-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BPqN6rP2rCd16FzDB1/1hL23gF2+lnVyUxzndQooDPdqQcquBETC3XuzBdCIfrk0 9WmdY9L7sWfLnjqZZCHnWw== 0000083293-04-000005.txt : 20040401 0000083293-04-000005.hdr.sgml : 20040401 20040331184544 ACCESSION NUMBER: 0000083293-04-000005 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040131 FILED AS OF DATE: 20040401 EFFECTIVENESS DATE: 20040401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRANKLIN GOLD & PRECIOUS METALS FUND CENTRAL INDEX KEY: 0000083293 IRS NUMBER: 942663354 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-01700 FILM NUMBER: 04707439 BUSINESS ADDRESS: STREET 1: ONE FRANKLIN PARKWAY CITY: SAN MATEO STATE: CA ZIP: 94403-1906 BUSINESS PHONE: 650-312-2000 MAIL ADDRESS: STREET 1: ONE FRANKLIN PARKWAY CITY: SAN MATEO STATE: CA ZIP: 94403-1906 FORMER COMPANY: FORMER CONFORMED NAME: FRANKLIN GOLD FUND DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: RESEARCH CAPITAL FUND INC DATE OF NAME CHANGE: 19831025 FORMER COMPANY: FORMER CONFORMED NAME: WINCAP FUND DATE OF NAME CHANGE: 19730726 N-CSRS 1 fgpmfsemincsr.txt 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 811-1700 -------- FRANKLIN GOLD AND PRECIOUS METALS FUND -------------------------------------- (Exact name of registrant as specified in charter) ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906 (Address of principal executive offices) (Zip code) MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906 ----------------------------------------------------------------- (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: 1/31/04 ------- ITEM 1. REPORTS TO STOCKHOLDERS. January 31, 2004 - -------------------------------------------------------------------------------- [PHOTO OMITTED] - -------------------------------------------------------------------------------- SEMIANNUAL REPORT AND SHAREHOLDER LETTER SECTOR - -------------------------------------------------------------------------------- WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL? FRANKLIN GOLD AND PRECIOUS METALS FUND Eligible shareholders can sign up for eDelivery at franklintempleton.com. See inside for details. - -------------------------------------------------------------------------------- [LOGO OMITTED](R) FRANKLIN(R) TEMPLETON(R) INVESTMENTS FRANKLIN o Templeton o Mutual Series FRANKLIN TEMPLETON INVESTMENTS GAIN FROM OUR PERSPECTIVE Franklin Templeton's distinct multi-manager structure combines the specialized expertise of three world-class investment management groups-- Franklin, Templeton and Mutual Series. SPECIALIZED EXPERTISE Each of our portfolio management groups operates autonomously, relying on its own research and staying true to the unique investment disciplines that underlie its success. FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a driving force in fixed income investing around the globe. They also bring expertise in growth- and value-style U.S. equity investing. TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in 1954, launched what has become the industry's oldest global fund. Today, with research offices in over 25 countries, they offer investors the broadest global reach in the industry. MUTUAL SERIES. Established in 1949, Mutual Series is dedicated to a unique style of value investing, searching aggressively for opportunity among undervalued stocks, arbitrage situations and distressed companies. TRUE DIVERSIFICATION Because our management groups work independently and adhere to distinctly different investment approaches, Franklin, Templeton and Mutual Series funds typically have a low overlap of securities. That's why our funds can be used to build truly diversified portfolios covering every major asset class. RELIABILITY YOU At Franklin Templeton Investments, we seek to CAN TRUST consistently provide investors with exceptional risk-adjusted returns over the long term, as well as the reliable account services that have helped us become one of the most trusted names in financial services. - -------------------------------------------------------------------------------- MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS - -------------------------------------------------------------------------------- [PHOTO OMITTED] - -------------------------------------------------------------------------------- Not part of the semiannual report CONTENTS SHAREHOLDER LETTER ....... 1 SEMIANNUAL REPORT Financial Statements .................... 17 Franklin Gold and Precious Metals Fund ... 3 Notes to Financial Statements ........... 21 Performance Summary ...................... 8 Tax Designation ......................... 27 Financial Highlights and Proxy Voting Policies and Procedures .... 30 Statement of Investments ................ 11
- -------------------------------------------------------------------------------- SEMIANNUAL REPORT FRANKLIN GOLD AND PRECIOUS METALS FUND YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin Gold and Precious Metals Fund seeks capital appreciation, with current income as a secondary goal, by investing at least 80% of its net assets in securities of companies that mine, process or deal in gold or other precious metals. [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS: ----------------------------------------------------------- GEOGRAPHIC DISTRIBUTION Based on Total Net Assets as of 1/31/04 Canada ...................................... 35.2% South Africa ................................ 22.5% U.S. ........................................ 14.5% Australia .................................... 8.1% Ghana ........................................ 5.7% Peru ......................................... 4.4% U.K. ......................................... 3.5% Papua New Guinea ............................. 1.6% Short-Term Investments and Other Net Assets ............................. 4.5% ----------------------------------------------------------- We are pleased to bring you Franklin Gold and Precious Metals Fund's semiannual report for the period ended January 31, 2004. PERFORMANCE OVERVIEW Franklin Gold and Precious Metals Fund - Class A delivered a +28.39% cumulative total return for the six months ended January 31, 2004, as shown in the Performance Summary beginning on page 8. By comparison, the broad Standard & Poor's 500 Composite Index (S&P 500) had a 15.22% total return, and the sector-specific Financial Times (FT) Gold Mines Index posted an 18.87% price return during the same period. 1 1. Sources: Standard & Poor's Micropal; Financial Times. The unmanaged S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. Each stock's weight in the index is proportionate to its market value. The S&P 500 includes reinvested dividends and is one of the most widely used benchmarks of U.S. equity performance. The unmanaged FT Gold Mines Index is an unweighted index that tracks the daily performance of gold mining companies in South Africa, Australia and North America. This is a price-only index and does not include dividends. One cannot invest directly in an index, nor is an index representative of the Fund's portfolio. THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND COMPLETE LEGAL TITLES OF ALL PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE SOI BEGINS ON PAGE 15. Semiannual Report | 3 [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS: PORTFOLIO BREAKDOWN Based on Total Net Assets as of 1/31/04 Long Life Gold Mines 59.0% Medium Life Gold Mines 13.2% Platinum & Palladium 10.6% Gold & Diversified Resources 8.5% Gold Exploration 2.9% Foreign Equity Mutual Fund 1.3% Short-Term Investments & Other Net Assets 4.5% ECONOMIC AND MARKET OVERVIEW During the six months ended January 31, 2004, domestic economic recovery appeared to be on track. The annualized gross domestic product growth rate surged 8.2% in the third quarter of 2003 and rose 4.1% in the fourth quarter. The U.S. dollar's continued weakness, particularly against the euro, led to modest trade balance improvements. Business sentiment climbed in January 2004 to its highest level in nearly a decade; and business equipment spending, especially in information technology, rose in the third and fourth quarters of 2003. Consumer sentiment rose in January to its highest level since November 2000. Consumer spending, however, grew only modestly in fourth quarter 2003 compared with strong third-quarter spending, which was fueled by federal tax cuts, mortgage refinancing and auto-buying incentives. Slow wage growth, heavy indebtedness and lower wealth since 2000 despite recent stock market gains constrained consumer spending. Lack of job growth remained a risk to the economy during the reporting period, and although the unemployment rate fell to 5.6% in January, this occurred mainly because of a labor force decline. At the Federal Reserve Board's (Fed's) January meeting, Fed policymakers indicated they would not raise interest rates until the job market improved meaningfully. Thus, they kept the federal funds target rate at 1.00%, and maintained a neutral stance with respect to future economic growth and inflation. However, the Fed said it "can be patient" about raising rates, which was different from previous statements. The change in wording caused mixed reaction among market analysts about when the Fed might begin raising rates. During the period, equity markets continued a rally that began in March 2003. Data showing robust economic growth and improved revenue reports from corporate America seemed to increase investor confidence in the stock markets. The S&P 500 rose 15.22% for the six months under review, while the technology-heavy Nasdaq Composite Index increased 19.43%. 2 In the precious metals sector, gold prices continued to strengthen during the six months under review, rising 13.5% from the beginning of the period. Gold reached a high of $426 per ounce in January, a level not seen since 1988, before closing the period just above $400 per ounce. The average gold price for the period was $389 per ounce, up 11.5% from the prior six-month average of $349 per ounce. Gold price strength can be attributed partially to U.S. dollar weakness. The U.S. dollar depreciated 10% versus the euro and 12% versus the yen during 2. Source: Standard & Poor's Micropal. See footnote 1 for a description of the S&P 500. The Nasdaq Composite Index measures all domestic and international common stocks listed on The Nasdaq Stock Market. The index is market value-weighted and includes over 3,000 companies. 4 | Semiannual Report the period. Investor interest in gold and gold equities continued to be robust throughout the period with record levels of long trades on the commodities exchange as well as buoyant prices among many gold equities. Platinum prices also remained quite strong during the six-month period, breaking through the $850 level and reaching a 23-year high. Similar to gold, platinum benefited from the weak U.S. dollar and strong global demand. Additionally, delays at a number of large expansion projects managed by the world's leading primary provider of platinum, Anglo American Platinum, helped boost prices. Palladium, which has declined in price for the past three years, regained some ground, rising from the $180 level to more than $200 at period-end as higher platinum prices triggered some substitution of platinum with palladium. Franklin Gold and Precious Metals Fund Semiannual Report January 31, 2004 APPENDIX DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM 304 (a) OF REGULATION S-T) GRAPHIC MATERIAL (1) The following chart represents Precious Metals prices for platinum, palladium and gold in U.S. dollars per troy ounce, between 8/1/03 and 1/31/04. 