UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-09869
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FRANKLIN FLOATING RATE MASTER TRUST
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(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)
MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: (650) 312-2000
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Date of fiscal year end: 7/31
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Date of reporting period: 7/31/03
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ITEM 1. REPORTS TO STOCKHOLDERS.
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
FINANCIAL HIGHLIGHTS
YEAR ENDED JULY 31,
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2003 2002 2001 2000 b
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year $9.58 $9.88 $10.05 $10.00
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Income from investment operations:
Net investment income .464 .545 .861 .288
Net realized and unrealized gains (losses) .111 (.300) (.173) .050
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Total from investment operations .575 .245 .688 .338
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Less distributions from net investment income (.465) (.545) (.861) (.288)
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Net asset value, end of year $9.69 $9.58 $9.88 $10.05
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Total return a 6.19% 2.52% 7.13% 3.42%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $218,647 $265,940 $218,545 $37,370
Ratios to average net assets:
Expenses .60% .60% .62% 1.00% c
Expenses excluding waiver and payments by affiliate 1.02% .98% 1.01% 2.27% c
Net investment income 4.86% 5.55% 8.34% 8.62% c
Portfolio turnover rate 75.69% 77.29% 37.87% 11.10%
a Total return is not annualized for periods less than one year.
b For the period March 24, 2000 (effective date) to July 31, 2000.
c Annualized
See notes to financial statements.
STATEMENT OF INVESTMENTS, JULY, 31, 2003
% OF NET
SHARES VALUE ASSETS
- -------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (COST $111,661)
WIRELESS COMMUNICATIONS
a Arch Wireless Inc. 8,104 $ 76,988 .04
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PRINCIPAL AMOUNT
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BONDS
HOSPITAL/NURSING MANAGEMENT
Genesis Health Ventures Inc., 6.114%, 4/02/07 $ 980,000 975,100 .45
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WIRELESS COMMUNICATIONS
Arch Wireless Inc.,
Senior secured note, 10.00%, 5/15/07 93,770 94,239 .04
Senior sub. note, PIK, 12.00%, 5/15/09 1,047,000 1,154,318 .53
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1,248,557 .57
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TOTAL BONDS (COST $2,094,500) 2,223,657 1.02
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b SENIOR FLOATING RATE INTERESTS
AEROSPACE & DEFENSE
Integrated Defense Technology Inc., Term Loan B, 5.10%, 3/04/08 1,892,388 1,890,022 .86
Raytheon Aerospace LLC, Term Loan B, 5.10 - 5.11%, 6/29/07 992,463 993,083 .45
Titan Corp., Term Loan B, 4.38 - 6.00%, 2/23/06 990,000 992,681 .45
Veridian Corp., Term Loan, 4.35%, 6/05/08 1,460,408 1,460,408 .67
Vought Aircraft Industries, Term Loan X, 4.10%, 12/01/06 678,110 676,414 .31
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6,012,608 2.74
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ALTERNATIVE POWER GENERATION
Headwaters Inc., Term Loan B, 5.36 - 7.25%, 9/12/07 804,659 800,636 .37
