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
----------------------------------------------------------------
(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
----
Date of reporting period: 7/31/09
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ITEM 1. REPORTS TO STOCKHOLDERS.
JULY 31, 2009
ANNUAL REPORT
AND SHAREHOLDER LETTER
(GRAPHIC)
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SECTOR
FRANKLIN
GOLD AND PRECIOUS METALS FUND
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO)
FRANKLIN - Templeton - Mutual Series
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE(R)
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management groups--
Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups operates
autonomously, relying on its own research and
staying true to the unique investment disciplines
that underlie its success.
FRANKLIN. Founded in 1947, Franklin is a recognized
leader in fixed income investing and also brings
expertise in growth- and value-style U.S. equity
investing.
TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched what
has become the industry's oldest global fund. Today,
with offices in over 25 countries, Templeton offers
investors a truly global perspective.
MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what it
believes are undervalued stocks, as well as
arbitrage situations and distressed securities.
TRUE DIVERSIFICATION Because our management groups work independently and
adhere to different investment approaches, Franklin,
Templeton and Mutual Series funds typically have
distinct portfolios. That's why our funds can be
used to build truly diversified allocation plans
covering every major asset class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as well as
the reliable, accurate and personal service that has
helped us become one of the most trusted names in
financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
(GRAPHIC)
Not part of the annual report
Contents
SHAREHOLDER LETTER ........................................................ 1
ANNUAL REPORT
Franklin Gold and Precious Metals Fund .................................... 3
Performance Summary ....................................................... 8
Your Fund's Expenses ...................................................... 13
Financial Highlights and Statement of Investments ......................... 15
Financial Statements ...................................................... 22
Notes to Financial Statements ............................................. 26
Report of Independent Registered Public Accounting Firm ................... 37
Tax Designation ........................................................... 38
Board Members and Officers ................................................ 39
Shareholder Information ................................................... 43
Shareholder Letter
Dear Shareholder:
The one-year period ended July 31, 2009, was an extraordinary and stressful time
for investors and those of us who have worked in financial markets for many
years. During much of this turbulent period, the U.S. recession deepened, the
unemployment rate surged and consumer spending fell. In the past four months,
the U.S. economy, while still in a downturn, became marginally "less worse" as
the recession seemed to loosen its grip. The results of government "stress
tests" of major financial institutions were generally positive, enabling those
institutions to raise capital in the public markets and avoid a worst-case
scenario of government takeovers and/or failures of major banks. For most of the
reporting period, stocks suffered major losses as investors worried about an
uncertain future. After reaching cyclical lows in March, the stock indexes began
a rally as many investors reentered the market. At the same time, U.S. Treasury
yields rose from multi-year lows as investor risk aversion waned.
Amid recent events, we think it is important to put short-term market
developments in perspective. Keep in mind that as daunting as current conditions
may be, we have navigated through past periods of high market volatility by
remaining committed to our long-term perspective and disciplined investment
philosophy. During such times, we search for bargains that we believe may be
well positioned to become eventual winners. Although conditions remain
challenging, our experience gives us reason to be optimistic about future market
stabilization and recovery.
In the enclosed annual report for Franklin Gold and Precious Metals Fund, the
portfolio manager discusses market conditions, investment management decisions
and Fund performance during the period under review. You will also find other
performance data and financial information. Please remember that all securities
markets fluctuate, as do mutual fund share prices.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Not part of the annual report | 1
If you would like more frequent updates, franklintempleton.com provides daily
prices, monthly performance figures, portfolio holdings and other information.
You can also access your account, buy and sell shares, read timely articles, and
find helpful financial planning tools. We hope you will take advantage of these
online services.
Although market conditions are constantly changing, we remain committed to our
disciplined strategy as we manage the Fund, keeping in mind the trust you have
placed in us. As always, we recommend investors consult their financial advisors
and review their portfolios to design a long-term strategy and portfolio
allocation that meet their individual needs, goals and risk tolerance. We firmly
believe that most people benefit from professional advice, and that advice is
invaluable as investors navigate changing market conditions.
We thank you for investing with Franklin Templeton, welcome your questions and
comments, and look forward to serving your investment needs in the years ahead.
Sincerely,
/s/ Rupert H. Johnson
Rupert H. Johnson, Jr.
President and Chief Executive Officer - Investment Management
Franklin Gold and Precious Metals Fund
THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF JULY 31, 2009. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE.
2 | Not part of the annual report
Annual Report
Franklin Gold and Precious Metals Fund
YOUR FUND'S GOALS AND MAIN INVESTMENTS: Franklin Gold and Precious Metals Fund
seeks capital appreciation, with current income as its secondary goal, by
investing at least 80% of its net assets in securities of gold and precious
metals operation companies.
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 (800) 342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
This annual report for Franklin Gold and Precious Metals Fund covers the fiscal
year ended July 31, 2009.
PERFORMANCE OVERVIEW
Franklin Gold and Precious Metals Fund - Class A had a -3.48% cumulative total
return for the 12 months ended July 31, 2009. The Fund - Class A performed
better than the broad Standard & Poor's 500 Index's (S&P 500's) -19.96% total
return and the sector-specific FTSE Gold Mines Index's -4.10% price return
during the same period.(1) You can find the Fund's long-term performance data in
the Performance Summary beginning on page 8.
ECONOMIC AND MARKET OVERVIEW
During the 12-month period ended July 31, 2009, the U.S. economy and stock
markets reached historical extremes, declining dramatically until tentative
signs of stabilization emerged in the latter half of the period and equity
markets staged a robust rally. Early in the period, the U.S. recession deepened,
several blue chip banks and financial institutions failed or sought government
assistance, credit markets seized up and housing prices plummeted. With a new
president, Barack Obama, the country and financial markets were eager to see how
effectively the government could address these problems.
(1.) Source: (C) 2009 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 a free float-weighted
index that comprises companies whose principal activity is gold mining.
This is a price-only index and does not include dividends. The indexes are
unmanaged. One cannot invest directly in an index, and an index is not
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 7/31/09
Canada 41.8%
South Africa 22.3%
Australia 14.9%
U.K 10.4%
U.S. 3.4%
Peru 3.2%
Papua New Guinea 2.5%
Other 0.7%
Short-Term Investments & Other Net Assets 0.8%
Despite the government's swift interventions, novel policy responses and massive
emergency funding, the nation's economic travails continued. Although home sales
declined for most of the period, they edged higher near period-end, but prices
remained depressed in light of persistent mortgage defaults and weak demand.
Jobless claims mounted and the unemployment rate surged from 5.8% to 9.4% during
the year, led by steep losses in manufacturing, construction and business
services.(2) Cumulative job losses since the recession began in December 2007
increased to 6.7 million, the biggest drop in any post-World War II economic
slump.(2) As consumers grew more frugal, retail and auto sales plummeted. The
Conference Board's Consumer Confidence Index fell to the lowest level since it
began in 1967 before rebounding in 2009's second quarter due to improved
expectations. Economic activity as measured by gross domestic product (GDP)
declined 3.9% in the second quarter of 2009 compared with the second quarter of
2008, the biggest year-over-year contraction in 27 years.
Oil prices stood at an elevated level of $124 per barrel at the beginning of the
period but retreated to a four-year low of $31 in December as demand waned amid
an intensifying global recession. Prices rose to $69 by period-end as
commodities fluctuated in tandem with investor sentiment and vacillations in
equity markets. Other commodity prices, including those for industrial metals
and agricultural products, were also driven by optimism that a global recovery
could revive demand. Partially as a result of the steep price correction for
energy products and reduced consumer spending, deflationary pressures surfaced
and July's inflation rate was an annualized -2.1%, representing the steepest
yearly decline in the cost of living in nearly six decades.(2) Core inflation,
which excludes food and energy costs, rose at a 1.5% annualized rate, which was
within the Federal Reserve Board's (Fed's) informal target range of 1.5% to
2.0%.(2)
A slowing economy and decelerating inflation prompted Washington policy-makers
to further lower interest rates and enact stimulus plans. During the 12 months
under review, the Fed lowered the federal funds target rate to a range of 0% to
0.25% from 2.00% at the start of the period. Toward period-end the Fed stated
the economy and financial system were still too weak for it to begin tightening
monetary policy. The government introduced various new measures to shore up
financial markets and enhance market liquidity, and out-lined details of its
Public-Private Investment Program, with an objective of removing devalued real
estate-related assets from banks' balance sheets.
Most stocks and bonds suffered major losses through early March as investors
worried about an uncertain future. Following an extended wave of extreme
(2.) Source: Bureau of Labor Statistics.
4 | Annual Report
PRECIOUS METALS PRICES (8/1/08-7/31/09)*
(PERFORMANCE GRAPH)
DATE PLATINUM (LHS) GOLD (LHS) PALLADIUM (RHS)
- ---- -------------- ---------- ---------------
8/1/2008 1760.5 914.07 382
8/1/2008 1656.5 910.95 368.75
8/4/2008 1565 894.8 354.5
8/5/2008 1574 874.4 356.75
8/6/2008 1604.5 879.8 354
8/7/2008 1575.5 873.05 348.5
8/8/2008 1556.5 856.6 332
8/11/2008 1527 823.85 322
8/12/2008 1477 812.32 310.25
8/13/2008 1514 826.8 324.75
8/14/2008 1491 806.63 308.5
8/15/2008 1371.5 787.7 284.5
8/18/2008 1395 800.07 286
8/19/2008 1359.5 814.2 286.5
8/20/2008 1379.5 813.67 285.5
8/21/2008 1459.5 837 290
8/22/2008 1435.5 823.05 287
8/25/2008 1433 821.95 289.25
8/26/2008 1420 824.9 286
8/27/2008 1443.5 826.9 292
8/28/2008 1477.5 834.05 293.75
8/29/2008 1486.5 831.15 306.5
9/1/2008 1445.5 817.7 301.75
9/2/2008 1402 805.35 289.5
9/3/2008 1388.5 801.3 287
9/4/2008 1400 796.45 284.25
9/5/2008 1373 803.5 275.75
9/8/2008 1343.5 802.3 262
9/9/2008 1235.5 777.25 233
9/10/2008 1180 752.45 227.75
9/11/2008 1143 746.47 230.5
9/12/2008 1210 765.5 246.5
9/15/2008 1179.5 786.65 236.5
9/16/2008 1070.75 779.75 225
9/17/2008 1130 863.85 247.5
9/18/2008 1103 850.84 236
9/19/2008 1136 873.55 236
9/22/2008 1256 897 257.5
9/23/2008 1221.5 892.15 250
9/24/2008 1202.5 882.63 251
9/25/2008 1185.5 877.9 239.5
9/26/2008 1123 878.75 226
9/29/2008 1090 909.5 213.5
9/30/2008 1011 870.95 199.5
10/1/2008 1036 870.8 206.5
10/2/2008 974.5 836.4 195.5
10/3/2008 962 835.5 199
10/6/2008 973 859.75 197.75
10/7/2008 1014.5 887.1 199
10/8/2008 1002.5 907.62 198.5
10/9/2008 1030.5 913.25 204.5
10/10/2008 992.5 849.85 193.25
10/13/2008 989 833.05 204.25
10/14/2008 1027.5 836.7 199
10/15/2008 968.5 846.9 192.75
10/16/2008 896 804.6 177
10/17/2008 866 783.35 174.5
10/20/2008 898.5 796.9 183
10/21/2008 893.5 771.65 183.5
10/22/2008 844.5 730.45 178.5
10/23/2008 810.5 721.45 172
10/24/2008 800.5 734.75 170
10/27/2008 771 730.8 173
10/28/2008 811 746.95 181.5
10/29/2008 808 754.95 199
10/30/2008 830.5 738.13 202
10/31/2008 823 724.55 199.5
11/3/2008 820 723.45 200.5
11/4/2008 851.5 763.25 212
11/5/2008 871.5 740.35 219.5
11/6/2008 836.5 732.85 220.75
11/7/2008 854.5 736.65 225
11/10/2008 857 746.2 221.5
11/11/2008 822.5 731.7 217.5
11/12/2008 820 712.3 214.25
11/13/2008 831.5 736.5 214
11/14/2008 840.5 742.1 217
11/17/2008 814 737.92 218.5
11/18/2008 836 738.15 217.5
11/19/2008 818 734.55 183.5
11/20/2008 777.5 745.06 180.25
11/21/2008 826.5 800.4 185.5
11/24/2008 866 821.65 195.5
11/25/2008 870 821.05 198.5
11/26/2008 864.5 812.9 193.5
11/27/2008 863 815.83 191.5
