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:
It's a pleasure to bring you Franklin Floating Rate Trust's annual report for
the period ended July 31, 2000.
ECONOMIC OVERVIEW
The U.S. economy displayed strong growth during the 12 months under review,
although the Federal Reserve Board (the Fed) continued to signal an increased
focus on fighting inflation. The Fed raised interest rates five times, moving
the federal funds target rate to 6.5% from 5.0% between August 1999 and May
2000. By July, however, Fed Chairman Alan Greenspan suggested that the economy
was feeling some of the impact of these rate changes, implying the trend toward
tightening rates might slow down. Despite the rate hikes, U.S. gross domestic
product surged at an annual rate of 8.3% in the fourth quarter of 1999, then
dropped to 4.8% for the first three months of 2000, before nudging up to a 5.3%
annual rate in this year's second quarter. Additionally, most indicators showed
relatively muted inflation during this time. Foreign economies saw varying
degrees of recovery and strong economic growth for the most part, despite
interest rate pressures, especially in Europe.
CONTENTS
<TABLE>
<S> <C>
Shareholder Letter ..................................................... 1
Performance Summary .................................................... 7
The Fund's Repurchase Offers ........................................... 8
Financial Highlights & Statement of Investments ........................ 10
Financial Statements ................................................... 22
Notes to Financial Statements .......................................... 26
Independent Auditors' Report ........................................... 30
</TABLE>
[PYRAMID GRAPHIC]
The dollar value, number of shares or principal value, and complete legal titles
of all portfolio holdings are listed in the Fund's Statement of Investments
(SOI). The SOI begins on page 11.
Interestingly, long-term interest rates actually declined slightly during this
period. The 30-year Treasury bond yield ended the period at 5.78%, down from
6.12% a year earlier. In contrast, short-term interest rates, as measured by the
3-month London InterBank Offered Rate (LIBOR), the benchmark underlying most of
our loans in the portfolio, increased substantially, from 5.34% at the beginning
of the reporting period, to 6.72% at the end. On July 31, 2000, the Dow Jones(R)
Industrial Average stood at 10522, compared with 10655 a year earlier, a
decrease of 1.25%.
SYNDICATED BANK LOAN MARKET
The bank loan market faced significant challenges during the 12 months under
review. The rising interest-rate environment increased costs for potential
borrowers and hampered the closely linked high-yield bond market. Additionally,
in February, several large bank loan borrowers revealed accounting
irregularities. These negative announcements created technical pressure for loan
prices across the entire market.
The environmental sector, led by hazardous waste management company
Safety-Kleen, drove much of the market's price decline. Safety-Kleen, widely
held by many institutions but not by your Fund, revealed significant accounting
errors and liquidity constraints. Other environmental companies' loans traded
down in sympathy, but to a lesser degree, including Allied Waste, one of our
largest holdings.
After finishing strongly in 1999, new issuance in the primary market (where
investors purchase loans from issuers) started 2000 slowly. Perhaps in response,
secondary market trading activity soared during the first quarter. Lenders
required higher interest payments from potential borrowers, particularly in the
media and telecommunications sectors. The high yield market remained effectively
shut down except for the better-quality borrowers.
By late spring, the leveraged loan market strengthened a bit as market
participants anticipated fewer rate tightenings going forward. New deal volume,
as measured by the dollar amount of transactions, increased, and secondary
market bid prices went up as well.
PORTFOLIO NOTES
During the year under review, Fed interest-rate hikes and Y2K fears contributed
to the London InterBank Offered Rate (LIBOR) increase. Within this environment,
Franklin Floating Rate Trust's dividend increased from 5.7350 cents per share on
July 31, 1999, to 7.9706 cents per share on July 31, 2000. During the same time,
the Fund's 30-day standardized yield grew from 7.10% to 9.59%, as reported in
the Performance Summary on page 7. However, the aforementioned pressures on the
loan market negatively affected the Fund's share price as measured by net asset
value, and it declined from $9.98 on July 31, 1999, to $9.85 on July 31, 2000.
On a positive note, the Fund's assets grew rapidly during the period, surpassing
the $2.5 billion milestone by July 31, 2000. Although the Fund grew
significantly, we remained selective, while actively managing our investments.
Our increased size allows us access to a wide variety of loan syndications and
enhances our buying power, which also gives us leverage to negotiate better
terms on the deals we buy to help benefit our shareholders. During the period
under review, Franklin Floating Rate Trust reviewed 198 deals representing $109
billion in credit facilities. Because we have seen market action affect loans to
all companies in the same industry, rather than just the company with the bad
news, we tried to maintain broad diversification across industries. As of
period-end, the Fund's largest concentrations were in cable television (8.2% of
total net assets), cellular telephone (8.1%), telecommunications equipment
(6.0%) and movies/entertainment (5.5%).
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 merger and
acquisition activity, leveraged buyouts or refinancings. Borrowing rates are
generally pegged to an index, such as LIBOR, the London InterBank Offered
Rate.
TOP 10 HOLDINGS
7/31/00
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
SECTOR NET ASSETS
------ ----------
<S> <C>
Wyndham International Inc. 3.7%
Hotels/Resorts
Charter Communications
CCVI, CCVIII and
Charter Communications
Operating LLC 3.6%
Cable Television
Allied Waste Industries Inc. 2.9%
Environmental Services
Nextel Communications Inc. 2.3%
Cellular Telephone
Iasis Healthcare Corp. 1.7%
Hospital/Nursing
Management
Burns Philp 1.6%
Packaged Foods
Century Cable (Adelphia) 1.6%
Cable Television
SFX Entertainment Inc. 1.6%
Movies/Entertainment
AES Texas 1.4%
Electrical Utilities, South
Pagenet 1.4%
Telecommunications
Equipment
</TABLE>
A good example of what happened in the bank loan market over the past 12 months
can be seen in one of our largest positions, Allied Waste. One of the largest
non-hazardous solid waste management companies in the U.S., Allied merged with
Browning-Ferris in 1999 in a $9.4 billion transaction financed by bank loans,
high yield bonds and preferred stock. In early 2000, problems experienced by
other environmental services companies cast a pall over the entire sector.
Although Allied Waste was performing in line with analysts' expectations, the
negative events announced within the environmental services industry made it
difficult for the company to divest assets and reduce debt. The uncertainty
created by these announcements lasted through the spring, as market participants
traded the loans down in price to as low as 86 cents on the dollar. However, by
early summer, Allied Waste's prospects appeared to improve and the prices of the
loans moved up to the mid-90s.
The movie exhibition industry was another loan market sector that experienced
pressure during the 12-month period. Companies with a national presence, such as
AMC, Loews/Cineplex and Regal Cinemas, experienced reduced profitability due to
increased competition and heavy spending on capital improvements and new
theaters. Bank loans in this sector also traded down in price during the past
year and our exposure to this sector did put some pressure on the Fund's share
price.
In the new issue market, the Fund continued to find what we believed to be many
solid investments during the year under review. For example, we invested
significantly in a subsidiary of Adelphia Communications several months ago.
Adelphia is set to become the sixth-largest U.S. cable operator, pending the
closing of acquisitions, with more than 5.5 million subscribers nationwide. Our
investment helped fund Adelphia's purchase of high-quality systems from
Cablevision Systems and Prestige Systems. We believe the company's growth
prospects are strong, as it continues to upgrade its systems and roll out
ancillary services, including digital video and high-speed data/Internet access.