3 Gold Platinum Palladium 8/1/03 $346.15 $679.50 $183.50 8/8/03 $356.75 $679.50 $177.50 8/15/03 $363.75 $699.50 $176.50 8/22/03 $362.95 $698.50 $193.50 8/29/03 $375.55 $710.00 $201.50 9/5/03 $377.35 $713.50 $218.50 9/12/03 $375.25 $698.00 $213.50 9/19/03 $381.85 $699.50 $218.50 9/26/03 $380.85 $705.50 $211.50 10/3/03 $369.55 $716.00 $209.50 10/10/03 $373.05 $730.50 $208.50 10/17/03 $371.65 $726.50 $195.50 10/24/03 $388.55 $737.50 $195.50 10/31/03 $384.25 $748.50 $208.50 11/7/03 $383.05 $755.50 $203.50 11/14/03 $397.55 $771.00 $199.50 11/21/03 $396.05 $764.50 $194.50 11/28/03 $398.15 $765.50 $189.50 12/5/03 $406.35 $788.00 $197.50 12/12/03 $408.85 $823.00 $208.50 12/19/03 $409.35 $829.50 $194.50 12/26/03 $412.25 $823.50 $202.50 1/2/04 $415.85 $814.50 $194.50 1/9/04 $426.38 $852.00 $203.50 1/16/04 $406.75 $855.50 $215.50 1/23/04 $408.08 $864.50 $235.50 1/30/04 $402.45 $837.50 $229.50 For illustrative purposes only; not representative of the Fund's portfolio composition or performance. TOP 10 HOLDINGS 1/31/04 - --------------------------------------------------------- COMPANY % OF TOTAL INDUSTRY, COUNTRY NET ASSETS - --------------------------------------------------------- Barrick Gold Corp. 7.9% LONG LIFE GOLD MINES, CANADA - --------------------------------------------------------- Newmont Mining Corp. 7.1% LONG LIFE GOLD MINES, U.S. - --------------------------------------------------------- Placer Dome Inc. 6.4% LONG LIFE GOLD MINES, CANADA - --------------------------------------------------------- Harmony Gold Mining Co. Ltd., ord. & ADR 5.9% LONG LIFE GOLD MINES, SOUTH AFRICA - --------------------------------------------------------- Ashanti Goldfields Co. Ltd., GDR, Reg S 5.7% LONG LIFE GOLD MINES, GHANA - --------------------------------------------------------- Impala Platinum Holdings Ltd., ord. & ADR 5.2% PLATINUM & PALLADIUM, SOUTH AFRICA - --------------------------------------------------------- Newcrest Mining Ltd. 5.0% MEDIUM LIFE GOLD MINES, AUSTRALIA - --------------------------------------------------------- Freeport-McMoRan Copper & Gold Inc., B 4.7% GOLD AND DIVERSIFIED RESOURCES, U.S. - --------------------------------------------------------- Meridian Gold Inc. 4.5% LONG LIFE GOLD MINES, CANADA - --------------------------------------------------------- Anglo American Platinum Corp. Ltd., ADR 4.4% PLATINUM & PALLADIUM, SOUTH AFRICA - --------------------------------------------------------- INVESTMENT STRATEGY Our conservative management style seeks to expose shareholders to the benefits of diversification by investing globally in the precious metals sector. We like companies with multiple mines, attractive production profiles, strong reserve bases and active exploration programs that can drive future reserve and production growth. While the sector can be volatile especially over the short term, precious metals, such as gold, can be attractive because they are a hard asset not tied to any particular country or financial system, which can help stabilize a portfolio in times of economic uncertainty. 3. Amounts shown are based on spot prices quoted in U.S. dollars per troy ounce. Semiannual Report | 5 MANAGER'S DISCUSSION Given higher gold and platinum prices, all but one of the Fund's holdings posted positive performance during the six months under review. The end of 2003 also marked the fifth consecutive year that Franklin Gold and Precious Metals Fund has outperformed the S&P 500. 4 The Fund's top performing stocks for the period, with individual weightings over 1.5% of total net assets, were Wheaton River Minerals, Ashanti Goldfields, Companhia de Minas Buenaventura, Anglo American Platinum and Freeport-McMoRan Copper & Gold. All of these were overweighted positions relative to the FT Gold Mines Index. Wheaton River and Freeport benefited from higher copper prices as both companies are significant miners of copper as well as gold. Competitive acquisition attempts between AngloGold and Randgold Resources boosted Ashanti's performance. AngloGold eventually gained board approval to proceed with the acquisition. The bottom performing stocks, each with positions greater than 1.5% of total net assets, were Meridian Gold, Gold Fields, Kinross Gold and Randgold Resources. We were overweighted in Meridian and Randgold relative to the FT Gold Mines Index. Meridian shares continued to lag due to concerns over the company's inability to gain approval to proceed with developing its Esquel project in Argentina. Despite these concerns, and consistent with our strategy, we added to this position during the period. Gold Fields suffered from operational problems as well as cost pressure from an appreciating South African rand. Randgold's shares fell following their failed takeover attempt of Ashanti Goldfields. As gold prices rose, we increased our holdings in small-capitalization gold companies as higher margins may help offset some of the risk of smaller, less diversified operations. Because these smaller companies can be relatively risky investments by themselves, we took a basket approach and bought small positions in a number of different companies, significantly increasing the number of Fund holdings. We also participated in six secondary stock offerings that included warrants. Still, we maintained large weightings in the sector's largest and broadly diversified players. Our two biggest holdings at period-end were Barrick Gold and Newmont Mining, the sector's largest companies. 4. Franklin Gold and Precious Metals Fund - Class A one-year returns (not including sales charges) were 25.39%, -7.38%, 10.00%, 37.38% and 52.32% for 1999, 2000, 2001, 2002 and 2003, respectively, compared with the S&P 500's 21.04%, -9.10%, -11.88%, -22.09% and 28.67% one-year returns for the same respective years. The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index, nor is an index representative of the Fund's portfolio. Past performance does not guarantee future results. 6 | Semiannual Report Thank you for your continued participation in Franklin Gold and Precious Metals Fund. We look forward to serving your future investment needs. [PHOTO OMITTED] /S/Stephen M. Land Stephen M. Land Portfolio Manager Franklin Gold and Precious Metals Fund THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF JANUARY 31, 2004, 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 ADVISOR MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT PHILOSOPHY. Semiannual Report | 7 PERFORMANCE SUMMARY AS OF 1/31/04 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 due on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects the Fund's dividend income, capital gain distributions, if any, and any unrealized gains or losses. PRICE AND DISTRIBUTION INFORMATION
- --------------------------------------------------------------------------------------------------------- CLASS A CHANGE 1/31/04 7/31/03 - --------------------------------------------------------------------------------------------------------- Net Asset Value (NAV) +$3.81 $17.54 $13.73 - --------------------------------------------------------------------------------------------------------- DISTRIBUTIONS (8/1/03-1/31/04) - --------------------------------------------------------------------------------------------------------- Dividend Income $0.1001 - --------------------------------------------------------------------------------------------------------- CLASS B CHANGE 1/31/04 7/31/03 - --------------------------------------------------------------------------------------------------------- Net Asset Value (NAV) +$3.71 $17.16 $13.45 - --------------------------------------------------------------------------------------------------------- DISTRIBUTIONS (8/1/03-1/31/04) - --------------------------------------------------------------------------------------------------------- Dividend Income $0.0457 - --------------------------------------------------------------------------------------------------------- CLASS C CHANGE 1/31/04 7/31/03 - --------------------------------------------------------------------------------------------------------- Net Asset Value (NAV) +$3.74 $17.32 $13.58 - --------------------------------------------------------------------------------------------------------- DISTRIBUTIONS (8/1/03-1/31/04) - --------------------------------------------------------------------------------------------------------- Dividend Income $0.0403 - --------------------------------------------------------------------------------------------------------- ADVISOR CLASS CHANGE 1/31/04 7/31/03 - --------------------------------------------------------------------------------------------------------- Net Asset Value (NAV) +$3.90 $17.98 $14.08 - --------------------------------------------------------------------------------------------------------- DISTRIBUTIONS (8/1/03-1/31/04) - --------------------------------------------------------------------------------------------------------- Dividend Income $0.1268 - ---------------------------------------------------------------------------------------------------------
8 | Past performance does not guarantee future results. | Semiannual Report Performance Summary (CONTINUED) PERFORMANCE
- ---------------------------------------------------------------------------------------------------------- CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR - ---------------------------------------------------------------------------------------------------------- Cumulative Total Return 1 +28.39% +35.91% +141.95% +38.74% Average Annual Total Return 2 +20.99% +28.11% +17.92% +2.72% Value of $10,000 Investment 3 $12,099 $12,811 $22,803 $13,079 Avg. Ann. Total Return (12/31/03) 4 +43.59% +20.30% +3.59% - ---------------------------------------------------------------------------------------------------------- CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99) - ---------------------------------------------------------------------------------------------------------- Cumulative Total Return 1 +27.88% +34.90% +133.35% +132.44% Average Annual Total Return 2 +23.88% +30.90% +18.26% +17.94% Value of $10,000 Investment 3 $12,388 $13,090 $23,135 $23,144 Avg. Ann. Total Return (12/31/03) 4 +47.19% +20.65% +20.65% - ---------------------------------------------------------------------------------------------------------- CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/95) - ---------------------------------------------------------------------------------------------------------- Cumulative Total Return 1 +27.80% +34.85% +133.68% +34.17% Average Annual Total Return 2 +26.80% +33.85% +18.50% +3.41% Value of $10,000 Investment 3 $12,680 $13,385 $23,368 $13,417 Avg. Ann. Total Return (12/31/03) 4 +48.62% +20.62% +4.56% - ---------------------------------------------------------------------------------------------------------- ADVISOR CLASS 5 6-MONTH 1-YEAR 5-YEAR 10-YEAR - ---------------------------------------------------------------------------------------------------------- Cumulative Total Return 1 +28.49% +36.23% +145.34% +46.07% Average Annual Total Return 2 +28.49% +36.23% +19.66% +3.86% Value of $10,000 Investment 3 $12,849 $13,623 $24,534 $14,607 Avg. Ann. Total Return (12/31/03) 4 +52.70% +22.06% +4.74% - ---------------------------------------------------------------------------------------------------------
