UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-01700
FRANKLIN GOLD AND PRECIOUS METALS FUND
-------------------------------------------------
(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
--------------
Date of fiscal year end: 7/31
----
Date of reporting period: 1/31/10
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ITEM 1. REPORTS TO STOCKHOLDERS.
JANUARY 31, 2010
SEMIANNUAL 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 semiannual report
Contents
SHAREHOLDER LETTER ....................................................... 1
SEMIANNUAL REPORT
Franklin Gold and Precious Metals Fund ................................... 3
Performance Summary ...................................................... 8
Your Fund's Expenses ..................................................... 11
Financial Highlights and Statement of Investments ........................ 13
Financial Statements ..................................................... 20
Notes to Financial Statements ............................................ 24
Shareholder Information .................................................. 35
Shareholder Letter
Dear Shareholder:
During the six-month period ended January 31, 2010, U.S. economic activity
showed signs of expansion while interest rates remained low and inflation was
subdued. Many companies reported better-than-expected earnings after cutting
costs. U.S. equity markets enjoyed a remarkable rally until January, when
investor anxieties returned due to concerns about the global recovery's
sustainability as government stimulus measures began to unwind. At the same
time, U.S. Treasury yields rose and fell in response to wavering investor
sentiment.
Franklin Gold and Precious Metals Fund's semiannual report goes into greater
detail about prevailing conditions during the period. In addition, you will find
performance data, financial information and a discussion from the portfolio
manager. Please remember that all securities markets fluctuate, as do mutual
fund share prices. 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 current market conditions.
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.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
Not part of the semiannual report | 1
We thank you for investing with Franklin Templeton, welcome your questions and
comments, and look forward to serving your investment needs in the years ahead.
Sincerely,
/s/ Rupert H. Johnson, Jr.
Rupert H. Johnson, Jr.
President and Chief Executive Officer - Investment Management
Franklin Gold and Precious Metals Fund
THIS LETTER REFLECTS OUR ANALYSIS AND OPINIONS AS OF JANUARY 31, 2010. 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 semiannual report
Semiannual 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.
We are pleased to bring you Franklin Gold and Precious Metals Fund's semiannual
report for the period ended January 31, 2010.
PERFORMANCE OVERVIEW
Franklin Gold and Precious Metals Fund - Class A delivered a +12.93% cumulative
total return for the six months ended January 31, 2010. The Fund outperformed
the broad Standard & Poor's 500 Index's (S&P 500's) +9.87% total return and the
sector-specific FTSE Gold Mines Index's +1.02% 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
The U.S. economy improved during the six-month reporting period, though
challenges remained at period-end as corporate and economic data underscored
some weak spots. Industrial output, manufacturing and exports showed steady
gains, but the economy's advance was hindered by elevated debt concerns, soft
(but slowly improving) consumer confidence and spending, and lack of job
prospects for the unemployed as federal stimulus measures began to wind down.
Third and fourth quarter 2009 corporate profit growth surpassed consensus
estimates, which allowed businesses to begin restocking depleted inventories.
The ongoing housing crisis abated slightly as home prices rose in some areas due
to lower interest rates, a first-time homebuyer tax credit program and prices
dipping to levels that lured bargain hunters.
(1.) Source: (C) 2010 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 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 17.
Semiannual Report | 3
GEOGRAPHIC BREAKDOWN
Based on Total Net Assets as of 1/31/10
(BAR CHART)
Canada 46.3%
South Africa 18.4%
Australia 15.8%
U.K. 9.6%
U.S. 3.1%
Papua New Guinea 2.9%
Peru 2.2%
Hong Kong 0.5%
Short-Term Investments & Other Net Assets 1.2%
Given few inflationary pressures and the uncertainty surrounding the economic
recovery, the Federal Open Market Committee (FOMC) kept central bank monetary
policy unchanged, as it had done throughout 2009. The FOMC announced it intended
to hold the federal funds target rate in the 0% to 0.25% range "for an extended
period" as it laid the groundwork for an eventual tightening of monetary policy.
Late in the period, the labor market improved somewhat as the economy lost fewer
jobs than expected and the unemployment rate declined, dropping from a period
high of 10.2% in October 2009 to 9.7% at period-end.(2)
By year-end 2009, the U.S. economy was expanding at its fastest pace in six
years as the recovery gained traction. Gross domestic product (GDP) grew at an
estimated annual rate of 5.9% in the fourth quarter, following a 2.2% annualized
increase in the third quarter.(3) As economic conditions improved, oil prices
rose from $69 per barrel at the end of July 2009 to $73 at period-end, still
well below 2008's record highs. The January 2010 inflation rate was an
annualized 2.6%.(2) Core inflation, which excludes food and energy costs, rose
at a 1.5% annualized rate, and was within the Fed's informal target range of
1.6% to 2.0%.(2)
As investor confidence improved amid encouraging economic data, equity markets
generally rose. They cooled off toward period-end, however, when market
participants began to question 2010 global growth prospects and the bull
market's durability. For the six months under review, the blue chip stocks of
the Dow Jones Industrial Average delivered a total return of +11.30%, while the
broader S&P 500 posted a +9.87% total return and the technology-heavy NASDAQ
Composite Index returned +9.02%.(4) With the exception of telecommunication
services, all sectors posted gains for the period, with the strongest returns
from the industrials, consumer discretionary and health care sectors.
For the six months ended January 31, 2010, gold prices initially rose on an
exceptionally strong combination of fundamental, government and speculative
buying, but then retreated toward period-end as demand subsided and the U.S.
(2.) Source: Bureau of Labor Statistics.
(3.) Source: Bureau of Economic Analysis.
(4.) Source: (C) 2010 Morningstar. The Dow Jones Industrial Average is price
weighted based on the average market price of 30 blue chip stocks of
companies that are generally industry leaders. See footnote 1 for a
description of the S&P 500. The NASDAQ Composite Index measures all NASDAQ
domestic and international common type stocks listed on The NAS-DAQ Stock
Market.
4 | Semiannual Report
PRECIOUS METALS PRICES (8/1/09-1/31/10)
(PERFORMANCE GRAPH)
(PLOT POINTS TO COME)
* 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.
dollar strengthened, partially offsetting the earlier gains. Nonetheless, gold
was up more than 13% for this period as it began August 2009 at $954 per ounce,
then jumped to an all-time high of nearly $1,216 per ounce in early December
before fading to $1,081 per ounce by the end of January 2010. Price trends for
silver generally followed suit and it, too, lost some momentum during the final
two months of the reporting period, while pricing for platinum and palladium
remained steady through January in response to a sustained acceleration in
industrial demand and the launch of commodity backed exchange traded funds
(ETFs) in the U.S. markets. Silver, which began the period at $13.92 per ounce,
reached a 2009 high point of more than $19 per ounce before falling to $16.20 by
period-end, producing an overall gain of more than 16%. Platinum rose 24%,
advancing from $1,213 per ounce to $1,505 per ounce during the reporting period,
while at the same time palladium returned an outsized 59% as its per-ounce price
jumped from $263 to roughly $418.
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 hard
assets not tied to any particular country or financial system.
PORTFOLIO BREAKDOWN
Based on Total Net Assets as of 1/31/10
(BAR CHART)
Long Life Gold Mines 47.7%
Gold Exploration & Development 19.2%
Medium Life Gold Mines 14.6%
Platinum & Palladium 12.4%
Silver Mines 3.4%
Gold & Diversified Resources 1.5%
Short-Term Investments & Other Net Assets 1.2%
Semiannual Report | 5
TOP 10 HOLDINGS
1/31/10
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- ------------------------ ----------
Randgold Resources Ltd., ADR 6.6%
LONG LIFE GOLD MINES, U.K.