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APPAREL/FOOTWEAR
Levi Strauss & Co., Term Loan B, 5.353%, 7/31/06 976,696 962,962 .44
St. John Knits Inc., Term Loan B, 4.86%, 7/31/07 997,773 999,488 .46
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1,962,450 .90
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AUTO PARTS: ORIGINAL EQUIPMENT MANUFACTURER
Dayco Products LLC, Term Loan B, 4.25 - 4.51%, 5/31/07 543,627 540,093 .25
Hayes Lemmerz, Term Loan, 5.86 - 6.04%, 6/03/09 2,000,000 2,012,500 .92
Hilite International Inc., Term Loan B, 5.60 - 5.77%, 3/31/09 982,500 966,534 .44
Key Plastics Inc.,
Term Loan B, 8.00%, 4/25/09 720,000 730,800 .33
Term Loan C, 12.50%, 4/25/10 1,000,000 1,005,000 .46
Metaldyne, Term Loan D, 4.125%, 12/31/09 497,502 475,487 .22
Progressive Moulded Products, Term Loan C, 4.625%, 6/30/08 1,000,000 1,005,000 .46
Tenneco Automotive Inc.,
Term Loan B, 5.30%, 11/04/07 824,821 824,748 .38
Term Loan C, 5.55%, 5/04/08 824,821 825,926 .38
TRW Automotive Acquisition Corp., Term Loan C1, 4.13%, 2/28/11 2,000,000 2,010,208 .92
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10,396,296 4.76
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AUTOMOTIVE AFTERMARKET
Advanced Store Co. Inc., Term Loan C, 3.875 - 4.063%, 11/30/07 787,106 792,222 .36
United Components Inc., Term Loan B, 4.37%, 6/20/10 1,000,000 1,008,958 .46
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1,801,180 .82
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BEVERAGES: ALCOHOLIC
Southern Wine & Spirits of America Inc., Term Loan B, 3.60%, 6/21/08 990,000 995,260 .46
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BROADCASTING
Cumulus Media Inc., Term Loan C, 3.625%, 3/28/10 997,500 1,004,202 .46
Emmis Operating Co., Term Loan B, 3.375%, 8/31/09 1,000,000 1,006,389 .46
Radio One Inc., Term Loan A, 2.03%, 6/30/07 1,850,000 1,826,875 .84
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3,837,466 1.76
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BUILDING PRODUCTS
Tapco International,
Term Loan B, 4.00 - 4.10%, 7/23/07 484,848 485,758 .22
Term Loan C, 4.25 - 4.35%, 7/23/08 484,848 485,758 .22
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971,516 .44
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CABLE/SATELLITE TELEVISION
Bresnan Broadband Holdings LLC, Term Loan, 5.35 - 5.57%, 9/20/10 1,000,000 1,003,906 .46
Century Cable (Adelphia), Discretionary Term Loan, 6.00%, 12/31/09 1,000,000 840,500 .38
Charter Communications CCVIII, Term Loan B, 3.62 - 3.85%, 2/02/08 975,101 918,684 .42
Charter Communications Operating LLC, Term Loan B, 3.85%, 9/18/08 977,582 921,371 .42
DirecTV Holdings LLC, Term loan, 4.74 - 4.77%, 3/06/10 1,000,000 1,006,438 .46
Insight Midwest Holdings, Term Loan B, 4.063%, 12/31/09 1,000,000 1,004,196 .46
MCC Iowa (Broadband), Term Loan B1, 3.62%, 9/12/10 1,000,000 1,008,264 .46
Olympus Cable Holdings (Adelphia), Term Loan B, 6.00%, 9/30/10 2,000,000 1,775,750 .81
PanAmSat Corp., Term Loan B, 4.60%, 12/31/08 1,300,000 1,308,009 .60
UPC Distribution Holdings BV, Term Loan C2, 6.61%, 3/31/09 2,000,000 1,781,250 .81
Videotron Itee, Term Loan B, 4.03%, 12/01/09 1,184,882 1,176,982 .54
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12,745,350 5.82
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CASINOS/GAMING
Alliance Gaming Corp., Term Loan, 4.45%, 12/31/06 989,975 993,069 .45
Greektown Casinos LLC, Term Loan B, 4.875 - 5.063%, 11/16/04 1,602,515 1,608,525 .74
Isle of Capri, Term Loan B, 3.758 - 3.77%, 4/26/08 987,500 991,974 .45
