SHAREHOLDER LETTER
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Your Fund's Goal: Franklin Floating Rate Trust's primary goal is to provide as
high a level of current income and preservation of capital as is consistent with
investment primarily in senior secured corporate loans and corporate debt
securities with floating interest rates.
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Dear Shareholder:
This semiannual report for Franklin Floating Rate Trust covers the six months
ended January 31, 2000.
ECONOMIC OVERVIEW
Over the six-month reporting period, the U.S. economy continued its remarkable
expansion as economies around the world recovered from the financial crises that
occurred in late 1997 and in 1998. U.S. gross domestic product increased at
robust annualized rates of 5.7% and 6.9% in the third and fourth quarters of
1999, respectively, while inflation remained relatively muted.
However, worldwide recovery placed upward pressure on U.S. interest rates, which
rose during the reporting period. The Federal Reserve Board (the Fed) raised the
federal funds target rate two times to 5.50%, in an effort to head off
inflationary tendencies.
During the period under review, the benchmark 30-year Treasury bond yield
increased from 6.12% at the beginning of the period, to 6.49% on January 31,
2000. Believing the Fed is likely to raise rates again later this year, we
expect continuing interest-rate pressure in the near future. Despite a hawkish
Fed, equity markets, although volatile, continued to climb through the beginning
of the year. The Dow Jones(R) Industrial Average increased from 10646 on August
2, 1999, to 10941 on January 31, 2000, hitting a high of 11723 on January 14,
2000.
CONTENTS
Shareholder Letter ......................................................... 1
Performance Summary ........................................................ 6
Financial Highlights & Statement of Investments ............................ 7
Financial Statements ....................................................... 17
Notes to Financial Statements .............................................. 21
[PYRAMID GRAPHIC]
All portfolio holdings mentioned in the report are listed by their complete
legal titles in the fund's Statement of Investments (SOI), a complete listing of
the fund's portfolio holdings, including dollar value and number of shares or
principal amount. The SOI begins on page 8.
WHAT ARE SYNDICATED BANK LOANS?
Syndicated bank loans are typically secured, floating rate loans to corporate
borrowers made by a group, or syndicate, of banks and other lenders. A group of
lenders provides capital to companies for varied purposes, such as mergers and
acquisition activity, leveraged buyouts or refinancings. Borrowing rates are
generally pegged to an index, such as LIBOR.
SYNDICATED BANK LOAN MARKET
During the period under review, business expansion as well as mergers and
acquisitions resulted in an active new-issue market. Senior secured loan volume
for the second half of 1999 totaled $173 billion, and reached a record $320
billion issuance for the full calendar year. For 1999, leveraged lending
represented 31% of the $1.017 trillion total loan market.
The second half of 1999 proved challenging for the senior secured loan market,
when activity in the closely linked high yield bond market slowed mainly due to
investor uncertainty related to rising interest rates. Primary issuance market
activity slowed during late summer 1999, as it did in 1998. However, unlike the
previous year, the institutional market remained open to finance borrowers'
capital needs, albeit at more favorable terms for lenders. Investor demands
drove restructuring and repricing on over $23 billion worth of loans between the
second and fourth quarters. By the fourth quarter, the market heated up again as
loan refinancings and strong fund flows gave lenders money to invest. Market
players remained cautious, nevertheless, focusing on higher-rated companies with
less debt.
The leveraged loan market has grown substantially and displayed liquidity even
in difficult times, bolstered by 149 investment vehicles buying bank loans in
1999 compared with just 64 in 1997. Such investment vehicles include mutual
funds, insurance companies and structured investment products, such as
collateralized loan obligations. This liquidity also contributed to strong
secondary market volumes in the second half of 1999. However, greater market
participation came at the price of increased volatility, as leveraged loans
continued to transition from a non-traded asset class to one where a capital
markets mentality prevails, with high trading volume and a focus on relative
value analysis.
PORTFOLIO NOTES
During the six months under review, Fed interest-rate hikes and Y2K fears
resulted in a London Interbank Overnight Lending Rate (LIBOR) increase from
5.34% to 6.08%. In such an environment Franklin Floating Rate Trust's dividend
increased from 5.7350 cents per share on July 31, 1999, to 7.1990 cents per
share on January 31, 2000. At the same time, its 30-day standardized yield grew
from 7.10% to 8.63%, as reported in the performance summary on page 6.
Furthermore, the Trust's 42-day average weighted interest-rate reset period
helped the fund maintain a relatively stable share price, despite the rise in
interest rates.
In another significant development during the review period, the Trust's total
net assets grew rapidly, surpassing $1.7 billion on January 31, 2000. Our
investment philosophy focuses on company loans that offer attractive
risk-versus-reward profiles. We favor companies we believe possess strong
capital structures, solid asset coverage and dominant market share. Once a loan
is added to our portfolio, we carefully follow the company's financial
performance to ensure that economic changes have not affected its credit profile
and the company still meets our investment criteria.
Despite the slower new issuance rate in the second half of 1999, the Trust still
found several solid investments that fit our criteria. During this period, we
participated in a debt refinancing by Nextel Communications Inc., a leading U.S.
wireless telecommunications service provider. Nextel continues to experience
healthy demand for its differentiated product line and has been successful in
marketing into new sales channels. As a result, the company displayed stalwart
operating results. We expect strong internal cash flow growth, combined with
additional capital from a recent refinancing, to support Nextel's strategic
expansion and the continued deployment of their nationwide network.
Additionally, Nextel's wireless Web services and worldwide roaming services
roll-out should help fuel future growth.
TOP 10 HOLDINGS
1/31/00
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
INDUSTRY NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Wyndham International Inc. 3.41%
Hotels/Resorts
Allied Waste Industries Inc. 2.84%
Environmental Services
Burns Philp 2.54%
Packaged Foods
Mueller Group 2.36%
Metal Fabrications
Omnipoint Communications 2.31%
Cellular Telephone
Nextel Communications Inc. 2.28%
Cellular Telephone
Burhmann US Inc. 2.27%
Diversified Commercial
Services
Charter Communications 1.98%
Operating LLC
Cable Television
Adelphia Communications
Corp. 1.97%
Cable Television
Iasis Healthcare Corp. 1.97%
Hospital Management
</TABLE>
We believe Premier Parks Inc. represents another attractive portfolio holding.