Newcrest Mining Ltd. 6.0%
LONG LIFE GOLD MINES, AUSTRALIA
Impala Platinum Holdings Ltd.,
ord. & ADR 5.5%
PLATINUM & PALLADIUM, SOUTH AFRICA
AngloGold Ashanti Ltd., ADR 5.3%
LONG LIFE GOLD MINES, SOUTH AFRICA
Barrick Gold Corp. 4.5%
LONG LIFE GOLD MINES, CANADA
Goldcorp Inc., ord. & warrants 4.4%
LONG LIFE GOLD MINES, CANADA
Centerra Gold Inc., ord. & 144A 4.0%
LONG LIFE GOLD MINES, CANADA
Anglo Platinum Ltd. 3.3%
PLATINUM & PALLADIUM, SOUTH AFRICA
Osisko Mining Corp., ord. & 144A 3.2%
GOLD EXPLORATION & DEVELOPMENT, CANADA
Centamin Egypt Ltd., ord. & 144A 2.9%
GOLD EXPLORATION & DEVELOPMENT,
AUSTRALIA
MANAGER'S DISCUSSION
Many gold equities underperformed gold bullion in the period under review, with
most of the underperformance coming in the last two weeks of January.
Merger and acquisition activity picked up in the six-month period, with Randgold
and AngloGold Ashanti closing the acquisition of Moto Goldmines, and Eldorado
Gold acquiring Sino Gold Mining. Goldcorp outbid Barrick Gold for Xstrata's
stake in the El Morro copper-gold project in Chile and also announced its
acquisition of Canplats. Goldcorp also agreed to sell its remaining interest in
the Morelos gold project in Mexico to Canadian mining company Gleichen
Resources. Alamos Gold purchased some development projects in Turkey from Teck
Resources and Fronteer Development. Allied Gold, with gold mining operations in
Papua New Guinea, merged with Australian Solomons Gold with the hopes of
restarting a mine in the Solomon Islands. Higher gold prices and relatively flat
production costs during the period led to improved cash flow from mining
operations. This led to more exploration activity and higher forecasted returns
for new projects.
In this environment, most of the Fund's investments appreciated in value during
the six-month reporting period. The Fund's shares of South African platinum
producer Anglo Platinum and Canada-based Eastern Platinum were among the major
contributors to returns during the period under review. Their share prices
surged as the prices of platinum and palladium, which are primarily used by
vehicle manufacturers to make catalytic converters, jumped in response to
increasing industrial activity as the global economy began to rebound from
recessionary lows. The launch of the first platinum and palladium ETFs in the
U.S. helped to further drive investor interest in these metals.
Against the backdrop of increased consumer, government and investor demand, gold
prices vaulted past the $1,000 per ounce mark on their way to record highs. This
caused most of the Fund's investments in gold mining companies to follow suit
until pricing momentum faded somewhat in December 2009 and January 2010. Key
Fund contributors from the group included Sino Gold, an Australian based company
focused on developing mines in China, following a takeover offer from Eldorado
Gold, a Canadian exploration and development company that has gold mining
operations in Brazil, Greece, China and Turkey; Ivanhoe Mines, which finally
negotiated an investment agreement with the Mongolian government for the
development of Oyu Tolgoi, their large copper-gold project in the Gobi desert;
Randgold Resources, a West African-focused gold producer; Compania de Minas
Beunaventura, a Peruvian miner focused on mining gold, silver and other metals;
and Semafo, whose stock price rose due to strong operating results and
exploration success at the Mana gold mine in Burkina Faso.
6 | Semiannual Report
Despite the Fund's outperformance versus its benchmark indexes, a few
gold-related holdings declined in value, hindering the Fund's advance. For
example, the stock price of Canada-based Kinross Gold, which produces gold and
silver from mining operations in Brazil, Russia, the U.S. and Chile, fell after
a disappointing third quarter 2009 earnings release, when management guided
future costs higher and deferred key growth initiatives. An investment in Nevsun
Resources, which is currently constructing its gold-copper-zinc mine in Eritrea,
depreciated during the last two months of the reporting period largely because
of financing concerns. Our position in Canadian gold and uranium producer First
Uranium, which was developing several mines in South Africa, also depreciated in
the wake of financing issues as well as development and permitting delays. The
share price of Agnico Eagle, another Canadian gold producer with mines in
Canada, Finland and Mexico, declined in value following the releases of third
quarter 2009 results, which showed slower-than-expected progress for the
company's new projects.
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
CFA(R) and Chartered Financial Analyst(R) are trademarks owned by CFA Institute.
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JANUARY 31, 2010, 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.
Semiannual Report | 7
Performance Summary as of 1/31/10
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 does 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 1/31/10 7/31/09
- ----------------------- ------ ------- -------
Net Asset Value (NAV) +$2.04 $35.60 $33.56
DISTRIBUTIONS (8/1/09-1/31/10)
Dividend Income $2.2241
Short-Term Capital Gain $0.1941
Long-Term Capital Gain $0.3837
TOTAL $2.8019
CLASS B (SYMBOL: FAGPX) CHANGE 1/31/10 7/31/09
- ----------------------- ------ ------- -------
Net Asset Value (NAV) +$1.94 $34.01 $32.07
DISTRIBUTIONS (8/1/09-1/31/10)
Dividend Income $1.9589
Short-Term Capital Gain $0.1941
Long-Term Capital Gain $0.3837
TOTAL $2.5367
CLASS C (SYMBOL: FRGOX) CHANGE 1/31/10 7/31/09
- ----------------------- ------ ------- -------
Net Asset Value (NAV) +$1.95 $34.31 $32.36
DISTRIBUTIONS (8/1/09-1/31/10)
Dividend Income $1.9914
Short-Term Capital Gain $0.1941
Long-Term Capital Gain $0.3837
TOTAL $2.5692
ADVISOR CLASS (SYMBOL: FGADX) CHANGE 1/31/10 7/31/09
- ----------------------------- ------ ------- -------
Net Asset Value (NAV) +$2.18 $36.89 $34.71
DISTRIBUTIONS (8/1/09-1/31/10)
Dividend Income $2.3026
Short-Term Capital Gain $0.1941
Long-Term Capital Gain $0.3837
TOTAL $2.8804
8 | Semiannual 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 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------- ------- ------- ------- -------
Cumulative Total Return(1) +12.93% +54.19% +158.42% +427.72%
Average Annual Total Return(2) +6.43% +45.32% +19.48% +17.40%
Value of $10,000 Investment(3) $10,643 $14,532 $24,352 $49,726
Avg. Ann. Total Return (12/31/09)(4) +59.83% +20.76% +17.87%
Total Annual Operating Expenses(5) 1.03%
CLASS B 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------- ------- ------- ------- -------
Cumulative Total Return(1) +12.50% +53.07% +148.71% +396.34%
Average Annual Total Return(2) +8.50% +49.07% +19.79% +17.38%
Value of $10,000 Investment(3) $10,850 $14,907 $24,671 $49,634
Avg. Ann. Total Return (12/31/09)(4) +64.39% +21.09% +17.86%
Total Annual Operating Expenses(5) 1.78%
CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------- ------- ------- ------- -------
Cumulative Total Return(1) +12.54% +53.08% +148.94% +390.26%
Average Annual Total Return(2) +11.54% +52.08% +20.01% +17.23%
Value of $10,000 Investment(3) $11,154 $15,208 $24,894 $49,026
Avg. Ann. Total Return (12/31/09)(4) +67.27% +21.29% +17.71%
Total Annual Operating Expenses(5) 1.78%
ADVISOR CLASS 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------- ------- ------- ------- -------
Cumulative Total Return(1) +13.06% +54.57% +161.52% +440.21%
Average Annual Total Return(2) +13.06% +54.57% +21.20% +18.37%
Value of $10,000 Investment(3) $11,306 $15,457 $26,152 $54,021
Avg. Ann. Total Return (12/31/09)(4) +70.00% +22.50% +18.85%
Total Annual Operating Expenses(5) 0.78%
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, GO TO
franklintempleton.com OR CALL (800) 342-5236.