11/28/2008 881.5 818.05 190.5
12/1/2008 800.5 768.95 176
12/2/2008 806 782.35 173
12/3/2008 803.5 773.95 175
12/4/2008 796.5 767 170.5
12/5/2008 803 756.45 164.5
12/8/2008 831.5 772.7 177
12/9/2008 813.5 776.95 178
12/10/2008 832 810.6 181.25
12/11/2008 836 821.35 181
12/12/2008 820.5 822.35 174
12/15/2008 832 838.45 176
12/16/2008 863 858.1 180
12/17/2008 865.5 867.9 177.5
12/18/2008 854 852.91 177.5
12/19/2008 849.5 838.28 176.5
12/22/2008 851 848.05 172.5
12/23/2008 844.5 840.2 173
12/24/2008 854.5 848 177
12/25/2008 860.5 846.99 173.75
12/26/2008 891 869.3 177
12/29/2008 918 880.3 188
12/30/2008 917 873.7 185.25
12/31/2008 934.5 882.05 187
1/1/2009 934.5 879.45 187
1/2/2009 946.5 875.4 192.5
1/5/2009 949 859.5 184.5
1/6/2009 968 863.9 198.5
1/7/2009 973 842.95 197
1/8/2009 993 857.4 196.75
1/9/2009 993.5 854.2 192.75
1/12/2009 958.5 820.85 186.5
1/13/2009 943.5 822 184
1/14/2009 935.5 811.7 183
1/15/2009 925 817.8 179.5
1/16/2009 949 843.15 185.5
1/19/2009 951 835.9 184
1/20/2009 940 857.25 184.75
1/21/2009 924.75 854.25 184.5
1/22/2009 928.5 857 185.25
1/23/2009 958 899.75 197.5
1/26/2009 962 903.35 191.25
1/27/2009 950 899.22 191
1/28/2009 956.5 887.55 190.5
1/29/2009 975 908.65 194.5
1/30/2009 988 927.85 193.5
2/2/2009 972 905.49 196
2/3/2009 962.5 900.35 195.75
2/4/2009 966.5 905.75 196.5
2/5/2009 977 914.55 201.75
2/6/2009 1002 911.5 212.5
2/9/2009 990.5 894.55 207.5
2/10/2009 1035.25 915.1 212.5
2/11/2009 1069.5 938.99 214.75
2/12/2009 1073.5 946.75 216.5
2/13/2009 1064.25 941.7 216.5
2/16/2009 1065 941.75 216.5
2/17/2009 1090.5 970.25 219.5
2/18/2009 1102.25 984.9 219
2/19/2009 1069 974.65 216
2/20/2009 1082.5 992.9 215
2/23/2009 1077 991.75 198
2/24/2009 1044 962.67 200.5
2/25/2009 1047.5 953.83 198
2/26/2009 1053 946.2 197
2/27/2009 1073.5 942.35 196
3/2/2009 1061.25 926.1 193
3/3/2009 1033.5 916.28 194
3/4/2009 1047.5 906.5 199
3/5/2009 1063.5 932.4 199.25
3/6/2009 1071.5 939.35 205.5
3/9/2009 1061 921.97 197.5
3/10/2009 1041.5 898.15 198
3/11/2009 1052.75 909.4 197.5
3/12/2009 1049 926.63 198.75
3/13/2009 1057 929.75 199
3/16/2009 1058 923.15 199.25
3/17/2009 1048.5 915.4 195.5
3/18/2009 1059.5 942 199.25
3/19/2009 1126.5 959.85 206
3/20/2009 1115 952.2 207
3/23/2009 1129.5 939.5 209.25
3/24/2009 1120.5 925.87 208.5
3/25/2009 1124.5 934.02 215.5
3/26/2009 1147.25 934.1 221.75
3/27/2009 1133.25 923.15 220.25
3/30/2009 1117.5 915.84 216.25
3/31/2009 1128.5 919.15 216
4/1/2009 1138.5 927.4 218.75
4/2/2009 1158 904.05 222.75
4/3/2009 1159.5 893.15 220.5
4/6/2009 1145.5 868.9 223.5
4/7/2009 1167 881.24 225.5
4/8/2009 1179.5 880.5 233.5
4/9/2009 1191.5 879.35 232.5
4/10/2009 1212.25 881.65 235.25
4/13/2009 1244.5 893.85 240
4/14/2009 1209.5 890.72 232.75
4/15/2009 1222.5 891.05 237.5
4/16/2009 1207 875.7 233.5
4/17/2009 1209.5 868.8 234
4/20/2009 1164.5 884.5 224.5
4/21/2009 1160.25 883.8 223.75
4/22/2009 1173.5 889.75 232.5
4/23/2009 1183.5 904.3 233
4/24/2009 1179 913.2 234.75
4/27/2009 1144 906.5 225.75
4/28/2009 1093.5 893.38 216.5
4/29/2009 1097.5 898 221
4/30/2009 1107.5 888.2 218
5/1/2009 1093 886.55 216.5
5/4/2009 1122 902.1 220.25
5/5/2009 1134.5 897.15 220
5/6/2009 1139.5 911.22 229
5/7/2009 1148.25 910.7 239
5/8/2009 1150.5 916.65 241.5
5/11/2009 1120.5 913.33 235.5
5/12/2009 1135.25 923.35 235
5/13/2009 1116 926.3 221.25
5/14/2009 1114.75 926.5 225.75
5/15/2009 1105 931.8 224.75
5/18/2009 1135.75 918.25 229
5/19/2009 1143.25 925.05 234
5/20/2009 1146.5 938.65 234.75
5/21/2009 1152 953.8 234.5
5/22/2009 1156.25 957.35 233.75
5/25/2009 1153.25 958.8 234
5/26/2009 1137 952 231.5
5/27/2009 1136.5 949.9 224
5/28/2009 1145 959.45 233
5/29/2009 1193 979.15 236.25
6/1/2009 1214 975.27 241
6/2/2009 1248.5 981.85 250.75
6/3/2009 1238.75 963.07 243.5
6/4/2009 1295.5 980.25 255
6/5/2009 1266.5 955.25 257.5
6/8/2009 1246.5 951.82 250.5
6/9/2009 1253 954.78 255
6/10/2009 1267 954.49 255.75
6/11/2009 1267.75 953.95 256.5
6/12/2009 1254.5 939.3 253.5
6/15/2009 1208 928.3 243.5
6/16/2009 1220 934.8 243.5
6/17/2009 1207.25 938.87 243.5
6/18/2009 1207.5 933.06 240.5
6/19/2009 1209.5 934.05 246.5
6/22/2009 1163.75 922.7 235.5
6/23/2009 1162.25 925.83 236.75
6/24/2009 1162.25 931.4 236
6/25/2009 1189 939.25 244.25
6/26/2009 1201.5 939.6 246
6/29/2009 1187.5 937.95 250
6/30/2009 1177.25 926.6 250.75
7/1/2009 1202.5 940.8 255
7/2/2009 1186.5 929.8 252
7/3/2009 1182.1 932.25 247.75
7/6/2009 1148.75 924.95 242
7/7/2009 1134.25 924.68 240.5
7/8/2009 1102.25 909.5 236.25
7/9/2009 1110.25 912.35 234.75
7/10/2009 1110.5 913.05 235.25
7/13/2009 1115.5 920.3 235.75
7/14/2009 1132.5 925.7 243
7/15/2009 1162.25 939.2 247.75
7/16/2009 1164.75 937.34 248.25
7/17/2009 1176.5 937.5 247.75
7/20/2009 1183.25 948.7 254.5
7/21/2009 1175 948.5 256
7/22/2009 1176.5 951.4 254.75
7/23/2009 1179.25 949.15 258.5
7/24/2009 1188 951.35 260.5
7/27/2009 1220.75 953.84 262
7/28/2009 1200.5 937.5 260.75
7/29/2009 1176.25 930 254.5
7/30/2009 1186.5 934.4 259.5
7/31/2009 1212.5 954 262.75
* 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 7/31/09
(BAR CHART)
Long Life Gold Mines 54.9%
Gold Exploration & Development 14.4%
Medium Life Gold Mines 12.6%
Platinum & Palladium 11.1%
Silver Mines 3.9%
Gold & Diversified Resources 2.3%
Short-Term Investments & Other New Assets 0.8%
volatility and panic selling, stocks partially recovered from 12-year lows as
investors found many bargains among the bear market fallout and data indicated
the economy's pace of contraction was moderating. For the 12 months under
review, the blue chip stocks of the Dow Jones Industrial Average had a total
return of -16.62%, the broader S&P 500 a -19.96% total return, and the
technology-heavy NASDAQ Composite Index a -14.05% total return.(3) All sectors
lost value with the financials, industrials and materials sectors posting the
largest declines.
For the 12 months ended July 31, 2009, gold prices initially fell, but then
rallied toward period-end, offsetting the earlier losses. Gold was up 4% for the
period as it began the period at $914 per ounce, moved to a low of $712 per
ounce in November 2008, then rose to $954 per ounce by the end of July 2009. On
the other hand, platinum, silver and palladium had similar returns as their
prices fell and never fully recovered. Platinum started at $1,761 per ounce,
traded lower until October 27, 2008 when prices accelerated, and closed at
$1,213 per ounce, down 31%. Silver prices fell from $18 per ounce at the
beginning of the period to a low of $9 on November 20, 2008, and ended the
period at $14, a 21% decrease. Palladium started the period at $382 per ounce,
fell to $165 in December 2008, and ended the period at $263 with a 31% loss.
(3.) Source: (C) 2009 Morningstar. All Rights Reserved. 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.
Annual Report | 5
TOP 10 HOLDINGS
7/31/09
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- ------------------------ ----------
AngloGold Ashanti Ltd., ord. & ADR 7.1%
LONG LIFE GOLD MINES, SOUTH AFRICA
Randgold Resources Ltd., ADR 6.9%
LONG LIFE GOLD MINES, U.K.
Newcrest Mining Ltd. 6.5%
LONG LIFE GOLD MINES, AUSTRALIA
Impala Platinum Holdings Ltd., ord. & ADR 6.1%
PLATINUM & PALLADIUM, SOUTH AFRICA
Goldcorp Inc., ord. & warrants 6.1%
LONG LIFE GOLD MINES, CANADA
Barrick Gold Corp. 4.6%
LONG LIFE GOLD MINES, CANADA
Kinross Gold Corp. 3.8%
LONG LIFE GOLD MINES, CANADA
Yamana Gold Inc., ord. & 144A 3.2%
MEDIUM LIFE GOLD MINES, CANADA
Compania de Minas Buenaventura SA, ord. & ADR 3.2%
LONG LIFE GOLD MINES, PERU
Centamin Egypt Ltd., ord. & 144A 3.1%
GOLD EXPLORATION & DEVELOPMENT, AUSTRALIA
INVESTMENT STRATEGY
We believe that investing in gold and other precious metals offers an excellent
opportunity for diversification in an attractive asset class over the long term.
We like companies with multiple mines, attractive production profiles, strong
reserve bases and active exploration programs that can drive future reserve and
production growth. While the sector can be volatile, especially over the short
term, precious metals, such as gold, can be attractive because they are a hard
asset not tied to any particular country or financial system.
MANAGER'S DISCUSSION
Gold equities dramatically underperformed gold bullion in the first few months
of the period but staged a strong recovery from their October low.
During the period, merger activity slowed as general market uncertainty made it
difficult for firms to agree on terms and to arrange financing. There were a few
exceptions, including IAMGOLD's purchase of Orezone's Essakane in Burkina Faso,
B2Gold's acquisition of Central Sun Mining, and New Gold's merger with Western
Goldfields. Red Back's bid for Moto Goldmines was superceded by a higher joint
bid by Randgold Resources and AngloGold Ashanti just before period-end. As gold
equities began their recovery, several companies sought to take advantage of
investor interest in the sector in January and issued additional shares to shore
up their balance sheets. The drop in prices of oil, natural gas, steel and other
consumables experienced during the middle of the period helped reverse the trend
of rising costs the industry faced in the past several years. The mining
business is very energy-intensive as many remote mines run on diesel generators
and operate mining trucks that consume large amounts of diesel fuel. The
downturn in the base metal sector also helped ease some of the problems that had
been plaguing the gold industry including wage pressure and a shortage of
qualified workers. In our view, the combination of improving balance sheets, a
strong gold price and declining input costs helped to create a more positive
outlook for the industry since its lows in October.
In this environment, the Fund had several detractors from performance during the
period. Shares of South African platinum producers Anglo Platinum and Impala
Platinum Holdings declined in value after the price of the metal, which is
primarily used by carmakers to make catalytic converters, slumped following a
decline in automobile manufacturing levels. Australian gold and copper mining
company Newcrest Mining's shares declined after the company's cash costs jumped
as a result of lower gold production levels and a drop in copper prices. Other
detractors for the review period included Australia-based PanAust (non-144A
security) and OZ Minerals.
6 | Annual Report
It is important to recognize the effect of currency movements on the Fund's
performance. In general, if the value of the U.S. dollar goes up compared with a
foreign currency, an investment traded in that foreign currency will go down in
value because it will be worth fewer U.S. dollars. This can have a negative
effect on Fund performance. Conversely, when the U.S. dollar weakens in relation
to a foreign currency, an investment traded in that foreign currency will
increase in value, which can contribute to Fund performance. For the 12 months
ended July 31, 2009, the U.S. dollar rose in value relative to most currencies.
The Fund is predominantly invested in securities with non-U.S. currency
exposure, and as a result, the Fund experienced a currency loss for the period.
On a positive note, significant contributors to Fund performance during the
reporting period were South African gold miner AngloGold Ashanti; Randgold
Resources, which owns mining and exploration operations in Mali and five other
African nations; and Canadian gold producer Kinross Gold. Other notable
contributors included Canada-based gold miners Eldorado Gold and Goldcorp
(ordinary shares) and South Africa-based gold miner Gold Fields.
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, 2009, 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 7/31/09
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 7/31/09 7/31/08
- ----------------------- ------ ------- -------
Net Asset Value (NAV) -$1.45 $33.56 $35.01
DISTRIBUTIONS (8/1/08-7/31/09)
Long-Term Capital Gain $0.1215
CLASS B (SYMBOL: FAGPX) CHANGE 7/31/09 7/31/08
- ----------------------- ------ ------- -------
Net Asset Value (NAV) -$1.66 $32.07 $33.73
DISTRIBUTIONS (8/1/08-7/31/09)
Long-Term Capital Gain $0.1215
CLASS C (SYMBOL: FRGOX) CHANGE 7/31/09 7/31/08
- ----------------------- ------ ------- -------
Net Asset Value (NAV) -$1.67 $32.36 $34.03
DISTRIBUTIONS (8/1/08-7/31/09)
Long-Term Capital Gain $0.1215
ADVISOR CLASS (SYMBOL: FGADX) CHANGE 7/31/09 7/31/08
- ----------------------------- ------ ------- -------
Net Asset Value (NAV) -$1.40 $34.71 $36.11
DISTRIBUTIONS (8/1/08-7/31/09)
Long-Term Capital Gain $0.1215
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) -3.48% +148.88% +407.68%
Average Annual Total Return(2) -9.04% +18.60% +16.94%
Value of $10,000 Investment(3) $ 9,096 $ 23,460 $ 47,830
Avg. Ann. Total Return (6/30/09)(4) -25.59% +16.79% +15.83%
Total Annual Operating Expenses(5) 0.91%
CLASS B 1-YEAR 5-YEAR 10-YEAR
- ------- ------- -------- --------
Cumulative Total Return(1) -4.23% +139.57% +378.59%
Average Annual Total Return(2) -8.04% +18.89% +16.95%
Value of $10,000 Investment(3) $ 9,196 $ 23,757 $ 47,859
Avg. Ann. Total Return (6/30/09)(4) -24.74% +17.08% +15.82%
Total Annual Operating Expenses(5) 1.66%
CLASS C 1-YEAR 5-YEAR 10-YEAR
- ------- ------- -------- --------
Cumulative Total Return(1) -4.23% +139.67% +372.22%
Average Annual Total Return(2) -5.18% +19.10% +16.79%
Value of $10,000 Investment(3) $ 9,482 $ 23,967 $ 47,222
Avg. Ann. Total Return (6/30/09)(4) -22.41% +17.30% +15.66%
Total Annual Operating Expenses(5) 1.66%
ADVISOR CLASS 1-YEAR 5-YEAR 10-YEAR
- ------------- ------- -------- --------
Cumulative Total Return(1) -3.26% +151.89% +419.93%
Average Annual Total Return(2) -3.26% +20.29% +17.92%
Value of $10,000 Investment(3) $ 9,674 $ 25,189 $ 51,993
Avg. Ann. Total Return (6/30/09)(4) -20.84% +18.46% +16.80%
Total Annual Operating Expenses(5) 0.66%
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 (800) 342-5236.
