<TABLE>
<CAPTION>
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
Financial Highlights
PERIOD ENDED
JULY 31, 2000 a
==================
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<S> <C>
Net asset value, beginning of period $10.00
------------------
Income from investment operations:
Net investment income .288
Net realized and unrealized gains .050
------------------
Total from investment operations .338
------------------
Less distributions from net investment income (.288)
------------------
Net asset value, end of period $10.05
==================
Total return b 3.42%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $37,370
Ratios to average net assets:
Expenses 1.00% c
Expenses excluding waiver and payments by affiliate 2.27% c
Net investment income 8.62% c
Portfolio turnover rate 11.10%
aFor the period March 24, 2000 (effective date) to July 31, 2000.
bTotal return is not annualized for periods less than one year.
cAnnualized
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
STATEMENT OF INVESTMENTS, JULY 31, 2000
PRINCIPAL AMOUNT VALUE
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
a SENIOR FLOATING RATE INERESTS 84.0%
AUTO PARTS: O.E.M. 4.7%
SPX Corp., Term Loan B, 8.93%, 12/31/06 $ 746,250 $ 749,328
Tenneco Automotive,
Term Loan B, 9.82%, 11/04/07 500,000 496,656
Term Loan C, 10.07%, 5/04/08 500,000 496,656
-----------
1,742,640
-----------
BUILDING MATERIALS 1.3%
Magnatrax, Term Loan B, 10.12%, 11/15/05 498,266 496,553
-----------
CABLE TELEVISION 9.4%
Century Cable (Adelphia), Term Loan, 9.73%, 6/30/09 1,000,000 1,003,819
Charter Communications CCVIII, Term Loan B, 9.49%, 2/02/08 1,000,000 1,000,417
Charter Communications Operating LLC, Term Loan B, 9.24%, 3/18/08 1,000,000 999,500
Pegasus Media & Communications, Term Loan B, 10.18%, 4/30/05 500,000 498,854
-----------
3,502,590
-----------
CASINOS/GAMBLING 1.3%
Isle of Capri,
Term Loan B, 9.97%, 3/02/06 266,000 267,473
Term Loan C, 10.22-10.44%, 3/02/07 233,333 234,039
-----------
501,512
-----------
CELLULAR TELEPHONE 8.0%
Centennial Cellular Operating Co. LLC, Term Loan B, 9.66%, 5/31/07 498,739 499,986
Dobson Operating Co., Term Loan B, 9.71%, 12/31/07 497,500 497,863
Nextel Communications Inc., Term Loan D, 9.81%, 3/31/09 1,000,000 995,881
Voicestream Holding LLC, Term Loan B, 9.76%, 2/25/09 1,000,000 996,406
-----------
2,990,136
-----------
CONSUMER SPECIALTIES 1.3%
Jostens Inc., Term Loan B, 12.00%, 5/31/08 500,000 501,615
-----------
DIVERSIFIED MANUFACTURING 2.7%
Superior Telecom Inc., Term Loan B, 10.43%, 11/27/05 1,000,000 996,964
-----------
ELECTRICAL UTILITIES: SOUTH 2.7%
AES Texas Funding II, Term Loan, 9.56%, 3/24/01 1,000,000 997,500
-----------
ENGINEERING & CONSTRUCTION 2.7%
Morrison Knudsen Corp., Term Loan B, 9.88%, 7/07/07 1,000,000 999,375
-----------
ENVIRONMENTAL SERVICES 3.9%
Allied Waste Industries Inc.,
Term Loan B, 9.56-9.75%, 7/30/06 681,818 657,026
Term Loan C, 9.37-9.81%, 7/30/07 817,182 787,469
-----------
1,444,495
-----------
HOMEBUILDING 2.7%
Lennar Corp., Term Loan C, 9.18%, 5/02/07 1,000,000 1,002,083
-----------
HOSPITAL/NURSING MANAGEMENT 2.7%
Iasis Healthcare Corp., Term Loan B, 11.00%, 9/30/06 1,000,000 995,625
-----------
HOTELS/RESORTS 5.3%
Extended Stay America Inc., Term Loan C, 10.12%, 12/31/04 1,000,000 1,002,500
Wyndham International Inc., Increasing Rate Loan, 11.93%, 6/05/03 1,000,000 992,750
-----------
1,995,250
-----------