Isle of Capri Black Hawk, Term Loan C, 5.00 - 5.30%, 4/15/06 997,460 1,000,890 .46
Marina District Finance Co. Inc., Term Loan B, 5.10 - 5.27%, 12/31/07 1,000,000 1,003,750 .46
Penn National Gaming Inc., Term Loan B, 5.00 - 5.28%, 3/03/09 997,500 1,001,490 .46
Scientific Games Corp., Term Loan B, 4.60%, 12/10/08 995,000 998,731 .46
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7,598,429 3.48
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CATALOG/SPECIALTY DISTRIBUTION
Affinity Group Inc.,
Term Loan B1, 5.13 - 5.34%, 5/21/09 285,000 286,336 .13
Term Loan B2, 5.10 - 5.164%, 5/21/09 712,500 715,840 .33
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1,002,176 .46
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CHEMICALS: SPECIALTY
FMC Corp., Term Loan B, 5.85%, 10/21/07 995,000 1,008,433 .46
Noveon Inc., Term Loan B, 3.938%, 12/31/09 2,000,000 2,023,126 .93
Rockwood Specialties Group Inc., Term Loan B, 6.25%, 7/23/10 1,000,000 1,012,500 .46
Sovereign Specialty Chemicals Inc., Term Loan B, 5.625%, 12/31/07 995,000 962,663 .44
Westlake Chemical Corp., Term Loan B, 4.88 - 4.97%, 7/31/10 1,000,000 1,011,250 .46
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6,017,972 2.75
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COAL
Massey Energy Co., Term Loan, 4.61%, 1/01/07 1,000,000 999,375 .46
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COMMERCIAL PRINTING/FORMS
CSG Systems Inc., Term Loan B, 3.85 - 4.02%, 12/31/07 462,815 459,633 .21
Moore Holdings USA Inc., Term Loan B, 4.25 - 4.313%, 3/14/10 1,000,000 1,003,281 .46
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1,462,914 .67
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CONSUMER SUNDRIES
NBTY Inc., Term Loan B, 3.60%, 7/22/091,000,000 1,011,250 .46
United Industries Corp., Term Loan B, 5.10%, 1/20/06 774,599 776,052 .35
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1,787,302 .81
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CONTAINERS/PACKAGING
ACI Operations Property Ltd., Term Loan, 4.39%, 4/01/07 1,000,000 997,031 .46
Berry Plastics, Term Loan, 4.29%, 7/22/10 990,000 996,930 .46
Constar International Inc., Term Loan B, 6.50%, 11/20/09 992,500 989,192 .45
Crown Cork & Seal Co. Inc., Term Loan B, 4.10%, 9/15/08 1,000,000 1,004,688 .46
Graham Packaging Co., Term Loan B, 5.00 - 5.063%, 2/20/10 1,000,000 1,000,250 .46
Impress Metal, Term Loan G, 4.352%, 12/31/06 579,211 577,763 .26
Owens-Brockway Glass Container Inc., Term Loan B, 4.36%, 4/01/08 1,000,000 1,003,750 .46
Stone Container Corp.,
Term Loan B, 3.625%, 7/25/09 1,442,843 1,450,237 .66
Term Loan C, 3.625%, 7/25/09 244,465 245,718 .11
US Can Corp., Term Loan B, 5.35 - 5.36%, 10/04/08 614,749 610,715 .28
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8,876,274 4.06
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DRUG STORE CHAINS
Rite Aid Corp., Term Loan, 4.60 - 4.61%, 5/22/08 1,000,000 1,008,250 .46
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ELECTRIC UTILITIES
AES Corp., Term Loan B, 5.13 - 5.32%, 4/30/08 1,000,000 994,792 .45
Calpine Corp., Term Loan, 8.75%, 7/15/07 2,000,000 1,879,286 .86
Consumers Energy Co., Term Loan, 5.61%, 3/31/06 1,000,000 1,006,875 .46
Michigan Electric Transmission Co. LLC, Term Loan, 3.60%, 5/01/07 990,000 993,918 .45
Southern California Edison Co., Term Loan B, 4.375%, 3/01/05 1,500,000 1,506,095 .69
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6,380,966 2.91