Annual Report | 9
Performance Summary (CONTINUED)
TOTAL RETURN INDEX COMPARISON FOR A 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 7/31/09
- ------- -------
1-Year -9.04%
5-Year +18.60%
10-Year +16.94%
CLASS A (8/1/99-7/31/09)
(PERFORMANCE GRAPH)
FRANKLIN GOLD AND PRECIOUS S&P 500 FTSE Gold
DATE METALS FUND - CLASS A INDEX MINES INDEX
- ------------- -------------------------- ------- -----------
8/1/1999 $ 9,421 $10,000 $10,000
8/31/1999 $ 9,807 $ 9,951 $10,632
9/30/1999 $11,578 $ 9,678 $13,369
10/31/1999 $10,465 $10,290 $11,599
11/30/1999 $10,636 $10,499 $11,083
12/31/1999 $10,988 $11,118 $10,991
1/31/2000 $10,236 $10,559 $ 9,699
2/29/2000 $ 9,791 $10,359 $10,005
3/31/2000 $ 9,506 $11,373 $ 9,255
4/30/2000 $ 8,845 $11,031 $ 8,955
5/31/2000 $ 9,153 $10,804 $ 9,225
6/30/2000 $ 9,574 $11,071 $ 9,560
7/31/2000 $ 9,005 $10,897 $ 8,627
8/31/2000 $ 9,905 $11,574 $ 8,735
9/30/2000 $ 9,198 $10,963 $ 8,271
10/31/2000 $ 8,708 $10,917 $ 7,012
11/30/2000 $ 9,278 $10,056 $ 7,396
12/31/2000 $10,177 $10,106 $ 8,094
1/31/2001 $10,373 $10,464 $ 7,902
2/28/2001 $10,835 $ 9,510 $ 8,463
3/31/2001 $ 9,518 $ 8,907 $ 7,630
4/30/2001 $10,893 $ 9,600 $ 8,896
5/31/2001 $11,736 $ 9,664 $ 9,201
6/30/2001 $11,147 $ 9,429 $ 9,192
7/31/2001 $10,257 $ 9,336 $ 8,973
8/31/2001 $10,916 $ 8,752 $ 9,547
9/30/2001 $10,708 $ 8,045 $10,414
10/31/2001 $10,385 $ 8,198 $ 9,960
11/30/2001 $10,512 $ 8,827 $ 9,561
12/31/2001 $11,194 $ 8,904 $ 9,810
1/31/2002 $12,061 $ 8,774 $11,348
2/28/2002 $13,165 $ 8,605 $12,473
3/31/2002 $14,233 $ 8,929 $13,754
4/30/2002 $15,005 $ 8,388 $14,669
5/31/2002 $16,726 $ 8,326 $16,808
6/30/2002 $14,661 $ 7,733 $14,396
7/31/2002 $12,203 $ 7,130 $12,180
8/31/2002 $13,770 $ 7,177 $13,868
9/30/2002 $13,794 $ 6,397 $13,942
10/31/2002 $13,058 $ 6,960 $12,679
11/30/2002 $13,106 $ 7,369 $12,355
12/31/2002 $15,379 $ 6,936 $15,129
1/31/2003 $15,559 $ 6,755 $15,061
2/28/2003 $14,455 $ 6,653 $14,099
3/31/2003 $13,580 $ 6,718 $13,226
4/30/2003 $13,364 $ 7,271 $13,087
5/31/2003 $15,343 $ 7,654 $14,585
6/30/2003 $15,823 $ 7,752 $15,342
7/31/2003 $16,471 $ 7,889 $15,898
8/31/2003 $18,894 $ 8,043 $17,938
9/30/2003 $19,326 $ 7,957 $18,068
10/31/2003 $21,089 $ 8,407 $19,533
11/30/2003 $23,512 $ 8,481 $21,618
12/31/2003 $23,425 $ 8,926 $21,604
1/31/2004 $21,147 $ 9,090 $18,898
2/29/2004 $21,665 $ 9,216 $19,257
3/31/2004 $22,943 $ 9,077 $20,889
4/30/2004 $18,289 $ 8,935 $16,337
5/31/2004 $19,917 $ 9,057 $18,003
6/30/2004 $19,435 $ 9,234 $17,273
7/31/2004 $19,218 $ 8,928 $17,326
8/31/2004 $20,423 $ 8,964 $18,845
9/30/2004 $22,015 $ 9,061 $20,227
10/31/2004 $22,461 $ 9,200 $21,003
11/30/2004 $23,486 $ 9,572 $21,660
12/31/2004 $22,144 $ 9,898 $20,108
1/31/2005 $20,902 $ 9,656 $18,626
2/28/2005 $22,506 $ 9,859 $19,892
3/31/2005 $21,493 $ 9,685 $18,935
4/30/2005 $19,575 $ 9,501 $16,957
5/31/2005 $19,877 $ 9,804 $17,141
6/30/2005 $21,770 $ 9,817 $18,894
7/31/2005 $21,481 $10,183 $18,257
8/31/2005 $22,687 $10,090 $19,116
9/30/2005 $26,836 $10,171 $23,028
10/31/2005 $25,099 $10,002 $21,253
11/30/2005 $27,704 $10,380 $23,173
12/31/2005 $31,132 $10,384 $25,703
1/31/2006 $37,021 $10,659 $30,410
2/28/2006 $33,731 $10,688 $26,533
3/31/2006 $36,839 $10,821 $27,809
4/30/2006 $41,016 $10,966 $31,340
5/31/2006 $36,973 $10,650 $28,774
6/30/2006 $37,495 $10,665 $28,997
7/31/2006 $37,240 $10,730 $28,387
8/31/2006 $38,648 $10,986 $29,093
9/30/2006 $35,285 $11,269 $26,205
10/31/2006 $37,956 $11,636 $27,569
11/30/2006 $41,732 $11,857 $29,994
12/31/2006 $41,001 $12,024 $28,940
1/31/2007 $40,399 $12,206 $27,847
2/28/2007 $41,334 $11,967 $27,864
3/31/2007 $42,192 $12,101 $27,300
4/30/2007 $43,101 $12,637 $27,361
5/31/2007 $42,947 $13,078 $26,630
6/30/2007 $42,512 $12,860 $26,158
7/31/2007 $43,178 $12,462 $28,270
8/31/2007 $40,950 $12,648 $26,949
9/30/2007 $50,079 $13,121 $33,438
10/31/2007 $56,405 $13,330 $37,256
11/30/2007 $51,360 $12,773 $35,045
12/31/2007 $51,491 $12,684 $35,031
1/31/2008 $55,978 $11,923 $38,491
2/29/2008 $61,102 $11,536 $40,783
3/31/2008 $55,143 $11,486 $35,714
4/30/2008 $52,411 $12,046 $32,549
5/31/2008 $56,091 $12,202 $34,824
6/30/2008 $56,728 $11,173 $37,379
7/31/2008 $49,552 $11,079 $33,272
8/31/2008 $43,523 $11,239 $28,611
9/30/2008 $38,342 $10,238 $27,365
10/31/2008 $23,000 $ 8,518 $17,641
11/30/2008 $27,897 $ 7,907 $23,084
12/31/2008 $35,587 $ 7,991 $28,068
1/31/2009 $35,031 $ 7,318 $27,735
2/28/2009 $35,131 $ 6,539 $26,737
3/31/2009 $40,618 $ 7,111 $29,915
4/30/2009 $38,323 $ 7,792 $26,723
5/31/2009 $50,423 $ 8,228 $34,836
6/30/2009 $44,794 $ 8,244 $30,799
7/31/2009 $47,830 $ 8,868 $31,907
Total Returns 378.30% -11.32% 219.07%
AVERAGE ANNUAL TOTAL RETURN
CLASS B 7/31/09
- ------- -------
1-Year -8.04%
5-Year +18.89%
10-Year +16.95%
CLASS B (8/1/99-7/31/09)
(PERFORMANCE GRAPH)
FRANKLIN GOLD AND PRECIOUS S&P 500 FTSE Gold
DATE METALS FUND - CLASS B INDEX MINES INDEX
- ------------- -------------------------- ------- -----------
8/1/1999 $10,000 $10,000 $10,000
8/31/1999 $10,412 $ 9,951 $10,632
9/30/1999 $12,300 $ 9,678 $13,369
10/31/1999 $11,102 $10,290 $11,599
11/30/1999 $11,283 $10,499 $11,083
12/31/1999 $11,638 $11,118 $10,991
1/31/2000 $10,847 $10,559 $ 9,699
2/29/2000 $10,373 $10,359 $10,005
3/31/2000 $10,045 $11,373 $ 9,255
4/30/2000 $ 9,352 $11,031 $ 8,955
5/31/2000 $ 9,668 $10,804 $ 9,225
6/30/2000 $10,106 $11,071 $ 9,560
7/31/2000 $ 9,510 $10,897 $ 8,627
8/31/2000 $10,446 $11,574 $ 8,735
9/30/2000 $ 9,692 $10,963 $ 8,271
10/31/2000 $ 9,169 $10,917 $ 7,012
11/30/2000 $ 9,765 $10,056 $ 7,396
12/31/2000 $10,688 $10,106 $ 8,094
1/31/2001 $10,896 $10,464 $ 7,902
2/28/2001 $11,374 $ 9,510 $ 8,463
3/31/2001 $ 9,978 $ 8,907 $ 7,630
4/30/2001 $11,410 $ 9,600 $ 8,896
5/31/2001 $12,304 $ 9,664 $ 9,201
6/30/2001 $11,680 $ 9,429 $ 9,192
7/31/2001 $10,725 $ 9,336 $ 8,973
8/31/2001 $11,423 $ 8,752 $ 9,547
9/30/2001 $11,190 $ 8,045 $10,414
10/31/2001 $10,847 $ 8,198 $ 9,960
11/30/2001 $10,970 $ 8,827 $ 9,561
12/31/2001 $11,680 $ 8,904 $ 9,810
1/31/2002 $12,569 $ 8,774 $11,348
2/28/2002 $13,710 $ 8,605 $12,473
3/31/2002 $14,813 $ 8,929 $13,754
4/30/2002 $15,602 $ 8,388 $14,669
5/31/2002 $17,394 $ 8,326 $16,808
6/30/2002 $15,239 $ 7,733 $14,396
7/31/2002 $12,670 $ 7,130 $12,180
8/31/2002 $14,299 $ 7,177 $13,868
9/30/2002 $14,311 $ 6,397 $13,942
10/31/2002 $13,534 $ 6,960 $12,679
11/30/2002 $13,584 $ 7,369 $12,355
12/31/2002 $15,927 $ 6,936 $15,129
1/31/2003 $16,104 $ 6,755 $15,061
2/28/2003 $14,954 $ 6,653 $14,099
3/31/2003 $14,045 $ 6,718 $13,226
4/30/2003 $13,805 $ 7,271 $13,087
5/31/2003 $15,851 $ 7,654 $14,585
6/30/2003 $16,331 $ 7,752 $15,342
7/31/2003 $16,988 $ 7,889 $15,898
8/31/2003 $19,476 $ 8,043 $17,938
9/30/2003 $19,906 $ 7,957 $18,068
10/31/2003 $21,699 $ 8,407 $19,533
11/30/2003 $24,187 $ 8,481 $21,618
12/31/2003 $24,079 $ 8,926 $21,604
1/31/2004 $21,725 $ 9,090 $18,898
2/29/2004 $22,244 $ 9,216 $19,257
3/31/2004 $23,548 $ 9,077 $20,889
4/30/2004 $18,749 $ 8,935 $16,337
5/31/2004 $20,408 $ 9,057 $18,003
6/30/2004 $19,902 $ 9,234 $17,273
7/31/2004 $19,674 $ 8,928 $17,326
8/31/2004 $20,889 $ 8,964 $18,845
9/30/2004 $22,497 $ 9,061 $20,227
10/31/2004 $22,940 $ 9,200 $21,003
11/30/2004 $23,965 $ 9,572 $21,660
12/31/2004 $22,598 $ 9,898 $20,108
1/31/2005 $21,319 $ 9,656 $18,626
2/28/2005 $22,927 $ 9,859 $19,892
3/31/2005 $21,889 $ 9,685 $18,935
4/30/2005 $19,914 $ 9,501 $16,957
5/31/2005 $20,218 $ 9,804 $17,141
6/30/2005 $22,130 $ 9,817 $18,894
7/31/2005 $21,826 $10,183 $18,257
8/31/2005 $23,041 $10,090 $19,116
9/30/2005 $27,232 $10,171 $23,028
10/31/2005 $25,447 $10,002 $21,253
11/30/2005 $28,067 $10,380 $23,173
12/31/2005 $31,511 $10,384 $25,703
1/31/2006 $37,466 $10,659 $30,410
2/28/2006 $34,108 $10,688 $26,533
3/31/2006 $37,225 $10,821 $27,809
4/30/2006 $41,419 $10,966 $31,340
5/31/2006 $37,314 $10,650 $28,774
6/30/2006 $37,821 $10,665 $28,997
7/31/2006 $37,529 $10,730 $28,387
8/31/2006 $38,936 $10,986 $29,093
9/30/2006 $35,527 $11,269 $26,205
10/31/2006 $38,188 $11,636 $27,569
11/30/2006 $41,964 $11,857 $29,994
12/31/2006 $41,203 $12,024 $28,940
1/31/2007 $40,567 $12,206 $27,847
2/28/2007 $41,481 $11,967 $27,864
3/31/2007 $42,329 $12,101 $27,300
4/30/2007 $43,204 $12,637 $27,361
5/31/2007 $43,032 $13,078 $26,630
6/30/2007 $42,555 $12,860 $26,158
7/31/2007 $43,204 $12,462 $28,270
8/31/2007 $40,975 $12,648 $26,949
9/30/2007 $50,112 $13,121 $33,438
10/31/2007 $56,441 $13,330 $37,256
11/30/2007 $51,395 $12,773 $35,045
12/31/2007 $51,529 $12,684 $35,031
1/31/2008 $56,017 $11,923 $38,491
2/29/2008 $61,143 $11,536 $40,783
3/31/2008 $55,181 $11,486 $35,714
4/30/2008 $52,450 $12,046 $32,549
5/31/2008 $56,132 $12,202 $34,824
6/30/2008 $56,772 $11,173 $37,379
7/31/2008 $49,590 $11,079 $33,272
8/31/2008 $43,555 $11,239 $28,611
9/30/2008 $38,372 $10,238 $27,365
10/31/2008 $23,019 $ 8,518 $17,641
11/30/2008 $27,920 $ 7,907 $23,084
12/31/2008 $35,618 $ 7,991 $28,068
1/31/2009 $35,062 $ 7,318 $27,735
2/28/2009 $35,160 $ 6,539 $26,737
3/31/2009 $40,652 $ 7,111 $29,915
4/30/2009 $38,355 $ 7,792 $26,723
5/31/2009 $50,464 $ 8,228 $34,836
6/30/2009 $44,832 $ 8,244 $30,799
7/31/2009 $47,859 $ 8,868 $31,907
Total Returns 378.59% -11.32% 219.07%
10 | Annual Report
Performance Summary (CONTINUED)
CLASS C (8/1/99-7/31/09)
(PERFORMANCE GRAPH)
FRANKLIN GOLD AND PRECIOUS S&P 500 FTSE Gold
DATE METALS FUND - CLASS C INDEX MINES INDEX
- ------------- -------------------------- ------- -----------
8/1/1999 $10,000 $10,000 $10,000
8/31/1999 $10,413 $ 9,951 $10,632