MEDICAL SPECIALTIES 2.7%
Alliance Imaging,
Term Loan B, 9.94%, 11/30/07 447,761 444,403
Term Loan C, 10.19%, 11/30/08 552,239 548,097
992,500
-----------
METAL FABRICATIONS 1.4%
Mueller Group, Term Loan D, 10.83%, 8/16/07 498,750 501,555
-----------
MILITARY/GOVERNMENT/TECHNICAL 1.3%
Titan Corp., Term Loan C, 11.50%, 2/23/07 498,750 500,932
-----------
MOVIES/ENTERTAINMENT .8%
Dreamworks Film Trust II, Term Loan B, 9.43%, 1/15/09 300,000 301,969
-----------
NON-U.S. UTILITIES 2.7%
AES EDC Funding, Term Loan, 9.63-9.79%, 9/13/01 1,000,000 997,500
-----------
OTHER TELECOMMUNICATIONS 1.3%
Nextlink Communications Inc., Term Loan B, 9.94%, 10/31/05 500,000 501,702
-----------
PACKAGED FOODS 2.0%
Merisant Corp., Term Loan B, 9.85%, 3/17/07 748,125 751,554
-----------
PAPER 2.5%
Stone Container Corp.,
Term Loan F, 9.94%, 12/31/05 376,028 377,086
Term Loan G, 10.18%, 12/31/06 264,756 264,452
Term Loan H, 10.18%, 12/31/06 291,770 291,435
-----------
932,973
-----------
PRINTING/FORMS 2.7%
Mail-Well, Term Loan B, 9.28-9.29%, 2/22/07 997,500 997,189
-----------
RAILROADS 2.0%
Kansas City Southern Railway Co.,
Term Loan B, 9.63%, 1/11/07 250,000 251,295
Term Loan Interim, 9.88%, 1/14/01 500,000 501,093
-----------
752,388
-----------
RENTAL/LEASING COMPANIES 8.0%
Ashtead Group, Term Loan B, 9.61%, 6/30/07 1,000,000 998,125
Rent-Way Inc, Term Loan B, 10.11%, 9/30/06 1,000,000 998,750
United Rentals Inc., Term Loan C, 9.16%, 6/30/06 1,000,000 988,125
-----------
2,985,000
-----------
SEMICONDUCTORS 1.3%
Semiconductor Components, Term Loan D, 9.50%, 8/04/07 500,000 500,500
-----------
SPECIALTY CHEMICALS 1.3%
Sybron Chemicals, Term Loan B, 9.78%, 3/29/07 498,750 497,919
-----------
TELECOMMUNICATIONS EQUIPMENT 5.3%
Crown Castle Operating Co., Term Loan B, 9.37%, 3/15/08 1,000,000 1,003,036
Dynatech Corp., Term Loan B, 10.03%, 9/30/07 996,078 994,709
-----------
1,997,745
-----------
TOTAL LONG TERM INVESTMENTS (COST $31,253,246) 31,377,764
-----------
SHARES
------------
SHORT TERM INVESTMENTS
b Franklin Institutional Fiduciary Trust Money Market Portfolio (COST $23,849) 23,849 23,849
-----------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT (COST $31,277,095) 31,401,613
-----------
PRINCIPAL
AMOUNT
-------------
C REPURCHASE AGREEMENT 14.8%
Joint Repurchase Agreement, 6.547%, 8/1/00, (Maturity Value $5,518,681) $ 5,517,678 5,517,678
(COST $5,517,678)
Banc of America Securities LLC (Maturity Value $467,979)
Barclays Capital Inc. (Maturity Value $467,979)
Bear, Stearns & Co., Inc. (Maturity Value $267,418)
Chase Securities Inc. (Maturity Value $467,979)
Donaldson, Lufkin, & Jenrette Securities Corp. (Maturity Value $467,979)
Dresdner Kleinwort Benson North America LLC (Maturity Value $467,979)
Goldman Sachs (Maturity Value $103,494)
Leham Government Securities (Maturity Value $467,979)
Nesbit Burns Securities (Maturity Value $467,979)
Paine Webber Inc. (Maturity Value $467,979)
Paribas Capital Markets (Maturity Value $467,979)
Societe Generale (Maturity Value $467,979)
UBS Warburg (Maturity Value $467,979)
Collateralized by U.S. Treasury Bills and Notes
-----------
TOTAL INVESTMENTS (COST $36,794,773) 98.8% 36,919,291
OTHER ASSETS, LESS LIABILITIES 1.2% 450,832
-----------
NET ASSETS 100.0% $ 37,370,123
-----------
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 The Franklin Institutional Fiduciary Trust Money Market Portfolio (the
Sweep Money Fund) is managed by Franklin Advisors, Inc.