Semiannual Report | 9
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. Six-month return has not been
annualized.
(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.
10 | Semiannual 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.
Semiannual Report | 11
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 8/1/09 VALUE 1/31/10 PERIOD* 8/1/09-1/31/10
----------------- -------------- ----------------------
CLASS A
Actual $1,000 $1,129.30 $4.94
Hypothetical (5% return before expenses) $1,000 $1,020.57 $4.69
CLASS B
Actual $1,000 $1,125.00 $8.89
Hypothetical (5% return before expenses) $1,000 $1,016.84 $8.44
CLASS C
Actual $1,000 $1,125.40 $8.95
Hypothetical (5% return before expenses) $1,000 $1,016.79 $8.49
ADVISOR CLASS
Actual $1,000 $1,130.60 $3.60
Hypothetical (5% return before expenses) $1,000 $1,021.83 $3.41
* Expenses are calculated using the most recent six-month expense ratio,
annualized for each class (A: 0.92%; B: 1.66%; C: 1.67%; and Advisor:
0.67%), multiplied by the average account value over the period, multiplied
by 184/365 to reflect the one-half year period.
12 | Semiannual Report
Franklin Gold and Precious Metals Fund
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED JULY 31,
JANUARY 31, 2010 --------------------------------------------------------------
CLASS A (UNAUDITED) 2009 2008 2007 2006 2005
- ------- ---------------- ---------- ---------- ---------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period ....... $ 33.56 $ 35.01 $ 33.73 $ 30.67 $ 17.81 $ 15.94
---------- ---------- ---------- ---------- -------- --------
Income from investment operations(a):
Net investment income (loss)(b) ......... (0.09) 0.07 0.03 0.11 0.15 0.04
Net realized and unrealized gains
(losses) ............................. 4.93 (1.40) 5.09 4.71 12.87 1.84
---------- ---------- ---------- ---------- -------- --------
Total from investment operations ........... 4.84 (1.33) 5.12 4.82 13.02 1.88
---------- ---------- ---------- ---------- -------- --------
Less distributions from:
Net investment income ................... (2.22) -- (1.97) (0.76) (0.16) (0.01)
Net realized gains ...................... (0.58) (0.12) (1.87) (1.00) -- --
---------- ---------- ---------- ---------- -------- --------
Total distributions ........................ (2.80) (0.12) (3.84) (1.76) (0.16) (0.01)
---------- ---------- ---------- ---------- -------- --------
Redemption fees(c) ......................... -- --(d) --(d) --(d) --(d) --(d)
---------- ---------- ---------- ---------- -------- --------
Net asset value, end of period ............. $ 35.60 $ 33.56 $ 35.01 $ 33.73 $ 30.67 $ 17.81
========== ========== ========== ========== ======== ========
Total return(e) ............................ 12.93% (3.48)% 14.76% 15.94% 73.36% 11.78%
RATIOS TO AVERAGE NET ASSETS(f)
Expenses(g) ................................ 0.92% 1.01% 0.89% 0.93% 0.92% 0.96%
Net investment income (loss) ............... (0.44)% 0.24% 0.08% 0.33% 0.57% 0.21%
SUPPLEMENTAL DATA
Net assets, end of period (000's) .......... $1,518,399 $1,297,172 $1,310,889 $1,011,344 $885,176 $439,628
Portfolio turnover rate .................... 11.06% 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) Effective September 1, 2008, the redemption fee was eliminated.
(d) Amount rounds to less than $0.01 per share.
(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(f) Ratios are annualized for periods less than one year.
(g) Benefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Semiannual Report | 13
Franklin Gold and Precious Metals Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
SIX MONTHS ENDED YEAR ENDED JULY 31,
JANUARY 31, 2010 -------------------------------------------------------
CLASS B (UNAUDITED) 2009 2008 2007 2007 2005
- ------- ---------------- ------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............. $ 32.07 $ 33.73 $ 32.60 $ 29.62 $ 17.24 $ 15.54
------- ------- ------- ------- ------- -------
Income from investment operations(a):
Net investment income (loss)(b) ............... (0.22) (0.11) (0.23) (0.12) (0.04) (0.09)
Net realized and unrealized gains (losses) .... 4.70 (1.43) 4.92 4.54 12.44 1.79
------- ------- ------- ------- ------- -------
Total from investment operations ................. 4.48 (1.54) 4.69 4.42 12.40 1.70
------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income ......................... (1.96) -- (1.69) (0.44) (0.02) --
Net realized gains ............................ (0.58) (0.12) (1.87) (1.00) -- --
------- ------- ------- ------- ------- -------
Total distributions .............................. (2.54) (0.12) (3.56) (1.44) (0.02) --
------- ------- ------- ------- ------- -------
Redemption fees(c) ............................... -- --(d) --(d) --(d) --(d) --(d)
------- ------- ------- ------- ------- -------
Net asset value, end of period ................... $ 34.01 $ 32.07 $ 33.73 $ 32.60 $ 29.62 $ 17.24
======= ======= ======= ======= ======= =======
Total return(e) .................................. 12.50% (4.23)% 13.91% 15.12% 71.95% 10.94%
RATIOS TO AVERAGE NET ASSETS(f)
Expenses(g) ...................................... 1.66% 1.76% 1.64% 1.68% 1.67% 1.70%
Net investment income (loss) ..................... (1.18)% (0.51)% (0.67)% (0.41)% (0.19)% (0.53)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ................ $47,096 $48,936 $60,872 $62,386 $60,423 $41,270
Portfolio turnover rate .......................... 11.06% 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) Effective September 1, 2008, the redemption fee was eliminated.
(d) Amount rounds to less than $0.01 per share.
(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(f) Ratios are annualized for periods less than one year.
(g) Benefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
14 | Semiannual Report
Franklin Gold and Precious Metals Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
SIX MONTHS ENDED YEAR ENDED JULY 31,
JANUARY 31, 2010 ------------------------------------------------------------
CLASS C (UNAUDITED) 2009 2008 2007 2006 2005
- ------- ---------------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............. $ 32.36 $ 34.03 $ 32.90 $ 29.90 $ 17.40 $ 15.69
-------- -------- -------- -------- -------- --------
Income from investment operations(a):
Net investment income (loss)(b) ............... (0.22) (0.13) (0.25) (0.13) (0.05) (0.09)
Net realized and unrealized gains (losses) .... 4.74 (1.42) 4.98 4.60 12.58 1.80
-------- -------- -------- -------- -------- --------
Total from investment operations ................. 4.52 (1.55) 4.73 4.47 12.53 1.71
-------- -------- -------- -------- -------- --------
Less distributions from:
Net investment income ......................... (1.99) -- (1.73) (0.47) (0.03) --
Net realized gains ............................ (0.58) (0.12) (1.87) (1.00) -- --
-------- -------- -------- -------- -------- --------
Total distributions .............................. (2.57) (0.12) (3.60) (1.47) (0.03) --
-------- -------- -------- -------- -------- --------
Redemption fees(c) ............................... -- --(d) --(d) --(d) --(d) --(d)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ................... $ 34.31 $ 32.36 $ 34.03 $ 32.90 $ 29.90 $ 17.40
======== ======== ======== ======== ======== ========
Total return(e) .................................. 12.54% (4.23)% 13.89% 15.10% 72.04% 10.96%
RATIOS TO AVERAGE NET ASSETS(f)
Expenses(g) ...................................... 1.67% 1.76% 1.64% 1.68% 1.67% 1.71%
Net investment income (loss) ..................... (1.19)% (0.51)% (0.67)% (0.41)% (0.19)% (0.54)%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ................ $357,402 $312,002 $319,641 $240,424 $217,371 $114,315
Portfolio turnover rate .......................... 11.06% 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) Effective September 1, 2008, the redemption fee was eliminated.