9/30/1999 $12,284 $ 9,678 $13,369
10/31/1999 $11,094 $10,290 $11,599
11/30/1999 $11,276 $10,499 $11,083
12/31/1999 $11,629 $11,118 $10,991
1/31/2000 $10,840 $10,559 $ 9,699
2/29/2000 $10,366 $10,359 $10,005
3/31/2000 $10,050 $11,373 $ 9,255
4/30/2000 $ 9,345 $11,031 $ 8,955
5/31/2000 $ 9,673 $10,804 $ 9,225
6/30/2000 $10,110 $11,071 $ 9,560
7/31/2000 $ 9,515 $10,897 $ 8,627
8/31/2000 $10,451 $11,574 $ 8,735
9/30/2000 $ 9,709 $10,963 $ 8,271
10/31/2000 $ 9,175 $10,917 $ 7,012
11/30/2000 $ 9,770 $10,056 $ 7,396
12/31/2000 $10,705 $10,106 $ 8,094
1/31/2001 $10,912 $10,464 $ 7,902
2/28/2001 $11,388 $ 9,510 $ 8,463
3/31/2001 $ 9,997 $ 8,907 $ 7,630
4/30/2001 $11,437 $ 9,600 $ 8,896
5/31/2001 $12,316 $ 9,664 $ 9,201
6/30/2001 $11,693 $ 9,429 $ 9,192
7/31/2001 $10,741 $ 9,336 $ 8,973
8/31/2001 $11,437 $ 8,752 $ 9,547
9/30/2001 $11,205 $ 8,045 $10,414
10/31/2001 $10,863 $ 8,198 $ 9,960
11/30/2001 $10,985 $ 8,827 $ 9,561
12/31/2001 $11,688 $ 8,904 $ 9,810
1/31/2002 $12,585 $ 8,774 $11,348
2/28/2002 $13,731 $ 8,605 $12,473
3/31/2002 $14,828 $ 8,929 $13,754
4/30/2002 $15,625 $ 8,388 $14,669
5/31/2002 $17,420 $ 8,326 $16,808
6/30/2002 $15,252 $ 7,733 $14,396
7/31/2002 $12,685 $ 7,130 $12,180
8/31/2002 $14,317 $ 7,177 $13,868
9/30/2002 $14,329 $ 6,397 $13,942
10/31/2002 $13,557 $ 6,960 $12,679
11/30/2002 $13,607 $ 7,369 $12,355
12/31/2002 $15,953 $ 6,936 $15,129
1/31/2003 $16,128 $ 6,755 $15,061
2/28/2003 $14,976 $ 6,653 $14,099
3/31/2003 $14,073 $ 6,718 $13,226
4/30/2003 $13,835 $ 7,271 $13,087
5/31/2003 $15,878 $ 7,654 $14,585
6/30/2003 $16,367 $ 7,752 $15,342
7/31/2003 $17,018 $ 7,889 $15,898
8/31/2003 $19,512 $ 8,043 $17,938
9/30/2003 $19,938 $ 7,957 $18,068
10/31/2003 $21,730 $ 8,407 $19,533
11/30/2003 $24,211 $ 8,481 $21,618
12/31/2003 $24,110 $ 8,926 $21,604
1/31/2004 $21,750 $ 9,090 $18,898
2/29/2004 $22,277 $ 9,216 $19,257
3/31/2004 $23,570 $ 9,077 $20,889
4/30/2004 $18,773 $ 8,935 $16,337
5/31/2004 $20,444 $ 9,057 $18,003
6/30/2004 $19,929 $ 9,234 $17,273
7/31/2004 $19,703 $ 8,928 $17,326
8/31/2004 $20,921 $ 8,964 $18,845
9/30/2004 $22,541 $ 9,061 $20,227
10/31/2004 $22,968 $ 9,200 $21,003
11/30/2004 $24,010 $ 9,572 $21,660
12/31/2004 $22,629 $ 9,898 $20,108
1/31/2005 $21,348 $ 9,656 $18,626
2/28/2005 $22,968 $ 9,859 $19,892
3/31/2005 $21,925 $ 9,685 $18,935
4/30/2005 $19,941 $ 9,501 $16,957
5/31/2005 $20,243 $ 9,804 $17,141
6/30/2005 $22,164 $ 9,817 $18,894
7/31/2005 $21,863 $10,183 $18,257
8/31/2005 $23,068 $10,090 $19,116
9/30/2005 $27,262 $10,171 $23,028
10/31/2005 $25,492 $10,002 $21,253
11/30/2005 $28,116 $10,380 $23,173
12/31/2005 $31,564 $10,384 $25,703
1/31/2006 $37,537 $10,659 $30,410
2/28/2006 $34,167 $10,688 $26,533
3/31/2006 $37,298 $10,821 $27,809
4/30/2006 $41,498 $10,966 $31,340
5/31/2006 $37,386 $10,650 $28,774
6/30/2006 $37,889 $10,665 $28,997
7/31/2006 $37,613 $10,730 $28,387
8/31/2006 $39,008 $10,986 $29,093
9/30/2006 $35,601 $11,269 $26,205
10/31/2006 $38,254 $11,636 $27,569
11/30/2006 $42,052 $11,857 $29,994
12/31/2006 $41,278 $12,024 $28,940
1/31/2007 $40,646 $12,206 $27,847
2/28/2007 $41,567 $11,967 $27,864
3/31/2007 $42,410 $12,101 $27,300
4/30/2007 $43,278 $12,637 $27,361
5/31/2007 $43,107 $13,078 $26,630
6/30/2007 $42,646 $12,860 $26,158
7/31/2007 $43,291 $12,462 $28,270
8/31/2007 $41,028 $12,648 $26,949
9/30/2007 $50,147 $13,121 $33,438
10/31/2007 $56,436 $13,330 $37,256
11/30/2007 $51,370 $12,773 $35,045
12/31/2007 $51,465 $12,684 $35,031
1/31/2008 $55,899 $11,923 $38,491
2/29/2008 $60,984 $11,536 $40,783
3/31/2008 $55,000 $11,486 $35,714
4/30/2008 $52,247 $12,046 $32,549
5/31/2008 $55,884 $12,202 $34,824
6/30/2008 $56,478 $11,173 $37,379
7/31/2008 $49,306 $11,079 $33,272
8/31/2008 $43,279 $11,239 $28,611
9/30/2008 $38,092 $10,238 $27,365
10/31/2008 $22,835 $ 8,518 $17,641
11/30/2008 $27,688 $ 7,907 $23,084
12/31/2008 $35,300 $ 7,991 $28,068
1/31/2009 $34,716 $ 7,318 $27,735
2/28/2009 $34,804 $ 6,539 $26,737
3/31/2009 $40,218 $ 7,111 $29,915
4/30/2009 $37,927 $ 7,792 $26,723
5/31/2009 $49,863 $ 8,228 $34,836
6/30/2009 $44,260 $ 8,244 $30,799
7/31/2009 $47,222 $ 8,868 $31,907
Total Returns 372.22% -11.32% 219.07%
AVERAGE ANNUAL TOTAL RETURN
CLASS C 7/31/09
- ------- -------
1-Year -5.18%
5-Year +19.10%
10-Year +16.79%
ADVISOR CLASS (8/1/99-7/31/09)
(PERFORMANCE GRAPH)
FRANKLIN GOLD AND PRECIOUS S&P 500 FTSE GOLD
DATE METALS FUND - ADVISOR CLASS INDEX MINES INDEX
- ------------- --------------------------- ------- -----------
8/1/1999 $10,000 $10,000 $10,000
8/31/1999 $10,424 $ 9,951 $10,632
9/30/1999 $12,309 $ 9,678 $13,369
10/31/1999 $11,119 $10,290 $11,599
11/30/1999 $11,319 $10,499 $11,083
12/31/1999 $11,675 $11,118 $10,991
1/31/2000 $10,882 $10,559 $ 9,699
2/29/2000 $10,408 $10,359 $10,005
3/31/2000 $10,100 $11,373 $ 9,255
4/30/2000 $ 9,402 $11,031 $ 8,955
5/31/2000 $ 9,733 $10,804 $ 9,225
6/30/2000 $10,183 $11,071 $ 9,560
7/31/2000 $ 9,579 $10,897 $ 8,627
8/31/2000 $10,538 $11,574 $ 8,735
9/30/2000 $ 9,792 $10,963 $ 8,271
10/31/2000 $ 9,271 $10,917 $ 7,012
11/30/2000 $ 9,875 $10,056 $ 7,396
12/31/2000 $10,828 $10,106 $ 8,094
1/31/2001 $11,044 $10,464 $ 7,902
2/28/2001 $11,538 $ 9,510 $ 8,463
3/31/2001 $10,130 $ 8,907 $ 7,630
4/30/2001 $11,598 $ 9,600 $ 8,896
5/31/2001 $12,512 $ 9,664 $ 9,201
6/30/2001 $11,887 $ 9,429 $ 9,192
7/31/2001 $10,924 $ 9,336 $ 8,973
8/31/2001 $11,634 $ 8,752 $ 9,547
9/30/2001 $11,417 $ 8,045 $10,414
10/31/2001 $11,081 $ 8,198 $ 9,960
11/30/2001 $11,213 $ 8,827 $ 9,561
12/31/2001 $11,939 $ 8,904 $ 9,810
1/31/2002 $12,868 $ 8,774 $11,348
2/28/2002 $14,044 $ 8,605 $12,473
3/31/2002 $15,184 $ 8,929 $13,754
4/30/2002 $16,014 $ 8,388 $14,669
5/31/2002 $17,859 $ 8,326 $16,808
6/30/2002 $15,667 $ 7,733 $14,396
7/31/2002 $13,041 $ 7,130 $12,180
8/31/2002 $14,713 $ 7,177 $13,868
9/30/2002 $14,750 $ 6,397 $13,942
10/31/2002 $13,958 $ 6,960 $12,679
11/30/2002 $14,020 $ 7,369 $12,355
12/31/2002 $16,451 $ 6,936 $15,129
1/31/2003 $16,652 $ 6,755 $15,061
2/28/2003 $15,460 $ 6,653 $14,099
3/31/2003 $14,545 $ 6,718 $13,226
4/30/2003 $14,307 $ 7,271 $13,087
5/31/2003 $16,438 $ 7,654 $14,585
6/30/2003 $16,953 $ 7,752 $15,342
7/31/2003 $17,655 $ 7,889 $15,898
8/31/2003 $20,250 $ 8,043 $17,938
9/30/2003 $20,714 $ 7,957 $18,068
10/31/2003 $22,608 $ 8,407 $19,533
11/30/2003 $25,203 $ 8,481 $21,618
12/31/2003 $25,120 $ 8,926 $21,604
1/31/2004 $22,685 $ 9,090 $18,898
2/29/2004 $23,240 $ 9,216 $19,257
3/31/2004 $24,628 $ 9,077 $20,889
4/30/2004 $19,619 $ 8,935 $16,337
5/31/2004 $21,385 $ 9,057 $18,003
6/30/2004 $20,868 $ 9,234 $17,273
7/31/2004 $20,641 $ 8,928 $17,326
8/31/2004 $21,941 $ 8,964 $18,845
9/30/2004 $23,656 $ 9,061 $20,227
10/31/2004 $24,136 $ 9,200 $21,003
11/30/2004 $25,234 $ 9,572 $21,660
12/31/2004 $23,807 $ 9,898 $20,108
1/31/2005 $22,478 $ 9,656 $18,626
2/28/2005 $24,199 $ 9,859 $19,892
3/31/2005 $23,123 $ 9,685 $18,935
4/30/2005 $21,049 $ 9,501 $16,957
5/31/2005 $21,390 $ 9,804 $17,141
6/30/2005 $23,440 $ 9,817 $18,894
7/31/2005 $23,136 $10,183 $18,257
8/31/2005 $24,439 $10,090 $19,116
9/30/2005 $28,904 $10,171 $23,028
10/31/2005 $27,032 $10,002 $21,253
11/30/2005 $29,840 $10,380 $23,173
12/31/2005 $33,536 $10,384 $25,703
1/31/2006 $39,901 $10,659 $30,410
2/28/2006 $36,355 $10,688 $26,533
3/31/2006 $39,710 $10,821 $27,809
4/30/2006 $44,213 $10,966 $31,340
5/31/2006 $39,863 $10,650 $28,774
6/30/2006 $40,450 $10,665 $28,997
7/31/2006 $40,182 $10,730 $28,387
8/31/2006 $41,712 $10,986 $29,093
9/30/2006 $38,090 $11,269 $26,205
10/31/2006 $40,973 $11,636 $27,569
11/30/2006 $45,067 $11,857 $29,994
12/31/2006 $44,287 $12,024 $28,940
1/31/2007 $43,641 $12,206 $27,847
2/28/2007 $44,664 $11,967 $27,864
3/31/2007 $45,607 $12,101 $27,300
4/30/2007 $46,577 $12,637 $27,361
5/31/2007 $46,442 $13,078 $26,630
6/30/2007 $45,971 $12,860 $26,158
7/31/2007 $46,712 $12,462 $28,270
8/31/2007 $44,301 $12,648 $26,949
9/30/2007 $54,187 $13,121 $33,438
10/31/2007 $61,043 $13,330 $37,256
11/30/2007 $55,601 $12,773 $35,045
12/31/2007 $55,752 $12,684 $35,031
1/31/2008 $60,618 $11,923 $38,491
2/29/2008 $66,197 $11,536 $40,783
3/31/2008 $59,755 $11,486 $35,714
4/30/2008 $56,794 $12,046 $32,549
5/31/2008 $60,796 $12,202 $34,824
6/30/2008 $61,496 $11,173 $37,379
7/31/2008 $53,743 $11,079 $33,272
8/31/2008 $47,212 $11,239 $28,611
9/30/2008 $41,587 $10,238 $27,365
10/31/2008 $24,952 $ 8,518 $17,641
11/30/2008 $30,279 $ 7,907 $23,084
12/31/2008 $38,631 $ 7,991 $28,068
1/31/2009 $38,032 $ 7,318 $27,735
2/28/2009 $38,152 $ 6,539 $26,737
3/31/2009 $44,114 $ 7,111 $29,915
4/30/2009 $41,642 $ 7,792 $26,723
5/31/2009 $54,794 $ 8,228 $34,836
6/30/2009 $48,682 $ 8,244 $30,799
7/31/2009 $51,993 $ 8,868 $31,907
Total Returns 419.93% -11.32% 219.07%
AVERAGE ANNUAL TOTAL RETURN
ADVISOR CLASS 7/31/09
- ------------- -------
1-Year -3.26%
5-Year +20.29%
10-Year +17.92%
Annual Report | 11
Performance Summary (CONTINUED)
ENDNOTES
INVESTING IN A NONDIVERSIFIED FUND CONCENTRATING IN THE PRECIOUS METALS SECTOR
INVOLVES SPECIAL RISKS, INCLUDING THOSE RELATED TO FLUCTUATIONS IN THE PRICE OF
GOLD AND OTHER PRECIOUS METALS AND INCREASED SUSCEPTIBILITY TO ADVERSE ECONOMIC
AND REGULATORY DEVELOPMENTS AFFECTING THE SECTOR. 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 MAY ALSO INVEST
IN SMALLER COMPANIES, WHICH CAN BE PARTICULARLY SENSITIVE TO CHANGING ECONOMIC
CONDITIONS, AND THEIR PROSPECTS FOR GROWTH ARE LESS CERTAIN THAN THOSE OF
LARGER, MORE ESTABLISHED COMPANIES. THE FUND'S PROSPECTUS ALSO INCLUDES A
DESCRIPTION OF THE MAIN INVESTMENT RISKS.