In our analysis, these services should generate higher revenues each month as
customers take advantage of this new technology.
The Fund has also taken a large position in the bank debt of several
subsidiaries of the AES Corporation, the world's largest independent global
power company with 122 power plants in 16 countries. As one of the
fastest-growing companies in its industry, AES has tapped the bank loan market
several times to finance acquisition of coal-fired power plants in New York, a
cogeneration plant in Texas, and a Venezuelan utility company.
Another recent investment is VoiceStream Holding LLC. With its strategic
acquisitions of Omnipoint and Aerial Communications, VoiceStream has become one
of four leading providers of advanced wireless communications in the United
States. VoiceStream is currently the only company to provide nationwide service
utilizing GSM technology, the most widely used wireless protocol in the
world.(1) VoiceStream covers 220 million people, with 349 licenses in 23 of the
largest 25 markets, including its recent joint venture to build infrastructure
in the Midwest U.S. region.
DIVIDEND DISTRIBUTIONS*
8/1/99 - 7/31/00
<TABLE>
<CAPTION>
DIVIDEND
MONTH PER SHARE
------------------------------
<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
February 6.7871 cents
March 7.1408 cents
April 6.5974 cents
May 7.7663 cents
June 7.3197 cents
July 7.9706 cents
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TOTAL 83.9163 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 Fund during the reporting
period.
1. GSM refers to the global standard for mobile communications.
As the Fund continues to grow, we will maintain our strategy of holding loans
from companies that we believe possess defensive market positions and strong
asset coverage in industries that we feel will do well even during periods of
economic decline. With its relatively stable share price and potential for high,
current income, we believe the Fund is an attractive investment for investors
seeking to diversify portfolios heavily weighted in equities.
We appreciate your investment in Franklin Floating Rate Trust, and welcome your
comments or suggestions.
Sincerely,
/s/ C B Johnson
Charles B. Johnson
Chairman
Franklin Floating Rate Trust
/s/ Chauncey Lufkin
Chauncey Lufkin
Portfolio Manager
Franklin Floating Rate Trust
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This discussion reflects our views, opinions and portfolio holdings as of July
31, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund'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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ONE-YEAR PERFORMANCE
SUMMARY AS OF 7/31/00
One-year 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>
One-Year Total Return +7.39%
Net Asset Value (NAV) $9.85 (7/31/00) $9.98 (7/31/99)
Change in NAV -$0.13
Distributions (8/1/99 - 7/31/00) Dividend Income $0.839163
</TABLE>
ADDITIONAL PERFORMANCE
AS OF 6/30/00
<TABLE>
<CAPTION>
INCEPTION
1-YEAR (10/10/97)
---------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return(1) +7.39% +20.59%
Average Annual Total Return(2) +6.40% +6.90%
</TABLE>
<TABLE>
<CAPTION>
AS OF 7/31/00
<S> <C>
Distribution Rate(3) 9.55%
30-Day Standardized Yield(4) 9.59%
</TABLE>
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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 July's 7.9706 cent per
share monthly dividend and the net asset value of $9.85 on July 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 July 31, 2000.
For updated performance figures, see "Prices and Performance" at
franklintempleton.com, or call Franklin Templeton at 1-800/342-5236.
Past performance does not guarantee future results.
THE FUND'S REPURCHASE OFFERS
The Fund will make quarterly repurchase offers for a portion of its shares. With
any repurchase offer, shareholders may elect to tender (have the Fund
repurchase) all, a portion or none of their shares. With each repurchase offer,
shareholders will be notified in writing about the offer, how to request that
the Fund repurchase their shares and the deadline for submitting repurchase
requests.
Each quarter the Board of Trustees will set the amount of the repurchase offer,
as a percentage of outstanding shares. This amount is known as the repurchase
offer amount and will generally be between 5% and 25% of the Fund's outstanding
shares. If repurchase requests exceed the repurchase offer amount, the Fund will
prorate requests. The Fund may, however, first accept any requests to repurchase
all of a shareholder's shares if the shareholder owns less than 100 shares. The
Board will also determine the date by which the Fund must receive shareholders'
repurchase requests, which is known as the repurchase request deadline. The
Board will base these decisions on investment management considerations, market
conditions, liquidity of the Fund's assets, shareholder servicing and
administrative considerations and other factors it deems appropriate. Each
repurchase request deadline will occur within the period that begins 21 days
before, and ends 21 days after, the end of the quarterly interval. The
repurchase price of the shares will be the net asset value as of the close of
the NYSE on the date the Board sets as the repurchase pricing date. The maximum
number of days between the repurchase request deadline and the repurchase
pricing date is 14 days.
SUMMARY OF REPURCHASE OFFERS - 8/1/99 THROUGH 7/31/00
<TABLE>
<CAPTION>
REPURCHASE REPURCHASE % OF SHARES NUMBER OF
REQUEST DEADLINE OFFER AMOUNT TENDERED* SHARES TENDERED*
----------------------------------------------------------------
<S> <C> <C> <C>
1. 10/1/99 25% 3.66% 5,067,644.320
2. 1/20/00 25% 5.38% 9,726,447.159
3. 4/3/00 25% 5.43% 11,955,810.639
4. 7/3/00 25% 6.61% 16,969,158.470
</TABLE>
*In connection with the repurchase offers, due to the limited number of shares
tendered, the Fund did not have to consider whether to repurchase an additional
amount of shares, not in excess of 2% of the shares outstanding, and did not
need to repurchase any shares on a pro rata basis as described in the Prospectus
and Repurchase Offer/Request Form.
FRANKLIN FLOATING RATE TRUST
Financial Highlights
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------------------------------------
2000 1999 1998(a)
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<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................. $ 9.98 $ 10.04 $ 10.00
----------------------------------------------------------------
Income from investment operations:
Net investment income ............................. .839 .700 .482
Net realized and unrealized gains (losses) ........ (.130) (.060) .040
----------------------------------------------------------------
Total from investment operations ................... .709 .640 .522
----------------------------------------------------------------
Less distributions from net investment income ...... (.839) (.700) (.482)
----------------------------------------------------------------
Net asset value, end of year ....................... $ 9.85 $ 9.98 $ 10.04
----------------------------------------------------------------
Total return(b)..................................... 7.39% 6.62% 5.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .................... $ 2,541,497 $ 1,106,363 $ 168,537
Ratios to average net assets:
Expenses .......................................... 1.35% 1.39% 1.32%(c)
Expenses excluding waiver and payments by affiliate 1.35% 1.41% 1.76%(c)
Net investment income ............................. 8.51% 6.93% 6.06%(c)
Portfolio turnover rate ............................ 66.27% 63.29% 45.32%
</TABLE>
(a) For period October 10, 1997 (effective date) to July 31, 1998.
(b) Total return does not reflect the contingent deferred sales charge and is
not annualized for periods less than one year.