ONGOING MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE RECENT RETURNS MAY DIFFER FROM THOSE SHOWN. SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. FOR MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236. Semiannual Report | Past performance does not guarantee future results. | 9 PERFORMANCE SUMMARY (CONTINUED) ENDNOTES INVESTING IN A NON-DIVERSIFIED FUND CONCENTRATING IN THE PRECIOUS METALS SECTOR INVOLVES SPECIAL RISKS, INCLUDING THOSE RELATED TO FLUCTUATIONS IN THE PRICE OF GOLD AND OTHER PRECIOUS METALS AND INCREASED SUSCEPTIBILITY TO ADVERSE ECONOMIC AND REGULATORY DEVELOPMENTS AFFECTING THE SECTOR. THE FUND MAY ALSO INVEST IN FOREIGN COMPANIES, INCLUDING IN DEVELOPING MARKETS, WHICH CAN INVOLVE EXPOSURE TO CURRENCY VOLATILITY AND POLITICAL, ECONOMIC AND REGULATORY UNCERTAINTY. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS. CLASS A: Subject to the current, maximum 5.75% initial sales charge. Prior to 8/3/98, Fund shares were offered at a lower initial sales charge; thus actual total returns may differ. Effective 5/1/94, the Fund implemented a Rule 12b-1 plan, which affects subsequent performance. CLASS B: Subject to no initial sales charge, but subject to a contingent deferred sales charge (CDSC) declining from 4% to 0% over six years. These shares have higher annual fees and expenses than Class A shares. CLASS C: Subject to no initial sales charge, but subject to 1% CDSC for shares redeemed within 12 months of investment. Prior to 1/1/04, these shares were offered with an initial sales charge; thus actual returns would have differed. These shares have higher annual fees and expenses than Class A shares. ADVISOR CLASS: No initial sales charge or Rule 12b-1 fees; shares are available to a limited class of investors. 1. Cumulative total return represents the change in value of an investment over the periods indicated and does not include sales charges. 2. Average annual total return represents the average annual change in value of an investment over the periods indicated and includes any current, applicable, maximum sales charge(s). 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 and include any current, applicable, maximum sales charge(s). 4. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter. 5. Effective 1/2/97, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 1/2/97, a restated figure is used based upon the Fund's Class A performance, excluding the effect of Class A's maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 1/1/97, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 1/2/97 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +51.01% and +5.99%. 10 | Past performance does not guarantee future results. | Semiannual Report FRANKLIN GOLD AND PRECIOUS METALS FUND FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------- SIX MONTHS ENDED JANUARY 31, 2004 YEAR ENDED JULY 31, CLASS A (UNAUDITED) 2003 2002 2001 2000 1999 -------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............. $13.74 $10.28 $ 8.88 $7.90 $8.30 $7.48 -------------------------------------------------------------------------------- Income from investment operations: Net investment income a ......................... .05 .13 .13 .25 .10 .07 Net realized and unrealized gains (losses) ...... 3.85 3.44 1.52 .84 (.46) .79 -------------------------------------------------------------------------------- Total from investment operations ................. 3.90 3.57 1.65 1.09 (.36) .86 -------------------------------------------------------------------------------- Less distributions from net investment income ............................... (.10) (.11) (.25) (.11) (.04) (.04) -------------------------------------------------------------------------------- Net asset value, end of period ................... $17.54 $13.74 $10.28 $8.88 $7.90 $8.30 ================================================================================ Total return b ................................... 28.39% 34.97% 18.97% 13.91% (4.42)% 11.51% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ................ $410,233 $306,283 $200,627 $164,004 $156,236 $205,889 Ratios to average net assets: Expenses ........................................ 1.00% c 1.09% 1.13% 1.32% 1.34% 1.31% Net investment income ........................... .54% c 1.05% 1.18% 2.86% 1.17% .85% Portfolio turnover rate .......................... 4.18% 6.59% 12.77% 7.31% 3.53% 4.29% a Based on average daily shares outstanding. b Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less than one year. c Annualized.
Semiannual Report | 11 FRANKLIN GOLD AND PRECIOUS METALS FUND FINANCIAL HIGHLIGHTS (CONTINUED)
-------------------------------------------------------------------------------- SIX MONTHS ENDED JANUARY 31, 2004 YEAR ENDED JULY 31, CLASS B (UNAUDITED) 2003 2002 2001 2000 1999 c -------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............. $13.46 $10.11 $ 8.76 $7.82 $8.26 $7.72 -------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) a .................. (.02) .02 .01 .17 .01 (.04) Net realized and unrealized gains (losses) ...... 3.77 3.41 1.55 .83 (.41) .58 -------------------------------------------------------------------------------- Total from investment operations ................. 3.75 3.43 1.56 1.00 (.40) .54 -------------------------------------------------------------------------------- Less distributions from net investment income ............................... (.05) (.08) (.21) (.06) (.04) -- -------------------------------------------------------------------------------- Net asset value, end of period ................... $17.16 $13.46 $10.11 $8.76 $7.82 $8.26 ================================================================================ Total return b ................................... 27.88% 34.08% 18.14% 12.78% (4.90)% 6.99% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ................ $41,044 $26,278 $10,964 $4,037 $2,779 $1,217 Ratios to average net assets: Expenses ........................................ 1.75% d 1.85% 1.89% 2.08% 2.10% 2.10% d Net investment income (loss) .................... (.21)% d .29% .12% 1.88% .17% (.84)% d Portfolio turnover rate .......................... 4.18% 6.59% 12.77% 7.31% 3.53% 4.29% a Based on average daily shares outstanding. b Total return does not reflect the contingent deferred sales charge, and is not annualized for periods less than one year. c For the period January 1, 1999 (effective date) to July 31, 1999. d Annualized.
12 | Semiannual Report FRANKLIN GOLD AND PRECIOUS METALS FUND FINANCIAL HIGHLIGHTS (CONTINUED)
-------------------------------------------------------------------------------- SIX MONTHS ENDED JANUARY 31, 2004 YEAR ENDED JULY 31, CLASS C (UNAUDITED) 2003 2002 2001 2000 1999 -------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............. $13.59 $10.18 $ 8.80 $7.83 $8.23 $7.43 -------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss) a .................. (.03) .04 .04 .18 .03 .01 Net realized and unrealized gains (losses) ...... 3.81 3.43 1.53 .83 (.43) .80 -------------------------------------------------------------------------------- Total from investment operations ................. 3.78 3.47 1.57 1.01 (.40) .81 -------------------------------------------------------------------------------- Less distributions from net investment income ............................... (.04) (.06) (.19) (.04) -- c (.01) -------------------------------------------------------------------------------- Net asset value, end of period ................... $17.33 $13.59 $10.18 $8.80 $7.83 $8.23 ================================================================================ Total return b ................................... 27.80% 34.16% 18.09% 12.89% (4.85)% 10.85% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ................ $107,359 $65,729 $38,219 $22,220 $20,721 $23,473 Ratios to average net assets: Expenses ........................................ 1.75% d 1.82% 1.88% 2.07% 2.10% 2.07% Net investment income (loss) .................... (.21)% d .32% .35% 2.11% .36% .08% Portfolio turnover rate .......................... 4.18% 6.59% 12.77% 7.31% 3.53% 4.29% a Based on average daily shares outstanding. b Total return does not reflect the contingent deferred sales charge, and is not annualized for periods less than one year. c Includes distributions from net investment income in the amount of $.001. d Annualized.
Semiannual Report | 13 FRANKLIN GOLD AND PRECIOUS METALS FUND FINANCIAL HIGHLIGHTS (CONTINUED)
-------------------------------------------------------------------------------- SIX MONTHS ENDED JANUARY 31, 2004 YEAR ENDED JULY 31, ADVISOR CLASS (UNAUDITED) 2003 2002 2001 2000 1999 -------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period) Net asset value, beginning of period ............. $14.08 $10.53 $ 9.09 $8.09 $8.49 $7.61 -------------------------------------------------------------------------------- Income from investment operations: Net investment income a ......................... .06 .09 .15 .28 .11 .08 Net realized and unrealized gains (losses) ...... 3.97 3.60 1.56 .85 (.46) .85 -------------------------------------------------------------------------------- Total from investment operations ................. 4.03 3.69 1.71 1.13 (.35) .93 -------------------------------------------------------------------------------- Less distributions from net investment income ............................... (.13) (.14) (.27) (.13) (.05) (.05) -------------------------------------------------------------------------------- Net asset value, end of period ................... $17.98 $14.08 $10.53 $9.09 $8.09 $8.49 ================================================================================ Total return ..................................... 28.49% 35.38% 19.38% 14.04% (4.21)% 12.30% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's) ................ $42,534 $21,223 $5,573 $3,574 $3,715 $3,204 Ratios to average net assets: Expenses ........................................ .75% b .85% .90% 1.08% 1.10% 1.08% Net investment income ........................... .79% b 1.29% 1.29% 3.15% 1.24% .98% Portfolio turnover rate .......................... 4.18% 6.59% 12.77% 7.31% 3.53% 4.29% a Based on average daily shares outstanding. b Annualized.