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. In periods of market volatility, assets may decline
significantly, causing total annual Fund operating expenses to become
higher than the figures shown.
(6.) Source: (C) 2009 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 a free
float-weighted index that comprises companies whose principal activity is
gold mining. 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
- - 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.
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
VALUE 2/1/09 VALUE 7/31/09 PERIOD* 2/1/09--7/31/09
----------------- -------------- -----------------------
CLASS A
Actual $1,000 $1,365.30 $ 5.81
Hypothetical (5% return before expenses) $1,000 $1,019.89 $ 4.96
CLASS B
Actual $1,000 $1,360.60 $10.18
Hypothetical (5% return before expenses) $1,000 $1,016.17 $ 8.70
CLASS C
Actual $1,000 $1,360.20 $10.18
Hypothetical (5% return before expenses) $1,000 $1,016.17 $ 8.70
ADVISOR CLASS
Actual $1,000 $1,367.10 $ 4.34
Hypothetical (5% return before expenses) $1,000 $1,021.12 $ 3.71
* Expenses are calculated using the most recent six-month expense ratio,
annualized for each class (A: 0.99%; B: 1.74%; C: 1.74%; and Advisor:
0.74%), multiplied by the average account value over the period, multiplied
by 181/365 to reflect the one-half year period.
14 | Annual Report
Franklin Gold and Precious Metals Fund
FINANCIAL HIGHLIGHTS
YEAR ENDED JULY 31,
-------------------------------------------------------
CLASS A 2009 2008 2007 2006 2005
- ------- ---------- ---------- ---------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............. $ 35.01 $ 33.73 $ 30.67 $ 17.81 $ 15.94
---------- ---------- ---------- -------- --------
Income from investment operations(a):
Net investment income(b) .................... 0.07 0.03 0.11 0.15 0.04
Net realized and unrealized gains (losses) .. (1.40) 5.09 4.71 12.87 1.84
---------- ---------- ---------- -------- --------
Total from investment operations ............... (1.33) 5.12 4.82 13.02 1.88
---------- ---------- ---------- -------- --------
Less distributions from:
Net investment income ....................... -- (1.97) (0.76) (0.16) (0.01)
Net realized gains .......................... (0.12) (1.87) (1.00) -- --
---------- ---------- ---------- -------- --------
Total distributions ............................ (0.12) (3.84) (1.76) (0.16) (0.01)
---------- ---------- ---------- -------- --------
Redemption fees(c, d) .......................... -- -- -- -- --
---------- ---------- ---------- -------- --------
Net asset value, end of year ................... $ 33.56 $ 35.01 $ 33.73 $ 30.67 $ 17.81
========== ========== ========== ======== ========
Total return(e) ................................ (3.48)% 14.76% 15.94% 73.36% 11.78%
RATIOS TO AVERAGE NET ASSETS(f)
Expenses(f) .................................... 1.01% 0.89% 0.93% 0.92% 0.96%
Net investment income .......................... 0.24% 0.08% 0.33% 0.57% 0.21%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ................ $1,297,172 $1,310,889 $1,011,344 $885,176 $439,628
Portfolio turnover rate ........................ 17.17% 4.48% 7.20% 10.96% 11.33%
(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) Effective September 1, 2008, the redemption fee was eliminated.
(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(f) 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,
-----------------------------------------------
CLASS B 2009 2008 2007 2006 2005
- ------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 33.73 $ 32.60 $ 29.62 $ 17.24 $ 15.54
------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income (loss)(b) .............. (0.11) (0.23) (0.12) (0.04) (0.09)
Net realized and unrealized gains (losses) ... (1.43) 4.92 4.54 12.44 1.79
------- ------- ------- ------- -------
Total from investment operations ................ (1.54) 4.69 4.42 12.40 1.70
------- ------- ------- ------- -------
Less distributions from:
Net investment income ........................ -- (1.69) (0.44) (0.02) --
Net realized gains ........................... (0.12) (1.87) (1.00) -- --
------- ------- ------- ------- -------
Total distributions ............................. (0.12) (3.56) (1.44) (0.02) --
------- ------- ------- ------- -------
Redemption fees(c, d) -- -- -- -- --
------- ------- ------- ------- -------
Net asset value, end of year .................... $ 32.07 $ 33.73 $ 32.60 $ 29.62 $ 17.24
======= ======= ======= ======= =======
Total return(e) ................................. (4.23)% 13.91% 15.12% 71.95% 10.94%
RATIOS TO AVERAGE NET ASSETS(f)
Expenses(f) ..................................... 1.76% 1.64% 1.68% 1.67% 1.70%
Net investment income (loss) .................... (0.51)% (0.67)% (0.41)% (0.19)% (0.53)%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $48,936 $60,872 $62,386 $60,423 $41,270
Portfolio turnover rate ......................... 17.17% 4.48% 7.20% 10.96% 11.33%
(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) Effective September 1, 2008, the redemption fee was eliminated.
(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(f) 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,
----------------------------------------------------
CLASS C 2009 2008 2007 2006 2005
- ------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 34.03 $ 32.90 $ 29.90 $ 17.40 $ 15.69
-------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income (loss)(b) .............. (0.13) (0.25) (0.13) (0.05) (0.09)
Net realized and unrealized gains (losses) ... (1.42) 4.98 4.60 12.58 1.80
-------- -------- -------- -------- --------
Total from investment operations ................ (1.55) 4.73 4.47 12.53 1.71
-------- -------- -------- -------- --------
Less distributions from:
Net investment income ........................ -- (1.73) (0.47) (0.03) --
Net realized gains ........................... (0.12) (1.87) (1.00) -- --
-------- -------- -------- -------- --------
Total distributions ............................. (0.12) (3.60) (1.47) (0.03) --
-------- -------- -------- -------- --------
Redemption fees(c, d) -- -- -- -- --
-------- -------- -------- -------- --------
Net asset value, end of year .................... $ 32.36 $ 34.03 $ 32.90 $ 29.90 $ 17.40
======== ======== ======== ======== ========
Total return(e) ................................. (4.23)% 13.89% 15.10% 72.04% 10.96%
RATIOS TO AVERAGE NET ASSETS
Expenses(f) ..................................... 1.76% 1.64% 1.68% 1.67% 1.71%
Net investment income (loss) .................... (0.51)% (0.67)% (0.41)% (0.19)% (0.54)%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $312,002 $319,641 $240,424 $217,371 $114,315
Portfolio turnover rate ......................... 17.17% 4.48% 7.20% 10.96% 11.33%
(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) Effective September 1, 2008, the redemption fee was eliminated.
(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable.
(f) 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,
--------------------------------------------------
ADVISOR CLASS 2009 2008 2007 2006 2005
- ------------- -------- -------- ------- ------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 36.11 $ 34.68 $ 31.50 $ 18.28 $ 16.36
-------- -------- ------- ------- -------
Income from investment operations(a):
Net investment income(b) ..................... 0.11 0.11 0.19 0.22 0.08
Net realized and unrealized gains (losses) ... (1.39) 5.25 4.84 13.20 1.89
-------- -------- ------- ------- -------
Total from investment operations ................ (1.28) 5.36 5.03 13.42 1.97
-------- -------- ------- ------- -------
Less distributions from:
Net investment income ........................ -- (2.06) (0.85) (0.20) (0.05)
Net realized gains ........................... (0.12) (1.87) (1.00) -- --
-------- -------- ------- ------- -------
Total distributions ............................. (0.12) (3.93) (1.85) (0.20) (0.05)
-------- -------- ------- ------- -------
Redemption fees(c, d) -- -- -- -- --
-------- -------- ------- ------- -------
Net asset value, end of year .................... $ 34.71 $ 36.11 $ 34.68 $ 31.50 $ 18.28
======== ======== ======= ======= =======
Total return .................................... (3.26)% 15.05% 16.25% 73.68% 12.09%
RATIOS TO AVERAGE NET ASSETS
Expenses(e) ..................................... 0.76% 0.64% 0.68% 0.67% 0.71%
Net investment income ........................... 0.49% 0.33% 0.58% 0.82% 0.46%
SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $147,197 $115,322 $65,120 $60,213 $34,519
Portfolio turnover rate ......................... 17.17% 4.48% 7.20% 10.96% 11.33%
(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) Effective September 1, 2008, the redemption fee was eliminated.