(d) Amount rounds to less than $0.01 per share.
(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(f) Ratios are annualized for periods less than one year.
(g) Benefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
Semiannual Report | 15
Franklin Gold and Precious Metals Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
SIX MONTHS ENDED YEAR ENDED JULY 31,
JANUARY 31, 2010 ---------------------------------------------------------
ADVISOR CLASS (UNAUDITED) 2009 2008 2007 2006 2005
- ------------- ---------------- -------- -------- -------- ------- -------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ............. $ 34.71 $ 36.11 $ 34.68 $ 31.50 $ 18.28 $ 16.36
-------- -------- -------- ------- ------- -------
Income from investment operations(a):
Net investment income (loss)(b) ............... (0.04) 0.11 0.11 0.19 0.22 0.08
Net realized and unrealized gains (losses) .... 5.10 (1.39) 5.25 4.84 13.20 1.89
-------- -------- -------- ------- ------- -------
Total from investment operations ................. 5.06 (1.28) 5.36 5.03 13.42 1.97
-------- -------- -------- ------- ------- -------
Less distributions from:
Net investment income ......................... (2.30) -- (2.06) (0.85) (0.20) (0.05)
Net realized gains ............................ (0.58) (0.12) (1.87) (1.00) -- --
-------- -------- -------- ------- ------- -------
Total distributions .............................. (2.88) (0.12) (3.93) (1.85) (0.20) (0.05)
-------- -------- -------- ------- ------- -------
Redemption fees(c) ............................... -- --(d) --(d) --(d) --(d) --(d)
-------- -------- -------- ------- ------- -------
Net asset value, end of period ................... $ 36.89 $ 34.71 $ 36.11 $ 34.68 $ 31.50 $ 18.28
======== ======== ======== ======= ======= =======
Total return(e) .................................. 13.06% (3.26)% 15.05% 16.25% 73.68% 12.09%
RATIOS TO AVERAGE NET ASSETS(f)
Expenses(g) ...................................... 0.67% 0.76% 0.64% 0.68% 0.67% 0.71%
Net investment income (loss) ..................... (0.19)% 0.49% 0.33% 0.58% 0.82% 0.46%
SUPPLEMENTAL DATA
Net assets, end of period (000's) ................ $177,338 $147,197 $115,322 $65,120 $60,213 $34,519
Portfolio turnover rate .......................... 11.06% 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) Effective September 1, 2008, the redemption fee was eliminated.
(d) Amount rounds to less than $0.01 per share.
(e) Total return does not reflect sales commissions or contingent deferred
sales charges, if applicable, and is not annualized for periods less than
one year.
(f) Ratios are annualized for periods less than one year.
(g) Benefit of expense reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
16 | Semiannual Report
Franklin Gold and Precious Metals Fund
STATEMENT OF INVESTMENTS, JANUARY 31, 2010 (UNAUDITED)
SHARES/
COUNTRY WARRANTS VALUE
-------------------- ------------ --------------
COMMON STOCKS AND OTHER EQUITY INTERESTS 98.8%
GOLD AND DIVERSIFIED RESOURCES 1.5%
(a) OZ Minerals Ltd. .......................................... Australia 5,882,655 $ 5,539,850
(a) PanAust Ltd. .............................................. Australia 30,600,000 12,717,283
(a, b) PanAust Ltd., 144A ........................................ Australia 11,600,000 4,820,931
Royal Gold Inc. ........................................... United States 180,000 7,671,600
--------------
30,749,664
--------------
GOLD EXPLORATION AND DEVELOPMENT 19.2%
(a, c) Anatolia Minerals Development Ltd. ........................ Canada 7,649,700 23,669,556
(a, b, c) Anatolia Minerals Development Ltd., 144A .................. Canada 1,500,000 4,641,271
(a) Andean Resources Ltd. ..................................... Australia 500,000 1,060,996
(a, b) Andean Resources Ltd., 144A ............................... Australia 3,000,000 6,365,973
(a, b) AXMIN Inc., 144A .......................................... Canada 1,143,000 80,136
(a) Banro Corp. ............................................... Canada 2,457,000 4,524,693
(a) Banro Corp. ............................................... Canada 2,400,000 4,392,000
(a) Banro Corp., wts., 9/17/11 ................................ Canada 600,000 486,000
Bendigo Mining Ltd. ....................................... Australia 18,648,795 3,957,647
(a) Centamin Egypt Ltd. ....................................... Australia 10,500,000 17,863,987
(a, b) Centamin Egypt Ltd., 144A ................................. Australia 25,000,000 42,533,302
(a) Colossus Minerals Inc. .................................... Canada 1,000,000 4,028,979
(a, b) Colossus Minerals Inc., 144A .............................. Canada 900,000 3,626,081
(a, b) G-Resources Group Ltd., 144A .............................. Hong Kong 120,000,000 7,187,249
(a, b, c) Gleichen Resources Ltd., 144A ............................. Canada 14,000,000 14,265,015
(a, b, c) Gleichen Resources Ltd., wts., 144A, 11/12/11 ............. Canada 3,750,000 --
(a) Great Basin Gold Ltd. ..................................... Canada 12,000,000 19,406,403
(a) Great Basin Gold Ltd., wts., 10/15/10 ..................... Canada 6,000,000 2,187,427
(a, c) Guyana Goldfields Inc. .................................... Canada 4,107,600 24,536,166
(a, b, c) Guyana Goldfields Inc., 144A .............................. Canada 1,400,000 8,362,702
(a, c, d) Guyana Goldfields Inc., wts., 144A, 6/10/12 ............... Canada 500,000 1,301,659
(a) Imperial Metals Corp. ..................................... Canada 333,000 4,622,622
(a) International Minerals Corp. .............................. Canada 700,000 2,846,459
(a) Ivanhoe Australia Ltd. .................................... Australia 6,290,866 17,800,634
(a) Ivanhoe Mines Ltd. ........................................ Canada 1,850,000 25,493,000
(a, b) Ivanhoe Mines Ltd., 144A .................................. Canada 738,500 10,341,416
(a, b) Ivanhoe Mines Ltd., 144A .................................. Canada 553,800 7,755,012
(a) MAG Silver Corp. .......................................... Canada 1,200,000 6,663,239
(a) Nautilus Minerals Inc. .................................... Canada 3,565,000 7,031,690
(a, b) Nautilus Minerals Inc., 144A .............................. Canada 1,278,000 2,520,757
(a, c) Nevsun Resources Ltd. ..................................... Canada 9,827,000 18,831,830
(a, c, d) Nevsun Resources Ltd., 144A ............................... Canada 4,500,000 8,515,716
(a, b) Orsu Metals Corp., 144A ................................... Canada 1,060,000 406,263
(a, b) Orsu Metals Corp., wts., 144A, 4/11/10 .................... Canada 5,300,000 --
(a) Osisko Mining Corp. ....................................... Canada 3,210,800 23,531,360
(a, b) Osisko Mining Corp., 144A ................................. Canada 6,021,400 44,129,728
(a, c) Romarco Minerals Inc. ..................................... Canada 9,779,600 13,804,343
(a, b, c) Romarco Minerals Inc., 144A ............................... Canada 8,000,000 11,292,358
(a, c, d) Romarco Minerals Inc., wts., 144A, 3/03/11 ................ Canada 4,000,000 3,451,274
--------------
403,514,943
--------------
Semiannual Report | 17
Franklin Gold and Precious Metals Fund
STATEMENT OF INVESTMENTS, JANUARY 31, 2010 (UNAUDITED) (CONTINUED)
SHARES/