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ELECTRICAL PRODUCTS
Rayovac Corp., Term Loan B, 4.85 - 5.04%, 10/01/09 890,000 891,854 .41
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ELECTRONIC COMPONENTS
Amkor Technology Inc., Term Loan, 5.10%, 1/31/06 997,500 1,011,528 .46
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ELECTRONIC EQUIPMENT/INSTRUMENTS
Neptune Technology Group Inc., Term Loan B, 5.58%, 3/31/10 973,684 984,638 .45
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ELECTRONICS/APPLIANCES
Alliance Laundry Systems LLC, Term Loan, 4.61 - 4.74%, 7/31/09 896,373 892,451 .41
Interline Brands, Term Loan B, 5.60%, 9/30/09 1,000,000 1,003,750 .46
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1,896,201 .87
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ENGINEERING & CONSTRUCTION
Washington Group International (Morrison Knudsen),
Synthetic Term Loan, 1.00%, 7/23/04 1,000,000 997,500 .46
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ENVIRONMENTAL SERVICES
Allied Waste North America Inc.,
Term Loan, 4.37%, 1/15/10 1,285,714 1,298,201 .59
Term Loan B, 4.37 - 4.54%, 1/15/10 214,286 216,272 .10
Casella Waste Systems Inc., Term Loan B, 4.375 - 4.563%, 1/24/09 1,000,000 1,005,375 .46
Mactec Inc., Term Loan B, 6.75%, 2/22/08 474,306 332,014 .15
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2,851,862 1.30
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FOOD: MAJOR DIVERSIFIED
Birds Eye Foods Inc., Term Loan B, 3.85%, 8/08/08 992,500 995,808 .46
Dole Food Inc., Term Loan B, 4.938 - 6.75%, 3/28/08 426,087 430,082 .20
International Multifoods Corp., Term Loan B, 4.07 - 6.00%, 2/28/08 1,320,206 1,327,529 .61
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2,753,419 1.27
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FOOD: MEAT/FISH/DAIRY
American Seafoods, Term Loan B, 4.35%, 4/15/09 890,130 891,799 .41
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FOOD: SPECIALTY/CANDY
Nellson Neutraceuticals Inc., Term Loan, 4.11%, 10/04/09 1,000,000 1,008,750 .46
Otis Spunkmeyer Inc., Term Loan B, 5.35%, 2/20/09 965,082 966,490 .44
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1,975,240 .90
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HOME FURNISHINGS
Aero Products International, Term Loan, 5.77 - 7.75%, 12/16/08 951,456 939,861 .43
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HOSPITAL/NURSING MANAGEMENT
Iasis Healthcare Corp., Term Loan B, 5.36 - 5.364%, 2/07/09 1,850,000 1,863,875 .85
Triad Hospitals Inc., Term Loan B, 4.10%, 9/30/08 2,942,727 2,964,965 1.36
Vanguard Health Systems Inc., Term Loan B, 5.36%, 1/03/10 995,000 999,975 .46
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5,828,815 2.67
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HOTEL/RESORTS/CRUISELINES
Extended Stay America Inc., Term Loan B, 4.85%, 7/01/07 1,889,875 1,902,529 .87
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INDUSTRIAL CONGLOMERATES
Walter Industries Inc., Term Loan B, 5.35 - 5.518%, 4/14/10 975,000 975,000 .45
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INDUSTRIAL MACHINERY
Colfax Corp., Term Loan B, 3.125 - 4.875%, 5/30/09 1,000,000 997,500 .46
Flowserve Corp., Term Loan C, 3.875 - 4.063%, 6/30/09 743,532 747,649 .34
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1,745,149 .80
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INDUSTRIAL SPECIALTIES
SC Johnson Commercial Markets, Term Loan B, 4.80%, 11/03/09 958,294 962,914 .44
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INFORMATION TECHNOLOGY SERVICES