(c) Annualized
See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a)SENIOR FLOATING RATE INTERESTS 96.0%
ADVERTISING .3%
Lamar Media Corp., Term Loan B, 8.88 - 8.93%, 7/02/06 .............................. $ 8,000,000 $ 8,017,000
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APPAREL 1.1%
Levi Straus & Co., 364 Day Fac., 9.58 - 10.07%, 1/31/02 ............................ 21,947,021 21,407,500
St. John Knits Inc., Term Loan B, 9.62%, 7/31/07 ................................... 6,258,683 6,023,983
-------------
27,431,483
-------------
AUTO PARTS: O.E.M. 1.2%
JL French Automotive, Term Loan B, 9.41 - 9.47%, 10/31/06 .......................... 5,489,957 5,465,940
SPX Corp., Term Loan B, 8.93%, 12/31/06 ............................................ 8,201,268 8,235,099
Tenneco Automotive,
Term Loan B, 9.82%, 11/04/07 ..................................................... 8,250,000 8,194,824
Term Loan C, 10.07%, 5/04/08 ..................................................... 8,250,000 8,194,824
-------------
30,090,687
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BOOKS/MAGAZINES 2.0%
Advanstar Communications, Term Loan C, 9.62%, 10/31/05 ............................. 12,251,824 12,282,454
American Media Operations, Term Loan B, 9.56 - 9.83%, 4/01/07 ...................... 4,000,000 4,009,000
PEI Holdings, Term Loan B, 10.81 - 10.82%, 3/15/06 ................................. 7,166,666 7,095,000
Primedia Inc., Term Loan B, 9.38%, 7/31/04 ......................................... 11,442,500 11,413,894
Reiman Publications Co., Term Loan B, 10.43%, 11/30/05 ............................. 6,971,634 6,999,228
Weekly Reader, Term Loan B, 10.78 - 10.97%, 11/08/06 ............................... 9,925,000 9,776,125
-------------
51,575,701
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BROADCASTING 2.1%
Comcorp Broadcasting, Term Loan B, 10.25%, 6/30/07 ................................. 4,583,901 4,331,787
Comcorp Holdings, Term Loan, 13.06%, 8/28/01 ....................................... 5,000,000 4,725,000
Corus Entertainment Inc., Term Loan B, 9.94%, 9/01/07 .............................. 10,000,000 10,075,000
Cumulus Media Corp.,
Term Loan B, 9.66%, 9/30/07 ...................................................... 3,000,000 2,977,500
Term Loan C, 9.84%, 2/28/08 ...................................................... 2,000,000 1,985,000
Nassau Broadcasting Partners, Term Loan B, 10.39%, 6/30/07 ......................... 7,600,000 7,609,500
Quorum Broadcasting, Term Loan B, 10.22%, 9/30/07 .................................. 9,950,000 9,968,656
Sinclair Broadcast Group Inc.,
(c)Revolver, 7.60 - 9.50%, 9/15/05 ............................................... 3,104,827 3,016,863
Term Loan, 7.18%, 9/15/05 ....................................................... 3,820,961 3,726,122
White Knight Broadcasting, Term Loan B, 10.25%, 6/30/07 ............................ 4,674,767 4,417,655
-------------
52,833,083
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BUILDING MATERIALS .5%
Formica Corporation, Term Loan B, 10.33 - 10.56%, 4/30/06 .......................... 6,982,500 6,995,593
Magnatrax, Term Loan B, 10.12%, 11/15/05 ........................................... 4,484,389 4,468,978
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11,464,571
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</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
BUILDING PRODUCTS .2%
Tapco International,
Term Loan B, 9.78%, 7/23/07 $ 3,093,750 $ 3,093,750
Term Loan C, 10.03%, 7/23/08 1,856,250 1,856,250
Therma-Tru Corp., Term Loan B, 10.12%, 5/09/07 995,000 997,488
--------------
5,947,488
--------------
CABLE TELEVISION 8.2%
CC Michigan/Avalon Cable, Term Loan B, 9.04%, 11/15/08 8,000,000 7,975,000
Century Cable (Adelphia), Term Loan, 9.73%, 6/30/09 41,000,000 41,156,579
Charter Communications CCVI,
Term Loan A, 8.98%, 5/12/08 1,125,000 1,118,144
Term Loan B, 9.73%, 11/12/08 20,000,000 19,990,000
Charter Communications CCVIII, Term Loan B, 9.49%, 2/02/08 999,998 1,000,417
Charter Communications Operating LLC, Term Loan B, 9.24%, 3/18/08 69,000,000 68,965,500
Mediacom Illinois, Term Loan B, 9.13%, 12/31/08 5,000,000 5,012,500
Mediacom Southeast, Term Loan B, 9.12 - 9.13%, 8/01/08 7,500,000 7,515,937
Pegasus Media & Communications, Term Loan B, 10.18%, 4/30/05 19,500,000 19,455,306
UCA-HHC (Adelphia), Term Loan B, 9.00%, 3/31/08 35,000,000 34,982,500
--------------
207,171,883
--------------
CASINOS/GAMBLING .6%
Hollywood Casino Corp., 12.89%, 5/01/06 5,000,000 5,187,500
Horseshoe Gaming Holding, Term Loan B, 9.43%, 3/17/06 5,952,000 5,968,743
Isle of Capri,
Term Loan B, 9.97%, 3/02/06 2,394,000 2,407,253
Term Loan C, 10.22 - 10.44%, 3/02/07 2,094,750 2,106,346
--------------
15,669,842
--------------
CELLULAR TELEPHONE 8.1%
Alec Holdings Inc.,
Term Loan B, 9.43%, 11/04/07 2,631,578 2,632,950
Term Loan C, 10.01%, 5/14/08 2,368,421 2,370,148
American Cellular Inc.,
Term Loan B, 9.01%, 3/01/08 4,250,000 4,250,332
Term Loan C, 9.95%, 3/01/09 10,000,000 10,000,780
Centennial Cellular Operating Co. LLC,
Term Loan B, 9.66%, 5/31/07 7,893,230 7,912,963
Term Loan C, 9.94%, 11/30/07 4,525,489 4,538,763
Cook Inlet/Voicestream Operating, Term Loan, 12.50%, 12/31/08 20,000,000 19,950,000
Dobson Operating Co., Term Loan B, 9.71%, 12/31/07 4,477,500 4,480,764
Microcell Connexions Inc.,
Term Loan B, 9.78%, 3/01/06 5,601,575 5,589,325
Term Loan C, 9.43%, 3/01/06 5,000,000 4,996,875
Nextel Communications Inc.,
Term Loan B, 10.12%, 1/29/08 7,500,000 7,544,063
Term Loan C, 10.37%, 7/29/08 12,500,000 12,573,438
Term Loan D, 9.81%, 3/31/09 39,000,000 38,839,359
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
CELLULAR TELEPHONE (CONT.)
