........................................................................... (3,432,880) (3,698,184)
Class C ........................................................................... 81,576,070 2,733,961
Advisor Class ..................................................................... 52,919,737 (744,605)
-------------- --------------
Total capital share transactions ........................................................ 423,765,561 36,976,571
-------------- --------------
Redemption fees ......................................................................... 70,989 8,785
-------------- --------------
Net increase (decrease) in net assets .......................................... 427,449,727 156,090,442
Net assets:
Beginning of year ....................................................................... 1,379,273,959 1,223,183,517
-------------- --------------
End of year ............................................................................. $1,806,723,686 $1,379,273,959
============== ==============
Distributions in excess of net investment income included in net assets:
End of year ............................................................................. $ (95,856,094) $ (25,605,202)
============== ==============
The accompanying notes are an integral part of these financial statements.
Annual Report | 25
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Gold and Precious Metals Fund (Fund) is registered under the Investment
Company Act of 1940, as amended, (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. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS
The Fund may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Fund will generally purchase these securities with the intention of holding the
securities, it may sell the securities before the settlement date. Sufficient
assets have been segregated for these securities.
D. 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.
Annual Report | 27
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. 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.
The Fund has reviewed the tax positions, taken on federal income tax returns,
for the three open tax years and as of July 31, 2008, and has determined that no
provision for income tax is required in the Fund's financial statements.
F. 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.
G. 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.
28 | Annual Report
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. 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. Effective September 1, 2008, the redemption fee will be eliminated.
I. 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.
2. SHARES OF BENEFICIAL INTEREST
At July 31, 2008, there were an unlimited number of shares authorized (without
par value). Transactions in the Fund's shares were as follows:
YEAR ENDED JULY 31,
---------------------------------------------------------
2008 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
CLASS A SHARES:
Shares sold ................................ 16,455,560 $ 642,590,673 9,952,865 $ 321,030,285
Shares issued in reinvestment of
distributions ........................... 2,793,112 101,724,854 1,337,299 43,208,127
Shares redeemed ............................ (11,792,878) (451,612,893) (10,163,730) (325,553,013)
----------- ------------- ----------- -------------
Net increase (decrease) .................... 7,455,794 $ 292,702,634 1,126,434 $ 38,685,399
=========== ============= =========== =============
CLASS B SHARES:
Shares sold ................................ 387,880 $ 14,588,592 166,415 $ 5,219,309
Shares issued in reinvestment of
distributions ........................... 157,613 5,555,874 79,582 2,498,087
Shares redeemed ............................ (654,065) (23,577,346) (372,167) (11,415,580)
----------- ------------- ----------- -------------
Net increase (decrease) .................... (108,572) $ (3,432,880) (126,170) $ (3,698,184)
=========== ============= =========== =============
CLASS C SHARES:
Shares sold ................................ 3,931,713 $ 151,719,692 1,657,798 $ 52,788,963
Shares issued in reinvestment of
distributions ........................... 636,766 22,649,772 268,875 8,515,298
Shares redeemed ............................ (2,482,227) (92,793,394) (1,887,994) (58,570,300)
----------- ------------- ----------- -------------
Net increase (decrease) .................... 2,086,252 $ 81,576,070 38,679 $ 2,733,961
=========== ============= =========== =============
Annual Report | 29
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
YEAR ENDED JULY 31,
---------------------------------------------------------
2008 2007
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
ADVISOR CLASS SHARES:
Shares sold ................................ 1,692,601 $ 68,221,162 404,725 $ 13,568,522
Shares issued in reinvestment of
distributions ........................... 182,311 6,836,654 92,530 3,068,310
Shares redeemed ............................ (559,298) (22,138,079) (531,240) (17,381,437)
----------- ------------- ----------- -------------
Net increase (decrease) .................... 1,315,614 $ 52,919,737 (33,985) $ (744,605)
=========== ============= =========== =============
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
A. MANAGEMENT FEES
Effective January 1, 2008, 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 $7.5 billion
0.440% Over $7.5 billion, up to and including $10 billion
0.430% 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
Prior to January 1, 2008, the Fund paid fees 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
30 | Annual Report
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
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 .................... $1,010,270
Contingent deferred sales charges retained ........ $ 186,787
E. TRANSFER AGENT FEES
For the year ended July 31, 2008, the Fund paid transfer agent fees of
$2,243,970, of which $1,360,332 was retained by Investor Services.