14 | See notes to financial statements. | Semiannual Report FRANKLIN GOLD AND PRECIOUS METALS FUND STATEMENT OF INVESTMENTS, JANUARY 31, 2004 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------- COUNTRY SHARES/WARRANTS VALUE - ---------------------------------------------------------------------------------------------------------------------------- COMMON STOCKS, RIGHTS AND WARRANTS 94.2% GOLD AND DIVERSIFIED RESOURCES 8.5% Anglo American PLC ............................................. United Kingdom 256,100 $ 5,822,362 Anglo American PLC, ADR ........................................ United Kingdom 420,479 9,667,233 a Coeur D'Alene Mines Corp. ...................................... United States 550,000 2,997,500 Freeport-McMoRan Copper & Gold Inc., B ......................... United States 762,011 28,087,725 Rio Tinto PLC .................................................. United Kingdom 170,401 4,528,477 a Sociedad Minera El Brocal SA ................................... Peru 1,006 2,314 -------------- 51,105,611 -------------- GOLD EXPLORATION 2.9% a Gabriel Resources Ltd. ......................................... Canada 348,000 1,033,223 Highland Gold Mining Ltd ....................................... United Kingdom 250,000 1,217,281 a Ivanhoe Mines Ltd. ............................................. Canada 868,600 6,359,113 a Ivanhoe Mines Ltd, wts., 12/19/05 .............................. Canada 159,300 323,294 a Metallica Resources Inc. ....................................... Canada 988,998 1,568,540 a Metallica Resources Inc., wts., 12/11/08 ....................... Canada 494,499 223,015 a,c Miramar Mining Corp., Restricted Shares ........................ Canada 330,000 651,914 a Miramar Mining Corp. (cad) ..................................... Canada 1,000,000 2,097,114 a,c Miramar Mining Corp., Restricted wts., 6/09/05 ................. Canada 165,000 13,394 a Nevsun Resources Ltd. .......................................... Canada 654,100 2,340,286 a,c Semafo Inc., Restricted Shares ................................. Canada 2,450,000 1,670,287 a Semafo Inc. .................................................... Canada 286,100 208,597 a,c Semafo Inc., 144A, Restricted, wts., 12/18/06 .................. Canada 1,225,000 123,384 -------------- 17,829,442 -------------- LONG LIFE GOLD MINES 59.0% Agnico-Eagle Mines Ltd. ........................................ Canada 425,000 5,418,750 AngloGold Ltd. ................................................. South Africa 182,530 7,408,840 AngloGold Ltd., ADR ............................................ South Africa 448,617 18,092,724 a Ashanti Goldfields Co. Ltd., GDR, Reg S ........................ Ghana 3,002,450 34,137,856 Barrick Gold Corp. ............................................. Canada 2,405,371 47,385,809 Compania de Minas Buenaventura SA .............................. Peru 100,593 2,340,174 Compania de Minas Buenaventura SA, ADR ......................... Peru 1,038,986 24,312,272 Gold Fields Ltd. ............................................... South Africa 704,999 9,073,637 Gold Fields Ltd., ADR .......................................... South Africa 389,528 5,013,225 Harmony Gold Mining Ltd., ADR .................................. South Africa 200,000 3,054,000 Harmony Gold Mining Co. Ltd. ................................... South Africa 2,093,000 32,265,573 Lihir Gold Ltd. ................................................ Papua New Guinea 8,566,841 8,475,759 Lihir Gold Ltd., ADR, 144A ..................................... Papua New Guinea 50,000 1,020,500 a Meridian Gold Inc. ............................................. Canada 2,085,260 27,101,768 Newcrest Mining Ltd. ........................................... Australia 3,455,050 29,897,120 Newmont Mining Corp. ........................................... United States 1,020,914 42,531,277 a Oxiana Ltd. .................................................... Australia 7,906,124 5,294,938 a Oxiana Ltd., rts., 2/19/04 ..................................... Australia 1,976,531 130,869 Placer Dome Inc. ............................................... Canada 2,418,755 38,240,517 a Randgold Resources Ltd., ADR ................................... United States 498,800 10,983,576 a Western Areas Ltd. ............................................. South Africa 402,225 2,400,409 a Western Areas Ltd., ADR ........................................ South Africa 26,430 157,730 -------------- 354,737,323 --------------
Semiannual Report | 15 FRANKLIN GOLD AND PRECIOUS METALS FUND STATEMENT OF INVESTMENTS, JANUARY 31, 2004 (UNAUDITED) (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------- COUNTRY SHARES/WARRANTS VALUE - ---------------------------------------------------------------------------------------------------------------------------- COMMON STOCKS, RIGHTS AND WARRANTS (CONT.) MEDIUM LIFE GOLD MINES 13.2% a Apollo Gold Corp. .............................................. Canada 1,150,000 $ 2,264,732 a Glamis Gold Ltd. ............................................... Canada 841,000 12,615,000 a Eldorado Gold Corp. ............................................ Canada 860,000 2,391,762 Kingsgate Consolidated Ltd. .................................... Australia 1,855,148 4,941,527 a Kinross Gold Corp. ............................................. Canada 2,663,012 18,615,463 a Northgate Exploration Ltd. ..................................... Canada 1,300,000 2,618,761 a Queenstake Resources Ltd. ...................................... Canada 5,000,000 2,705,953 a Rio Narcea Gold Mines Ltd. ..................................... Canada 1,100,000 2,480,457 a Sons of Gwalia Ltd. ............................................ Australia 2,980,500 8,347,405 a Wheaton River Minerals Ltd. .................................... Canada 5,250,000 13,851,097 a Wheaton River Minerals Ltd., wts., 5/30/07 ..................... Canada 1,312,500 1,992,822 a Yamana Gold Inc. ............................................... Canada 2,300,000 5,030,818 a Yamana Gold Inc., wts., 7/31/08 ................................ Canada 1,150,000 1,512,703 -------------- 79,368,500 -------------- PLATINUM & PALLADIUM 10.6% Anglo American Platinum Corp. Ltd., ADR ........................ South Africa 571,138 26,492,242 Impala Platinum Holdings Ltd. .................................. South Africa 194,000 15,692,841 Impala Platinum Holdings Ltd., ADR ............................. South Africa 385,600 15,595,772 a North American Palladium Ltd. .................................. Canada 377,500 3,021,929 a Stillwater Mining Co. .......................................... United States 253,246 2,902,199 -------------- 63,704,983 -------------- TOTAL COMMON STOCKS, RIGHTS AND WARRANTS (COST $366,266,109) ... 566,745,859 -------------- SHORT TERM INVESTMENTS (COST $27,686,498) 4.6% b Franklin Institutional Fiduciary Trust Money Market Portfolio .. United States 27,686,498 27,686,498 -------------- MUTUAL FUNDS (COST $6,996,900) 1.3% FOREIGN EQUITY Central Fund Canada- Class A ................................... Canada 1,405,000 7,615,100 -------------- TOTAL INVESTMENTS (COST $400,949,507) 100.1% ................... 602,047,457 OTHER ASSETS, LESS LIABILITIES (.1)% ........................... (877,257) -------------- NET ASSETS 100.0% .............................................. $601,170,200 ============== a Non-income producing. b See Note 6 regarding investments in the Franklin Institutional Fiduciary Trust Money Market Portfolio. c See Note 7 regarding restricted securities.