Premier Parks' position as the world's largest regional theme park company with
a presence in North America and Europe made it an attractive investment, in our
opinion. We also liked the fact that this company is well-diversified, with more
than 34 parks in various markets and a strong franchise in the Six Flags brand
name. Premier Parks also benefits from having few competitors due to the
industry's strong barriers to entry. In 1999, the company displayed impressive
revenue and cash flow growth, driven mainly by increased park attendance and
management's ability to improve profitability in acquired theme parks. We
believe the company should continue to outpace the industry's average 3% to 4%
attendance growth. With a recent overseas expansion agreement with Time Warner
Inc. and an exclusive license to use the Looney Tunes, DC Comics and
Hanna-Barbera cartoon characters in its major international markets, we expect
favorable growth prospects for Premier Parks in the near future.
We also added United Rentals Inc. to the portfolio. United Rentals is the
largest construction and industrial equipment rental company in North America,
two times the size of its nearest competitor. The company's leading market
position is buoyed by more than $2 billion in annual revenues and over 600
branches, including a presence in Canada and Mexico. In addition to geographic
diversity, the company benefits from a strong capital structure and management
team, rapid internal growth and significant purchasing power. In our opinion,
the company has maintained a disciplined program in acquiring independent
operators and consolidating a highly fragmented industry.
As the Trust continues to grow, we will maintain our strategy of holding loans
from companies we believe have defensive market positions and strong asset
coverage in industries that we feel will perform well even in economic
downturns. With its relatively stable share price and high, current income
potential, we believe the Trust is an attractive investment for investors
seeking to diversify portfolios heavily weighted in equities, particularly in a
rising interest-rate environment.
We appreciate your investment in Franklin Floating Rate Trust, and welcome any
comments or suggestions you may have.
Sincerely,
/s/ Charles B. Johnson
Charles B. Johnson
Chairman
Franklin Floating Rate Trust
/s/ Chauncey Lufkin
Chauncey Lufkin
Portfolio Manager
Franklin Floating Rate Trust
DIVIDEND DISTRIBUTIONS*
8/1/99 - 1/31/00
<TABLE>
<CAPTION>
DIVIDEND
MONTH PER SHARE
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<S> <C>
August 6.5757 cents
September 6.1891 cents
October 6.9652 cents
November 6.5144 cents
December 6.8910 cents
January 7.1990 cents
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TOTAL 40.3344 CENTS
</TABLE>
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the Trust during the
reporting period.
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This discussion reflects our views, opinions, and portfolio holdings as of
January 31, 2000, the end of the reporting period. Our strategies and the
Trust's portfolio composition will change depending on market and economic
conditions. Although historical performance is no guarantee of future results,
these insights may help you understand our investment and management philosophy.
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Shares repurchased within 12 months of investment are subject to 1% early
withdrawal charge.
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1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the early withdrawal charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1% early withdrawal
charge, assuming shares were redeemed within 12 months of purchase.
3. Distribution rate is based on an annualization of January's 7.199 cent
($0.07199) per share monthly dividend and the net asset value of $9.96 on
January 31, 2000.
4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended January 31, 2000.
SIX-MONTH PERFORMANCE SUMMARY AS OF 1/31/00
Six-month total return does not include the early withdrawal charge.
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
<TABLE>
<S> <C> <C>
SIX-MONTH TOTAL RETURN +3.92%
NET ASSET VALUE (NAV) (1/31/00) $9.96 (7/31/99) $9.98
CHANGE IN NAV -$0.02
DISTRIBUTIONS (8/1/99-1/31/00) DIVIDEND INCOME $0.403344
</TABLE>
ADDITIONAL PERFORMANCE
AS OF QUARTER ENDED 12/31/99
<TABLE>
<CAPTION>
INCEPTION
1-YEAR (10/10/97)
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<S> <C> <C>
Cumulative Total Return(1) +7.66% +15.74%
Average Annual Total Return(2) +6.66% +6.79%
</TABLE>
AS OF 1/31/00
<TABLE>
<S> <C>
Distribution Rate(3) 8.51%
30-Day Standardized Yield(4) 8.63%
</TABLE>
For updated performance figures, see "Prices and Performance" on the Internet at
www.franklintempleton.com, or call Franklin Templeton at 1-800/342-5236.
Past performance does not guarantee future results.
FRANKLIN FLOATING RATE TRUST
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED JULY 31,
JANUARY 31, 2000 ------------------------------
(UNAUDITED) (a) 1999 1998 (b)
-------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ........................... $ 9.98 $ 10.04 $ 10.00
-------------------------------------------------
Income from investment operations:
Net investment income ......................................... .40 .70 .48
Net realized and unrealized gains (losses) .................... (.02) (.06) .04
-------------------------------------------------
Total from investment operations ............................... .38 .64 .52
-------------------------------------------------
Less distributions from net investment income .................. (.40) (.70) (.48)
-------------------------------------------------
Net asset value, end of period ................................. $ 9.96 $ 9.98 $ 10.04
=================================================
Total return (c) ............................................... 3.92% 6.62% 5.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .............................. $ 1,773,356 $ 1,106,363 $ 168,537
Ratios to average net assets:
Expenses ...................................................... 1.40% (d) 1.39% 1.32% (d)
Expenses excluding waiver and payments by affiliate ........... 1.42% (d) 1.41% 1.76% (d)
Net investment income ......................................... 8.08% (d) 6.93% 6.06% (d)
Portfolio turnover rate ........................................ 41.84% 63.29% 45.32%
</TABLE>
(a) Based on average shares outstanding.
(b) For period ended October 10, 1997 (effective date) to July 31, 1998.
(c) Total return does not reflect the contingent deferred sales charge and is
not annualized.