(e) 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, 2009
COUNTRY SHARES/WARRANTS VALUE
---------------- --------------- --------------
COMMON STOCKS AND OTHER EQUITY INTERESTS 99.2%
GOLD AND DIVERSIFIED RESOURCES 2.3%
(a) First Uranium Corp. ............................... Canada 800,600 $ 2,911,813
(a, b) First Uranium Corp., 144A ......................... Canada 1,044,800 3,799,978
(b) Franco-Nevada Corp., 144A ......................... Canada 180,000 4,492,484
OZ Minerals Ltd. .................................. Australia 5,882,655 5,508,048
(a) PanAust Ltd. ...................................... Australia 30,600,000 10,488,456
(a, b) PanAust Ltd., 144A ................................ Australia 19,408,142 6,652,335
Royal Gold Inc. ................................... United States 180,000 7,394,400
--------------
41,247,514
--------------
GOLD EXPLORATION AND DEVELOPMENT 14.4%
(a) Anatolia Minerals Development Ltd. ................ Canada 3,500,000 8,767,861
(a, b) Andean Resources Ltd., 144A ....................... Australia 3,000,000 4,704,027
(a) AXMIN Inc. ........................................ Canada 500,000 46,391
(a, b) AXMIN Inc., 144A .................................. Canada 2,000,000 185,563
(a) Banro Corp. ....................................... Canada 2,400,000 4,968,000
(a) Banro Corp. ....................................... Canada 2,457,000 5,129,198
(a) Banro Corp., wts., 2/01/49 ........................ Canada 600,000 450,000
(a) Bendigo Mining Ltd. ............................... Australia 18,648,795 3,663,742
(a) Centamin Egypt Ltd. ............................... Australia 10,500,000 16,853,776
(a, c) Centamin Egypt Ltd., 144A ......................... Australia 8,000,000 12,070,514
(a, b) Centamin Egypt Ltd., 144A ......................... Australia 17,000,000 27,287,066
(a) CGA Mining Ltd. ................................... Australia 6,724,000 9,108,406
(a, b) G-resources Group Ltd., 144A ...................... Hong Kong 140,000,000 11,561,514
(a) Great Basin Gold Ltd. ............................. Canada 12,000,000 17,480,052
(a) Great Basin Gold Ltd., wts., 10/15/10 ............. Canada 6,000,000 2,171,089
(a, d) Guyana Goldfields Inc. ............................ Canada 2,500,000 8,883,837
(a, c, d) Guyana Goldfields Inc., 144A ...................... Canada 1,000,000 3,443,375
(a, c, d) Guyana Goldfields Inc., wts., 144A, 5/28/12 ....... Canada 500,000 421,507
(a) International Minerals Corp. ...................... Canada 700,000 2,143,255
(a, e) Ivanhoe Australia Ltd. ............................ Australia 5,880,535 9,316,062
(a) Ivanhoe Mines Ltd. ................................ Canada 1,850,000 14,911,000
(a) Ivanhoe Mines Ltd. ................................ Canada 738,500 5,961,171
(a, b) Ivanhoe Mines Ltd., 144A .......................... Canada 918,600 7,414,938
(a) MAG Silver Corp. .................................. Canada 1,200,000 5,845,240
(a) Mineral Deposits Ltd. ............................. Australia 8,696,185 5,089,008
(a) Nautilus Minerals Inc. ............................ Canada 2,574,600 2,890,393
(a, b) Nautilus Minerals Inc., 144A ...................... Canada 1,278,000 1,434,756
(a, d, e) Nevsun Resources Ltd. ............................. Canada 8,094,600 13,518,538
(a, b) Orsu Metals Corp., 144A ........................... Canada 10,600,000 639,265
(a, b) Orsu Metals Corp., wts., 144A, 4/11/10 ............ Canada 5,300,000 --
(a, b) Osisko Mining Corp., 144A ......................... Canada 5,321,400 33,721,620
(a, b) Osisko Mining Corp., wts., 144A, 11/17/09 ......... Canada 2,360,700 3,613,987
(a, d) Romarco Minerals Inc. ............................. Canada 9,779,600 8,347,775
(a, b, d) Romarco Minerals Inc., 144A ....................... Canada 8,000,000 6,828,725
(a, c, d) Romarco Minerals Inc., wts., 144A, 3/03/11 ........ Canada 4,000,000 1,312,674
--------------
260,184,325
--------------
LONG LIFE GOLD MINES 54.9%
Agnico-Eagle Mines Ltd. ........................... Canada 930,000 54,451,500
(a) Alamos Gold Inc. .................................. Canada 1,596,400 14,352,492
Annual Report | 19
Franklin Gold and Precious Metals Fund
STATEMENT OF INVESTMENTS, JULY 31, 2009 (CONTINUED)
COUNTRY SHARES/WARRANTS VALUE
---------------- --------------- --------------
COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
LONG LIFE GOLD MINES (CONTINUED)
(a, b) Alamos Gold Inc., 144A ............................ Canada 400,000 $ 3,596,214
AngloGold Ashanti Ltd. ............................ South Africa 78,911 3,011,948
AngloGold Ashanti Ltd., ADR ....................... South Africa 3,174,723 124,449,141
Barrick Gold Corp. ................................ Canada 2,376,283 82,932,277
(a) Centerra Gold Inc. ................................ Canada 2,121,100 13,480,734
(a, b) Centerra Gold Inc., 144A .......................... Canada 1,319,800 8,388,040
Compania de Minas Buenaventura SA ................. Peru 201,186 5,165,268
Compania de Minas Buenaventura SA, ADR ............ Peru 2,017,972 52,568,171
Gold Fields Ltd. .................................. South Africa 697,191 8,311,452
Gold Fields Ltd., ADR ............................. South Africa 3,704,528 44,676,608
Goldcorp Inc. ..................................... Canada 1,260,625 47,872,872
Goldcorp Inc. ..................................... Canada 1,664,865 62,748,762
(a) Goldcorp Inc., wts., 6/09/11 ...................... Canada 9,125 82,123
(a) Harmony Gold Mining Co. Ltd. ...................... South Africa 1,693,000 15,325,416
(a) Harmony Gold Mining Co. Ltd., ADR ................. South Africa 2,800,000 25,928,000
Kinross Gold Corp. ................................ Canada 3,478,012 68,572,792
(a) Lihir Gold Ltd. ................................... Papua New Guinea 19,447,142 45,034,137
Newcrest Mining Ltd. .............................. Australia 4,690,928 117,648,479
Newmont Mining Corp. .............................. United States 1,235,614 51,092,639
Randgold Resources Ltd., ADR ...................... United Kingdom 2,001,400 124,326,968
(a) Red Back Mining Inc. .............................. Canada 1,944,900 18,063,137
--------------
992,079,170
--------------
MEDIUM LIFE GOLD MINES 12.6%
(a, b) Aurizon Mines Ltd., 144A .......................... Canada 1,000,000 3,711,264
(a) B2Gold Corp. ...................................... Canada 3,974,528 2,691,970
(a) Eldorado Gold Corp. ............................... Canada 3,445,000 34,616,209
(a) Gammon Gold Inc. .................................. Canada 2,814,500 19,689,488
(a) Gammon Gold Inc. .................................. Canada 205,800 1,436,484
(a) Golden Star Resources Ltd. ........................ Canada 2,450,000 6,023,845
(a) Golden Star Resources Ltd. ........................ Canada 700,000 1,715,000
IAMGOLD Corp. ..................................... Canada 1,472,000 15,596,808
IAMGOLD Corp. ..................................... Canada 1,360,000 14,361,600
(a, b) Jinshan Gold Mines Inc., 144A ..................... Canada 5,046,900 6,321,502
(a) Kingsgate Consolidated Ltd. ....................... Australia 1,805,148 10,488,271
(a) New Gold Inc. ..................................... Canada 450,000 1,340,230
(a, b) New Gold Inc., 144A ............................... Canada 890,098 2,650,969
(a, b) Real Gold Mining Ltd., 144A ....................... Hong Kong 2,207,000 1,973,523
(a) SEMAFO Inc. ....................................... Canada 4,725,000 9,995,361
(a, b) SEMAFO Inc., 144A ................................. Canada 3,000,000 6,346,261
(a) Sino Gold Mining Ltd. ............................. Australia 3,850,000 17,026,395
(a, b) Sino Gold Mining Ltd., 144A Australia 413,333 1,827,941
(a) St. Barbara Ltd. .................................. Australia 65,461,382 10,671,515
Yamana Gold Inc. .................................. Canada 1,029,527 9,770,211
Yamana Gold Inc. .................................. Canada 2,779,193 26,482,012
(b) Yamana Gold Inc., 144A ............................ Canada 2,300,000 21,915,940
--------------
226,652,799
--------------
20 | Annual Report
1
Franklin Gold and Precious Metals Fund
STATEMENT OF INVESTMENTS, JULY 31, 2009 (CONTINUED)
COUNTRY SHARES/WARRANTS VALUE
---------------- --------------- --------------
COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
PLATINUM & PALLADIUM 11.1%
Anglo Platinum Ltd., ADR .......................... South Africa 681,138 $ 48,787,286
Aquarius Platinum Ltd. ............................ South Africa 1,000,000 4,333,650
(a) Eastern Platinum Ltd. ............................. Canada 30,813,600 17,153,609
Impala Platinum Holdings Ltd. ..................... South Africa 3,025,000 73,329,433
Impala Platinum Holdings Ltd., ADR ................ South Africa 1,542,400 37,449,472
(a) Mvelaphanda Resources Ltd. ........................ South Africa 2,650,000 13,302,966
(a, d) Platinum Group Metals Ltd. ........................ Canada 3,000,000 3,256,634
(a, b, d) Platinum Group Metals Ltd., 144A .................. Canada 2,000,000 2,171,089
(a, b, d) Platinum Group Metals Ltd., wts., 144A, 12/16/10 .. Canada 1,000,000 171,646
--------------
199,955,785
--------------
SILVER MINES 3.9%
Fresnillo PLC ..................................... United Kingdom 1,100,000 11,481,250
(b) Fresnillo PLC, 144A ............................... United Kingdom 3,536,100 36,908,043
(a) Hecla Mining Co. .................................. United States 1,200,000 3,780,000
Hochschild Mining PLC ............................. United Kingdom 3,600,000 14,969,880
(a) Silver Wheaton Corp. .............................. Canada 450,000 4,131,000
--------------
71,270,173
--------------
TOTAL COMMON STOCKS AND OTHER EQUITY INTERESTS
(COST $1,038,910,693) .......................... 1,791,389,766
--------------
SHORT TERM INVESTMENTS (COST $19,696,012) 1.1%
MONEY MARKET FUNDS 1.1%
(f) Institutional Fiduciary Trust Money Market
Portfolio, 0.00% ............................... United States 19,696,012 19,696,012
--------------
TOTAL INVESTMENTS (COST $1,058,606,705) 100.3% .... 1,811,085,778
OTHER ASSETS, LESS LIABILITIES (0.3)% ............. (5,778,647)
--------------
NET ASSETS 100.0% ................................. $1,805,307,131
==============
See Abbreviations on page 36.
(a) Non-income producing.
(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, 2009, the
aggregate value of these securities was $208,318,690, representing 11.5% of
net assets.
(c) See Note 9 regarding restricted securities.
(d) See Note 10 regarding holdings of 5% voting securities.
(e) A portion or all of the security purchased on a delayed delivery basis. See
Note 1(c).
(f) See Note 7 regarding investments in the 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
2
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2009
Assets:
Investments in securities:
Cost - Unaffiliated issuers .......................... $1,001,112,847
Cost - Non-controlled affiliated issuers (Note 10) ... 37,797,846
Cost - Sweep Money Fund (Note 7) ..................... 19,696,012
--------------
Total cost of investments ............................ $1,058,606,705
==============
Value - Unaffiliated issuers ......................... $1,743,033,966
Value - Non-controlled affiliated issuers (Note 10) .. 48,355,800
Value - Sweep Money Fund (Note 7) .................... 19,696,012
--------------
Total value of investments ........................... 1,811,085,778
Foreign currency, at value (cost $3,616) ................ 3,885
Receivables:
Investment securities sold ........................... 1,007,809
Capital shares sold .................................. 5,184,223
Dividends ............................................ 18,478
Other assets ............................................ 1,490
--------------
Total assets ...................................... 1,817,301,663
--------------
Liabilities:
Payables:
Investment securities purchased ...................... 7,423,705
Capital shares redeemed .............................. 2,744,526
Affiliates ........................................... 1,509,573
Accrued expenses and other liabilities .................. 316,728
--------------
Total liabilities ................................. 11,994,532
--------------
Net assets, at value ........................... $1,805,307,131
==============
Net assets consist of:
Paid-in capital ......................................... $1,138,847,010
Undistributed net investment loss ....................... (80,052,672)
Net unrealized appreciation (depreciation) .............. 752,467,748
Accumulated net realized gain (loss) .................... (5,954,955)
--------------
Net assets, at value ........................... $1,805,307,131
==============
The accompanying notes are an integral part of these financial statements.
22 | Annual Report
3
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
July 31, 2009
CLASS A:
Net assets, at value ................................................... $1,297,171,989
--------------
Shares outstanding ..................................................... 38,656,659
--------------
Net asset value per share(a) ........................................... $ 33.56
--------------
Maximum offering price per share (net asset value per share / 94.25%) .. $ 35.61
--------------
CLASS B:
Net assets, at value ................................................... $ 48,936,193
--------------
Shares outstanding ..................................................... 1,525,814
--------------
Net asset value and maximum offering price per share(a) ................ $ 32.07
--------------
CLASS C:
Net assets, at value ................................................... $ 312,001,891
--------------
Shares outstanding ..................................................... 9,640,391
--------------
Net asset value and maximum offering price per share(a) ................ $ 32.36
--------------
ADVISOR CLASS:
Net assets, at value ................................................... $ 147,197,058
--------------
Shares outstanding ..................................................... 4,241,205
--------------
Net asset value and maximum offering price per share ................... $ 34.71
--------------
(a) Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable.
The accompanying notes are an integral part of these financial statements.
Annual Report | 23
4
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended July 31, 2009
Investment income:
Dividends: (net of foreign taxes of $499,569)
Unaffiliated issuers ........................................................... $ 16,662,934
Sweep Money Fund (Note 7) ...................................................... 145,426
Interest .......................................................................... 17,838
------------
Total investment income ..................................................... 16,826,198
------------
Expenses:
Management fees (Note 3a) ......................................................... 6,443,380
Distribution fees: (Note 3c)
Class A ........................................................................ 2,413,371
Class B ........................................................................ 419,434
Class C ........................................................................ 2,372,405
Transfer agent fees (Note 3e and 3f) .............................................. 2,947,166
Custodian fees (Note 4) ........................................................... 138,592
Reports to shareholders ........................................................... 274,191
Registration and filing fees ...................................................... 161,003
Professional fees ................................................................. 54,086
Trustees' fees and expenses ....................................................... 94,335
Other ............................................................................. 88,336
------------
Total expenses .............................................................. 15,406,299
------------
Expense reductions (Note 4) ................................................. (1,185)
------------
Net expenses ............................................................. 15,405,114
------------
Net investment income ................................................. 1,421,084
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments .................................................................... 8,380,416
Foreign currency transactions .................................................. (1,256,097)
------------
Net realized gain (loss) .............................................. 7,124,319
------------
Net change in unrealized appreciation (depreciation) on:
Investments .................................................................... (80,782,672)
Translation of other assets and liabilities denominated in foreign currencies .. (12,780)
------------
Net change in unrealized appreciation (depreciation) .................. (80,795,452)
------------
Net realized and unrealized gain (loss) .............................................. (73,671,133)
------------
Net increase (decrease) in net assets resulting from operations ...................... $(72,250,049)
============
The accompanying notes are an integral part of these financial statements.
24 | Annual Report
5
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31,
-------------------------------
2009 2008
-------------- --------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) ............................. $ 1,421,084 $ (1,201,751)
Net realized gain (loss) from investments and foreign
currency transactions ................................. 7,124,319 40,039,868
Net change in unrealized appreciation (depreciation) on
investments and translation of other assets and
liabilities denominated in foreign currencies ......... (80,795,452) 122,638,317
-------------- --------------
Net increase (decrease) in net assets resulting from
operations ...................................... (72,250,049) 161,476,434
-------------- --------------
Distributions to shareholders from:
Net investment income:
Class A ............................................... -- (59,606,649)
Class B ............................................... -- (2,968,742)
Class C ............................................... -- (13,239,503)
Advisor Class ......................................... -- (4,264,295)
Net realized gains:
Class A ............................................... (4,210,163) (56,393,008)
Class B ............................................... (219,402) (3,268,164)
Class C ............................................... (1,115,501) (14,261,659)
Advisor Class ......................................... (463,119) (3,861,237)
-------------- --------------
Total distributions to shareholders ......................... (6,008,185) (157,863,257)
-------------- --------------
Capital share transactions: (Note 2)
Class A ............................................... 50,994,016 292,702,634
Class B ............................................... (7,656,258) (3,432,880)
Class C ............................................... 8,530,945 81,576,070
Advisor Class ......................................... 24,968,634 52,919,737
-------------- --------------
Total capital share transactions ............................ 76,837,337 423,765,561
-------------- --------------
Redemption fees ............................................. 4,342 70,989
-------------- --------------
Net increase (decrease) in net assets .............. (1,416,555) 427,449,727
Net assets:
Beginning of year ........................................... 1,806,723,686 1,379,273,959
-------------- --------------
End of year ................................................. $1,805,307,131 $1,806,723,686
============== ==============
Undistributed net investment loss included in net assets, end of
year ........................................................ $ (80,052,672) $ --
-------------- --------------
Distributions in excess of net investment income included in net
assets, end of year ......................................... $ -- $ (95,856,094)
============== ==============
The accompanying notes are an integral part of these financial statements.