16 | See notes to financial statements. | Semiannual Report FRANKLIN GOLD AND PRECIOUS METALS FUND FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES January 31, 2004 (unaudited)
Assets: Investments in securities: Cost ................................................................................................. $400,949,507 -------------- Value ................................................................................................ 602,047,457 Receivables: Investment securities sold .......................................................................... 2,047,716 Capital shares sold .................................................................................. 4,108,093 Dividends and interest ............................................................................... 152,402 -------------- Total assets ..................................................................................... 608,355,668 -------------- Liabilities: Payables: Investment securities purchased ...................................................................... 1,649,295 Capital shares redeemed .............................................................................. 4,719,646 Affiliates ........................................................................................... 697,997 Other liabilities ..................................................................................... 118,530 -------------- Total liabilities ................................................................................ 7,185,468 -------------- Net assets, at value ........................................................................... $601,170,200 Net assets consist of: Undistributed net investment income ................................................................... $ 1,053,820 Net unrealized appreciation (depreciation) ............................................................ 201,126,720 Accumulated net realized gain (loss) .................................................................. (47,857,595) Capital shares ........................................................................................ 446,847,255 -------------- Net assets, at value ........................................................................... $601,170,200 ==============
Semiannual Report | 17 FRANKLIN GOLD AND PRECIOUS METALS FUND FINANCIAL STATEMENTS (CONTINUED) STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) January 31, 2004 (unaudited) CLASS A: Net assets, at value .................................................................................. $410,232,731 -------------- Shares outstanding .................................................................................... 23,384,207 -------------- Net asset value per share a ........................................................................... $17.54 -------------- Maximum offering price per share (Net asset value per share / 94.25%) ................................. $18.61 -------------- CLASS B: Net assets, at value .................................................................................. $ 41,044,400 -------------- Shares outstanding .................................................................................... 2,391,290 -------------- Net asset value and maximum offering price per share a ................................................ $17.16 -------------- CLASS C: Net assets, at value .................................................................................. $107,358,807 -------------- Shares outstanding .................................................................................... 6,195,381 -------------- Net asset value per share a ........................................................................... $17.33 -------------- ADVISOR CLASS: Net assets, at value .................................................................................. $ 42,534,262 -------------- Shares outstanding .................................................................................... 2,365,292 -------------- Net asset value and maximum offering price per share .................................................. $17.98 -------------- a Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
18 | See notes to financial statements. | Semiannual Report FRANKLIN GOLD AND PRECIOUS METALS FUND FINANCIAL STATEMENTS (CONTINUED) STATEMENT OF OPERATIONS for the six months ended January 31, 2004 (unaudited) Investment income: (net of foreign taxes of $79,677) Dividends ............................................................................................. $ 4,309,896 Interest .............................................................................................. 2,290 -------------- Total investment income .......................................................................... 4,312,186 Expenses: Management fees (Note 3) .............................................................................. 1,361,847 Distribution fees (Note 3) Class A .............................................................................................. 481,486 Class B .............................................................................................. 193,048 Class C .............................................................................................. 486,956 Transfer agent fees (Note 3) .......................................................................... 543,900 Custodian fees ........................................................................................ 69,074 Reports to shareholders ............................................................................... 44,715 Registration and filing fees .......................................................................... 50,260 Professional fees ..................................................................................... 11,481 Trustees' fees and expenses ........................................................................... 10,500 Other ................................................................................................. 3,848 -------------- Total expenses ................................................................................... 3,257,115 -------------- Net investment income .......................................................................... 1,055,071 -------------- Realized and unrealized gains (losses): Net realized gain (loss) from: Investments .......................................................................................... 3,030,939 Foreign currency transactions ........................................................................ 14,817 -------------- Net realized gain (loss) ....................................................................... 3,045,756 -------------- Net unrealized appreciation (depreciation) on: Investment ........................................................................................... 110,694,489 Translation of assets and liabilities denominated in foreign currencies .............................. (3,915) -------------- Net unrealized appreciation (depreciation) ..................................................... 110,690,574 -------------- Net realized and unrealized gain (loss) ................................................................ 113,736,330 -------------- Net increase (decrease) in net assets resulting from operations ........................................ $114,791,401 ==============
Semiannual Report | See notes to financial statements. | 19 FRANKLIN GOLD AND PRECIOUS METALS FUND FINANCIAL STATEMENTS (CONTINUED) STATEMENTS OF CHANGES IN NET ASSETS for the six months ended January 31, 2004 (unaudited) and the year ended July 31, 2003
-------------------------------------- SIX MONTHS ENDED YEAR ENDED JANUARY 31, 2004 JULY 31, 2003 -------------------------------------- Increase (decrease) in net assets: Operations: Net investment income (loss) .......................................................... $ 1,055,071 $ 3,055,697 Net realized gain (loss) from investments and foreign currency transactions ........... 3,045,756 (4,829,414) Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currency ...................................... 110,690,574 98,025,903 ---------------------------------- Net increase (decrease) in net assets resulting from operations ................... 114,791,401 96,252,186 Distributions to shareholders from: Net investment income: Class A .............................................................................. (2,303,565) (2,293,660) Class B .............................................................................. (108,625) (118,232) Class C .............................................................................. (236,649) (251,973) Advisor Class ........................................................................ (253,014) (72,571) ---------------------------------- Total distributions to shareholders .................................................... (2,901,853) (2,736,436) Capital share transactions: (Note 2) Class A .............................................................................. 23,603,932 35,230,740 Class B .............................................................................. 7,275,925 10,718,114 Class C .............................................................................. 23,218,721 13,422,528 Advisor Class 15,668,133 11,243,440 ---------------------------------- Total capital share transactions ....................................................... 69,766,711 70,614,822 Net increase (decrease) in net assets ............................................. 181,656,259 164,130,572 Net assets: Beginning of period .................................................................... 419,513,941 255,383,369 ---------------------------------- End of period .......................................................................... $601,170,200 $419,513,941 ================================== Undistributed net investment income included in net assets: End of period .......................................................................... $ 1,053,820 $ 2,900,602 ==================================
20 | See notes to financial statements. | Semiannual Report FRANKLIN GOLD AND PRECIOUS METALS FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Franklin Gold and Precious Metals Fund (the Fund) is registered under the Investment Company Act of 1940 as a non-diversified, open-end investment company. The Fund seeks capital growth and income by investing at least 80% of total net assets in securities of companies that mine, process or deal in gold or other precious metals. The following summarizes the Fund's significant accounting policies. A. SECURITY VALUATION Securities listed or traded on a recognized national exchange or NASDAQ are valued at the last reported sales price. Over-the-counter securities and listed securities for which no sale is reported are valued within the range of the latest quoted bid and asked prices. Investments in open-end mutual funds are valued at the closing net asset value. Foreign securities are valued at the close of trading of the foreign exchange or the NYSE, whichever is earlier. If events occur that materially affect the values of securities after the prices or foreign exchange rates are determined, or if market quotations are not readily available, the securities will be valued at fair value as determined following procedures approved by the Board of Trustees. B. FOREIGN CURRENCY TRANSLATION Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities and income items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. C. INCOME TAXES No provision has been made for income taxes because the Fund's policy is to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable income. D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Semiannual Report | 21 FRANKLIN GOLD AND PRECIOUS METALS FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS (CONTINUED) Realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. E. ACCOUNTING ESTIMATES The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates. F. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the 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. However, based on experience the Fund expects the risk of loss to be remote. 2. SHARES OF BENEFICIAL INTEREST The Fund offers four classes of shares: Class A, Class B, Class C, and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, distribution fees, voting rights on matters affecting a single class and its exchange privilege. At January 31, 2004, there were an unlimited number of shares authorized ($.10 par value). Transactions in the Fund's shares were as follows:
----------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JANUARY 31, 2004 JULY 31, 2003 ----------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ----------------------------------------------------------------- CLASS A SHARES: Shares sold ................................. 9,390,988 $163,571,082 16,656,770 $203,119,760 Shares issued on reinvestment of distributions .............................. 100,250 1,994,988 184,327 2,003,492 Shares redeemed ............................. (8,394,632) (141,962,138) (14,078,537) (169,892,512) ----------------------------------------------------------------- Net increase (decrease) ..................... 1,096,506 $ 23,603,932 2,762,560 $ 35,230,740 ================================================================= CLASS B SHARES: Shares sold ................................. 1,011,617 $ 17,171,119 1,491,869 $ 17,975,850 Shares issued on reinvestment of distributions .............................. 5,064 98,798 10,078 107,837 Shares redeemed ............................. (578,167) (9,993,992) (633,983) (7,365,573) ----------------------------------------------------------------- Net increase (decrease) ..................... 438,514 $ 7,275,925 867,964 $ 10,718,114 =================================================================