(d) Annualized
See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
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<S> <C> <C>
(a) SENIOR FLOATING RATE INTERESTS 95.5%
ADVERTISING .3%
Lamar Media Corp., Term Loan B, 8.0625%, 7/02/06 .............................................. $ 6,000,000 $ 6,022,500
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APPAREL .4%
St. John Knits Inc., Term Loan B, 9.3762%, 7/31/07 ............................................ 6,630,119 6,514,092
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AUTO PARTS: O.E.M. 1.2%
JL French Automotive, Term Loan, 9.00%, 10/31/06 .............................................. 5,526,316 5,540,132
SPX Corp., Term Loan B, 9.625%, 9/30/06 ....................................................... 3,437,500 3,471,875
Tenneco Automotive,
Term Loan B, 9.41%, 11/04/07 ................................................................ 6,250,000 6,296,875
Term Loan C, 9.66%, 5/04/08 ................................................................. 6,250,000 6,296,875
-------------
21,605,757
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BOOKS/MAGAZINES 3.3%
Advanstar Communications, Term Loan C, 9.03%, 10/31/05 ........................................ 17,251,824 17,230,259
American Media Operations Inc., Term Loan B, 9.51 - 9.62%, 4/01/07 ............................ 9,000,000 9,056,250
Primedia Inc., Term Loan B, 8.53%, 7/31/04 .................................................... 5,000,000 5,009,375
Reiman Publications Co., Term Loan B, 9.5625%, 11/30/05 ....................................... 7,000,000 7,026,250
Weekly Reader, Term Loan B, 10.02 - 10.07%, 11/08/06 .......................................... 9,975,000 9,862,782
Ziff-Davis Inc.,
(c) Revolver, 7.6875 - 8.00%, 3/31/05 ........................................................ 6,841,095 6,764,133
Term Loan A, 8.0625%, 3/31/05 ............................................................ 3,564,017 3,523,922
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58,472,971
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BROADCASTING 2.0%
Comcorp Broadcasting, Term Loan B, 9.1875%, 6/30/07 ........................................... 2,338,071 2,323,458
Comcorp Holdings, Term Loan, 12.375%, 8/28/01 ................................................. 5,000,000 4,968,750
Corus Entertainment Inc., Term Loan B, 8.935%, 9/01/07 ........................................ 10,000,000 10,025,000
Cumulus Media Corp.,
Term Loan B, 9.17%, 9/30/07 .............................................................. 3,000,000 3,013,125
Term Loan C, 9.295%, 2/28/08 ............................................................. 2,000,000 2,008,750
Quorum Broadcasting, Term Loan B, 9.29%, 9/30/07 .............................................. 10,000,000 10,000,000
White Knight Broadcasting, Term Loan B, 9.1875%, 6/30/07 ...................................... 2,275,000 2,260,781
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34,599,864
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BUILDING PRODUCTS .3%
Tapco International,
Term Loan B, 9.43%, 7/23/07 .............................................................. 3,109,375 3,105,488
Term Loan C, 9.68 - 9.98%, 7/23/08 ....................................................... 1,870,313 1,867,975
-------------
4,973,463
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CABLE TELEVISION 8.3%
Adelphia Communications Corp., Term Loan B, 8.375%, 3/31/08 ................................... 35,000,000 35,000,000
Bresnan Telecommunications, Term Loan B, 8.27 - 8.82%, 1/29/08 ................................ 2,000,000 2,003,750
CC Michigan/Avalon Cable, Term Loan B, 8.79%, 11/15/08 ........................................ 8,000,000 8,030,000
Charter Communications CCVI,
Term Loan A, 8.04%, 5/12/08 .............................................................. 1,125,000 1,122,188
Term Loan B, 8.79%, 11/12/08 ............................................................. 25,000,000 25,093,750
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
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<S> <C> <C>
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
CABLE TELEVISION (CONT.)
Charter Communications Operating LLC, Term Loan B, 8.54 - 8.64%, 3/18/08 ...................... $ 35,000,000 $ 35,141,301
Classic Cable,
Term Loan B, 8.8125 - 8.875%, 1/31/08 .................................................... 4,000,000 4,007,500
Term Loan C, 8.8125 - 8.875%, 1/31/08 .................................................... 4,000,000 4,007,501
Mediacom Midwest, Term Loan B, 8.58%, 12/31/08 ................................................ 5,000,000 4,992,500
Mediacom USA, Term Loan B, 8.58%, 8/01/08 ..................................................... 7,500,000 7,488,750
Pegasus Media & Communications, Term Loan B, 9.75%, 4/30/05 ................................... 19,500,000 19,524,375
-------------
146,411,615
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CASINOS/GAMBLING .6%
Hollywood Casino Corp., 11.36%, 5/01/06 ....................................................... 5,000,000 5,100,000
Horseshoe Gaming Holding, Term Loan B, 8.5712 - 8.6212%, 3/17/06 .............................. 5,985,000 6,022,406
-------------
11,122,406
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CELLULAR TELEPHONE 8.2%
Centennial Cellular Operating Co. LLC,
Term Loan B, 9.05%, 5/31/07 .............................................................. 2,475,000 2,493,563
Term Loan C, 9.30%, 11/30/07 ............................................................. 2,475,000 2,493,563
Clearnet Communications, Term Loan, 10.125%, 5/01/09 .......................................... 7,500,000 7,537,500
Dobson Operating Co., Term Loan B, 10.50%, 12/31/07 ........................................... 4,500,000 4,525,313
Microcell Connexions Inc.,
Term Loan B, 9.1835%, 3/01/06 ............................................................ 5,601,575 5,580,569
Term Loan C, 8.7612%, 3/01/06 ............................................................ 5,000,000 5,000,000
Nextel Communications Inc.,
Term Loan B, 9.4375%, 1/29/08 ............................................................ 7,500,000 7,617,188
Term Loan C, 9.875%, 7/29/08 ............................................................. 12,500,000 12,695,313
Nextel Partners Inc., Term Loan C, 10.34%, 7/29/08 ............................................ 20,000,000 20,037,500
Omnipoint Communications,
Term Loan, 9.55%, 2/17/06 ................................................................ 10,000,000 10,012,500
Term Loan A, 8.81%, 1/16/06 .............................................................. 2,983,446 2,996,499
Term Loan B, 8.81%, 1/16/06 .............................................................. 2,983,195 2,996,246
Term Loan C, 9.49%, 1/16/06 .............................................................. 24,889,397 24,998,288
Omnipoint Midwest, Term Loan A, 9.7912 - 11.50%, 12/31/06 ..................................... 14,250,000 13,964,999
Sygnet Wireless Inc., Term Loan C, 9.79%, 12/23/07 ............................................ 1,980,000 1,992,375
Telecorp PCS Inc., Term Loan B, 9.12%, 1/17/08 ................................................ 5,000,000 4,956,250