COUNTRY WARRANTS VALUE
-------------------- ------------ --------------
COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
LONG LIFE GOLD MINES 47.7%
Agnico-Eagle Mines Ltd. ................................... Canada 845,000 $ 42,816,150
(a) Alamos Gold Inc. .......................................... Canada 1,586,900 16,911,110
(a, b) Alamos Gold Inc., 144A .................................... Canada 400,000 4,262,678
AngloGold Ashanti Ltd., ADR ............................... South Africa 3,094,723 110,450,664
Barrick Gold Corp. ........................................ Canada 2,726,283 94,929,174
(a) Centerra Gold Inc. ........................................ Canada 2,921,100 29,572,810
(a, b) Centerra Gold Inc., 144A .................................. Canada 5,418,400 54,855,127
(a, c) CGA Mining Ltd. ........................................... Australia 8,724,000 15,413,283
(a, c, d) CGA Mining Ltd., 144A ..................................... Australia 3,750,000 6,476,309
(a, c, d, e) CGA Mining Ltd., 144A ..................................... Australia 8,850,000 14,097,324
(a) Crew Gold Corp. ........................................... Canada 86,450,000 10,065,726
Gold Fields Ltd. .......................................... South Africa 697,191 8,145,695
Gold Fields Ltd., ADR ..................................... South Africa 3,154,528 36,024,710
Goldcorp Inc. ............................................. Canada 1,260,625 42,706,286
Goldcorp Inc. ............................................. Canada 1,464,865 49,746,815
(a) Goldcorp Inc., wts., 6/09/11 .............................. Canada 9,125 39,238
Harmony Gold Mining Co. Ltd. .............................. South Africa 652,140 6,160,498
Harmony Gold Mining Co. Ltd., ADR ......................... South Africa 1,350,000 12,379,500
Kinross Gold Corp. ........................................ Canada 3,478,012 56,278,932
Lihir Gold Ltd. ........................................... Papua New Guinea 24,447,142 59,880,157
(a) Mineral Deposits Ltd. ..................................... Australia 8,696,185 6,920,641
Newcrest Mining Ltd. ...................................... Australia 4,540,928 126,602,900
Newmont Mining Corp. ...................................... United States 1,235,614 52,958,416
Randgold Resources Ltd., ADR .............................. United Kingdom 2,001,400 137,956,502
(a) Red Back Mining Inc. ...................................... Canada 369,900 5,556,712
--------------
1,001,207,357
--------------
MEDIUM LIFE GOLD MINES 14.6%
(a, b) Aurizon Mines Ltd., 144A .................................. Canada 1,000,000 3,683,104
(a, c) Allied Gold Ltd. .......................................... Australia 7,000,000 1,887,874
(a, b, c) Allied Gold Ltd., 144A .................................... Australia 45,000,000 12,409,442
(a) B2Gold Corp. .............................................. Canada 3,974,528 4,644,225
Compania de Minas Buenaventura SA ......................... Peru 201,186 6,484,653
Compania de Minas Buenaventura SA, ADR .................... Peru 1,250,114 39,353,589
(a) Eldorado Gold Corp. ....................................... Canada 2,945,000 34,962,842
(a) Eldorado Gold Corp., IDR .................................. Canada 2,117,500 25,408,459
(a) Gammon Gold Inc. .......................................... Canada 705,800 6,091,054
(a) Gammon Gold Inc. .......................................... Canada 2,814,500 24,257,714
(a) Golden Star Resources Ltd. ................................ Canada 2,450,000 6,710,446
(a) Golden Star Resources Ltd. ................................ Canada 700,000 1,932,000
IAMGOLD Corp. ............................................. Canada 860,000 11,360,600
IAMGOLD Corp. ............................................. Canada 1,072,000 14,119,635
(a, b) Jinshan Gold Mines Inc., 144A ............................. Canada 3,595,000 9,073,615
Kingsgate Consolidated Ltd. ............................... Australia 1,421,665 11,640,813
(a) New Gold Inc. ............................................. Canada 1,700,000 6,817,481
(a, b) Real Gold Mining Ltd., 144A ............................... Hong Kong 2,207,000 2,561,271
(a) SEMAFO Inc. ............................................... Canada 4,525,000 19,204,020
(a, c) St. Barbara Ltd. .......................................... Australia 73,461,382 16,239,557
18 | Semiannual Report
Franklin Gold and Precious Metals Fund
STATEMENT OF INVESTMENTS, JANUARY 31, 2010 (UNAUDITED) (CONTINUED)
SHARES/
COUNTRY WARRANTS VALUE
-------------------- ------------ --------------
COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
MEDIUM LIFE GOLD MINES (CONTINUED)
(a, b, c) St. Barbara Ltd., 144A .................................... Australia 33,536,676 $ 7,413,702
Yamana Gold Inc. .......................................... Canada 1,829,193 18,415,900
(b) Yamana Gold Inc., 144A .................................... Canada 2,300,000 23,155,878
--------------
307,827,874
--------------
PLATINUM & PALLADIUM 12.4%
(a) Anglo Platinum Ltd. ....................................... South Africa 736,138 70,118,453
(a) Aquarius Platinum Ltd. .................................... South Africa 1,800,000 10,726,380
(a) Eastern Platinum Ltd. ..................................... Canada 23,783,024 26,234,137
Impala Platinum Holdings Ltd. ............................. South Africa 2,950,000 76,441,917
Impala Platinum Holdings Ltd., ADR ........................ South Africa 1,542,400 39,346,624
(a) Lonmin PLC ................................................ United Kingdom 360,000 10,406,920
(a) Mvelaphanda Resources Ltd. ................................ South Africa 2,650,000 17,645,110
(a, c) Platinum Group Metals Ltd. ................................ Canada 3,000,000 5,496,611
(a, b, c) Platinum Group Metals Ltd., 144A .......................... Canada 2,000,000 3,664,408
(a, b, c) Platinum Group Metals Ltd., wts., 144A, 12/16/10 .......... Canada 1,000,000 495,443
--------------
260,576,003
--------------
SILVER MINES 3.4%
Fresnillo PLC ............................................. United Kingdom 1,100,000 11,819,069
(b) Fresnillo PLC, 144A ....................................... United Kingdom 2,336,100 25,100,478
(a) Hecla Mining Co. .......................................... United States 1,200,000 5,472,000
Hochschild Mining PLC ..................................... United Kingdom 3,600,000 15,581,600
(a) Silver Wheaton Corp. ...................................... Canada 450,000 6,192,000
(a, b) Silver Wheaton Corp., 144A ................................ Canada 500,000 6,880,000
--------------
71,045,147
--------------
TOTAL COMMON STOCKS AND OTHER EQUITY INTERESTS
(COST $1,158,279,031) ..................................... 2,074,920,988
--------------
SHORT TERM INVESTMENTS (COST $39,496,070) 1.9%
MONEY MARKET FUNDS 1.9%
(f) Institutional Fiduciary Trust Money Market
Portfolio, 0.00%........................................... United States 39,496,070 39,496,070
--------------
TOTAL INVESTMENTS (COST $1,197,775,101) 100.7% ............ 2,114,417,058
OTHER ASSETS, LESS LIABILITIES (0.7)% ..................... (14,182,199)
--------------
NET ASSETS 100.0% ......................................... $2,100,234,859
==============
See Abbreviations on page 34.