22 | Semiannual Report FRANKLIN GOLD AND PRECIOUS METALS FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 2. SHARES OF BENEFICIAL INTEREST (CONTINUED)
----------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED JANUARY 31, 2004 JULY 31, 2003 ----------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ----------------------------------------------------------------- CLASS C SHARES: Shares sold ................................. 2,409,613 $ 41,138,866 2,475,924 $ 30,074,772 Shares issued on reinvestment of distributions ............................... 9,915 195,335 18,783 202,855 Shares redeemed ............................. (1,062,499) (18,115,480) (1,410,209) (16,855,099) ----------------------------------------------------------------- Net increase (decrease) ..................... 1,357,029 $ 23,218,721 1,084,498 $ 13,422,528 ================================================================= ADVISOR CLASS SHARES: Shares sold ................................. 1,023,704 $ 18,465,130 1,354,547 $ 16,005,126 Shares issued on reinvestment of distributions ............................... 11,945 243,798 6,238 69,364 Shares redeemed ............................. (177,175) (3,040,795) (383,473) (4,831,050) ----------------------------------------------------------------- Net increase (decrease) ..................... 858,474 $ 15,668,133 977,312 $ 11,243,440 =================================================================
3. TRANSACTIONS WITH AFFILIATES Certain officers and trustees of the Fund are also officers and/or directors of the following entities:
- ------------------------------------------------------------------------------------------------------------------ ENTITY AFFILIATION - ------------------------------------------------------------------------------------------------------------------ Franklin Advisers Inc. (Advisers) Investment manager Franklin Templeton Services LLC (FT Services) Administrative manager Franklin/Templeton Distributors Inc. (Distributors) Principal underwriter Franklin/Templeton Investor Services LLC (Investor Services) Transfer agent
The Fund pays an investment management fee to Advisers based on the net assets of the Fund as follows: - -------------------------------------------------------------------------------- ANNUALIZED FEE RATE AVERAGE MONTHLY NET ASSETS - -------------------------------------------------------------------------------- .625% First $100 million .500% Over $100 million, up to and including $250 million .450% In excess of $250 million Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on average daily net assets, and is not an additional expense of the Fund. The Fund reimburses Distributors up to .25%, 1.00%, and 1.00% per year of the average daily net assets of Class A, Class B, and Class C, respectively, for costs incurred in marketing the Fund's shares. Distributors paid net commissions on sales of Fund shares, and received contingent deferred sales charges for the period of $803,979 and $95,286, respectively. The Fund paid transfer agent fees of $543,900, of which $332,308 was paid to Investor Services. Semiannual Report | 23 FRANKLIN GOLD AND PRECIOUS METALS FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 4. INCOME TAXES At January 31, 2004, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows: Cost of investments ..................................... $401,348,363 -------------- Unrealized appreciation ................................. 211,808,429 Unrealized depreciation ................................. (11,109,336) -------------- Net unrealized appreciation (depreciation) $200,699,093 ============== At July 31, 2003, the Fund had tax basis capital losses of $45,700,262, which may be carried over to offset future capital gains. Such losses expire as follows: Capital loss carryovers expiring in: 2005 ................................................... $ 4,474,120 2006 ................................................... 8,665,097 2007 ................................................... 28,763,977 2008 ................................................... 2,754,018 2009 ................................................... 1,043,050 ------------- $45,700,262 ============= At July 31, 2003, the Fund had deferred capital and currency losses occurring subsequent to October 31, 2002 of $4,586,240 and $217,993 respectively. For tax purposes, such losses will be reflected in the year ending July 31, 2004. Net investment income differs for financial statement and tax purposes primarily due to differing treatment of foreign currency transactions and passive foreign investment company shares. Net realized losses differ for financial statement and tax purposes primarily due to differing treatments of foreign currency transactions, wash sales and losses realized subsequent to October 31, 2002 on the sales of securities and foreign currencies. 5. INVESTMENT TRANSACTIONS Purchases and sales of securities (excluding short-term securities) for the period ended January 31, 2004 aggregated $88,969,054 and $21,672,489, respectively. 6. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market Portfolio (the Sweep Money Fund), an open-end investment company managed by Advisers. Management fees paid by the Fund are reduced on assets invested in the Sweep Money Fund, in an amount not to exceed the management fees paid by the Sweep Money Fund. For the period ended January 31, 2004, the Fund earned $120,900 of dividend income from investment in the Sweep Money Fund. 24 | Semiannual Report FRANKLIN GOLD AND PRECIOUS METALS FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 7. RESTRICTED SECURITIES At January 31, 2004, investments in securities included issues that are restricted or illiquid. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. At January 31, 2004, the Fund held investments in restricted and illiquid securities that were valued under approved methods by the Trustees, as follows:
- ----------------------------------------------------------------------------------------------------------- NUMBER ACQUISITION OF SHARES ISSUER DATE COST VALUE - ----------------------------------------------------------------------------------------------------------- 330,000 Miramar Mining Corp., Restricted Shares .... 10/03/03 $ 753,314 $ 651,914 165,000 Miramar Mining Corp., Restricted, wts., 6/09/05 ............................. 12/05/03 17,537 13,394 2,450,000 Semafo Inc., Restricted Shares ............. 12/18/03 2,004,229 1,670,287 1,225,000 Semafo Inc., 144A, Restricted, wts., 12/18/06 ............................ 12/18/03 21,630 123,384 --------------------------- TOTAL RESTRICTED SECURITIES (.41% OF NET ASSETS) ........... $2,796,710 $2,458,979 ===========================
8. REGULATORY MATTERS On February 4, 2004, the Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts filed an administrative complaint against Franklin Resources, Inc. and certain of its subsidiaries (the "Company"), alleging violations of the Massachusetts Uniform Securities Act. The complaint arises from activity that occurred in 2001 during which time an officer of a Company subsidiary was negotiating an agreement with an investor relating to investments in a mutual fund and a hedge fund. Semiannual Report | 25 FRANKLIN GOLD AND PRECIOUS METALS FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 8. REGULATORY MATTERS (CONTINUED) The Fund, in addition to other entities within Franklin Templeton Investments, including the Company and other funds, has been named in shareholder class actions related to the matter described above. The Fund's management believes that the claims made in the lawsuit are without merit and it intends to defend vigorously against the allegations. It is anticipated that the Fund may be named in additional similar civil actions related to the matter described above. In addition, as part of ongoing investigations by the U.S. Securities and Exchange Commission (the "SEC"), the U.S. Attorney for the Northern District of California, the New York Attorney General, the California Attorney General, the U.S. Attorney for the District of Massachusetts, the Florida Department of Financial Services, and the Commissioner of Securities and the Attorney General of the State of West Virginia, relating to certain practices in the mutual fund industry, including late trading, market timing and sales compensation arrangements, the Company and its subsidiaries, as well as certain current or former executives and employees of the Company, have received requests for information and/or subpoenas to testify or produce documents. The Company and its current employees are providing documents and information in response to these requests and subpoenas. In addition, the Company has responded to requests for similar kinds of information from regulatory authorities in some of the foreign countries where the Company conducts its global asset management business. The Staff of the SEC has informed the Company that it intends to recommend that the Commission authorize an action against the Fund's investment adviser relating to the frequent trading issues that are the subject of the SEC's investigation. These issues were previously disclosed as being under investigation by government authorities and the subject of an internal inquiry by the Company in its Annual Report on Form 10-K and on its public website. The Company currently is in discussions with the SEC Staff in an effort to resolve the issues raised in their investigation. Such discussions are preliminary and the Fund's management has been advised that the Company cannot predict the likelihood of whether those discussions will result in a settlement and, if so, the terms of such settlement. The impact, if any, of these matters on the Fund is uncertain at this time. If the Company finds that it bears responsibility for any unlawful or improper conduct, it has committed to making the Fund or its shareholders whole, as appropriate. 26 | Semiannual Report FRANKLIN GOLD AND PRECIOUS METALS FUND TAX DESIGNATION (UNAUDITED) At July 31, 2003, more than 50% of the Franklin Gold and Precious Metals Fund total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from dividends paid to the Fund on these investments. As shown in the table below the Fund hereby designates to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This designation will allow shareholders of record on November 28, 2003, to treat their proportionate share of foreign taxes paid by the Fund as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution. The following tables provide a detailed analysis, by country, of Foreign Tax Paid, Foreign Source Income, Foreign Qualified Dividends and Adjusted Foreign Source Income as designated by the Fund, to Class A, Class B, Class C, and Advisor Class shareholders. As a service to individual shareholders filing Form 1116, "Adjusted Foreign Source Income per Share" in column 4 below reports foreign source income with the required adjustments to foreign source qualified dividends. This information is provided to simplify your reporting of foreign source income for line 1 of Form 1116.
- --------------------------------------------------------------------------------------------------------------------- CLASS A ADJUSTED FOREIGN TAX FOREIGN FOREIGN FOREIGN PAID SOURCE INCOME QUALIFIED DIVIDENDS SOURCE INCOME COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE - --------------------------------------------------------------------------------------------------------------------- Australia ................................. 0.0005 0.0064 0.0013 0.0057 Canada .................................... 0.0029 0.0096 0.0051 0.0067 Papua New Guinea .......................... 0.0003 0.0016 0.0002 0.0015 Peru ...................................... 0.0001 0.0029 0.0013 0.0022 South Africa .............................. 0.0000 0.0737 0.0329 0.0549 United Kingdom ............................ 0.0016 0.0077 0.0049 0.0049 -------------------------------------------------------------------- TOTAL ..................................... $0.0054 $0.1019 $0.0457 $0.0759 ====================================================================
- --------------------------------------------------------------------------------------------------------------------- CLASS B ADJUSTED FOREIGN TAX FOREIGN FOREIGN FOREIGN PAID SOURCE INCOME QUALIFIED DIVIDENDS SOURCE INCOME COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE - --------------------------------------------------------------------------------------------------------------------- Australia ................................. 0.0005 0.0032 0.0007 0.0028 Canada .................................... 0.0029 0.0048 0.0025 0.0034 Papua New Guinea .......................... 0.0003 0.0008 0.0001 0.0007 Peru ...................................... 0.0001 0.0015 0.0007 0.0011 South Africa .............................. 0.0000 0.0374 0.0167 0.0279 United Kingdom ............................ 0.0016 0.0039 0.0025 0.0025 -------------------------------------------------------------------- TOTAL ..................................... $0.0054 $0.0516 $0.0232 $0.0384 ====================================================================