Tritel Holding Corp., Term Loan B, 10.28%, 12/31/07 ........................................... 5,000,000 5,031,250
Wireless One Network LP, Term Loan B, 8.94%, 9/30/07 .......................................... 10,000,000 9,875,000
-------------
144,803,916
-------------
COAL MINING .5%
AEI Resources, Term Loan B, 9.92 - 9.94%, 9/30/05 ............................................. 9,800,000 9,604,000
CONSUMER SPECIALTIES .5%
Boyds Collection Ltd., Term Loan B, 8.0625 - 8.1875%, 4/30/06 ................................. 1,416,666 1,405,157
Holmes Products Corp., Term Loan B, 9.5313%, 2/05/07 .......................................... 6,977,500 6,907,725
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8,312,882
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</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
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<S> <C> <C>
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
CONSUMER SUNDRIES .8%
Scotts Co.,
Term Loan B, 8.6875 - 9.375%, 6/30/06 .................................................... $ 5,092,024 $ 5,158,859
Term Loan C, 8.875 - 9.625%, 6/30/07 ..................................................... 4,877,301 4,941,315
United Industries Corp., Term Loan B, 9.46%, 1/20/06 .......................................... 4,937,500 4,863,438
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14,963,612
-------------
CONTAINERS/PACKAGING .7%
Graham Packaging Co.,
Term Loan B, 8.8125%, 1/31/06 ............................................................ 2,720,495 2,723,896
Term Loan C, 9.06 - 9.0625%, 1/31/07 ..................................................... 2,254,124 2,256,943
Term Loan D, 8.8125 - 9.125%, 1/31/07 .................................................... 6,682,499 6,699,196
-------------
11,680,035
-------------
DIVERSIFIED COMMERCIAL SERVICES 3.0%
Burhmann US Inc., Term Loan B, 9.375%, 10/26/07 ............................................... 40,000,000 40,200,000
Outsourcing Solutions Inc., Term Loan B, 9.80%, 6/01/06 ....................................... 4,987,500 4,950,094
Stream International, Term Loan, 10.43%, 10/29/06 ............................................. 2,500,000 2,481,250
U.S. Office Products Co., Term Loan B, 8.31%, 6/09/06 ......................................... 7,318,269 6,330,303
-------------
53,961,647
-------------
DIVERSIFIED MANUFACTURING 2.3%
Fisher Scientific International,
Term Loan B, 8.3125%, 1/21/05 ............................................................ 2,540,537 2,553,240
Term Loan C, 8.5625%, 10/21/05 ........................................................... 1,754,120 1,762,890
General Cable Corp., Term Loan B, 8.875%, 5/27/2007 ........................................... 13,420,313 13,420,313
Mediapak Holdings,
Term Loan B, 9.4375%, 1/14/06 ............................................................ 6,224,867 6,220,976
Term Loan C, 9.6875%, 1/14/07 ............................................................ 6,224,867 6,220,976
Superior Telecom Inc., Term Loan B, 9.9375%, 11/27/05 ......................................... 10,658,681 10,698,652
-------------
40,877,047
-------------
ELECTRIC UTILITIES: EAST .8%
AES New York Funding LLC, Term Loan, 8.8125%, 5/04/02 ......................................... 15,000,000 14,990,625
ELECTRONIC COMPONENTS 1.8%
Coorstek Inc., Term Loan B, 8.55%, 12/06/06 ................................................... 5,000,000 4,996,875
Viasystems Inc.,
Term Loan B, 9.37%, 06/30/04 ............................................................. 3,584,319 3,414,270
Term Loan C, 9.50%, 06/30/05 ............................................................. 22,993,019 22,648,124
-------------
31,059,269
-------------
ENGINEERING & CONSTRUCTION .8%
URS Corp.,
Term Loan B, 9.3125%, 6/09/06 ............................................................ 7,462,500 7,499,813
Term Loan C, 9.5625%, 6/09/07 ............................................................ 7,462,500 7,499,813
-------------
14,999,626
-------------
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
ENVIRONMENTAL SERVICES 3.9%
Allied Waste Industries Inc.,
Term Loan B, 8.875%, 7/30/06 ............................................................. $ 23,636,364 $ 22,927,273
Term Loan C, 9.125 - 9.1875%, 7/30/07 .................................................... 28,363,627 27,512,718
Environmental Systems Products Holdings Inc., Term Loan B, 10.1837%, 9/30/05 .................. 9,900,000 9,603,000
Safety Kleen Corp.,
Term Loan B, 8.8125 - 8.9375%, 9/30/05 ................................................... 2,468,671 2,464,042
Term Loan C, 9.0625 - 9.1875%, 9/30/06 ................................................... 2,468,671 2,464,043
Stericycle Inc., Term Loan B, 9.67%, 11/10/06 ................................................. 5,000,000 5,028,125
-------------
69,999,201
-------------
FINANCE COMPANIES .3%
First Dominion Funding II, sub. floating rate deb., Series 1A-D2, 10.6969%, 4/25/14 ........... 3,000,000 2,985,000
Highland CLO I, Term Loan D2, 11.73%, 6/01/11 ................................................. 2,000,000 1,995,000
-------------
4,980,000
-------------
FOOD CHAINS .3%
Pathmark Stores Inc., Term Loan B, 8.281 - 8.981%, 12/15/01 ................................... 5,000,000 4,756,250
FOREST PRODUCTS .1%
Grant Forest Products Inc., Term Loan B, 9.58%, 9/30/06 ....................................... 1,739,130 1,740,217
HOME FURNISHINGS .1%
Sealy Mattress Co.,
Term Loan B, 8.1875%, 12/15/04 ........................................................... 751,212 754,499
Term Loan C, 8.4375%, 12/15/05 ........................................................... 541,213 543,580
Term Loan D, 8.6875%, 12/15/06 ........................................................... 691,667 694,693
-------------
1,992,772
-------------
HOSPITAL MANAGEMENT 2.6%
Columbia-Healthone, Term Loan B, 9.33%, 6/30/05 ............................................... 6,951,724 6,960,414
Community Health Systems, Term Loan D, 9.68%, 12/31/05 ........................................ 4,896,904 4,866,298
Iasis Healthcare Corp., Term Loan B, 10.625%, 9/30/06 ......................................... 35,000,000 35,000,000
-------------
46,826,712
-------------
HOTELS/RESORTS 4.3%
Extended Stay America Inc., Term Loan C, 9.69%, 12/31/04 ...................................... 10,000,000 10,043,750
Pebble Beach Co., Term Loan B, 9.4163%, 7/30/06 ............................................... 5,989,091 6,015,293
Wyndham International Inc.,
Increasing Rate Loan, 10.3125%, 6/05/03 .................................................. 25,000,000 24,812,500
(c) Revolver, 8.5625 - 9.50%, 6/30/05 ........................................................ 6,300,000 6,205,500
Term Loan, 9.8750%, 6/30/06 .............................................................. 30,000,000 29,437,500
-------------
76,514,543
-------------
INDUSTRIAL MACHINERY/COMPONENTS 1.8%
Blount International Inc., Term Loan, 9.82 - 9.92%, 6/30/06 ................................... 14,962,500 15,093,422
Terex Corp., Term Loan C, 8.8212 - 9.14%, 3/31/06 ............................................. 12,000,001 12,030,000
Thermadyne Holdings Corp.,
Term Loan B, 7.56 - 8.93%, 5/23/05 ....................................................... 2,468,750 2,382,343