(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 January 31, 2010,
the aggregate value of these securities was $321,883,340, representing
15.33% of net assets.
(c) See Note 10 regarding holdings of 5% voting securities.
(d) See Note 9 regarding restricted securities.
(e) 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.
Semiannual Report | 19
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2010 (unaudited)
Assets:
Investments in securities:
Cost - Unaffiliated issuers ............................. $ 987,304,920
Cost - Non-controlled affiliated issuers (Note 10) ...... 170,974,111
Cost - Sweep Money Fund (Note 7) ........................ 39,496,070
--------------
Total cost of investments ............................... $1,197,775,101
==============
Value - Unaffiliated issuers ............................ $1,858,655,145
Value - Non-controlled affiliated issuers (Note 10) ..... 216,265,843
Value - Sweep Money Fund (Note 7) ....................... 39,496,070
==============
Total value of investments .............................. 2,114,417,058
Cash ....................................................... 3,393,019
Receivables:
Investment securities sold .............................. 20,727,339
Capital shares sold ..................................... 6,045,931
Other assets ............................................... 2,909
--------------
Total assets ......................................... 2,144,586,256
--------------
Liabilities:
Payables:
Investment securities purchased ......................... 25,005,005
Capital shares redeemed ................................. 16,931,750
Affiliates .............................................. 1,749,993
Allocator Funds (Note 11) ............................... 12,373
Foreign currency advanced by custodian .................. 279,854
Accrued expenses and other liabilities .................. 372,422
--------------
Total liabilities .................................... 44,351,397
--------------
Net assets, at value .............................. $2,100,234,859
==============
Net assets consist of:
Paid-in capital ............................................ $1,366,668,761
Distributions in excess of net investment income ........... (208,930,367)
Net unrealized appreciation (depreciation) ................. 917,078,576
Accumulated net realized gain (loss) ....................... 25,417,889
--------------
Net assets, at value .............................. $2,100,234,859
==============
The accompanying notes are an integral part of these financial statements.
20 | Semiannual Report
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
January 31, 2010 (unaudited)
CLASS A:
Net assets, at value .................................................... $1,518,398,628
==============
Shares outstanding ...................................................... 42,648,559
==============
Net asset value per share(a) ............................................ $ 35.60
==============
Maximum offering price per share (net asset value per share / 94.25%) ... $ 37.77
==============
CLASS B:
Net assets, at value .................................................... $ 47,096,136
==============
Shares outstanding ...................................................... 1,384,910
==============
Net asset value and maximum offering price per share(a) ................. $ 34.01
==============
CLASS C:
Net assets, at value .................................................... $ 357,401,748
==============
Shares outstanding ...................................................... 10,416,336
==============
Net asset value and maximum offering price per share(a) ................. $ 34.31
==============
ADVISOR CLASS:
Net assets, at value .................................................... $ 177,338,347
==============
Shares outstanding ...................................................... 4,807,339
==============
Net asset value and maximum offering price per share .................... $ 36.89
==============
(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.
Semiannual Report | 21
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended January 31, 2010 (unaudited)
Investment income:
Dividends: (net of foreign taxes of $234,775) ...................................... $ 5,335,368
-------------
Expenses:
Management fees (Note 3a) .......................................................... 4,887,095
Distribution fees: (Note 3c)
Class A ......................................................................... 1,998,968
Class B ......................................................................... 270,741
Class C ......................................................................... 1,870,462
Transfer agent fees (Note 3e) ...................................................... 1,982,857
Special servicing agreement fees (Note 11) ......................................... 73,729
Custodian fees (Note 4) ............................................................ 86,658
Reports to shareholders ............................................................ 129,911
Registration and filing fees ....................................................... 82,751
Professional fees .................................................................. 31,084
Trustees' fees and expenses ........................................................ 59,248
Other .............................................................................. 55,992
-------------
Total expenses ............................................................... 11,529,496
Expense reductions (Note 4) .................................................. (60)
-------------
Net expenses .............................................................. 11,529,436
-------------
Net investment income (loss) ........................................... (6,194,068)
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers ......................................................... 63,824,411
Non-controlled affiliated issuers (Note 10) .................................. 421,327
Foreign currency transactions ................................................... (402,137)
-------------
Net realized gain (loss) .................................................. 63,843,601
-------------
Net change in unrealized appreciation (depreciation) on:
Investments ..................................................................... 164,162,884
Translation of other assets and liabilities denominated in foreign currencies ... 447,944
-------------
Net change in unrealized appreciation (depreciation) ...................... 164,610,828
-------------
Net realized and unrealized gain (loss) ............................................... 228,454,429
-------------
Net increase (decrease) in net assets resulting from operations ....................... $ 222,260,361
=============
The accompanying notes are an integral part of these financial statements.
22 | Semiannual Report
Franklin Gold and Precious Metals Fund
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JANUARY 31, 2010 YEAR ENDED
(UNAUDITED) JULY 31, 2009
---------------- --------------
Increase (decrease) in net assets:
Operations:
Net investment income (loss) .......................................................... $ (6,194,068) $ 1,421,084
Net realized gain (loss) from investments and foreign currency transactions ........... 63,843,601 7,124,319
Net change in unrealized appreciation (depreciation) on investments and translation of
other assets and liabilities denominated in foreign currencies ..................... 164,610,828 (80,795,452)
-------------- --------------
Net increase (decrease) in net assets resulting from operations ................. 222,260,361 (72,250,049)
-------------- --------------
Distributions to shareholders from:
Net investment income:
Class A ............................................................................ (90,319,644) --
Class B ............................................................................ (2,766,426) --
Class C ............................................................................ (19,471,646) --
Advisor Class ...................................................................... (10,125,911) --
Net realized gains:
Class A ............................................................................ (23,464,184) (4,210,163)
Class B ............................................................................ (815,988) (219,402)
Class C ............................................................................ (5,649,652) (1,115,501)
Advisor Class ...................................................................... (2,540,933) (463,119)
-------------- --------------
Total distributions to shareholders ...................................................... (155,154,384) (6,008,185)
-------------- --------------
Capital share transactions: (Note 2)
Class A ............................................................................ 174,642,754 50,994,016
Class B ............................................................................ (5,002,282) (7,656,258)
Class C ............................................................................ 33,010,792 8,530,945
Advisor Class ...................................................................... 25,170,487 24,968,634
-------------- --------------
Total capital share transactions ......................................................... 227,821,751 76,837,337
-------------- --------------
Redemption fees .......................................................................... -- 4,342
-------------- --------------
Net increase (decrease) in net assets ........................................... 294,927,728 (1,416,555)
Net assets:
Beginning of period ................................................................... 1,805,307,131 1,806,723,686
-------------- --------------
End of period ......................................................................... $2,100,234,859 $1,805,307,131
============== ==============
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 period ... $ (208,930,367) $ --
============== ==============
The accompanying notes are an integral part of these financial statements.
Semiannual Report | 23
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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.
24 | Semiannual Report
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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. The Fund may enter
into foreign currency exchange contracts to facilitate transactions denominated
in a foreign currency. 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 January 31, 2010, 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 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.
Semiannual Report | 25
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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.