Semiannual Report | 27 FRANKLIN GOLD AND PRECIOUS METALS FUND TAX DESIGNATION (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------- CLASS C ADJUSTED FOREIGN TAX FOREIGN FOREIGN FOREIGN PAID SOURCE INCOME QUALIFIED DIVIDENDS SOURCE INCOME COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE - --------------------------------------------------------------------------------------------------------------------- Australia ................................. 0.0005 0.0029 0.0006 0.0026 Canada .................................... 0.0029 0.0044 0.0023 0.0031 Papua New Guinea .......................... 0.0003 0.0007 0.0001 0.0006 Peru ...................................... 0.0001 0.0013 0.0006 0.0010 South Africa .............................. 0.0000 0.0339 0.0151 0.0253 United Kingdom ............................ 0.0016 0.0035 0.0022 0.0022 -------------------------------------------------------------------- TOTAL ..................................... $0.0054 $0.0467 $0.0209 $0.0348 ====================================================================
- --------------------------------------------------------------------------------------------------------------------- ADVISOR CLASS ADJUSTED FOREIGN TAX FOREIGN FOREIGN FOREIGN PAID SOURCE INCOME QUALIFIED DIVIDENDS SOURCE INCOME COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE - --------------------------------------------------------------------------------------------------------------------- Australia ................................. 0.0005 0.0079 0.0017 0.0069 Canada .................................... 0.0029 0.0119 0.0063 0.0083 Papua New Guinea .......................... 0.0003 0.0020 0.0002 0.0019 Peru ...................................... 0.0001 0.0036 0.0017 0.0026 South Africa .............................. 0.0000 0.0918 0.0410 0.0684 United Kingdom ............................ 0.0016 0.0095 0.0060 0.0061 -------------------------------------------------------------------- TOTAL ..................................... $0.0054 $0.1267 $0.0569 $0.0942 ====================================================================
Foreign Tax Paid per Share (Column 1) is the amount per share available to you, as a tax credit or deduction (assuming you held your shares in the fund for a minimum of 16 days during the 30-day period beginning 15 days before the ex-dividend date of the fund's distribution to which the foreign taxes relate). Foreign Source Income per Share (Column 2) is the amount per share of income dividends paid to you that is attributable to foreign securities held by the fund, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends without adjustment for the lower U.S. tax rates. Generally, this is the foreign source income to be reported by certain trusts and corporate shareholders. Foreign Qualified Dividends per Share (Column 3) is the amount per share of foreign source qualified dividends the fund paid to you, plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income reported to you in column 2 that were derived from qualified foreign securities held by the fund. If you are an individual shareholder who does not meet the qualified dividend holding period requirements, you may find this information helpful to calculate the foreign source income adjustment needed to complete line 1 of Form 1116. Adjusted Foreign Source Income per Share (Column 4) is the adjusted amount per share of foreign source income the fund paid to you. These amounts reflect the Foreign Source Income reported in column 2 adjusted for the tax rate differential on foreign source qualified dividends that may be required for certain individual shareholders pursuant to Internal Revenue Code 904(b)(2)(B). If you 28 | Semiannual Report FRANKLIN GOLD AND PRECIOUS METALS FUND TAX DESIGNATION (UNAUDITED) (CONTINUED) are an individual shareholder who meets the qualified dividend holding period requirements, generally, these Adjusted Foreign Source Income amounts may be reported directly on line 1 of Form 1116 without additional adjustment. In January 2004, shareholders received Form 1099-DIV which included their share of taxes paid and foreign source income distributed during the calendar year 2003. The Foreign Source Income reported on Form 1099-DIV was reduced to take into account the tax rate differential on foreign source qualified dividend income pursuant to Internal Revenue Code 904(b)(2)(B). Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their 2003 individual income tax returns. Semiannual Report | 29 FRANKLIN GOLD AND PRECIOUS METALS FUND PROXY VOTING POLICIES AND PROCEDURES The Fund has established Proxy Voting Policies and Procedures ("Policies") that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund's complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or by sending a written request to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy Group. 30 | Semiannual Report This page intentionally left blank. This page intentionally left blank. LITERATURE REQUEST For a brochure and prospectus, which contains more complete information, including charges, expenses and risks, call Franklin Templeton Investments at 1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before investing or sending money. To ensure the highest quality of service, we may monitor, record and access telephone calls to or from our service departments. These calls can be identified by the presence of a regular beeping tone. FRANKLIN TEMPLETON INVESTMENTS INTERNATIONAL Mutual European Fund Templeton China World Fund Templeton Developing Markets Trust Templeton Foreign Fund Templeton Foreign Smaller Companies Fund Templeton International (Ex EM) Fund GLOBAL Franklin Global Aggressive Growth Fund Franklin Global Growth Fund Mutual Discovery Fund Templeton Capital Accumulator Fund Templeton Global Long-Short Fund Templeton Global Opportunities Trust Templeton Global Smaller Companies Fund Templeton Growth Fund Templeton World Fund GROWTH Franklin Aggressive Growth Fund Franklin Capital Growth Fund Franklin Flex Cap Growth Fund Franklin Small-Mid Cap Growth Fund Franklin Small Cap Growth Fund II 1 VALUE Franklin Balance Sheet Investment Fund 2 Franklin Equity Income Fund Franklin Large Cap Value Fund Franklin MicroCap Value Fund 2 Franklin Small Cap Value Fund Mutual Beacon Fund Mutual Qualified Fund Mutual Recovery Fund 3 Mutual Shares Fund BLEND Franklin Blue Chip Fund Franklin Convertible Securities Fund Franklin Growth Fund Franklin Rising Dividends Fund Franklin U.S. Long-Short Fund 4 SECTOR Franklin Biotechnology Discovery Fund Franklin DynaTech Fund Franklin Global Communications Fund Franklin Global Health Care Fund Franklin Gold and Precious Metals Fund Franklin Natural Resources Fund Franklin Real Estate Securities Fund Franklin Utilities Fund Franklin Technology Fund Mutual Financial Services Fund ASSET ALLOCATION Franklin Templeton Corefolio Allocation Fund Franklin Templeton Founding Funds Allocation Fund TARGET FUNDS Franklin Templeton Conservative Target Fund Franklin Templeton Growth Target Fund Franklin Templeton Moderate Target Fund INCOME Franklin Adjustable U.S. Government Securities Fund 5 Franklin's AGE High Income Fund Franklin Federal Money Fund 5, 6 Franklin Floating Rate Daily Access Fund Franklin Floating Rate Trust 3 Franklin Income Fund Franklin Money Fund 5, 6 Franklin Short-Intermediate U.S. Government Securities Fund 5 Franklin Strategic Income Fund Franklin Strategic Mortgage Portfolio Franklin Templeton Hard Currency Fund Franklin Total Return Fund Franklin U.S. Government Securities Fund 5 Templeton Global Bond Fund TAX-FREE INCOME 7 NATIONAL FUNDS Double Tax-Free Income Fund Federal Tax-Free Income Fund High Yield Tax-Free Income Fund Insured Tax-Free Income Fund 8 Tax-Exempt Money Fund 5, 6 LIMITED-TERM FUNDS California Limited-Term Tax-Free Income Fund Federal Limited-Term Tax-Free Income Fund New York Limited-Term Tax-Free Income Fund INTERMEDIATE-TERM FUNDS California Intermediate-Term Tax-Free Income Fund Federal Intermediate-Term Tax-Free Income Fund New York Intermediate-Term Tax-Free Income Fund STATE-SPECIFIC 7 Alabama Michigan 8 Arizona Minnesota 8 California 9 Missouri Colorado New Jersey Connecticut New York 9 Florida 9 North Carolina Georgia Ohio 8 Kentucky Oregon Louisiana Pennsylvania Maryland Tennessee Massachusetts 8 Virginia INSURANCE FUNDS Franklin Templeton Variable Insurance Products Trust 10 1.The fund is closed to new investors. Existing shareholders can continue adding to their accounts. 2.The fund is only open to existing shareholders as well as select retirement plans. 3.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.Upon reaching approximately $350 million in assets, the fund intends to close to all investors. 5.An investment in the fund is neither insured nor guaranteed by the U.S. government or by any other entity or institution. 6.No assurance exists that the fund's $1.00 per share price will be maintained. It is possible to lose money by investing in the fund. 7.For investors subject to the alternative minimum tax, a small portion of fund dividends may be taxable. Distributions of capital gains are generally taxable. 8.Portfolio of insured municipal securities. 9.These funds are available in two or more variations, including long-term portfolios, portfolios of insured securities, a high-yield portfolio (CA) and limited-term, intermediate-term and money market portfolios (CA and NY). 10.The funds of the Franklin Templeton Variable Insurance Products Trust are generally available only through insurance company variable contracts. 02/04 Not part of the semiannual report [LOGO OMITTED](R) FRANKLIN(R) TEMPLETON(R) One Franklin Parkway INVESTMENTS San Mateo, CA 94403-1906 [ ] WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL? Eligible shareholders can sign up for eDelivery at franklintempleton.com. See inside for details. SEMIANNUAL REPORT AND SHAREHOLDER LETTER FRANKLIN GOLD AND PRECIOUS METALS FUND INVESTMENT MANAGER Franklin Advisers, Inc. DISTRIBUTOR Franklin Templeton Distributors, Inc. 1-800/DIAL BEN(R) franklintempleton.com SHAREHOLDER SERVICES 1-800/632-2301 This report must be preceded or accompanied by the current Franklin Gold and Precious Metals Fund prospectus, which contains more complete information including charges, expenses and risks. 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 S2003 03/04 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 11(A), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers financial and accounting officer. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The registrant has an audit committee financial expert serving on its audit committee. (2) The audit committee financial expert is Frank W.T. LaHaye, and he is "independent" as defined under the relevant Securities and Exchange Commission Rules and Releases. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A ITEM 9. 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 10. 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 11. EXHIBITS. (A) Code of Ethics for Principal Executive and Senior Financial Officers. (B)(1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and Diomedes Loo-Tam, Chief Financial Officer (B)(2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and Diomedes Loo-Tam, Chief Financial Officer SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FRANKLIN GOLD AND PRECIOUS METALS FUND By /s/Jimmy D. Gambill Chief Executive Officer - Finance and Administration Date March 31, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/Jimmy D. Gambill Chief Executive Officer - Finance and Administration Date March 31, 2004 By /s/Diomedes Loo-Tam Chief Financial Officer Date March 31, 2004 EX-99.CODE ETH 3 codeofethics.txt EXHIBIT (A) FRANKLIN TEMPLETON FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. COVERED OFFICERS AND PURPOSE OF THE CODE This code of ethics (the "Code")1 is for the investment companies within the complex registered with the United States Securities & Exchange Commission ("SEC") (collectively, "FT Funds") applies to each FT Fund's Principal Executive Officers, Principal Financial Officer and Principal Accounting Officer (the "Covered Officers" each of whom are set forth in Exhibit A) for the purpose of promoting: o Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o Full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the SEC and in other public communications made by or on behalf of the FT Funds; o Compliance with applicable laws and governmental rules and regulations; o The prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o Accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the FT Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the FT Funds. Certain conflicts of interest arise out of the relationships between Covered Officers and the FT Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the FT Funds because of their status as "affiliated persons" of the FT Funds. The FT Funds' and the investment advisers' compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the FT Funds, the investment advisers and the fund administrator of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the