Annual Report | 31
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 2008, the
custodian fees were reduced as noted in the Statement of Operations.
5. INCOME TAXES
For tax purposes, realized currency losses and ordinary income losses occurring
subsequent to October 31, may be deferred and treated as occurring on the first
day of the following fiscal year. At July 31, 2008, the Fund deferred realized
currency losses and ordinary income losses of $363,995 and $42,768,904,
respectively.
The tax character of distributions paid during the years ended July 31, 2008 and
2007, was as follows:
2008 2007
------------ -----------
Distributions paid from:
Ordinary income ......... $ 79,118,657 $27,658,282
Long term capital gain .. 78,744,600 39,671,041
------------ -----------
$157,863,257 $67,329,323
============ ===========
At July 31, 2008, the cost of investments, net unrealized appreciation
(depreciation) and undistributed long term capital gains for income tax purposes
were as follows:
Cost of investments ............................... $1,036,785,745
==============
Unrealized appreciation ........................... $ 836,984,135
Unrealized depreciation ........................... (62,693,968)
--------------
Net unrealized appreciation (depreciation) ........ $ 774,290,167
==============
Distributable earnings - undistributed long term
capital gains .................................. $ 6,005,913
==============
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 wash sales, foreign currency
transactions, and passive foreign investment company shares.
32 | Annual Report
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, 2008, aggregated $329,029,219 and $77,332,134, respectively.
7. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (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.
8. 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.
9. NEW ACCOUNTING PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board (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.
In March 2008, FASB issued FASB Statement No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133"
(SFAS 161), which expands disclosures about derivative investments and hedging
activities. SFAS 161 is effective for fiscal years beginning after November 15,
2008, and interim periods within those fiscal years. The Fund is currently
evaluating the impact, if any, of applying the various provisions of SFAS 161.
Annual Report | 33
Franklin Gold and Precious Metals Fund
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FRANKLIN GOLD AND PRECIOUS METALS
FUND
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin Gold and Precious Metals
Fund (the "Fund") at July 31, 2008, 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, 2008 by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
September 17, 2008
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 $39,664,977 as a long
term capital gain dividend for the fiscal year ended July 31, 2008.
Under Section 854(b)(2) of the Code, the Fund designates the maximum amount
allowable but no less than $6,467,039 as qualified dividends for purposes of the
maximum rate under Section 1(h)(11) of the Code for the fiscal year ended July
31, 2008. Distributions, including qualified dividend income, paid during the
calendar year 2008 will be reported to shareholders on Form 1099-DIV in January
2009. 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 $861,026 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, 2008.
At July 31, 2008, 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 2008, 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.
In addition, in January 2009, shareholders will receive Form 1099-DIV which will
include their share of taxes withheld and foreign source income distributed
during the calendar year 2008.
Annual Report | 35
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 143 Bar-S Foods (meat packing
One Franklin Parkway company).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief
Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).
ROBERT F. CARLSON (1928) Trustee Since 2007 122 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Retired; and FORMERLY, Vice President, senior member and past President, Board of Administration, California Public Employees
Retirement Systems (CALPERS); 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 2007 122 Chevron Corporation (global energy
One Franklin Parkway company) and ICO Global
San Mateo, CA 94403-1906 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 143 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas), H.J.
San Mateo, CA 94403-1906 Heinz Company (processed foods and
allied products), RTI
International Metals, Inc.
(manufacture and distribution 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).
36 | 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
- ------------------- --------------- ------------------ ----------------------- ----------------------------------
FRANK W. T. LAHAYE (1929) Trustee Since 1968 122 Center for Creative Land Recycling
One Franklin Parkway (brownfield redevelopment).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
FRANK A. OLSON (1932) Trustee Since 2005 143 Hess Corporation (exploration and
One Franklin Parkway refining of oil and gas) and
San Mateo, CA 94403-1906 Sentient Jet (private jet
service).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (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 (airlines).