Term Loan C, 7.81 - 9.18%, 5/22/06 ....................................................... 2,468,750 2,382,343
-------------
31,888,108
-------------
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
INSURANCE BROKERS/SERVICES .3%
Willis Corroon Group,
Term Loan C, 8.6012%, 2/19/08 ............................................................ $ 2,425,000 $ 2,425,000
Term Loan D, 8.8512%, 8/19/08 ............................................................ 2,425,000 2,425,000
-------------
4,850,000
-------------
MAJOR CHEMICALS 2.5%
Georgia Gulf Corp., Term Loan B, 8.5625 - 8.9375%, 11/12/06 ................................... 5,000,000 5,031,251
Huntsman ICI Chemicals LLC,
Term Loan B, 9.25%, 6/30/07 .............................................................. 3,750,000 3,787,500
Term Loan C, 9.0625 - 9.4375%, 6/30/08 ................................................... 3,750,000 3,787,500
Lyondell Petrochemical Co.,
Term Loan A, 9.08 - 9.1712%, 5/30/03 ..................................................... 5,916,373 5,927,467
Term Loan B, 9.58%, 6/30/05 .............................................................. 9,516,590 9,647,443
Term Loan E, 9.9787%, 6/30/06 ............................................................ 14,887,281 15,278,072
-------------
43,459,233
-------------
MARINE TRANSPORTATION .2%
American Commercial Lines,
Term Loan B, 8.625%, 6/30/06 ............................................................. 1,857,285 1,841,034
Term Loan C, 8.875%, 6/30/07 ............................................................. 2,533,743 2,511,572
-------------
4,352,606
-------------
MEDIA CONGLOMERATES 1.5%
Bridge Information Systems Inc.,
(c) Revolver, 9.3125 - 9.50%, 5/29/03 ........................................................ 2,598,870 2,429,942
Term Loan A, 9.50%, 5/29/03 .............................................................. 2,090,396 1,954,520
Term Loan B, 9.75%, 5/29/05 .............................................................. 21,890,000 21,315,388
PEI Holdings, Term Loan B, 9.0575 - 9.06%, 3/15/06 ............................................ 1,000,000 990,000
-------------
26,689,850
-------------
MEDICAL SPECIALTIES .8%
Dade Behring Inc.,
Term Loan B, 9.00%, 6/29/06 .............................................................. 2,487,500 2,499,937
Term Loan C, 9.25%, 6/29/07 .............................................................. 2,487,500 2,499,937
Hanger Orthopedic Group Inc., Term Loan B, 9.5037%, 12/31/06 .................................. 4,000,000 3,800,000
Maxxim Medical Inc.,
Term Loan B, 9.0625%, 5/12/06 ............................................................ 2,500,000 2,496,875
Term Loan C, 9.3125%, 5/12/07 ............................................................ 2,500,000 2,496,875
-------------
13,793,624
-------------
MEDICAL/NURSING SERVICES .3%
Apria Healthcare Group Inc., Term Loan, 9.38%, 8/09/01 ........................................ 5,274,452 5,244,784
METAL FABRICATIONS 2.6%
Fairchild Corp., Term Loan B, 9.43 - 9.7112%, 4/30/06 ......................................... 5,000,000 4,825,000
Mueller Group,
IRN, 12.50%, 8/16/01 ..................................................................... 40,000,000 39,900,000
Term Loan B, 9.29%, 8/16/05 .............................................................. 982,531 988,672
Term Loan C, 9.72%, 8/16/06 .............................................................. 982,531 988,672
-------------
46,702,344
-------------
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
MID-SIZE BANKS .6%
Sovereign Bancorp Inc., Term Loan, 9.3075%, 11/14/03 .......................................... $ 10,000,000 $ 10,031,250
-------------
MILITARY/GOVERNMENT/TECHNICAL .3%
Titan Corp., Term Loan B, 10.50%, 6/09/05 ..................................................... 4,975,000 4,968,782
-------------
MOVIES/ENTERTAINMENT 5.8%
Dreamworks Film Trust II, Term Loan B, 8.726%, 1/15/09 ........................................ 12,700,000 12,763,500
Premier Parks Inc., Term Loan B, 9.38%, 11/05/05 .............................................. 15,000,000 15,150,000
Regal Cinemas Inc.,
(c) Revolver, 7.4287 - 8.47%, 5/26/05 ........................................................ 11,975,517 11,197,110
Term Loan A, 8.3562%, 5/26/05 ............................................................ 8,806,486 8,366,162
Term Loan B, 8.6062%, 5/26/06 ............................................................ 3,471,755 3,328,545
Term Loan C, 8.8562%, 5/24/07 ............................................................ 3,144,706 3,014,987
SFX Entertainment Inc., Term Loan B, 9.5625%, 6/30/06 ......................................... 35,000,000 34,956,250
United Artist Theaters,
Term Loan B, 8.8125 - 10.75%, 4/21/06 .................................................... 2,090,885 1,421,802
Term Loan C, 9.0625 - 11.00%, 4/21/07 .................................................... 2,865,933 1,948,834
Washington Football Group, Term Loan A, 7.6812%, 10/22/04 ..................................... 400,000 400,500
WFI Corp., Term Loan B, 9.0562%, 10/22/04 ..................................................... 9,600,000 9,612,000
-------------
102,159,690
-------------
NEWSPAPERS .7%
Hollinger Inc., Term Loan, 9.1875%, 12/31/04 .................................................. 12,500,000 12,617,188
-------------
OIL REFINING/MARKETING .1%
Clark Refining & Marketing Inc., Term Loan, 8.875%, 11/15/04 .................................. 3,500,000 2,362,500
-------------
OTHER CONSUMER SERVICES 1.0%
AMF Bowling Inc.,
(c) Revolver, 9.56 - 9.93%, 3/31/02 .......................................................... 1,443,180 1,349,373
Term Loan A, 9.68%, 3/31/02 .............................................................. 6,549,115 6,123,423
Fitness Holdings Worldwide,
Term Loan B, 10.125%, 11/02/06 ........................................................... 5,000,000 5,000,000
Term Loan C, 10.375%, 11/02/07 ........................................................... 5,000,000 5,000,000
-------------
17,472,796
-------------
OTHER METALS/MINERALS .5%
ASARCO Corp., Term Loan, 9.5625%, 6/30/01 ..................................................... 3,977,968 3,970,509
Better Minerals & Aggregates, Term Loan B, 9.53%, 9/30/07 ..................................... 4,986,842 5,030,477
-------------
9,000,986
-------------
OTHER PHARMACEUTICALS .1%
King Pharmaceuticals, Term Loan B, 9.58%, 12/22/06 ............................................ 1,967,594 1,977,432
-------------
OTHER TELECOMMUNICATIONS 4.8%
Alec Holdings Inc.,
Term Loan B, 9.188%, 11/04/07 ............................................................ 2,631,579 2,651,316
Term Loan C, 9.438%, 5/14/08 ............................................................. 2,368,421 2,386,184
Arch Paging, Term Loan C, 12.9375%, 6/30/06 ................................................... 18,284,063 17,004,178
Cincinnati Bell Inc., Term Loan B, 8.03 - 8.16%, 1/14/07 ...................................... 10,000,000 10,025,000
ICG Communications Inc., Term Loan B, 9.33 - 9.61%, 3/31/06 ................................... 4,975,000 4,968,782
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
OTHER TELECOMMUNICATIONS (CONT.)