26 | Semiannual Report
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
At January 31, 2010, there were an unlimited number of shares authorized
(without par value). Transactions in the Fund's shares were as follows:
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2010 JULY 31, 2009
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ------------ --------------
CLASS A SHARES:
Shares sold .................... 10,295,802 $ 411,718,572 19,761,170 $ 525,006,148
Shares issued in reinvestment of
distributions ............... 2,372,522 102,896,089 211,521 3,703,733
Shares redeemed ................ (8,676,424) (339,971,907) (18,759,944) (477,715,865)
---------- ------------- ----------- -------------
Net increase (decrease) ........ 3,991,900 $ 174,642,754 1,212,747 $ 50,994,016
========== ============= =========== =============
CLASS B SHARES:
Shares sold .................... 65,640 $ 2,464,756 400,007 $ 8,645,037
Shares issued in reinvestment of
distributions ............... 77,912 3,231,775 11,349 190,781
Shares redeemed ................ (284,456) (10,698,813) (690,461) (16,492,076)
---------- ------------- ----------- -------------
Net increase (decrease) ........ (140,904) $ (5,002,282) (279,105) $ (7,656,258)
========== ============= =========== =============
CLASS C SHARES:
Shares sold .................... 2,255,549 $ 87,019,992 3,800,768 $ 94,749,188
Shares issued in reinvestment of
distributions ............... 500,678 20,948,359 55,244 937,498
Shares redeemed ................ (1,980,282) (74,957,559) (3,609,311) (87,155,741)
---------- ------------- ----------- -------------
Net increase (decrease) ........ 775,945 $ 33,010,792 246,701 $ 8,530,945
========== ============= =========== =============
ADVISOR CLASS SHARES:
Shares sold .................... 1,307,587 $ 53,693,732 2,800,927 $ 69,888,421
Shares issued in reinvestment of
distributions ............... 218,257 9,804,096 22,458 406,039
Shares redeemed ................ (959,710) (38,327,341) (1,775,632) (45,325,826)
---------- ------------- ----------- -------------
Net increase (decrease) ........ 566,134 $ 25,170,487 1,047,753 $ 24,968,634
========== ============= =========== =============
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
Semiannual Report | 27
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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%
28 | Semiannual Report
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 period:
Sales charges retained net of commissions paid to
unaffiliated broker/dealers .................. $672,481
Contingent deferred sales charges retained ...... $ 70,218
E. TRANSFER AGENT FEES
For the period ended January 31, 2010, the Fund paid transfer agent fees of
$1,982,857, of which $1,352,190 was retained by Investor Services.
4. EXPENSE OFFSET ARRANGEMENT
The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the period ended January 31, 2010, the
custodian fees were reduced as noted in the Statement of Operations.
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.
At January 31, 2010, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments.............................. $1,340,721,004
==============
Unrealized appreciation.......................... 824,915,470
Unrealized depreciation.......................... (51,219,416)
--------------
Net unrealized appreciation (depreciation)....... $ 773,696,054
==============
Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of foreign currency transactions and
passive foreign investment company shares.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions and passive foreign investment company shares.
Semiannual Report | 29
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short term securities) for the
period ended January 31, 2010, aggregated $282,524,965 and $226,787,129,
respectively.
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 January 31, 2010, 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
- --------- ----------------------------------------------------- ---------------- ----------- -----------
3,750,000 (a) CGA Mining Ltd., 144A ........................... 9/22/09 $ 5,970,499 $ 6,476,309
8,850,000 (a) CGA Mining Ltd., 144A ........................... 1/20/10 18,709,460 14,097,324
500,000 (b) Guyana Goldfields Inc., wts., 144A, 6/10/12 ..... 6/05/09 -- 1,301,659
4,500,000 (c) Nevsun Resources Ltd., 144A ..................... 10/20/09 12,220,105 8,515,716
4,000,000 (d) Romarco Minerals Inc., wts., 144A, 3/03/11 ...... 3/04/09 -- 3,451,274
-----------
TOTAL RESTRICTED SECURITIES (1.61% of Net Assets) ................................ $33,842,282
===========
(a) The Fund also invests in unrestricted securities of the issuer, valued at
$15,413,283 as of January 31, 2010.
(b) The Fund also invests in unrestricted securities of the issuer, valued at
$32,898,868 as of January 31, 2010.
(c) The Fund also invests in unrestricted securities of the issuer, valued at
$18,831,830 as of January 31, 2010.
(d) The Fund also invests in unrestricted securities of the issuer, valued at
$25,096,701 as of January 31, 2010.
30 | Semiannual Report
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 period ended January
31, 2010, were as shown below.
NUMBER OF NUMBER OF
SHARES/ SHARES/
WARRANTS HELD WARRANTS VALUE REALIZED
AT BEGINNING GROSS GROSS HELD AT END AT END INVESTMENT CAPITAL
NAME OF ISSUER OF PERIOD ADDITIONS REDUCTIONS OF PERIOD OF PERIOD INCOME GAIN (LOSS)
- -------------- ------------- ---------- ---------- ----------- ------------ ---------- -----------
NON-CONTROLLED AFFILIATES
Allied Gold Ltd. ........................ -- 7,000,000 -- 7,000,000 $ 1,887,874 $-- $ --
Allied Gold Ltd., 144A .................. -- 45,000,000 -- 45,000,000 12,409,442 -- --
Anatolia Minerals Development Ltd. ...... 3,500,000 4,149,700 -- 7,649,700 23,669,556 -- --
Anatolia Minerals Development Ltd.,
144A ................................. -- 1,500,000 -- 1,500,000 4,641,271 -- --
CGA Mining Ltd. ......................... 6,724,000 2,000,000 -- 8,724,000 15,413,283 -- --
CGA Mining Ltd., 144A ................... -- 3,750,000 -- 3,750,000 6,476,309 -- --
CGA Mining Ltd., 144A ................... -- 8,850,000 -- 8,850,000 14,097,324 -- --
Gleichen Resources Ltd. ................. -- 15,000,000 1,000,000 14,000,000 14,265,015 -- 87,345
Gleichen Resources Ltd., wts.,
11/12/11 ............................. -- 3,750,000 -- 3,750,000 -- -- --
Guyana Goldfields Inc. .................. 2,500,000 1,700,500 92,900 4,107,600 24,536,166 -- 333,982
Guyana Goldfields Inc., 144A ............ 1,000,000 400,000 -- 1,400,000 8,362,702 -- --
Guyana Goldfields Inc., wts., 144A,
6/10/12 .............................. 500,000 -- -- 500,000 1,301,659 -- --
Nevsun Resources Ltd. ................... 8,094,600 1,732,400 -- 9,827,000 18,831,830 -- --
Nevsun Resources Ltd., 144A ............. -- 4,500,000 -- 4,500,000 8,515,716 -- --
Platinum Group Metals Ltd. .............. 3,000,000 -- -- 3,000,000 5,496,611 -- --
Platinum Group Metals Ltd., 144A ........ 2,000,000 -- -- 2,000,000 3,664,408 -- --
Platinum Group Metals Ltd., wts., 144A,
12/16/10 ............................. 1,000,000 -- -- 1,000,000 495,443 -- --
Romarco Minerals Inc. ................... 9,779,600 -- -- 9,779,600 13,804,343 -- --
Romarco Minerals Inc., 144A ............. 8,000,000 -- -- 8,000,000 11,292,358 -- --
Romarco Minerals Inc., wts., 144A,
3/03/11 .............................. 4,000,000 -- -- 4,000,000 3,451,274 -- --
St. Barbara Ltd. ........................ 65,461,382 8,000,000 -- 73,461,382 16,239,557 -- --
St. Barbara Ltd., 144A .................. -- 33,536,676 -- 33,536,676 7,413,702 -- --
------------ --- --------
TOTAL AFFILIATED ISSUERS (10.30% of
Net Assets) ....................... $216,265,843 $-- $421,327
============ === ========
11. SPECIAL SERVICING AGREEMENT
On May 1, 2009, the Fund, which is an eligible underlying investment of one or
more of the Franklin Templeton Fund Allocator Series Funds (Allocator Funds),
entered into a Special Servicing Agreement (SSA) with the Allocator Funds and
certain service providers of the Fund and the Allocator Funds. Under the SSA,
the Fund pays a portion of the Allocator Funds' expenses (other than any asset
allocation, administrative, and distribution fees) 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
Semiannual Report | 31
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
11. SPECIAL SERVICING AGREEMENT (CONTINUED)
either managed by Advisers or administered by FT Services. For the period ended
January 31, 2010, the Fund was held by one or more of the Allocator Funds and
was allocated expenses as noted in the Statement of Operations. At January 31,
2010, 3.34% of the Fund's outstanding shares was held by one or more of the
Allocator Funds.