Nextel Partners Inc., Term Loan C, 10.34%, 7/29/08 $ 20,000,000 $ 20,108,340
Rural Cellular Corp.,
Term Loan B, 9.43%, 10/03/08 7,500,000 7,491,563
Term Loan C, 9.88%, 4/03/09 7,500,000 7,491,563
Sygnet Wireless Inc., Term Loan C, 10.41%, 12/23/07 1,696,000 1,698,120
Telecorp PCS Inc., Term Loan B, 9.78%, 1/17/08 5,000,000 4,994,790
Tritel Holding Corp., Term Loan B, 11.15%, 12/31/07 5,000,000 5,020,000
Voicestream Holding LLC, Term Loan B, 9.76%, 2/25/09 34,000,000 33,877,804
--------------
206,361,940
--------------
COAL MINING .3%
AEI Resources, Term Loan B, 10.44%, 9/30/05 9,600,000 8,640,000
--------------
COMPUTER/VIDEO CHAINS .8%
Blockbuster Inc.,
(c)Revolver, 7.47 - 8.81%, 7/01/04 18,221,538 16,353,831
Term Loan, 8.19%, 7/01/04 4,615,383 4,269,231
--------------
20,623,062
--------------
CONSUMER SPECIALTIES .4%
Boyds Collection Ltd., Term Loan B, 8.74 - 8.81%, 4/30/06 705,555 700,851
Holmes Products Corp., Term Loan B, 10.19%, 2/05/07 1,972,562 1,945,440
Jostens Inc., Term Loan B, 12.00%, 5/31/08 7,500,000 7,524,218
--------------
10,170,509
--------------
CONSUMER SUNDRIES .4%
Scotts Co.,
Term Loan B, 9.56 - 10.00%, 6/30/06 2,508,186 2,522,297
Term Loan C, 10.12 - 10.18%, 6/30/07 2,414,593 2,428,039
United Industries Corp., Term Loan B, 10.47%, 1/20/06 4,912,500 4,666,875
--------------
9,617,211
--------------
CONTAINERS/PACKAGING .7%
Graham Packaging Co.,
Term Loan B, 9.75%, 1/31/06 2,713,554 2,709,072
Term Loan C, 10.00%, 1/31/07 2,242,623 2,239,020
Term Loan D, 9.62 - 10.12%, 1/31/07 6,648,749 6,639,057
Tekni-Plex Inc., Term Loan B, 10.31%, 6/21/06 5,000,000 5,028,125
--------------
16,615,274
--------------
DIVERSIFIED COMMERCIAL SERVICES 2.2%
Burhmann US Inc., Term Loan B, 10.09%, 10/26/07 32,482,473 32,563,680
Outsourcing Solutions Inc., Term Loan B, 10.73%, 6/01/06 4,962,500 4,950,868
Stream International, Term Loan, 10.49%, 10/29/06 2,500,000 2,479,688
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
DIVERSIFIED COMMERCIAL SERVICES (CONT.)
U.S. Office Products Co.,
Multi-Draw Term Loan, 9.67%, 6/09/05 $ 2,117,358 $ 1,455,684
(c)Revolver, 9.66 - 11.50%, 6/09/05 10,652,547 7,421,280
Term Loan A, 9.63%, 6/09/06 1,039,169 720,924
Term Loan B, 10.13%, 6/09/06 10,310,608 7,221,726
--------------
56,813,850
--------------
DIVERSIFIED MANUFACTURING 1.7%
Fisher Scientific International, Term Loan C, 9.25%, 10/21/05 1,741,353 1,745,163
Foamex,
Term Loan B, 10.75%, 6/30/05 1,544,339 1,516,832
Term Loan C, 11.00%, 6/30/06 1,403,949 1,378,942
Term Loan D, 11.125%, 12/31/06 7,210,494 7,082,061
General Cable Corp., Term Loan B, 9.87%, 5/27/07 10,420,312 10,381,236
Mediapak Holdings,
Term Loan B, 10.03%, 1/14/06 6,193,585 6,185,843
Term Loan C, 10.28%, 1/14/07 6,193,585 6,185,843
Superior Telecom Inc., Term Loan B, 10.43%, 11/27/05 9,540,603 9,511,639
--------------
43,987,559
--------------
DRUG STORE CHAINS .2%
Shoppers Drug Mart, Term Loan C, 9.81%, 2/04/08 5,192,662 5,203,048
--------------
ELECTRIC UTILITIES: CENTRAL 1.0%
Western Resources, Term Loan, 9.39%, 3/17/03 25,000,000 25,046,875
--------------
ELECTRIC UTILITIES: EAST .4%
AES New York Funding LLC, Term Loan, 9.50%, 5/04/02 10,000,000 9,943,750
--------------
ELECTRICAL UTILITIES: SOUTH 1.5%
AES Texas Funding II, Term Loan, 9.56%, 3/24/01 39,000,000 38,902,500
--------------
ELECTRONIC COMPONENTS .6%
Amkor Technology Inc., Term Loan B, 9.62%, 9/30/05 9,975,000 10,041,793
Coorstek Inc., Term Loan B, 9.37%, 12/06/06 4,975,000 4,962,563
--------------
15,004,356
--------------
ENGINEERING & CONSTRUCTION 1.9%
Morrison Knudsen Corp., Term Loan B, 9.88%, 7/07/07 34,000,000 33,978,750
URS Corp.,
Term Loan B, 10.06%, 6/09/06 7,425,000 7,443,563
Term Loan C, 10.31%, 6/09/07 7,425,000 7,443,563
--------------
48,865,876
--------------
ENVIRONMENTAL SERVICES 3.7%
Allied Waste Industries Inc.,
Term Loan B, 9.56 - 9.75%, 7/30/06 34,772,726 33,508,391
Term Loan C, 9.37 - 9.81%, 7/30/07 41,727,261 40,210,059
Environmental Systems Products Holdings Inc.,
Term Loan B, 10.78%, 9/30/05 28,058,428 20,026,703
--------------
93,745,153
--------------
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
FARMING/SEEDS/MILLING .2%
Hines Nurseries Inc., Term Loan B, 10.00%, 2/28/05 $ 5,000,000 $ 5,000,000
--------------
FINANCE COMPANIES .2%
First Dominion Funding II, sub. floating rate deb.,
Series 1A-D2, 144A, 11.96%, 4/25/14 3,000,000 2,985,000
Highland Legacy Ltd., Term Loan D, 12.13%, 6/01/11 2,000,000 1,990,000
--------------
4,975,000
--------------
FOOD CHAINS .3%
Pathmark Stores Inc., Term Loan B, 9.15 - 9.68%, 12/15/01 7,845,046 7,720,367
--------------
FOREST PRODUCTS .1%
Grant Forest Products Inc., Term Loan, 10.38%, 9/30/06 1,739,130 1,740,217
--------------
HOMEBUILDING .6%
Lennar Corp., Term Loan C, 9.18%, 5/02/07 14,000,000 14,029,162
--------------
HOME FURNISHINGS .1%
Sealy Mattress Co.,
Term Loan B, 8.81%, 12/15/04 747,226 748,083
Term Loan C, 9.06%, 12/15/05 538,438 539,336
Term Loan D, 9.31%, 12/15/06 688,154 688,943
--------------
1,976,362
--------------
HOSPITAL/NURSING MANAGEMENT 2.4%
Genesis Health Ventures Inc.,
Revolver, 11.00%, 9/30/03 2,986,997 1,804,146
Term Loan B, 11.00%, 9/30/04 2,718,166 1,651,286
Term Loan C, 11.00%, 9/30/05 2,006,977 1,219,239
HCA-HealthONE, Term Loan B, 10.12%, 6/30/05 6,927,586 6,907,378
Iasis Healthcare Corp., Term Loan B, 11.00%, 9/30/06 43,553,358 43,362,812
Multicare Companies Inc.,
Term Loan B, 11.00%, 9/30/04 2,473,838 1,392,771
Term Loan C, 11.00%, 9/30/05 602,882 339,423
Vanguard Health Systems Inc., Term Loan B, 11.00%, 2/01/06 3,989,978 3,989,979
--------------
60,667,034
--------------
HOTELS/RESORTS 4.9%
Extended Stay America Inc.,
Term Loan C, 10.12%, 12/31/04 12,000,000 12,030,000
Term Loan D, 10.13%, 12/31/07 15,000,000 15,023,445
Pebble Beach Co., Term Loan B, 9.65%, 7/30/06 5,607,272 5,630,930
Wyndham International Inc.,
Increasing Rate Loan, 11.93%, 6/05/03 42,000,000 41,695,500
(c)Revolver, 9.68%, 6/30/05 5,180,000 4,901,575
Term Loan, 10.43%, 6/30/06 47,500,000 46,324,375
--------------
125,605,825
--------------
INDUSTRIAL MACHINERY/COMPONENTS 1.3%
Blount International, Term Loan B, 10.17 - 10.83%, 6/30/06 14,887,500 14,971,242
Gleason Corporation, Term Loan B, 10.25 - 10.37%, 2/18/08 5,000,000 4,974,999
Terex Corp., Term Loan C, 9.71 - 9.82%, 3/31/06 8,850,172 8,859,652
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
INDUSTRIAL MACHINERY/COMPONENTS (CONT.)