Northpoint Communications Group Inc., Term Loan, 10.29%, 3/31/04 .............................. $ 12,750,000 $ 12,781,875
(c) Pagenet, Revolver, 7.69 - 8.17%, 12/31/04 ..................................................... 16,762,500 14,331,939
RCN Corp., Term Loan B, 8.8750%, 6/03/07 ...................................................... 18,000,000 18,112,500
Satelites Mexicanos, Term Loan C, 8.75%, 6/30/04 .............................................. 3,530,000 3,371,150
-------------
85,632,924
-------------
PACKAGED FOODS 4.1%
Agrilink Foods Inc.,
Term Loan B, 9.9525%, 9/30/04 ............................................................ 6,797,915 6,772,423
Term Loan C, 10.2025%, 9/30/05 ........................................................... 6,968,296 6,942,165
Aurora Foods Inc., Term Loan B, 8.6212 - 8.6837%, 9/30/06 ..................................... 8,975,000 8,991,828
B&G Foods, Term Loan B, 9.345%, 3/31/06 ....................................................... 2,250,000 2,248,594
Burns Philp, Revolver, 6.5978 - 7.74%, 8/17/01 ................................................ 47,240,625 45,114,797
New World Pasta, Term Loan B, 9.375%, 1/28/06 ................................................. 2,659,900 2,663,225
-------------
72,733,032
-------------
PAPER 2.0%
Jefferson Smurfit Corp., Term Loan B, 9.375%, 3/31/06 ......................................... 955,123 956,914
Packaging Corp. of America,
Term Loan A, 7.6875%, 4/12/06 ............................................................ 53,540 53,507
Term Loan B, 8.6875%, 4/12/07 ............................................................ 3,204,001 3,230,034
Term Loan C, 8.9375%, 4/12/08 ............................................................ 3,216,219 3,242,351
Repap New Brunswick, Term Loan, 9.8712%, 6/01/04 .............................................. 23,000,000 22,310,000
Stone Container Corp., Term Loan E, 9.4375 - 9.6875%, 10/01/03 ................................ 5,840,690 5,862,592
-------------
35,655,398
-------------
PRINTING/FORMS 2.4%
Big Flower Press Holdings Inc.,
Term Loan, 13.00%, 12/09/09 .............................................................. 25,000,000 24,875,000
Term Loan B, 9.5625%, 12/09/08 ........................................................... 10,000,000 10,043,750
Dimac Corp.,
Term Loan B, 9.6662%, 6/30/06 ............................................................ 4,857,143 4,128,571
Term Loan C, 9.9162%, 12/31/06 ........................................................... 3,642,857 3,096,429
-------------
42,143,750
-------------
REAL ESTATE INVESTMENT TRUSTS 3.3%
Felcor Lodging Trust Inc., Term Loan, 8.67%, 3/31/04 .......................................... 10,000,000 9,981,250
Meditrust Corp.,
(c) Revolver, 8.875 - 9.0625%, 7/17/01 ....................................................... 6,671,361 6,437,863
Term Loan D, 9.0625%, 7/17/01 ............................................................ 10,000,000 9,700,000
Prison Realty Trust Corp.,
Term Loan B, 10.30%, 12/31/02 ............................................................ 8,910,000 8,954,550
Term Loan C, 10.12%, 12/31/02 ............................................................ 8,000,000 8,040,000
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
REAL ESTATE INVESTMENT TRUSTS (CONT.)
Ventas Realty LP,
Bridge Loan, 8.56%, 12/31/05 ............................................................. $ 12,349,431 $ 11,299,729
Revolver, 8.74%, 4/30/01 ................................................................. 1,267,143 1,140,429
Term Loan A, 8.74%, 4/30/01 .............................................................. 1,136,363 999,999
Term Loan B, 9.24%, 4/03/03 .............................................................. 2,615,057 2,301,250
-------------
58,855,070
-------------
RENTAL/LEASING COMPANIES 2.4%
NationsRent Inc., Term Loan B, 8.50%, 7/20/06 ................................................. 10,000,000 10,012,500
Rent-A-Center Inc.,
Term Loan B, 8.04 - 8.07%, 1/31/06 ....................................................... 1,474,916 1,472,150
Term Loan C, 8.29 - 8.32%, 1/31/07 ....................................................... 1,803,895 1,800,513
Rent-Way Inc., Term Loan B, 9.6837%, 9/30/06 .................................................. 4,987,500 4,999,969
United Rentals Inc., Term Loan C, 8.28%, 6/30/06 .............................................. 25,000,000 24,968,750
-------------
43,253,882
-------------
SEMICONDUCTORS 1.1%
Semiconductor Components,
Term Loan B, 9.3125%, 8/04/06 ............................................................ 9,629,630 9,804,167
Term Loan C, 9.5625%, 8/04/07 ............................................................ 10,370,370 10,558,333
-------------
20,362,500
-------------
SERVICES TO THE HEALTH INDUSTRY 1.3%
Quest Diagnostics Inc.,
Term Loan B, 9.27 - 9.43%, 6/15/06 ....................................................... 2,600,000 2,614,625
Term Loan C, 9.70 - 9.87%, 6/15/06 ....................................................... 2,400,000 2,413,500
Unilab Corp., Term Loan B, 10.00%, 11/23/06 ................................................... 17,456,250 17,325,328
-------------
22,353,453
-------------
SOFT DRINKS .6%
Triarc,
Term Loan B, 9.5937%, 3/01/06 ............................................................ 2,885,175 2,906,813
Term Loan C, 9.8437%, 3/01/07 ............................................................ 7,039,826 7,092,624
-------------
9,999,437
-------------
SPECIALTY CHEMICALS .2%
Kosa, Term Loan B, 9.4337%, 12/31/06 .......................................................... 3,896,323 3,918,239
-------------
STEEL/IRON ORE .7%
Ispat Sidbec Inc.,
Term Loan B, 8.6837%, 7/16/04 ............................................................ 4,937,374 4,888,001
Term Loan C, 9.1837%, 1/16/05 ............................................................ 4,937,374 4,888,001
Wheeling-Pittsburg, Term Loan, 9.4375%, 11/15/06 .............................................. 2,000,000 1,870,000
-------------
11,646,002
-------------
TELECOMMUNICATIONS EQUIPMENT 3.5%
American Tower Corp., Term Loan B, 9.16 - 9.28%, 12/31/07 ..................................... 7,500,000 7,551,562
E.Spire Communications,
Term Loan, 11.00%, 8/01/06 ............................................................... 10,000,000 9,700,000
Term Loan C, 10.5625%, 8/01/06 ........................................................... 15,000,000 14,550,000
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2000 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
TELECOMMUNICATIONS EQUIPMENT (CONT.)