Annual Report | 25
6
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 an 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
Equity and other 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. Certain equity securities are valued based upon
fundamental characteristics or relationships to similar securities. Investments
in open-end mutual funds are valued at the closing net asset value.
Foreign equity 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 equity 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 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 based upon the underlying investment book value,
anticipated future cash flows, market changes in comparable or similar
securities, 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
7
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 DELAYED DELIVERY BASIS
The Fund may purchase securities on a 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. 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.
The Fund has reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of July 31, 2009, and has determined
that no provision for income tax is required in the Fund's financial statements.
Foreign securities held by the Fund may be subject to foreign taxation on
dividend and interest income received. Foreign taxes, if any, are recorded based
on the tax regulations and rates that exist in the foreign markets in which the
Fund invests.
Annual Report | 27
8
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividend income is
recorded on the ex-dividend date except that certain dividends from foreign
securities are recognized as soon as the Fund is notified of the ex-dividend
date. Distributions to shareholders are recorded on the ex-dividend date and are
determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted in the United States of
America. These differences may be permanent or temporary. Permanent differences
are reclassified among capital accounts to reflect their tax character. These
reclassifications have no impact on net assets or the results of operations.
Temporary differences are not reclassified, as they may reverse in subsequent
periods.
Realized and unrealized gains and losses and net investment income, not
including class specific expenses, are allocated daily to each class of shares
based upon the relative proportion of net assets of each class. Differences in
per share distributions, by class, are generally due to differences in class
specific expenses.
F. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
G. REDEMPTION FEES
A short term trading redemption fee was imposed, with some exceptions, on any
Fund shares that were redeemed or exchanged within seven calendar days following
their purchase date. The redemption fee was 2% of the amount redeemed. Such fees
were retained by the fund and accounted for as an addition to paid-in capital.
Effective September 1, 2008, the redemption fee was eliminated.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and trustees are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, the Fund enters into contracts with service providers that contain
general indemnification clauses. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred. Currently, the Fund expects the
risk of loss to be remote.
28 | Annual Report
9
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
At July 31, 2009, there were an unlimited number of shares authorized (without
par value). Transactions in the Fund's shares were as follows:
YEAR ENDED JULY 31,
---------------------------------------------------------
2009 2008
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
CLASS A SHARES:
Shares sold ...................................... 19,761,170 $ 525,006,148 16,455,560 $ 642,590,673
Shares issued in reinvestment of distributions ... 211,521 3,703,733 2,793,112 101,724,854
Shares redeemed .................................. (18,759,944) (477,715,865) (11,792,878) (451,612,893)
----------- ------------- ----------- -------------
Net increase (decrease) .......................... 1,212,747 $ 50,994,016 7,455,794 $ 292,702,634
=========== ============= =========== =============
CLASS B SHARES:
Shares sold ...................................... 400,007 $ 8,645,037 387,880 $ 14,588,592
Shares issued in reinvestment of distributions ... 11,349 190,781 157,613 5,555,874
Shares redeemed .................................. (690,461) (16,492,076) (654,065) (23,577,346)
----------- ------------- ----------- -------------
Net increase (decrease) .......................... (279,105) $ (7,656,258) (108,572) $ (3,432,880)
=========== ============= =========== =============
CLASS C SHARES:
Shares sold ...................................... 3,800,768 $ 94,749,188 3,931,713 $ 151,719,692
Shares issued in reinvestment of distributions ... 55,244 937,498 636,766 22,649,772
Shares redeemed .................................. (3,609,311) (87,155,741) (2,482,227) (92,793,394)
----------- ------------- ----------- -------------
Net increase (decrease) .......................... 246,701 $ 8,530,945 2,086,252 $ 81,576,070
=========== ============= =========== =============
ADVISOR CLASS SHARES:
Shares sold ...................................... 2,800,927 $ 69,888,421 1,692,601 $ 68,221,162
Shares issued in reinvestment of distributions ... 22,458 406,039 182,311 6,836,654
Shares redeemed .................................. (1,775,632) (45,325,826) (559,298) (22,138,079)
----------- ------------- ----------- -------------
Net increase (decrease) .......................... 1,047,753 $ 24,968,634 1,315,614 $ 52,919,737
=========== ============= =========== =============
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Fund are also officers and/or directors of the following
subsidiaries:
SUBSIDIARY AFFILIATION
- ------------------------------------------------------------- ----------------------
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
Franklin Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent
Annual Report | 29
10
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
A. MANAGEMENT FEES
The Fund pays an investment management fee to Advisers based on the month-end
net assets of the Fund as follows:
ANNUALIZED FEE RATE NET ASSETS
- ------------------- ---------------------------------------------------
0.625% Up to and including $100 million
0.500% Over $100 million, up to and including $250 million
0.450% Over $250 million, up to and including $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
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%
30 | Annual Report
11
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
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 .................. $600,176
Contingent deferred sales charges retained ...... $196,472
E. TRANSFER AGENT FEES
For the year ended July 31, 2009, the Fund paid transfer agent fees of
$2,947,166, of which $1,936,791 was retained by Investor Services.
F. SPECIAL SERVICING AGREEMENT
Effective May 1, 2009, the Fund, which is an underlying investment of one or
more of the Franklin Templeton Fund Allocator Series Funds (Allocator Funds),
entered into a Special Servicing Agreement with the Allocator Funds, pursuant to
which the Fund pays a portion of eligible Allocator Funds' expenses, which
include transfer agency and shareholder service costs, to the extent such
payments are less than the amount of the benefits realized or expected to be
realized by the Fund from the investment in the Fund by the Allocator Funds. The
Allocator Funds and the Fund are either managed by Advisers or administered by
FT Services. Expenses allocated to the Fund under the Special Servicing
Agreement are included in transfer agent fees on the Statement of Operations,
and the amount payable to the Allocator Funds is included in the payable to
affiliates on the Statement of Assets and Liabilities. For the year ended July
31, 2009, the Fund was allocated expenses of $28,831.
The investment manager of the Fund has voluntarily agreed to limit the increase
in the Fund's net annual operating expense ratio that results from the
implementation of the Special Servicing Agreement at 0.02% through April 30,
2010.
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, 2009, the
custodian fees were reduced as noted in the Statement of Operations.
Annual Report | 31
12
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES
For tax purposes, realized currency 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, 2009, the Fund deferred realized currency losses of
$952,657.
The tax character of distributions paid during the years ended July 31, 2009 and
2008, was as follows:
2009 2008
---------- ------------
Distributions paid from:
Ordinary income ......... $ -- $ 79,118,657
Long term capital gain .. 6,008,185 78,744,600
---------- ------------
$6,008,185 $157,863,257
========== ============
At July 31, 2009, the cost of investments, net unrealized appreciation
(depreciation), and undistributed long term capital gains for income tax
purposes were as follows:
Cost of investments ............................... $1,144,097,732
==============
Unrealized appreciation ........................... 733,985,064
Unrealized depreciation ........................... (66,997,018)
--------------
Net unrealized appreciation (depreciation) ........ $ 666,988,046
==============
Distributable earnings - undistributed long term
capital gains .................................. $ 437,380
==============
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions, passive foreign
investment company shares, corporate actions, and non-deductible expenses.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions, passive foreign investment company shares, and corporate actions.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short term securities) for the
year ended July 31, 2009, aggregated $337,246,146 and $241,144,812,
respectively.
32 | Annual Report
13
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INVESTMENTS IN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the 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. RESTRICTED SECURITIES
The Fund may invest in securities that are restricted under the Securities Act
of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed
upon restrictions on resale. Restricted securities are often purchased in
private placement transactions, and cannot be sold without prior registration
unless the sale is pursuant to an exemption under the 1933 Act. Disposal of
these securities may require greater effort and expense, and prompt sale at an
acceptable price may be difficult. The Fund may have registration rights for
restricted securities. The issuer generally incurs all registration costs.
At July 31, 2009, the Fund held investments in restricted securities, excluding
144A securities deemed to be liquid, valued in accordance with procedures
approved by the Fund's Board of Trustees as reflecting fair value, as follows:
SHARES ISSUER ACQUISITION DATE COST VALUE
- --------- --------------------------------------------------------- ---------------- ----------- -----------
8,000,000 (a) Centamin Egypt Ltd., 144A ........................... 7/02/09 $10,748,891 $12,070,514
1,000,000 (b) Guyana Goldfields Inc., 144A ........................ 6/05/09 2,456,563 3,443,375
500,000 (b) Guyana Goldfields Inc., wts., 144A, 5/28/12 ......... 6/05/09 -- 421,507
4,000,000 (c) Romarco Minerals Inc., wts., 144A, 3/03/11 .......... 6/04/09 -- 1,312,674
-----------
TOTAL RESTRICTED SECURITIES (0.96% of Net Assets) ..................................... $17,248,070
===========
(a) The Fund also invests in unrestricted securities of the issuer, valued at
$44,140,842 as of July 31, 2009.
(b) The Fund also invests in unrestricted securities of the issuer, valued at
$8,883,837 as of July 31, 2009.
(c) The Fund also invests in unrestricted securities of the issuer, valued at
$15,176,500 as of July 31, 2009.
Annual Report | 33
14
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The 1940 Act defines "affiliated companies" to include investments in portfolio
companies in which a fund owns 5% or more of the outstanding voting securities.
Investments in "affiliated companies" for the Fund for the year ended July 31,
2009, were as shown below.
SHARES HELD SHARES HELD VALUE
AT BEGINNING GROSS GROSS AT END AT END DIVIDEND REALIZED
NAME OF ISSUER OF YEAR ADDITIONS REDUCTIONS OF YEAR OF YEAR INCOME GAIN (LOSS)
- -------------- ------------ --------- ---------- ----------- ----------- -------- -----------
NON-CONTROLLED AFFILIATES
B2Gold Corp. (Central Sun Mining Inc.) .... -- 3,105,100 -- 3,974,528(a) $ --(b) $-- $--
Guyana Goldfields Inc. .................... -- 2,500,000 -- 2,500,000 8,883,837 -- --
Guyana Goldfields Inc., 144A .............. -- 1,000,000 -- 1,000,000 3,443,375 -- --
Guyana Goldfields Inc., wts., 144A,
5/28/12 ................................ -- 500,000 -- 500,000 421,507 -- --
Nevsun Resources Ltd. ..................... 877,000 7,217,600 -- 8,094,600 13,518,538 -- --
Platinum Group Metals Ltd. ................ -- 3,000,000 -- 3,000,000 3,256,634 -- --
Platinum Group Metals Ltd., 144A .......... -- 2,000,000 -- 2,000,000 2,171,089 -- --
Platinum Group Metals Ltd., wts., 144A,
12/16/10 ............................... -- 1,000,000 -- 1,000,000 171,646 -- --
Romarco Minerals Inc. ..................... -- 9,779,600 -- 9,779,600 8,347,775 -- --
Romarco Minerals Inc., 144A ............... -- 8,000,000 -- 8,000,000 6,828,725 -- --
Romarco Minerals Inc., wts., 144A,
3/03/11 ................................ -- 4,000,000 -- 4,000,000 1,312,674 -- --
----------- --- ---
TOTAL AFFILIATED ISSUERS (2.68% of Net Assets) ............................................. $48,355,800 $-- $--
=========== === ===
(a) Reflects the merger of Central Sun Mining Inc. into B2Gold as of April 1,
2009.
(b) As of July 31, 2009, no longer an affiliate.
11. CREDIT FACILITY
Effective January 23, 2009, the Fund, together with other U.S. registered and
foreign investment funds managed by Franklin Templeton Investments
(individually, "Borrower"; collectively "Borrowers"), entered into a joint
syndicated senior unsecured credit facility totaling $725 million (Global Credit
Facility) to provide a source of funds to the Borrowers for temporary and
emergency purposes, including the ability to meet future unanticipated or
unusually large redemption requests.
Under the terms of the Global Credit Facility, the Fund shall, in addition to
interest charged on any borrowings made by the Fund and other costs incurred by
the Fund, pay its share of fees and expenses incurred in connection with the
implementation and maintenance of the Global Credit Facility, based upon its
relative share of the aggregate net assets of all of the Borrowers, including an
annual commitment fee based upon the unused portion of the Global Credit
Facility. During the period, the Fund incurred commitment fees of $1,644 of its
pro rata portion of the Global Credit Facility, which is reflected in other
expenses on the Statement of Operations. During the year ended July 31, 2009,
the Fund did not utilize the Global Credit Facility.
34 | Annual Report
15
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. FAIR VALUE MEASUREMENTS
The Fund adopted Financial Accounting Standards Board (FASB) Statement No. 157,
"Fair Value Measurement" (SFAS 157), on August 1, 2008. SFAS 157 defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. The Fund has determined that the implementation
of SFAS 157 did not have a material impact on the Fund's financial statements.
SFAS 157 establishes a fair value hierarchy that distinguishes between market
data obtained from independent sources (observable inputs) and the Fund's own
market assumptions (unobservable inputs). These inputs are used in determining
the value of the Fund's investments and are summarized in the following fair
value hierarchy:
- - Level 1 - quoted prices in active markets for identical securities
- - Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speed, credit risk, etc.)
- - Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
The following is a summary of the inputs used as of July 31, 2009, in valuing
the Fund's assets carried at fair value:
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
-------------- -------- ----------- --------------
ASSETS:
Investments in Securities
Equity Securities:(a)
Gold Exploration and Development .. $ 242,936,255 $ -- $17,248,070 $ 260,184,325
Platinum & Palladium .............. 199,784,139 171,646 -- 199,955,785
All Other Equity Securities(b) .... 1,331,249,656 -- -- 1,331,249,656
Short Term Investments ............ 19,696,012 -- -- 19,696,012
-------------- -------- ----------- --------------
Total Investments in Securities ...... $1,793,666,062 $171,646 $17,248,070 $1,811,085,778
============== ======== =========== ==============
(a) Includes common stock as well as other equity investments.
(b) For detailed industry descriptions, see the accompanying Statement of
Investments.