Thermadyne Holdings Corp.,
Term Loan B, 9.52 - 9.78%, 5/23/05 $ 2,391,051 $ 2,259,544
Term Loan C, 9.77 - 10.03%, 5/22/06 2,391,051 2,259,544
--------------
33,324,981
--------------
INSURANCE BROKERS/SERVICES .2%
Willis Corroon Corp.,
Term Loan C, 9.30%, 2/19/08 2,425,000 2,420,958
Term Loan D, 9.55%, 8/19/08 2,425,000 2,420,958
--------------
4,841,916
--------------
MAJOR CHEMICALS 1.0%
Georgia Gulf Corp., Tern Loan B, 9.37%, 11/12/06 1,982,503 1,995,927
Huntsman ICI Chemicals LLC,
Term Loan B, 9.87 - 9.93%, 6/30/07 2,475,000 2,493,703
Term Loan C, 9.93 - 10.00%, 6/30/08 2,475,000 2,493,703
Lyondell Chemical Co.,
Term Loan B, 10.37%, 6/30/05 2,805,241 2,836,472
Term Loan E, 10.49%, 5/16/06 14,812,281 15,292,052
--------------
25,111,857
--------------
MARINE TRANSPORTATION .3%
American Commercial Lines,
Term Loan B, 9.25 - 9.50%, 6/30/06 4,035,716 3,922,214
Term Loan C, 9.50 - 9.75%, 6/30/07 5,083,223 4,940,262
--------------
8,862,476
--------------
MEDIA CONGLOMERATES .8%
Bridge Information Systems Inc.,
2nd Funding, 10.06%, 5/29/05 1,314,705 1,084,632
(c)Revolver, 10.35 - 12.00%, 5/29/05 1,405,995 1,236,341
Term Loan A, 10.56%, 5/29/03 1,267,199 1,045,439
Term Loan B, 10.81%, 5/29/05 21,257,770 17,537,662
--------------
20,904,074
--------------
MEDICAL/NURSING SERVICES .7%
Apria Healthcare Group Inc., Term Loan, 10.12%, 8/09/01 4,943,412 4,898,615
Maxxim Medical,
Term Loan B, 10.00%, 5/12/06 2,500,000 2,468,750
Term Loan C, 10.31%, 5/12/07 2,500,000 2,468,750
Total Renal Care Holdings Inc., Term Loan B, 10.43%, 3/31/06 7,802,489 7,568,415
--------------
17,404,530
--------------
MEDICAL SPECIALTIES .6%
Alliance Imaging,
Term Loan B, 9.94%, 11/02/07 4,029,850 3,999,627
Term Loan C, 10.19%, 11/02/08 4,970,149 4,932,873
Hanger Orthopedic Group Inc., Term Loan B, 10.77%, 12/31/06 7,960,000 7,517,225
--------------
16,449,725
--------------
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
METAL FABRICATIONS 1.2%
Fairchild Corp., Term Loan B, 9.62 - 9.77%, 4/30/06 .......................... $ 8,742,237 $ 8,246,842
Mueller Group,
Term Loan B, 9.44 - 10.47%, 8/16/05 ........................................ 977,593 980,038
Term Loan C, 10.22 - 10.83%, 8/16/06 ....................................... 977,592 980,038
Term Loan D, 10.83%, 8/16/07 ............................................... 19,451,250 19,560,663
--------------
29,767,581
--------------
MID-SIZED BANKS .2%
Sovereign Bancorp Inc., Term Loan, 10.12%, 11/14/03 .......................... 6,000,000 6,022,500
--------------
MILITARY/GOVERNMENT/TECHNICAL .3%
Titan Corp., Term Loan B, 9.28%, 2/23/07 ..................................... 6,982,500 7,004,320
--------------
MOVIES/ENTERTAINMENT 5.5%
AMF Bowling Inc.,
AXEL A, 10.77 - 11.03%, 3/31/03 ............................................ 9,635,396 8,400,004
AXEL B, 11.27 - 11.53%, 3/31/04 ............................................ 6,229,273 5,430,593
(c)Revolver, 10.03 - 12.25%, 3/31/02 .......................................... 1,791,234 1,637,193
Term Loan A, 10.27 - 10.53%, 3/31/02 ....................................... 5,170,353 4,743,800
Dreamworks Film Trust II, Term Loan B, 9.43%, 1/15/09 ........................ 2,700,000 2,717,720
Fitness Holdings Worldwide,
Term Loan B, 10.87%, 11/02/06 .............................................. 4,980,000 4,933,313
Term Loan C, 11.12%, 11/02/07 .............................................. 4,980,000 4,934,871
Phoenix Suns, Term Loan, 8.63%, 3/31/05 ...................................... 10,000,000 9,981,250
Premier Parks Inc., Term Loan B, 9.89 - 10.11%, 9/30/05 ...................... 15,000,000 15,098,445
Regal Cinemas Inc.,
(c)Revolver, 8.34 - 10.50%, 5/26/05 ........................................... 15,697,624 11,289,219
Term Loan A, 9.07%, 5/26/05 ................................................ 8,717,531 6,437,897
Term Loan B, 9.32%, 5/26/06 ................................................ 2,160,247 1,617,099
Term Loan C, 9.57%, 5/24/07 ................................................ 3,004,747 2,249,266
SFX Entertainment Inc., Term Loan B, 10.13%, 6/30/06 ......................... 40,000,000 40,040,000
United Artist Theaters,
Term Loan B, 11.00 - 12.25%, 4/21/06 ....................................... 6,548,506 4,772,225
Term Loan C, 11.00 - 12.25%, 4/21/07 ....................................... 5,549,985 4,044,553
Washington Football Group, Term Loan A, 8.21%, 10/22/04 ...................... 400,000 399,500
WFI Corp., Term Loan B, 9.58%, 10/22/04 ...................................... 9,600,000 9,636,000
--------------
138,362,948
--------------
NEWSPAPERS .7%
Hollinger Inc., Term Loan, 9.81%, 12/31/04 ................................... 12,500,000 12,570,313
Trader.com,
Term Loan B, 9.62%, 12/31/06 ............................................... 4,480,280 4,446,679
Term Loan C, 10.12%, 12/31/07 .............................................. 3,019,718 2,997,071
--------------
20,014,063
--------------
NON-U.S. UTILITIES 1.3%
AES EDC Funding, Term Loan, 9.63 - 9.79%, 9/13/01 ............................ 34,000,000 33,915,000
--------------
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
OTHER METALS/MINERALS .2%
Better Minerals & Aggregates, Term Loan B, 10.25 - 11.50%, 9/30/07 ........... $ 4,960,525 $ 4,957,426
--------------
OTHER TELECOMMUNICATIONS 4.5%
Cincinnati Bell Inc., Term Loan B, 8.92 - 9.06%, 1/14/07 ..................... 5,000,000 5,010,115