Nextel Operations Inc., Leveraged Lease Loan, 10.25%, 3/15/05 ................................. $ 5,000,000 $ 5,062,500
Pacific Crossing Ltd., Term Loan B, 8.375%, 7/26/08 ........................................... 24,909,420 24,548,279
-------------
61,412,341
-------------
TEXTILES .7%
Synthetic Industries Inc.,
Bridge Loan, 13.00%, 12/17/00 ............................................................ 7,000,000 7,000,000
Term Loan B, 11.00%, 12/14/07 ............................................................ 5,000,000 5,028,125
-------------
12,028,125
-------------
TOOLS/HARDWARE .2%
Shop Vac Corp., Term Loan, 8.62%, 6/30/07 ..................................................... 3,000,000 3,007,500
-------------
TRANSPORTATION 1.6%
Avis Rent A Car Inc.,
Term Loan B, 9.1250%, 6/30/06 ............................................................. 10,000,000 10,062,500
Term Loan C, 9.6250%, 6/30/07 ............................................................. 10,000,000 10,062,500
Kansas City Southern Railway Co.,
Interim Term Loan, 8.5625%, 1/14/01 ....................................................... 3,500,000 3,504,375
Term Loan B, 8.8125%, 1/11/07 ............................................................. 4,750,000 4,785,625
-------------
28,415,000
-------------
WHOLESALE DISTRIBUTORS .1%
Spartan Stores, Term Loan B, 9.4375%, 3/18/07 ................................................. 1,988,333 1,975,895
-------------
TOTAL LONG TERM INVESTMENTS (COST $1,687,228,245).............................................. 1,692,748,743
-------------
SHARES
-----------
SHORT TERM INVESTMENTS 2.7%
(b) Franklin Institutional Fiduciary Trust Money Market Portfolio (COST $47,828,629) .............. 47,828,629 47,828,629
--------------
TOTAL INVESTMENTS (COST $1,735,056,874) 98.2% ................................................. 1,740,577,372
OTHER ASSETS, LESS LIABILITIES 1.8% ........................................................... 32,778,780
--------------
NET ASSETS 100.0% ............................................................................. $1,773,356,152
==============
</TABLE>
(a) Senior secured corporate loans in the Fund's portfolio generally have
variable rates which adjust to a base, such as the London Inter-Bank Offered
Rate (LIBOR), on the set dates, typically every 30 days but not greater than one
year; and/or have interest rates that float at a margin above a widely
recognized base lending rate such as the Prime Rate of a designated U.S. Bank.
(b) See Note 3 regarding investments in the "Sweep Money Fund".
(c) See Note 6 regarding unfunded loan commitments.
See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $1,735,056,874) .................................................... $ 1,740,577,372
Receivables:
Capital shares sold ......................................................................................... 26,309,406
Dividends and interest ...................................................................................... 14,926,013
Organization costs ........................................................................................... 64,947
Other assets ................................................................................................. 262,000
---------------
Total assets ............................................................................................ 1,782,139,738
---------------
Liabilities:
Payables:
Affiliates .................................................................................................. 1,898,514
Deferred facilities fees (Note 1) ............................................................................ 1,540,985
Distributions to shareholders ................................................................................ 3,717,358
Funds advanced by custodian .................................................................................. 456,445
Other liabilities ............................................................................................ 1,170,284
---------------
Total liabilities ....................................................................................... 8,783,586
---------------
Net assets, at value .................................................................................. $ 1,773,356,152
===============
Net assets consist of:
Net unrealized appreciation .................................................................................. $ 5,520,498
Accumulated net realized loss ................................................................................ (5,195,441)
Capital shares ............................................................................................... 1,773,031,095
---------------
Net assets, at value .................................................................................. $ 1,773,356,152
===============
Net asset value and maximum offering price per share ($1,773,356,152 / 178,012,157 shares outstanding) (a) ... $9.96
===============
</TABLE>
(a) Tender offer redemption price is equal to net asset value less any
applicable early withdrawal charges (Note 2).
See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Dividends ..................................................... $ 1,145,588
Interest ...................................................... 68,252,230
------------
Total investment income ................................ 69,397,818
------------
Expenses:
Management fees (Note 3) ...................................... 5,829,827
Administrative fees (Note 3) .................................. 835,359
Transfer agent fees (Note 3) .................................. 2,957,372
Custodian fees ................................................ 7,239
Reports to shareholders ....................................... 34,544
Registration and filing fees .................................. 672,097
Professional fees ............................................. 59,848
Trustees' fees and expenses ................................... 3,706
Amortization of organization costs ............................ 6,600
Other ......................................................... 39,006
------------
Total expenses ......................................... 10,445,598
Expenses waived/paid by affiliate (Note 3) ............. (188,634)
------------
Net expenses ......................................... 10,256,964
------------
Net investment income .............................. 59,140,854
------------
Realized and unrealized gains (losses):
Net realized loss from investments ..................... (3,064,517)
Net unrealized appreciation on investments ............. 1,929,269
------------
Net realized and unrealized loss ............................... (1,135,248)
------------
Net increase in net assets resulting from operations............ $ 58,005,606
============
</TABLE>
See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
AND THE YEAR ENDED JULY 31, 1999
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
JANUARY 31, 2000 JULY 31, 1999
-------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................... $ 59,140,854 $ 36,157,157
Net realized loss from investments ....................................................... (3,064,517) (2,125,932)
Net unrealized appreciation on investments ............................................... 1,929,269 3,407,972
-------------------------------------
Net increase in net assets resulting from operations ................................. 58,005,606 37,439,197
Distributions to shareholders from net investment income .................................. (59,140,854) 36,182,310)(a)
Capital share transactions (Note 2) ....................................................... 668,128,392 936,569,171
-------------------------------------
Net increase in net assets ........................................................... 666,993,144 937,826,058
Net assets (there is no undistributed net investment income at the beginning or end of
the period)
Beginning of period ...................................................................... 1,106,363,008 168,536,950
-------------------------------------
End of period ............................................................................ $ 1,773,356,152 $ 1,106,363,008
=====================================
</TABLE>
(a) Distributions were increased by a net realized gain from investments of
$25,153.