LARRY D. THOMPSON (1945) Trustee Since 2007 143 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. (credit card provider) (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) Lead Trustee since 122 None
One Franklin Parkway Independent 2006 and Lead
San Mateo, CA 94403-1906 Trustee Independent
Trustee since
January 2008
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 and 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 143 None
One Franklin Parkway Chairman 1976 and
San Mateo, CA 94403-1906 of 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.
Annual Report | 37
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 2007 94 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 President
Vice President - AML Compliance
- AML since 2006
Compliance
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 F. FERGERSON (1962) Treasurer, Treasurer Not Applicable Not Applicable
One Franklin Parkway Chief Financial since 2004,
San Mateo, CA 94403-1906 Officer and Chief Financial
Chief Officer and
Accounting Chief Accounting
Officer Officer since
February 2008
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 46 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) Vice President Since Not Applicable Not Applicable
500 East Broward Blvd. February 2008
Suite 2100
Fort Lauderdale, FL 33394-3091
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.
38 | 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
- ------------------- --------------- ------------------ ----------------------- ----------------------------------
RUPERT H. JOHNSON, JR. (1940) President and President since Not Applicable Not Applicable
One Franklin Parkway Chief Executive 2001 and Chief
San Mateo, CA 94403-1906 Officer - Executive 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.
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).
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
- ------------------- --------------- ------------------ ----------------------- ----------------------------------
GALEN G. VETTER (1951) Senior Vice Since Not Applicable Not Applicable
500 East Broward Blvd. President and February 2008
Suite 2100 Chief Executive
Fort Lauderdale, FL 33394-3091 Officer -
Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of some of the
other subsidiaries of Franklin Resources, Inc. and 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.
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 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 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 BOARD MEMBER 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.
40 | Annual Report
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT
At a meeting held April 15, 2008, 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 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,
Annual Report | 41
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
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, 2008, 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 highest quintile of such group and on an annualized
basis was in the highest quintile for the previous three-year period of such
performance universe and the second-highest and middle quintiles of such
universe on an annualized basis for the previous five- and 10-year periods,
respectively. 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 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
42 | Annual Report
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
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 similar in size to 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 and other regulatory 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 of fund brokerage and the use of "soft" commission
Annual Report | 43
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
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 $7.5
billion asset level. The Fund had assets of approximately $1.7 billion on
December 31, 2007, 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's investment manager 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.
44 | 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 | 45
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(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO) 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 A2008 09/08
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 $44,865 for the fiscal year ended July 31, 2008 and $29,972 for the fiscal
year ended July 31, 2007.
(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 $0 for the fiscal year ended July
31, 2008 and $46,000 for the fiscal year ended July 31, 2007. 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 $1,390 for the fiscal year ended July 31, 2008
and $0 for the fiscal year ended July 31, 2007. The services for which these
fees were paid include 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 other than
services reported in paragraphs (a)-(c) of Item 4 were $282,687 for the fiscal
year ended July 31, 2008 and $0 for the fiscal year ended July 31, 2007. The
services for which these fees were paid include 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 $284,077 for the fiscal year ended July 31, 2008 and $46,000 for
the fiscal year ended July 31, 2007.
(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 Galen G. Vetter, Chief Executive Officer - Finance and Administration, and
Laura F. Fergerson, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 of Galen G. Vetter, Chief Executive Officer - Finance and
Administration, and Laura F. Fergerson, Chief Financial Officer and Chief
Accounting 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/GALEN G. VETTER
----------------------------------
Galen G. Vetter
Chief Executive Officer -
Finance and Administration
Date September 26, 2008
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/GALEN G. VETTER
----------------------------------
Galen G. Vetter
Chief Executive Officer -
Finance and Administration
Date September 26, 2008
By /s/LAURA F. FERGERSON
---------------------------------
Laura F. Fergerson
Chief Financial Officer and
Chief Accounting Officer
Date September 26, 2008