The Relizon Co., Term Loan B, 6.04%, 12/31/07 954,535 940,814 .43
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MAJOR TELECOMMUNICATIONS
GCI Holdings Inc., Term Loan, 7.578%, 10/30/04 1,000,000 1,006,250 .46
Qwest Corp., Term Loan, 6.50%, 6/30/071,000,000 1,008,250 .46
Time Warner Telecom Inc., Term Loan B, 5.10%, 12/15/07 796,000 794,508 .36
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2,809,008 1.28
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MANAGED HEALTH CARE
Pacificare Health Systems Inc., Term Loan, 4.61%, 6/03/08 1,000,000 1,006,875 .46
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MARINE SHIPPING
Great Lakes Transportation LLC, Term Loan, 5.063 - 5.125%, 3/23/08 758,560 760,456 .35
Horizon Lines LLC, Term Loan, 5.03 - 5.33%, 2/27/09 998,571 1,002,160 .46
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1,762,616 .81
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MEDIA CONGLOMERATES
Canwest Media Inc.,
Term Loan B, 4.79%, 5/15/08 1,200,183 1,210,384 .55
Term Loan C, 5.04%, 5/15/09 749,817 756,191 .35
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1,966,575 .90
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MEDICAL SPECIALTIES
Medex Inc., Term Loan B, 4.85%, 5/21/09 1,000,000 1,006,667 .46
PerkinElmer Inc., Term Loan B, 5.10%, 12/26/08 902,500 912,936 .42
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1,919,603 .88
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MEDICAL/NURSING SERVICES
Alliance Imaging Inc., Term Loan C, 3.438 - 3.75%, 11/30/08 1,590,068 1,553,496 .71
Ameripath Inc., Term Loan B, 5.60%, 3/27/10 997,500 1,003,734 .46
Cross Country Healthcare Inc., Term Loan, 4.364%, 6/05/09 1,000,000 1,012,500 .46
DaVita Inc., Term Loan B, 3.603 - 3.66%, 3/31/09 2,000,000 2,010,626 .92
Insight Health Services, Term Loan B, 4.60 - 4.731%, 10/17/08 982,498 986,797 .45
Team Health Inc., Term Loan B, 4.531%, 10/31/08 951,898 941,487 .43
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7,508,640 3.43
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MILITARY/GOVERNMENT/TECHNICAL
DRS Technologies Inc., Term Loan, 4.10 - 4.34%, 9/28/08 1,965,053 1,982,247 .91
U.S. Investigations Services Inc., Term Loan, 5.07 - 5.26%, 1/02/08 902,158 905,260 .41
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2,887,507 1.32
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MISCELLANEOUS COMMERCIAL SERVICES
Century Maintenance Supply Inc., Term Loan B, 5.75%, 5/07/10 1,000,000 1,015,000 .46
Corrections Corp. of America, Term Loan B, 4.60 - 4.78%, 3/31/08 1,735,324 1,745,900 .80
Global Imaging Systems Inc., Term Loan, 4.03 - 4.10%, 6/20/09 1,000,000 1,012,500 .46
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3,773,400 1.72
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MISCELLANEOUS MANUFACTURING
Enersys Capital Inc., Term Loan B, 4.35 - 4.53%, 11/09/08 975,031 977,469 .45
Mueller Group, Term Loan E, 3.85 - 4.03%, 5/31/08 992,481 993,190 .45
Norcross Safety Products, Term Loan, 5.53%, 3/01/09 997,500 1,000,929 .46
Sanmina-Sci Corp., Term Loan B, 5.30%, 12/12/07 995,000 1,005,987 .46
Trimas Corp., Term Loan B, 4.375 - 4.50%, 12/06/09 1,991,456 1,996,086 .91
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5,973,661 2.73
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MOVIES/ENTERTAINMENT
Carmike Cinemas Inc., Term Loan, 7.75%, 1/31/07 1,716,995 1,727,369 .79
CH Operating LLC, Term Loan B, 5.625%, 6/21/07 586,207 585,841 .27