See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
Financial Statements (continued)
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<S> <C>
Cash flow from operating activities:
Dividends, interest and facility fees received ........................................................ $ 60,018,061
Operating expenses paid ............................................................................... (8,053,160)
---------------
Cash provided- operations ............................................................................ 51,964,901
---------------
Cash flow from investing activities:
Investment purchases .................................................................................. (2,013,481,318)
Investment sales and maturities ....................................................................... 1,356,797,728
---------------
Cash used- investments ............................................................................... (656,683,590)
---------------
Cash flow from financing activities:
Distributions to shareholders ......................................................................... (15,647,679)
Net proceeds from capital shares sold ................................................................. 618,953,760
---------------
Cash provided- financing activities .................................................................. 603,306,081
===============
Net decrease in cash ................................................................................... (1,412,608)
---------------
Cash at beginning of period ............................................................................ 956,163
---------------
Cash at end of period .................................................................................. $ (456,445)
===============
RECONCILIATION OF NET INVESTMENT INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
FOR THE SIX MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
Net investment income .................................................................................. $ 59,140,854
Adjustments to reconcile net investment income to net cash provided by operating activities:
Amortization income .................................................................................. (1,896,632)
Facility fees received ............................................................................... 891,057
Increase in interest receivable ...................................................................... (7,475,709)
Increase in other receivables ........................................................................ (255,400)
Increase in other liabilities ........................................................................ 1,560,731
---------------
Net cash provided by operating activities .............................................................. $ 51,964,901
===============
</TABLE>
See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Floating Rate Trust (the Fund) is registered under the Investment
Company Act of 1940 as a closed-end, continuously offered, non-diversified
investment company. The Fund seeks current income and preservation of capital.
The following summarizes the Fund's significant accounting policies.
a. SECURITY VALUATION:
The Fund invests primarily in senior secured corporate loans and senior secured
debt that meet credit standards established by Franklin Advisers, Inc.
Investment in these securities may be considered illiquid and prompt sale of
these securities at an acceptable price may be difficult.
The Fund values its securities based on quotations provided by banks,
broker/dealers or pricing services experienced in such matters. Restricted
securities and securities for which market quotations are not readily available
are valued at fair value as determined by management in accordance with
procedures established by the Board of Trustees.
b. 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
distribute all of its taxable income.
c. 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. Discount from
securities is amortized on an income tax basis. Facility fees received are
recognized as income over the expected term of the loan. Dividends from net
investment income are normally declared daily and distributed monthly to
shareholders.
d. ORGANIZATION COSTS:
Organization costs are amortized on a straight-line basis over five years.
e. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles 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 expense during the reporting
period. Actual results could differ from those estimates.
f. LINE OF CREDIT:
The Fund has an unsecured line of credit which, subject to limitations, allows
the fund to borrow up to an aggregate maximum amount of $25,000,000.
For the period ending January 31, 2000, the line of credit was unused.
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements (unaudited) (continued)
2. SHARES OF BENEFICIAL INTEREST
The Fund may, on a quarterly basis, make tender offers at net asset value for
the repurchase of a portion of the common shares outstanding. The price will be
established as of the close of business on the day the tender offer ends. An
early withdrawal charge may be imposed on shares offered for tender which have
been held for less than twelve months.
At January 31, 2000, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
JANUARY 31, 2000 JULY 31, 1999
----------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................................... 77,620,641 $ 771,928,206 104,460,894 $ 1,040,256,145
Shares issued in reinvestment of distributions......... 4,358,633 43,343,360 2,647,643 26,360,763
Shares repurchased .................................... (14,788,647) (147,143,174) (13,071,015) (130,047,737)
----------------------------------------------------------------------
Net increase .......................................... 67,190,627 $ 668,128,392 94,037,522 $ 936,569,171
======================================================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Fund are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin/ Templeton Distributors, Inc.
(Distributors), Franklin Templeton Services, Inc. (FT Services) and
Franklin/Templeton Investor Services, Inc. (Investor Services), the Fund's
investment manager, principal underwriter, administrative manager and transfer
agent, respectively.
The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund) which is managed by Advisers.
The Fund pays an investment management fee to Advisers of .80% per year of the
average daily net assets of the Fund. Management fees were reduced on assets
invested in the Sweep Money Fund.
The Fund pays administrative fees to FT Services, Inc. based on the Fund's
average daily net assets as follows:
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
------------------------------------------------------------------
.150% First $200 million
.135% Over $200 million, up to and including $700 million
.100% Over $700 million, up to and including $1.2 billion
.075% In excess of $1.2 billion
Advisers agreed in advance to waive a portion of administrative fees for the
Fund, as noted in the Statement of Operations.
The Fund pays a transfer agent fee to Investor Services of .40% per year of the
average daily net assets of the Fund.
Distributors received early withdrawal charges for the period of $675,630.
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES
At January 31, 2000, the unrealized appreciation based on the cost of
investments for income tax purposes of $1,735,444,342 was as follows:
Unrealized appreciation ................. $ 15,189,548
Unrealized depreciation ................. (10,056,518)
------------
Net unrealized appreciation ............. $ 5,133,030
============
At July 31, 1999, the Fund has deferred capital losses occurring subsequent to
October 31, 1998 of $2,123,618. For tax purposes, such losses will be reflected
in the year ending July 31, 2000.
Net realized capital losses differ for financial statement and tax purposes
primarily due to differing treatment of wash sales.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended January 31, 2000 aggregated $1,223,893,162 and $577,126,368,
respectively.
6. UNFUNDED LOAN COMMITMENTS
As of January 31, 2000, the Fund had unfunded loan commitments, which could be
extended at the option of the borrowers, pursuant to the following loan
agreements:
COMMITMENT UNFUNDED
SECURITY AMOUNT AMOUNT
------------------------------------------------------------------
AMF Bowling Inc., Revolver .......... $ 3,013,699 $ 1,664,326
Bridge Information Systems
Inc., Revolver ..................... 2,824,859 394,917
Meditrust Corp., Revolver ........... 10,000,000 3,562,137
Pagenet, Revolver ................... 22,500,000 8,168,061
Regal Cinemas Inc.,
Revolver ........................... 16,183,131 4,986,021
Triarc Revolver ..................... 5,000,000 5,000,000
Wyndham International Inc.,
Revolver ........................... 10,000,000 3,794,500
Ziff Davis Inc., Revolver ........... 9,121,461 2,357,328
-----------
$29,927,290
===========
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