Annual Report | 35
16
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. FAIR VALUE MEASUREMENTS (CONTINUED)
At July 31, 2009, the reconciliation of assets in which significant unobservable
inputs (Level 3) were used in determining fair value, is as follows:
NET CHANGE
NET CHANGE IN UNREALIZED
IN APPRECIATION
NET UNREALIZED NET TRANSFER (DEPRECIATION)
BEGINNING REALIZED APPRECIATION PURCHASES IN (OUT) OF ENDING ON ASSETS HELD
BALANCE GAIN (LOSS) (DEPRECIATION) (SALES) LEVEL 3 BALANCE AT YEAR END
--------- ----------- -------------- ----------- ----------- ----------- --------------
ASSETS
Equity Securities:
Gold Exploration and
Development ..... $-- $-- $4,042,616 $13,205,454 $-- $17,248,070 $4,042,616
13. SUBSEQUENT EVENTS
The Fund has evaluated subsequent events through September 17, 2009, the
issuance date of the financial statements and determined that no events have
occurred that require disclosure.
ABBREVIATIONS
SELECTED PORTFOLIO
ADR - American Depository Receipt
36 | Annual Report
17
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, 2009, 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, 2009 by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
September 17, 2009
Annual Report | 37
18
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 $6,008,185 as a long
term capital gain dividend for the fiscal year ended July 31, 2009.
At July 31, 2009, more than 50% of the Fund's total assets were invested in
securities of foreign issuers. In most instances, foreign taxes were withheld
from income 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 as of the December 2009 distribution date, 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 2010, shareholders will receive Form 1099-DIV which will
include their share of taxes withheld and foreign source income distributed
during the calendar year 2009.
38 | Annual Report
Franklin Gold and Precious Metals Fund
BOARD MEMBERS AND OFFICERS
The name, year of birth and address of the officers and board members, as well
as their affiliations, positions held with the Fund, principal occupations
during the past five years and number of portfolios overseen in the Franklin
Templeton Investments fund complex are shown below. Generally, each board member
serves until that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- -------------------- ------------------------ -------------------------------
HARRIS J. ASHTON (1932) Trustee Since 1982 135 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 112 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Retired; and FORMERLY, Vice President, senior member and President, Board of Administration, California Public Employees Retirement
Systems (CALPERS) (1971-2008); 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 112 Chevron Corporation (global
One Franklin Parkway energy 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 135 Hess Corporation (exploration
One Franklin Parkway and refining of oil and gas),
San Mateo, CA 94403-1906 H.J. 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).
Annual Report | 39
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- -------------------- ------------------------ -------------------------------
FRANK W. T. LAHAYE (1929) Trustee Since 1968 112 None
One Franklin Parkway
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 135 Hess Corporation (formerly,
One Franklin Parkway Amerada Hess Corporation)
San Mateo, CA 94403-1906 (exploration and refining of
oil and gas) and Sentient Jet
(private jet service).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer (1977-1999));
and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (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 2006 112 None
One Franklin Parkway Independent and Lead Independent
San Mateo, CA 94403-1906 Trustee Trustee since 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); Senior 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 1976 135 None
One Franklin Parkway Chairman of the and Chairman of the
San Mateo, CA 94403-1906 Board 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 41
of the investment companies in Franklin Templeton Investments.
40 | Annual Report
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- -------------------- ------------------------ -------------------------------
**GREGORY E. JOHNSON (1961) Trustee Since 2007 91 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; Director,
Templeton Asset Management Ltd.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of
Franklin Resources, Inc. and of 32 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
45 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources, Inc.
(1994-2001).
LAURA F. FERGERSON (1962) Chief Executive Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Officer -
San Mateo, CA 94403-1906 Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 45 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).
GASTON GARDEY (1967) Treasurer, Since March 2009 Not Applicable Not Applicable
One Franklin Parkway Chief Financial
San Mateo, CA 94403-1906 Officer and
Chief
Accounting
Officer
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Fund Accounting, Franklin Templeton Investments and officer of 27 of the investment companies in Franklin Templeton
Investments.
ALIYA S. GORDON (1973) Vice President Since March 2009 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Templeton Investments; officer of 45 of the investment companies in Franklin Templeton
Investments; and FORMERLY, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).
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/or director, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.
Annual Report | 41
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ----------------------------- --------------- -------------------- ------------------------ -------------------------------
RUPERT H. JOHNSON, JR. (1940) President and President since 2001 Not Applicable Not Applicable
One Franklin Parkway Chief Executive and Chief Executive
San Mateo, CA 94403-1906 Officer - Officer - Investment
Investment Management since
Management 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 43 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 29 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 45 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).
* 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 Trust
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 Trust 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 UNDER-STANDING
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 (800) DIAL BEN/(800) 342-5236 TO REQUEST THE SAI.
42 | Annual Report
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT
At a meeting held April 14, 2009, the Board of Trustees, 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 additional material, including 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. Such
material also discussed some of the actions taken by management in coping with
problems arising out of the past year's financial upheaval.
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 it 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
Annual Report | 43
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
shareholders from being part of the Franklin Templeton family of funds,
including the right to exchange investments between the same class of funds
without a sales charge, the ability to reinvest Fund dividends into other funds
and the right to combine holdings in other funds to obtain a reduced sales
charge. Favorable consideration was given to management's continuous efforts and
expenditures in establishing back-up systems and recovery procedures to function
in the event of a natural disaster, it being noted that such systems and
procedures had functioned smoothly during the Florida hurricanes and blackouts
experienced in recent years. Among other factors taken into account by the Board
were the Manager's best execution trading policies, including a favorable report
by an independent portfolio trading analytical firm. Consideration was also
given to the experience of the Fund's portfolio management team, the number of
accounts managed and general method of compensation. In this latter respect, the
Board noted that a primary factor in management's determination of a portfolio
manager's bonus compensation was the relative investment performance of the
funds he or she managed and that a portion of such bonus was required to be
invested in a predesignated list of funds within such person's fund management
area so as to be aligned with the interests of Fund shareholders. The Board also
took into account the quality of transfer agent and shareholder services
provided Fund shareholders by an affiliate of the Manager, noting continuing
expenditures by Management to increase and improve the scope of such services,
periodic favorable reports on such service conducted by third parties, and the
continuous enhancements to and high industry ranking given the Franklin
Templeton website. Particular attention was given to the overall performance and
actions taken by the Manager and its affiliates in response to problems arising
out of the market turmoil and financial crisis experienced during the past year.
In this respect, the Board noted that management's independent credit analysis
and diligent risk management procedures had minimized exposure of funds within
the Franklin Templeton complex to subprime mortgages and that its continuous
monitoring of counterparty credit risk had limited fund exposure to firms
experiencing financial difficulties like Bear Stearns and AIG. The same type of
conservative approach and attention to risk had also prevented any structured
investment products or other volatile instruments from being held in the
portfolios of any of the money market funds within the Franklin Templeton
complex, including the sweep money fund utilized by many of the funds as part of
their cash management. The Board also took into account, among other things,
management's efforts in establishing a $725 million global credit facility for
the benefit of the funds and other accounts managed by Franklin Templeton
Investments to provide a source of cash for temporary and emergency purposes or
to meet unusual redemption requests as well as the strong financial position of
the Manager's parent company and its commitment to the mutual fund business. The
Board also noted that during the past year Franklin Templeton Investments, like
many other fund managers, had announced a hiring freeze and implemented employee
reductions, and the Board discussed with management the nature of such
reductions and steps being taken to minimize any negative impact on the nature
and quality of services being provided the Fund.
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
44 | Annual Report
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
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, 2009, 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. Consistent with the market sell-off
that occurred in 2008, the Fund, along with most of the other funds within such
performance universe suffered a loss. On a comparative basis, the Lipper report
showed the Fund's total return for the one-year period to be in the
second-lowest quintile of the performance universe, and on an annualized basis
to be in the middle quintile of such universe for the previous three-year period
and the second-highest quintile of such universe for the previous five- and
10-year periods. The Board discussed with management the reasons for the Fund's
performance during the one-year period, but believed its overall comparative
performance was acceptable.
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 consisting of the Fund and six other funds selected by
Lipper as its appropriate Lipper expense group. Lipper expense data is based
upon historical information taken from each fund's most recent annual report
and, as a result of the severe decline in mutual fund industry assets during the
last quarter of 2008, is based on asset levels that are higher than the level
currently existing for most funds. While recognizing the limitations inherent in
Lipper's methodology and recognizing that current expense ratios may increase as
assets decline, the Board believed that the independent analysis conducted by
Lipper remained an appropriate measure of comparative expenses. In reviewing
comparative costs, Lipper provides information on 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 expense ratio, was the least expensive 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 during the 12-month period ended September 30, 2008, being the most
recent fiscal year end for Franklin Resources, Inc., the Manager's parent.
During such period, the assets of the Franklin Templeton U.S. fund business were
significantly higher than currently existing, and to such extent the
profitability analysis does not reflect current fund operations. While taking
this
Annual Report | 45
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
into account in assessing the significance of the Fund profitability analysis,
the Board recognized such analysis was made at a given point in time and that
the decline in assets and effect on profitability would be reflected in the
profitability analysis covering Franklin Resources' 2009 fiscal year period. In
reviewing the analysis, 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 commission dollars to
pay for research. Based upon its consideration of all these factors, the Board
determined that the level of profits realized by the Manager and its affiliates
from providing services to the Fund was not excessive in view of the nature,
quality and extent of services provided.
ECONOMIES OF SCALE. The Board also considered whether economies of scale are
realized by the Manager as the Fund grows larger and the extent to which this is
reflected in the level of management fees charged. While recognizing that any
precise determination is inherently subjective, the Board noted that based upon
the Fund profitability analysis, it appears that as some funds get larger, at
some point economies of scale do result in the Manager realizing a larger profit
margin on management services provided such a fund. The Board also noted that
economies of scale are shared with a fund and its shareholders through
management fee breakpoints so that as a fund grows in size, its effective
management fee rate declines. The fee structure under the Fund's investment
management agreement provides an initial fee of 0.625% on the first $100 million
of assets;
46 | Annual Report
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION (CONTINUED)
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT (CONTINUED)
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 $1.2 billion on December 31, 2008, 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 (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.
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 (800)
SEC-0330.
Annual Report | 47
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Franklin Templeton Funds
LITERATURE REQUEST. TO RECEIVE A PROSPECTUS, PLEASE CALL US AT (800) DIAL
BEN/(800) 342-5236 OR VISIT franklintempleton.com. INVESTORS SHOULD CAREFULLY
CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES BEFORE
INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE CAREFULLY
READ THE PROSPECTUS BEFORE INVESTING. TO ENSURE THE HIGHEST QUALITY OF SERVICE,
WE MAY MONITOR, RECORD AND ACCESS TELEPHONE CALLS TO OR FROM OUR SERVICE
DEPARTMENTS. THESE CALLS CAN BE IDENTIFIED BY THE PRESENCE OF A REGULAR BEEPING
TONE.
VALUE
Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(1)
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Quest Fund
Mutual Recovery Fund(2)
Mutual Shares Fund
BLEND
Franklin Focused Core Equity Fund
Franklin Large Cap Equity Fund
Franklin Rising Dividends Fund
GROWTH
Franklin Flex Cap Growth Fund
Franklin Growth Fund
Franklin Growth Opportunities Fund
Franklin Small Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Real Estate Fund
Franklin Gold & Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Mutual Financial Services Fund
GLOBAL
Mutual Global Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
INTERNATIONAL
Franklin India Growth Fund
Franklin International Growth Fund
Franklin International Small Cap Growth Fund
Mutual European Fund
Mutual International Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton Frontier Markets Fund
HYBRID
Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Equity Income Fund
Franklin Income Fund
Templeton Income Fund
ASSET ALLOCATION
Franklin Templeton Corefolio(R) Allocation Fund
Franklin Templeton Founding Funds AllocatioN Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund
FIXED INCOME
Franklin Adjustable U.S. Government Securities Fund(3)
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(3)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(3)
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund
TAX-FREE INCOME(4)
NATIONAL
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(5)
LIMITED-/INTERMEDIATE-TERM
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California(6)
Colorado
Connecticut
Florida
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(7)
Michigan(7)
Minnesota(7)
Missouri
New Jersey
New York(6)
North Carolina
Ohio(7)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust(8)
(1.) The fund is closed to new investors. Existing shareholders and select
retirement plans can continue adding to their accounts.
(2.) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25% of
the outstanding number of shares. Investors may tender all or a portion of
their shares during the tender period.
(3.) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(4.) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are generally
taxable.
(5.) The fund invests primarily in insured municipal securities.
(6.) These funds are available in four or more variations, including long-term
portfolios, intermediate-term portfolios, portfolios of insured securities,
a high-yield portfolio (CA only) and money market portfolios.
(7.) The Board of Trustees approved the elimination of the non-fundamental
policy requiring the fund to invest at least 80% of net assets in insured
municipal securities and the removal of the word "Insured" from the fund
name. The changes became effective 2/17/09.
(8.) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
04/09 Not part of the annual report
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO) One Franklin Parkway
San Mateo, CA 94403-1906
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ANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN GOLD AND PRECIOUS METALS FUND
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
(800) DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
(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 A2009 09/09
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 $41,723 for the fiscal year ended July 31, 2009 and $44,865 for the fiscal
year ended July 31, 2008.
(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 $6,000 for the fiscal year ended
July 31, 2009 and $0 for the fiscal year ended July 31, 2008. The services for
which these fees were paid included tax compliance and advice.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended July 31, 2009 and
$1,390 for the fiscal year ended July 31, 2008. 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 $0 for the fiscal year
ended July 31, 2009 and $282,687 for the fiscal year ended July 31, 2008. 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 $6,000 for the fiscal year ended July 31, 2009 and $284,077 for
the fiscal year ended July 31, 2008.
(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 Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, Chief Financial Officerand Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and
Gaston Gardey, 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 PERCIOUS METALS FUND
By /s/LAURA F. FERGERSON
---------------------------------------
Laura F. Fergerson
Chief Executive Officer - Finance
and Administration
Date September 25, 2009
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/LAURA F. FERGERSON
---------------------------------------
Laura F. Fergerson
Chief Executive Officer - Finance
and Administration
Date September 25, 2009
By /s/GASTON GARDEY
---------------------------------------
Gaston Gardey
Chief Financial Officer and Chief
Accounting Officer
Date September 25, 2009