Clearnet Communications,
Loan Certificate I, 10.12%, 7/7/07 ......................................... 4,000,000 4,000,000
Loan Certificate II, 8.02%, 7/01/07 ........................................ 25,000,000 23,125,000
ICG Communications Inc., Term Loan B, 10.37%, 3/31/06 ........................ 4,950,000 4,950,000
ITC Deltacom Inc., Term Loan B, 9.64%, 9/05/07 ............................... 4,987,500 4,962,563
(c)Level 3 Communications Inc., Term Loan A, 9.73%, 9/30/07 ...................... 7,272,727 7,053,411
Mcleod USA Inc., Term Loan B, 9.62%, 5/31/08 ................................. 20,000,000 20,044,640
Nextlink Communications Inc., Term Loan B, 9.94%, 10/31/05 ................... 4,500,000 4,515,314
Northpoint Communications Group Inc., Term Loan, 11.13%, 3/31/04 ............. 15,750,000 15,671,250
RCN Corp., Term Loan B, 10.25%, 6/03/07 ...................................... 18,000,000 17,827,038
Satelites Mexicanos, Term Loan C, 9.26%, 6/30/04 ............................. 3,530,000 3,282,900
WCI Capital Corp., Term Loan B, 11.43%, 3/31/07 .............................. 5,000,000 4,876,564
--------------
115,318,795
--------------
PACKAGE GOODS/CONTAINERS .3%
Huntsman Packaging Corp., Term Loan B, 9.68%, 5/31/08 ........................ 8,000,000 8,025,000
--------------
PACKAGED FOODS 3.0%
Agrilink Foods Inc.,
Term Loan B, 10.37% - 10.40%, 9/30/04 ...................................... 6,705,518 6,266,307
Term Loan C, 10.62% - 10.65%, 9/30/05 ...................................... 6,873,845 6,423,609
Aurora Foods Inc.,
Revolver, 9.87 - 9.96%, 6/30/05 ............................................ 778,094 709,367
Term Loan A, 9.96%, 6/30/05 ................................................ 666,742 608,403
Term Loan B, 10.41 - 10.46%, 9/30/06 ....................................... 8,432,531 7,807,116
B&G Foods, Term Loan B, 9.77%, 3/31/06 ....................................... 2,250,000 2,070,000
Burns Philp, Revolver, 7.87 - 7.93%, 8/17/01 ................................. 42,118,895 41,487,113
Merisant Corp., Term Loan B, 10.04%, 3/30/07 ................................. 2,992,500 3,006,215
New World Pasta, Term Loan B, 10.81%, 1/28/06 ................................ 2,646,500 2,575,926
Nutrasweet,
Second Lien Term Loan, 12.19%, 5/24/09 ..................................... 3,000,000 2,992,500
Term Loan B, 10.31% - 10.56%, 5/24/07 ...................................... 2,500,000 2,508,596
--------------
76,455,152
--------------
PAPER 2.7%
Jefferson Smurfit Corp., Term Loan B, 9.87%, 3/31/06 ......................... 955,122 956,805
Repap New Brunswick, Term Loan, 10.60%, 6/01/04 .............................. 20,500,000 20,038,750
Stone Container Corp.,
Term Loan E, 10.19% - 10.38%, 10/01/03 ..................................... 5,753,914 5,772,171
Term Loan F, 9.94%, 12/31/05 ............................................... 16,632,000 16,678,786
Term Loan G, 10.18%, 12/31/06 .............................................. 11,649,244 11,635,894
Term Loan H, 10.18%, 12/31/06 .............................................. 12,837,880 12,823,168
--------------
67,905,574
--------------
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
PRINTING/FORMS 2.6%
American Reprographics, Term Loan B, 10.31 - 11.75%, 4/10/08 $ 16,458,750 $ 16,335,310
Big Flower Press Holdings Inc.,
Term Loan, 13.50%, 12/09/09 25,000,000 24,843,750
Term Loan B, 10.37 - 10.43%, 12/09/08 9,983,333 9,983,333
Dimac Corp.,
Term Loan B, 9.91 - 12.50%, 6/30/06 4,857,142 4,128,572
Term Loan C, 9.91 - 12.50%, 12/31/06 3,642,856 3,096,428
Mail-Well, Term Loan B, 9.28 - 9.29%, 2/22/07 6,500,000 6,497,972
--------------
64,885,365
--------------
RAILROADS 1.0%
Kansas City Southern Railway Co.,
Term Loan B, 9.63%, 1/11/07 1,750,000 1,759,063
Term Loan Interim, 9.88%, 1/14/01 3,500,000 3,507,658
Railamerica Holding, Bridge Loan, 15.00%, 3/02/01 7,333,333 7,296,667
Railamerica Op. Co., Bridge Loan, 13.00%, 3/02/01 12,666,666 12,603,333
--------------
25,166,721
--------------
REAL ESTATE INVESTMENT TRUSTS 3.4%
Felcor Lodging Trust Inc., Term Loan, 9.38%, 3/31/04 9,973,333 9,931,774
Meditrust Corp.,
(c)Revolver, 9.56 - 9.68%, 7/17/01 7,301,861 6,711,633
Term Loan D, 9.69%, 7/17/01 15,000,000 14,050,005
Prison Realty Trust Corp.,
Term Loan B, 11.25%, 12/31/02 11,843,675 10,955,400
Term Loan C, 12.13%, 12/31/02 9,295,613 8,598,443
Ventas Realty LP,
Tranche A, 9.42%, 12/31/02 23,042,043 21,198,680
Tranche B, 10.42%, 12/31/05 11,318,753 10,186,878
Tranche C, 10.92%, 12/31/07 3,912,807 3,521,527
--------------
85,154,340
--------------
RENTAL/LEASING COMPANIES 2.9%
Ashtead Group, Term Loan B, 9.61%, 6/30/07 24,000,000 23,955,000
NationsRent Inc., Term Loan B, 9.59%, 7/20/06 9,900,000 9,813,375
Rent-A-Center Inc.,
(c)LC Multi-Draw, 8.13%, 7/31/04 1,240,634 1,222,024
Term Loan B, 8.62 - 8.65%, 1/31/06 2,136,172 2,125,493
Term Loan C, 8.87 - 8.90%, 1/31/07 2,863,824 2,849,508
Term Loan D, 9.38 - 9.43%, 12/31/07 3,000,000 2,992,500
Rent-Way Inc, Term Loan B, 10.11%, 9/30/06 9,962,500 9,950,047
United Rentals Inc., Term Loan C, 9.16%, 6/30/06 20,000,000 19,762,500
--------------
72,670,447
--------------
SEMICONDUCTORS 1.2%
Semiconductor Components,
Term Loan A, 9.87%, 8/04/05 131,276 131,004
Term Loan B, 10.31%, 8/04/06 9,629,629 9,705,463
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
SEMICONDUCTORS (CONT.)