Fitness Holdings Worldwide, Term Loan B, 5.875%, 11/02/06 378,136 375,536 .17
Hollywood Entertainment Corp., Term Loan, 4.60%, 3/31/08 825,000 829,125 .38
Loews Cineplex Entertainment Corp., Term Loan A, 4.688%, 2/28/08 2,330,480 2,324,654 1.06
Metro-Goldwyn-Mayer Inc.,
Term Loan A, 3.85%, 6/30/07 2,000,000 2,003,126 .92
Term Loan B, 4.10%, 6/30/08 1,000,000 1,001,563 .46
Mets II LLC, Term Loan, 4.35%, 8/23/051,000,000 998,750 .46
New Jersey Basketball LLC, Term Loan, 4.10%, 12/06/03 1,000,000 1,000,000 .46
Rainbow Media AMC/IFC/WE, Term Loan, 4.56%, 3/31/09 200,000 200,688 .09
Rainbow Media Holdings Inc., Term Loan, 4.56%, 3/31/09 800,000 802,750 .37
Vivendi Universal Entertainment, Term Loan, 3.85 - 3.86%, 6/24/08 1,000,000 1,006,406 .46
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12,855,808 5.89
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OIL & GAS PIPELINES
WEG Acquisitions LP, Term Loan, 5.60 - 5.61%, 6/17/08 1,000,000 1,010,000 .46
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OIL & GAS PRODUCTION
Williams Production RMT Co., Term Loan, 4.90%, 5/30/07 1,000,000 1,007,500 .46
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OIL REFINING/MARKETING
Citgo Petroleum Corp., Term Loan, 8.25%, 2/27/06 1,000,000 1,032,500 .47
Pacific Energy Group LLC, Term Loan B, 3.86 - 4.066%, 7/26/09 1,000,000 1,007,500 .46
Tesoro Petroleum Corp.,
Term Loan, 6.53 - 6.606%, 4/15/08997,500 1,004,625 .46
Term Loan (ABL), 4.36 - 5.50%, 4/17/07 831,250 838,523 .38
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3,883,148 1.77
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OTHER TRANSPORTATION
Laidlaw International Inc., Term Loan, 7.00%, 6/17/09 990,000 997,425 .46
Pacer International Inc., Term Loan, 4.375 - 6.25%, 6/06/10 949,020 957,324 .44
Transcore Holdings Inc., Term Loan B, 4.85 - 6.25%, 10/31/06 952,484 956,056 .44
TravelCenters of America Inc., Term Loan B, 4.36 - 6.25%, 11/14/08 950,593 955,050 .44
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3,865,855 1.78
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PERSONNEL SERVICES
Spectaguard Acquisition LLC, Term Loan, 7.50%, 4/25/10 986,184 961,530 .44
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PROPERTY-CASUALTY INSURANCE
Infinity Property & Casualty Corp., Term Loan, 3.60%, 7/17/10 1,000,000 1,008,125 .46
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PUBLISHING: BOOKS/MAGAZINES
Advanstar Communications, Term Loan B, 5.60%, 10/11/07 782,857 777,964 .36
CBD Media LLC, Term Loan, 4.37 - 4.38%, 12/31/09 1,000,000 1,010,000 .46
F&W Publications Inc., Term Loan B, 5.05%, 12/31/09 975,000 975,000 .45
R.H. Donnelley Corp., Term Loan B, 5.10 - 5.28%, 6/30/10 995,000 1,015,177 .46
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3,778,141 1.73
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PULP & PAPER
Appleton Papers Inc., Term Loan C, 4.31 - 4.37%, 11/08/06 578,867 581,393 .27
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RAILROADS
DM&E Railroad, Term Loan, 8.00%, 6/30/08 980,000 989,800 .45
Helm Holding Corp., Term Loan B, 4.86 - 5.089%, 10/18/06 807,759 753,235 .34
Kansas City Southern Industries Inc., Term Loan B, 3.625 - 3.76%, 6/07/08 161,292 161,796 .07
Trinity Industries Inc., Term Loan, 4.375 - 4.563%, 6/07/07 990,000 993,713 .45
------------ -------
2,898,544 1.31
------------ -------
REAL ESTATE INVESTMENT TRUSTS
Newkirk Master LP, Term Loan, 8.50%, 1/30/05 1,422,788 1,431,681 .65
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RECREATIONAL PRODUCTS