FT Funds, for the adviser, the administrator, or for all three), be involved in establishing policies and implementing decisions that will have different effects on the adviser, administrator and the FT Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the FT Funds, the adviser, and the administrator and is consistent with the performance by the Covered Officers of their duties as officers of the FT Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the FT Funds' Boards of Directors ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the FT Funds. Each Covered Officer must: o Not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the FT Funds whereby the Covered Officer would benefit personally to the detriment of the FT Funds; o Not cause the FT Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the FT Funds; o Not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; o Report at least annually the following affiliations or other relationships:/2 o all directorships for public companies and all companies that are required to file reports with the SEC; o any direct or indirect business relationship with any independent directors; o any direct or indirect business relationship with any independent public accounting firm; and o any direct or indirect interest in any transaction with any FT Fund that will benefit the officer (not including benefits derived from the advisory, sub-advisory, distribution or service agreements with affiliates of Franklin Resources). There are some conflict of interest situations that should always be approved in writing by FT's General Counsel or Deputy General Counsel, if material. Examples of these include/3: o Service as a director on the board of any public or private Company; o The receipt of any gifts in excess of $100; o The receipt of any entertainment from any Company with which the FT Funds has current or prospective business dealings unless such entertainment is business related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety. Notwithstanding the foregoing, the Covered Officers must obtain prior approval for any entertainment with a value in excess of $1000. o Any ownership interest in, or any consulting or employment relationship with, any of the FT Fund's service providers, other than an investment adviser, principal underwriter, administrator or any affiliated person thereof; o A direct or indirect financial interest in commissions, transaction charges or spreads paid by the FT Funds for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. FT's General Counsel or Deputy General Counsel will provide a report to the FT Funds Audit Committee of any approvals granted at the next regularly scheduled meeting. III. DISCLOSURE AND COMPLIANCE o Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the FT Funds; o Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the FT Funds to others, whether within or outside the FT Funds, including to the FT Funds' directors and auditors, and to governmental regulators and self-regulatory organizations; o Each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the FT Funds, the adviser and the administrator with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the FT Funds file with, or submit to, the SEC and in other public communications made by the FT Funds; and o It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o Upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he has received, read, and understands the Code (see Exhibit B); o Annually thereafter affirm to the Board that he has complied with the requirements of the Code; and o Notify FT's General Counsel or Deputy General Counsel promptly if he knows of any violation of this Code. Failure to do so is itself is a violation of this Code. FT's General Counsel and Deputy General Counsel are responsible for applying this Code to specific situations in which questions are presented under it and have the authority to interpret this Code in any particular situation.4 However, the Independent Directors of the respective fund will consider any approvals or waivers5 sought by any Chief Executive Officers of the Funds. The FT Funds will follow these procedures in investigating and enforcing this Code: o FT's General Counsel or Deputy General Counsel will take all appropriate action to investigate any potential violations reported to him; o If, after such investigation, FT's General Counsel or Deputy General Counsel believes that no violation has occurred, FT's General Counsel is not required to take any further action; o Any matter that FT's General Counsel or Deputy General Counsel believes is a violation will be reported to the Independent Directors of the appropriate FT Fund; o If the Independent Directors concur that a violation has occurred, it will inform and make a recommendation to the Board of the appropriate Funds, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; o The Independent Directors will be responsible for granting waivers, as appropriate; and o Any changes to or waivers of this Code will, to the extent required, are disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the FT Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies there under. Insofar as other policies or procedures of the FT Funds, the FT Funds' advisers, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The FT Code of Ethics and Policy Statement On Insider Trading, adopted by the FT Funds, FT investment advisers and FT Fund's principal underwriter pursuant to Rule 17j-l under the Investment Company Act and more detailed policies and procedures set forth in FT's Employee Handbook are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the FT Funds' Board including a majority of independent directors. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the FT Funds' Board and their counsel. VIII. INTERNAL USE The Code is intended solely for the internal use by the FT Funds and does not constitute an admission, by or on behalf of any FT Funds, as to any fact, circumstance, or legal conclusion. EXHIBIT A Persons Covered by the Franklin Templeton Funds Code of Ethics FRANKLIN GROUP OF FUNDS Edward B. Jamieson, President and Chief Executive Officer - Investment Management Charles B. Johnson, President and Chief Executive Officer - Investment Management Gregory E. Johnson, President and Chief Executive Officer - Investment Management Rupert H. Johnson, Jr. President and Chief Executive Officer - Investment Management William J. Lippman, President and Chief Executive Officer - Investment Management Christopher Molumphy, President and Chief Executive Officer - Investment Management Jimmy D. Gambill, Senior Vice President and Chief Executive Officer - Finance and Administration Diomedes Loo-Tam Treasurer & Chief Financial Officer FRANKLIN MUTUAL SERIES FUNDS David Winters Chairman of the Board, President, Chief Executive Officer-Investment Management Jimmy D. Gambill Senior Vice President and Chief Executive Officer- Finance and Administration Diomedes Loo-Tam Treasurer & Chief Financial Officer TEMPLETON GROUP OF FUNDS Jeffrey A. Everett President and Chief Executive Officer - Investment Management Martin L. Flanagan President and Chief Executive Officer - Investment Management Mark Mobius President and Chief Executive Officer - Investment Management Christopher J. Molumphy President and Chief Executive Officer - Investment Management Gary P. Motyl President and Chief Executive Officer - Investment Management Donald F. Reed President and Chief Executive Officer - Investment Management Jimmy D. Gambill, Senior Vice President and Chief Executive Officer - Finance and Administration Diomedes Loo-Tam Treasurer & Chief Financial Officer EXHIBIT B ACKNOWLEDGMENT FORM FRANKLIN TEMPLETON FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS. INSTRUCTIONS: 1. Complete all sections of this form. 2. Print the completed form, sign, and date. 3. Submit completed form to FT's General Counsel within 10 days of becoming a Covered Officer and by January 30th of each subsequent year. INTER-OFFICE MAIL: Murray Simpson, General Counsel, Legal SM-920/2 TELEPHONE: (650) 312-7331 Fax: (650) 312-2221 E-MAIL: Simpson, Murray (internal address); mlsimpson@frk.com (external address) - ---------------------------------------------------------------------------- COVERED OFFICER'S NAME: - ---------------------------------------------------------------------------- TITLE: - ---------------------------------------------------------------------------- DEPARTMENT: - ---------------------------------------------------------------------------- LOCATION: - ---------------------------------------------------------------------------- CERTIFICATION FOR YEAR ENDING: - ---------------------------------------------------------------------------- TO: FT GENERAL COUNSEL, LEGAL DEPARTMENT I hereby acknowledge receipt of a copy of Franklin Templeton Fund's code of ethics for Principal Executive Officers and Senior Financial Officers (the "Code") that I have read and understand. I will comply fully with all provisions of the Code to the extent they apply to me during the period of my employment. I further understand and acknowledge that any violation of the Code may subject me to disciplinary action, including termination of employment -------------------- --------------------- Signature Date signed 1 Item 2 of Form N-CSR requires a registered management investment company to disclose annually whether, as of the end of the period covered by the report, it has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these officers are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, it must explain why it has not done so. The registrant must also: (1) file with the SEC a copy of the code as an exhibit to its annual report; (2) post the text of the code on its Internet website and disclose, in its most recent report on Form N-CSR, its Internet address and the fact that it has posted the code on its Internet website; or (3) undertake in its most recent report on Form N-CSR to provide to any person without charge, upon request, a copy of the code and explain the manner in which such request may be made. Disclosure is also required of amendments to, or waivers (including implicit waivers) from, a provision of the code in the registrant's annual report on Form N-CSR or on its website. If the registrant intends to satisfy the requirement to disclose amendments and waivers by posting such information on its website, it will be required to disclose its Internet address and this intention. 2 Reporting of these affiliations or other relationships may be made separately by completing the Directors and Officers Questionnaire and returning to FT's General Counsel or Deputy General Counsel. 3 Any activity or relationship that would present a conflict for a Covered Officer would likely also present a conflict for the Covered Officer if a member of the Covered Officer's immediate family engages in such an activity or has such a relationship. The Cover Person should also obtain written approval by FT's General Counsel in such situations. 4 FT's General Counsel and Deputy General Counsel are authorized to consult, as appropriate, with members of the Audit Committee, counsel to the FT Funds and counsel to the Independent Directors, and are encouraged to do so. 5 Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics" and "implicit waiver," which must also be disclosed, as "the registrant's failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive officer" of the registrant. EX-99.CERT 4 fgpmfjimg302.txt EXHIBIT (B)(1) CERTIFICATIONS I, Jimmy D. Gambill, certify that: 1. I have reviewed this report on Form N-CSR of Franklin Gold and Precious Metals Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. March 18, 2004 /S/JIMMY D. GAMBILL Chief Executive Officer - Finance and Administration I, Diomedes Loo-Tam, certify that: 1. I have reviewed this report on Form N-CSR of Franklin Gold and Precious Metals Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. March 18, 2004 /S/DIOMEDES LOO-TAM Treasurer and Chief Financial Officer EX-99.906 5 fgpmfjimg906.txt EXHIBIT (B)(2) CERTIFICATIONS CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURUSANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Jimmy D. Gambill, Chief Executive Officer of the Franklin Gold and Precious Metals Fund (the "Registrant"), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: 1. The periodic report on Form N-CSR of the Registrant for the period ended 01/31/04 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: March 18, 2004 /S/JIMMY D. GAMBILL Chief Executive Officer - Finance and Administration A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Registrant and will be retained by Registrant and furnished to the Securities and Exchange Commission or its staff upon request. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURUSANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Diomedes Loo-Tam, Chief Financial Officer of the Franklin Gold and Precious Metals Fund (the "Registrant"), certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: 1. The periodic report on Form N-CSR of the Registrant for the period ended 01/31/04 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: March 18, 2004 /S/DIOMEDES LOO-TAM Treasurer and Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Registrant and will be retained by Registrant and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----