Semiconductor Components, (cont.)
Term Loan C, 10.56%, 8/04/07 $ 10,370,370 $ 10,452,037
Term Loan D, 9.50%, 8/04/07 9,500,000 9,509,500
--------------
29,798,004
--------------
SERVICES TO THE HEALTH INDUSTRY .8%
Dade Behring,
Term Loan B, 9.68%, 6/29/06 1,218,796 1,126,081
Term Loan C, 9.94%, 6/29/07 1,218,796 1,126,081
Quest Diagnostics Inc.,
Term Loan B, 9.76 - 9.99%, 6/15/06 2,586,773 2,595,395
Term Loan C, 9.62 - 10.48%, 6/15/06 2,387,808 2,395,766
Unilab Corp., Term Loan B, 10.75%, 11/23/06 13,366,826 13,258,221
--------------
20,501,544
--------------
SOFT DRINKS .4%
Triarc,
(c)Revolver, 9.65%, 3/01/05 1,250,000 1,231,250
Term Loan B, 9.18 - 10.25%, 3/01/06 2,870,635 2,882,188
Term Loan C, 10.43 - 10.50%, 3/01/07 7,004,357 7,032,540
--------------
11,145,978
--------------
SPECIALTY CHEMICALS 1.1%
Arteva B.V. (Kosa), Term Loan B, 10.03%, 12/31/06 3,864,644 3,885,982
OM Group Inc., Term Loan B, 9.78%, 3/31/07 9,975,000 9,999,938
Sybron Chemicals, Term Loan B, 9.78%, 3/29/07 14,463,750 14,439,639
--------------
28,325,559
--------------
STEEL/IRON ORE .5%
Ispat Sidbec Inc.,
Term Loan B, 8.87 - 9.28%, 7/16/04 6,149,500 6,053,415
Term Loan C, 9.37 - 9.78%, 1/16/05 6,149,500 6,053,415
Wheeling-Pittsburgh, Term Loan, 10.06%, 11/15/06 2,000,000 1,530,000
--------------
13,636,830
--------------
TELECOMMUNICATIONS EQUIPMENT 6.0%
American Tower Corp., Term Loan B, 9.88%, 12/31/07 7,500,000 7,533,240
Arch Paging,
Term Loan B, 8.68%, 6/30/05 5,000,000 4,550,000
Term Loan C, 13.62%, 6/30/06 23,284,061 21,467,906
Crown Castle Operating Co., Term Loan B, 9.37%, 3/15/08 9,000,000 9,027,324
Dynatech Corp., Term Loan B, 10.03%, 9/30/07 23,905,882 23,873,012
E.Spire Communications, Term Loan C, 10.68 - 11.37%, 8/01/06 22,713,414 21,009,909
Nextel Operations Inc., Leveraged Lease Loan, 10.25%, 3/15/05 5,000,000 4,987,500
Pacific Crossing Ltd., Term Loan B, 9.13 - 10.44%, 7/26/06 24,909,418 24,504,641
Pagenet, Revolver, 7.94 - 10.50%, 12/31/04 43,802,694 35,980,806
--------------
152,934,338
--------------
</TABLE>
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
------- -----
<S> <C> <C>
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
TEXTILES .4%
Synthetic Industries Inc., Bridge Loan, 14.00%, 12/17/08 $ 10,000,000 $ 9,650,000
--------------
TOOLS/HARDWARE .1%
Shop Vac Corp. Term Loan, 9.29%, 6/30/07 3,000,000 2,998,123
--------------
TRANSPORTATION 1.8%
Avis Rent A Car Inc.,
Term Loan B, 9.87%, 6/30/06 6,988,667 6,994,490
Term Loan C, 10.12%, 6/30/07 992,670 993,573
Eurotunnel Finance Ltd., (United Kingdom)
Tier 1 Jr Debt, 7.03%, 7/01/25 18,902,672GBP 23,037,021
Tier 2 Jr Debt, 7.03%, 7/01/25 14,000,000GBP 14,834,284
--------------
45,859,368
--------------
WHOLESALE DISTRIBUTORS .1%
Spartan Stores, Term Loan B, 10.06%, 3/18/07 1,985,012 1,970,125
--------------
TOTAL SENIOR FLOATING RATE INTERESTS (COST $2,464,489,932) 2,440,801,328
--------------
SHARES
--------
COMMON STOCK
COMPUTER SOFTWARE
Rivus Internet Group Inc. (COST $18,240) 72,960 18,240
--------------
TOTAL LONG TERM INVESTMENTS (COST $2,464,508,172) 2,440,819,568
--------------
SHORT TERM INVESTMENTS 2.3%
(b)Franklin Institutional Fiduciary Trust Money Market
Portfolio (COST $56,931,363) 56,931,363 56,931,363
--------------
TOTAL INVESTMENTS (COST $2,521,439,535) 98.3% 2,497,750,931
OTHER ASSETS, LESS LIABILITIES 1.7% 43,745,798
--------------
NET ASSETS 100.0% $2,541,496,729
--------------
</TABLE>
CURRENCY ABBREVIATIONS
GBP - British Pound
(*) The principal amount is stated in U.S. dollars unless otherwise indicated.
(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
JULY 31, 2000
<TABLE>
<S> <C>
Assets:
Investments in securities:
Cost ................................................................................................ $ 2,521,439,535
---------------
Value ............................................................................................... 2,497,750,931
Receivables:
Investment securities sold .......................................................................... 224,567
Capital shares sold ................................................................................. 36,514,135
Interest ............................................................................................ 20,911,415
Organization costs ................................................................................... 54,280
---------------
Total assets ..................................................................................... 2,555,455,328
---------------
Liabilities:
Payables:
Investment securities purchased ..................................................................... 545,000
Affiliates .......................................................................................... 2,626,484
Deferred facilities fees (Note 1) .................................................................... 3,993,592
Distributions to shareholders ........................................................................ 5,817,157
Funds advanced by custodian .......................................................................... 918,131
Other liabilities .................................................................................... 58,235
---------------
Total liabilities ................................................................................ 13,958,599
---------------
Net assets, at value ............................................................................ $ 2,541,496,729
---------------
Net assets consist of:
Net unrealized depreciation .......................................................................... (23,692,591)
Accumulated net realized loss ........................................................................ (618,246)
Capital shares ....................................................................................... 2,565,807,566
---------------
Net assets, at value ............................................................................. $ 2,541,496,729
===============
Net asset value and maximum offering price per share ($2,541,496,729/258,046,114 shares outstanding)(a) $ 9.85
===============
</TABLE>
(a) Redemption price is equal to net asset value less any applicable contingent
deferred sales charge (see Note 2).