12. CREDIT FACILITY
The Fund, together with other U.S. registered and foreign investment funds
(collectively "Borrowers"), managed by Franklin Templeton Investments, are
borrowers in a 364-day joint syndicated senior unsecured credit facility
totaling $750 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. On January 22,
2010, the Fund renewed the Global Credit Facility for a total of $750 million,
maturing January 21, 2011.
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 of 0.10% based upon the unused portion of the Global
Credit Facility, which is reflected in other expenses on the Statement of
Operations. During the period ended January 31, 2010, the Fund did not utilize
the Global Credit Facility.
13. FAIR VALUE MEASUREMENTS
The Fund follows 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.
32 | Semiannual Report
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
13. FAIR VALUE MEASUREMENTS (CONTINUED)
The following is a summary of the inputs used as of January 31, 2010, 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 ... $ 390,246,294 $ -- $13,268,649 $ 403,514,943
Long Life Gold Mines ............... 1,040,769,282 -- 20,573,633 1,061,342,915
Platinum & Palladium ............... 260,080,560 495,443 -- 260,576,003
All Other Equity Securities(b) ..... 349,487,127 -- -- 349,487,127
Short Term Investments .......... 39,496,070 -- -- 39,496,070
-------------- -------- ----------- --------------
Total Investments in Securities ....... $2,080,079,333 $495,443 $33,842,282 $2,114,417,058
============== ======== =========== ==============
(a) Includes common stock as well as other equity investments.
(b) For detailed industry descriptions, see the accompanying Statement of
Investments.
At January 31, 2010, 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
BALANCE AT NET UNREALIZED NET TRANSFER BALANCE AT (DEPRECIATION)
BEGINNING REALIZED APPRECIATION PURCHASES IN (OUT) OF END ON ASSETS HELD
OF PERIOD GAIN (LOSS) (DEPRECIATION) (SALES) LEVEL 3 OF PERIOD AT PERIOD END
----------- ----------- -------------- --------- ------------ ----------- --------------
ASSETS
Equity Securities:
Gold Exploration and
Development ........ $17,248,070 $-- $13,521,408 $-- $(17,500,829) $13,268,649 $13,521,408
Long Life Gold Mines .. -- -- 6,468,398 -- 14,105,235 20,573,633 6,468,398
----------- --- ----------- --- ------------ ----------- -----------
TOTAL .............. $17,248,070 $-- $19,989,806 $-- $ (3,395,594) $33,842,282 $19,989,806
=========== === =========== === ============ =========== ===========
14. NEW ACCOUNTING PRONOUNCEMENTS
In January 2010, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2010-6, FAIR VALUE MEASUREMENTS AND
DISCLOSURES (TOPIC 820): IMPROVING DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS,
which enhances and clarifies existing fair value measurement disclosure
requirements and is effective for interim and annual periods beginning after
December 15, 2009. The Fund is currently evaluating the impact, if any, of
applying this provision.
In March 2010, the FASB issued ASU No. 2010-11, DERIVATIVES AND HEDGING (TOPIC
815): SCOPE EXCEPTION RELATED TO EMBEDDED CREDIT DERIVATIVES, which clarifies
existing derivatives and hedging disclosure requirements and is effective for
fiscal quarters beginning after June 15, 2010. The Fund is currently evaluating
the impact, if any, of applying this provision.
Semiannual Report | 33
Franklin Gold and Precious Metals Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
15. SUBSEQUENT EVENTS
The Fund has evaluated subsequent events through the issuance of the financial
statements and determined that no events have occurred that require disclosure.
ABBREVIATIONS
SELECTED PORTFOLIO
ADR - American Depository Receipt
IDR - International Depository Receipt
34 | Semiannual Report
Franklin Gold and Precious Metals Fund
SHAREHOLDER INFORMATION
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.
Semiannual Report | 35
This page intentionally left blank.
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(2)
Mutual Recovery Fund(3)
Mutual Shares Fund
BLEND
Franklin Focused Core Equity Fund
Franklin Large Cap Equity Fund
Franklin Rising Dividends Fund
GROWTH
Franklin DynaTech Fund
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 Global Real Estate Fund
Franklin Gold & Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
ranklin Utilities Fund
Mutual Financial Services Fund
GLOBAL
Mutual Global Discovery Fund(4)
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(5)
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Limited Maturity U.S. Government Securities Fund(5)
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(5)
Templeton Global Bond Fund
Templeton Global Total Return Fund
Templeton International Bond Fund
TAX-FREE INCOME(6)
NATIONAL
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(7)
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(8)
Colorado
Connecticut
Florida
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(9)
Michigan(9)
Minnesota(9)
Missouri
New Jersey
New York(8)
North Carolina
Ohio(9)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust(10)
(1.) The fund is closed to new investors. Existing shareholders and select
retirement plans can continue adding to their accounts.
(2.) Effective 5/1/09, Mutual Qualified Fund changed its name to Mutual Quest
Fund. The fund's investment goal and strategy remained unchanged.
(3.) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25% of
the outstanding number of shares. Investors may tender all or a portion of
their shares during the tender period.
(4.) Effective 5/1/09, Mutual Discovery Fund changed its name to Mutual Global
Discovery Fund. The fund's investment goal and strategy remained unchanged.
(5.) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(6.) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are generally
taxable.
(7.) The fund invests primarily in insured municipal securities.
(8.) These funds are available in three or more variations, including long-term
portfolios, intermediate-term portfolios, portfolios of insured securities,
a high-yield portfolio (CA only) and a money market portfolio (CA only).
(9.) 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 2/15/09.
(10.) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
01/10 Not part of the semiannual report
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO) One Franklin Parkway
San Mateo, CA 94403-1906
SIGN UP FOR ELECTRONIC DELIVERY
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SEMIANNUAL 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 summary
prospectus and/or prospectus. Investors should carefully consider a fund's
investment goals, risks, charges and expenses before investing. A 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 S 03/10
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. N/A
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 Officer, Chief Accounting Officer and Treasurer
(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, Chief Accounting Officer and Treasurer
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. FERGRESON
----------------------
Laura F. Fergerson
Chief Executive Officer -
Finance and Administration
Date March 30, 2010
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. FERGRESON
----------------------
Laura F. Fergerson
Chief Executive Officer -
Finance and Administration
Date March 30, 2010
By /s/GASTON GARDEY
-----------------
Gaston Gardey
Chief Financial Officer and
Chief Accounting Officer
Date March 30, 2010