C See Note 1 regarding joint repurchase agreement.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2000
<S> <C>
Assets:
Investments in securities, at value (cost $31,277,095) $ 31,401,613
Repurchase agreements, at value and cost 5,517,678
Cash 15,936
Receivables:
Capital shares sold 517,868
Interest 219,671
Offering costs 10,646
-------------------------
Total assets 37,683,412
-------------------------
Liabilities:
Distributions to shareholders 224,968
Organization Costs 59,000
Other liabilities 29,321
-------------------------
Total liabilities 313,289
-------------------------
Net assets, at value $ 37,370,123
=========================
Net assets consist of:
Net unrealized appreciation 124,518
Accumulated net realized gain 3,947
Capital shares 37,241,658
-------------------------
Net assets, at value $ 37,370,123
=========================
Net asset value per share ($37,370,123 -:- 3,718,554 shares outstanding) $ 10.05
=========================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JULY 31, 2000A
<S> <C>
Investment income:
Dividends (Note 3) $ 46,290
Interest 692,411
-------------------------
Total investment income 738,701
-------------------------
Expenses:
Management fees (Note 3) 63,351
Administrative fees (Note 3) 11,879
Custodian fees 818
Registration and filing fees 105
Professional fees 43,003
Organization costs 59,000
Amortization of offering costs (Note 1) 5,324
Other 2,753
-------------------------
Total expenses 186,233
Expenses waived/paid by affiliate (Note 3) (107,042)
-------------------------
Net expenses 79,191
-------------------------
Net investment income 659,510
-------------------------
Realized and unrealized gains:
Net realized gain from investments 3,947
Net unrealized appreciation on investments 124,518
-------------------------
Net realized and unrealized gain 128,465
-------------------------
Net increase in net assets resulting from operations $ 787,975
=========================
a For the period March 24, 2000 (effective date) to July 31, 2000.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
Financial Statements (continued)
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JULY 31, 2000B
<S> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 659,510
Net realized gain from investments 3,947
Net unrealized appreciation on investments 124,518
-------------------------
Net increase in net assets resulting from operations 787,975
Distributions to shareholders from net investment income (659,510)
Capital share transactions (Note 2) 37,241,658
-------------------------
Net increase in net assets 37,370,123
Net assets (there is no undistributed net investment income at the beginning or end of period)
Beginning of period -
-------------------------
End of period $ 37,370,123
=========================
b For the period March 24, 2000 (effective date) to July 31, 2000.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
Financial Statements (continued)
Statement of Cash Flows
for the period ended July 31, 2000
<S> <C>
Cash flow from operating activities:
Dividends, interest and facility fees received $ 512,445
Operating expenses paid (1,516)
--------------
Cash provided - operations 510,929
==============
Cash flow from investing activities:
Investment purchases (39,130,480)
Investment sales and maturities 2,346,239
--------------
Cash used - investments (36,784,241)
==============
Cash flow from financing activities:
Distributions to shareholders (434,542)
Net proceeds from capital shares sold 36,723,790
--------------
Cash provided - financing activities 36,289,248
==============
Net increase in cash 15,936
--------------
Cash at beginning of period -
--------------
Cash at end of period $ 15,936
==============
Reconciliation of Net Investment Income to Net Cash Provided by Operating Activities
for the period ended July 31, 2000
Net investment income $ 659,510
Amortization income (6,585)
Payable of organization costs 59,000
Increase in interest receivable and offering costs (230,317)
Increase in other liabilities 29,321
--------------
Cash provided - operations $ 510,929
==============
See notes to financial statements.
</TABLE>
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Floating Rate Master Trust (the Trust) is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end, continuously
offered investment company. The Trust consists of one series, the Franklin
Floating Rate Master Series (the Fund), shares of which are issued in private
placements and are exempt from registration under the Securities Act of 1933.
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 all income and expenses are
allocated to the partners for inclusion in their individual income tax returns.
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. 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.
D. OFFERING COSTS:
Offering costs are amortized on a straight-line basis over twelve months.
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. JOINT REPURCHASE AGREEMENT:
The Fund may enter into a joint repurchase agreement whereby its uninvested cash
balance is deposited into a joint cash account to be used to invest in one or
more repurchase agreements. The value and face amount of the joint repurchase
agreement are allocated to the Fund based on its pro-rata interest. A repurchase
agreement is accounted for as a loan by the Fund to the seller, collateralized
by securities which are delivered to the Fund's custodian. The market value,
including accrued interest, of the initial collateralization is required to be
at least 102% of the dollar amount invested by the Funds, with the value of the
underlying securities marked to market daily to maintain coverage of at least
100%. At July 31, 2000, all repurchase agreements had been entered into on that
date.
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.
At July 31, 2000, there were an unlimited number of shares authorized ($.01 par
value). For the period March 24, 2000 (effective date) through July 31, 2000,
the Fund sold 3,718,554 shares for a net amount of $37,241,658.
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 pays an investment management fee to Advisers of .80% per year of the
average daily net assets of the Fund.
The Fund pays administrative fees to FT Services based on the net assets of the
Fund 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 administrative fees, management fees and
assume payments of other expenses for the Fund, as noted in the Statement of
Operations.
At July 31, 2000, the shares of the Franklin Floating Rate Master Series were
owned by the following entities:
PERCENTAGE OF
OUTSTANDING
SHARES SHARES
-----------------------------
Franklin Floating Rate Fund, PLC 1,718,554 46.21%
Franklin Resources, Inc. 1,500,000 40.34%
Templeton Investment Counsel, Inc. 500,000 13.45%
The Fund earned dividend income of $46,290 from its investment in the Sweep
Money Fund.
4. INCOME TAXES
At July 31, 2000, the unrealized appreciation based on the cost of investments
for income tax purposes of $36,794,773 was as follows:
Unrealized appreciation $ 141,494
Unrealized depreciation (16,976)
---------------
Net unrealized appreciation $ 124,518
===============
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended July 31, 2000 aggregated $33,588,953 and $2,343,739, respectively.
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
Independent Auditors' Report
To the Board of Trustees and Shareholders
of Franklin Floating Rate Master 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
Master Trust ("the Trust") at July 31, 2000, the results of its operations, cash
flows, the changes in its net assets, and the financial highlights for the
period March 24, 2000 (effective date) to July 31, 2000, 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 Trust'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