See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2000
<TABLE>
<S> <C>
Investment income:
Dividends (Note 3) ..................................................... $ 5,075,979
Interest ............................................................... 175,654,216
-------------
Total investment income ............................................ 180,730,195
-------------
Expenses:
Management fees (Note 3) ............................................... 14,368,694
Administrative fees (Note 3) ........................................... 1,952,261
Transfer agent fees (Note 3) ........................................... 7,438,919
Custodian fees ......................................................... 20,617
Reports to shareholders ................................................ 102,615
Registration and filing fees ........................................... 622,414
Professional fees ...................................................... 200,287
Trustees' fees and expenses ............................................ 5,231
Amortization of organization costs ..................................... 30,067
Other .................................................................. 48,629
-------------
Total expenses ..................................................... 24,789,734
-------------
Net investment income ............................................. 155,940,461
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ........................................................... 1,512,678
Foreign currency transactions ......................................... (27,374)
-------------
Net realized gain .................................................. 1,485,304
Net unrealized depreciation on:
Investments ........................................................... (27,279,833)
Translation of assets and liabilities denominated in foreign currencies (3,987)
-------------
Net unrealized depreciation ........................................ (27,283,820)
-------------
Net realized and unrealized loss ........................................ (25,798,516)
-------------
Net increase in net assets resulting from operations .................... $ 130,141,945
-------------
</TABLE>
See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JULY 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 155,940,461 $ 36,157,157
Net realized gain (loss) from investments and foreign currency transactions ........... 1,485,304 (2,125,932)
Net unrealized appreciation (depreciation) on investments and translation of assets and
liabilities denominated in foreign currencies ........................................ (27,283,820) 3,407,972
------------------------------------
Net increase in net assets resulting from operations ............................... 130,141,945 37,439,197
Distributions to shareholders from net investment income ............................... (155,913,087) (36,182,310)
Capital share transactions (Note 2) .................................................... 1,460,904,863 936,569,171
------------------------------------
Net increase in net assets ......................................................... 1,435,133,721 937,826,058
Net assets (there is no undistributed net investment income at beginning
or end of year):
Beginning of year ..................................................................... 1,106,363,008 168,536,950
------------------------------------
End of year ........................................................................... $ 2,541,496,729 $ 1,106,363,008
====================================
</TABLE>
See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
Financial Statements(continued)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JULY 31, 2000
<TABLE>
<S> <C>
Cash flow from operating activities:
Dividends, interest and facility fees received .......... $ 164,316,731
Operating expenses paid ................................. (23,387,875)
---------------
Cash provided - operations ......................... 140,928,856
---------------
Cash flow from investing activities:
Investment purchases .................................... (2,570,336,511)
Investment sales and maturities ......................... 1,135,890,658
---------------
Cash used - investments ............................ (1,434,445,853)
---------------
Cash flow from financing activities:
Distributions to shareholders ........................... (42,885,788)
Net proceeds from capital shares sold ................... 1,334,528,491
---------------
Cash provided - financing activities ............... 1,291,642,703
---------------
Net decrease in cash .................................... (1,874,294)
Cash at beginning of year ............................... 956,163
---------------
Funds advanced by custodian ............................. $ (918,131)
===============
</TABLE>
RECONCILIATION OF NET INVESTMENT INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES FOR THE YEAR ENDED JULY 31, 2000
<TABLE>
<S> <C>
Net investment income ...................................................................... $ 155,940,461
Adjustments to reconcile net investment income to net cash provided by operating
activities:
Amortization income ....................................................................... (5,723,906)
Amortization of offering costs ............................................................ 30,067
Facility fees received .................................................................... 2,771,553
Increase in interest receivable............................................................ (13,461,111)
Increase in other liabilities ............................................................. 1,371,792
-------------
Net cash provided by operating activities .................................................. $ 140,928,856
=============
</TABLE>
See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Floating Rate Trust (the Fund) is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end, continuously offered
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. 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. dollars
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. Bond discount is
amortized on an income tax basis. Facility fees received are recognized as
income over the expected term of the loan. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
e. ORGANIZATION COSTS:
Organization costs are amortized on a straight-line basis over five years.
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements(continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
f. 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.
g. 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 $25,000,000.
For the year ending July 31, 2000, the line of credit was unused.
2. SHARES OF BENEFICIAL INTEREST
The Fund may, on a quarterly basis, make tender offers at net asset value for
the repurchase of a portion of the common shares outstanding. The price will be
established as of the close of business on the day the tender offer ends. An
early withdrawal charge may be imposed on shares offered for tender which have
been held for less than twelve months.
At July 31, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................................. 179,578,847 $ 1,781,070,181 104,460,894 $ 1,040,256,145
Shares issued in reinvestment of distributions 11,364,798 112,540,752 2,647,643 26,360,763
Shares redeemed .............................. (43,719,061) (432,706,070) (13,071,015) (130,047,737)
-----------------------------------------------------------------------
Net increase ................................. 147,224,584 $ 1,460,904,863 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 earned
dividend income of $5,075,979 from investments in the Sweep Money Fund.
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.
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements(continued)
3. TRANSACTIONS WITH AFFILIATES (CONT.)
The Fund pays administrative fees to FT Services based on the net assets of the
Fund as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
------------------------------------------------------------------
<S> <C>
.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
</TABLE>
Included in professional fees are legal fees of $36,013 that were paid to a law
firm in which a partner was an officer of the Fund.
Distributors received contingent deferred sales charges for the year of
$1,257,884.
4. INCOME TAXES
At July 31, 2000, the Fund has deferred capital losses occurring subsequent to
October 31, 1999 of $6,496,058. For tax purposes, such losses will be reflected
in the year ending July 31, 2001.
At July 31, 2000, the unrealized depreciation based on the cost of investments
for income tax purposes of $2,523,067,385 was as follows:
Unrealized appreciation ... $ 17,240,576
Unrealized depreciation ... (42,557,030)
------------
Net unrealized depreciation $(25,316,454)
============
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions.
Net realized capital losses differ for financial statement and tax purposes
primarily due to differing treatment of wash sales and foreign currency
transactions.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended July 31, 2000 aggregated $2,553,825,088 and $1,135,501,456, respectively.
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements(continued)
6. UNFUNDED LOAN COMMITMENTS
As of July 31, 2000, the Fund had unfunded loan commitments, which could be
extended at the option of the borrowers, pursuant to the following loan
agreements:
<TABLE>
<CAPTION>
COMMITMENT UNFUNDED
SECURITY AMOUNT AMOUNT
-----------------------------------------------------------------------
<S> <C> <C>
AMF Bowling Inc., Revolver .............. $ 3,013,699 $ 1,222,465
Blockbuster Inc., Revolver .............. 25,753,848 7,532,310
Bridge Information Systems Inc., Revolver 2,599,700 1,193,705
Charter Communications CCVI, Revolver ... 875,000 875,000
Level 3 Communications Inc., Term Loan A 40,000,000 32,727,273
Meditrust Corp., Revolver ............... 10,000,000 2,698,139
Regal Cinemas Inc., Revolver ............ 15,859,455 161,831
Rent-A-Center Inc., LC Multi-Draw ....... 1,891,192 650,558
Semiconductor Components, Revolver ...... 1,071,429 1,071,429
Sinclair Broadcast Group Inc., Revolver . 9,612,483 6,507,656
Teligent, Revolver ...................... 5,869,565 5,869,565
Triarc, Revolver ........................ 5,000,000 3,750,000
U.S. Office Products Co., Revolver ...... 12,333,694 1,681,147
Wyndham International Inc., Revolver .... 9,934,222 4,754,222
-----------
$70,695,300
===========
</TABLE>
FRANKLIN FLOATING RATE TRUST
Independent Auditors' Report
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
OF FRANKLIN FLOATING RATE TRUST:
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations, cash
flows, and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of Franklin Floating Rate Trust
("the Fund") at July 31, 2000, the results of its operations and its cash flows
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at July 31, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
September 6, 2000
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