PlayPower Inc., Term Loan, 5.53%, 2/07/10 975,000 973,781 .45
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RENTAL/LEASING COMPANIES
United Rentals Inc., Term Loan B, 4.13%, 9/30/07 1,294,245 1,301,626 .60
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RESTAURANTS
Buffets Inc., Term Loan B, 4.60%, 6/28/09 1,391,244 1,387,419 .63
Dominos Inc., Term Loan, 4.125%, 6/25/10 1,901,639 1,921,844 .88
------------ -------
3,309,263 1.51
------------ -------
SEMICONDUCTORS
Fairchild Semiconductor Corp., Term Loan, 3.938%, 6/19/08 1,000,000 1,007,500 .46
------------ -------
SERVICES TO THE HEALTH INDUSTRY
NDC Health Corp., Term Loan B, 6.00%, 11/30/08 1,000,000 1,000,000 .46
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SPECIALTY STORES
CSK Auto Inc., Term Loan B, 3.87%, 2/15/06 1,000,000 1,010,250 .46
Pantry Inc., Term Loan, 6.00%, 4/11/07990,119 1,004,970 .46
PETCO Animal Supplies Inc., Term Loan C, 4.24 - 6.00%, 10/02/08 989,664 994,612 .45
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3,009,832 1.37
------------ -------
SPECIALTY TELECOMMUNICATIONS
Crown Castle Operating Co., Term Loan B, 4.15%, 3/15/08 997,500 1,000,172 .46
c Global Crossing Holdings Ltd., Term Loan B, 8.00%, 8/15/06 497,274 107,269 .05
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1,107,441 .51
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STEEL
International Steel Group,
Term Loan A, 4.37%, 5/05/05 576,000 576,000 .26
Term Loan B, 4.62%, 5/05/07 1,424,000 1,424,890 .65
Steel Dynamics Inc., Term Loan B, 4.85 - 5.079%, 3/15/08 835,336 838,990 .38
------------ -------
2,839,880 1.29
------------ -------
TELECOMMUNICATIONS EQUIPMENT
IPC Aquisition Corp., Term Loan, 7.50%, 12/31/06 998,970 988,981 .45
------------ -------
TOBACCO
Commonwealth Brands Inc., Term Loan, 5.188%, 8/22/07 572,167 572,882 .26
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TRUCKING
Flexi-Van Leasing Inc., Term Loan B, 4.10 - 4.21%, 9/20/07 496,250 497,801 .23
------------ -------
WHOLESALE DISTRIBUTORS
Amscan Holdings Inc., Term Loan, 6.50 - 7.50%, 6/20/07 995,000 999,975 .46
National Waterworks Inc., Term Loan B, 6.50%, 11/27/09 980,000 990,409 .45
------------ -------
1,990,384 .91
------------ -------
TOTAL SENIOR FLOATING RATE INTERESTS (COST $183,435,060) 183,694,524 84.00
------------ -------
TOTAL LONG TERM INVESTMENTS (COST $185,641,221) 185,995,169 85.06
------------ -------
REPURCHASE AGREEMENT (COST $30,649,682) 30,649,682 30,649,682 14.02
------------ -------
d Joint Repurchase Agreement, 1.062%, 8/01/03, (Maturity Value $30,650,586)
ABN AMRO Bank, N.V., New York Branch (Maturity Value $2,962,133)
Banc of America Securities LLC (Maturity Value $2,962,133)
Barclays Capital Inc. (Maturity Value $2,962,133)
Bear, Stearns & Co. Inc. (Maturity Value $2,235,577)
BNP Paribas Securities Corp. (Maturity Value $2,962,133)
Deutsche Bank Securities Inc. (Maturity Value $2,962,133)
Dresdner Kleinwort Wasserstein Securities LLC (Maturity Value $2,962,133)
Goldman, Sachs & Co. (Maturity Value $2,962,133)
Lehman Brothers Inc. (Maturity Value $1,755,812)
Morgan Stanley & Co. Inc. (Maturity Value $2,962,133)
UBS Securities LLC (Maturity Value $2,962,133)
Collateralized by U.S. Treasury Bills, Notes, Bonds, and U.S. Government
Agency Securities
TOTAL INVESTMENTS (COST $216,290,903) 216,644,851 99.08
OTHER ASSETS, LESS LIABILITIES 2,001,885 .92
------------ -------
NET ASSETS $218,646,736 100.00
------------ -------
<FN>
a Non-income producing
b See Note 1(d) regarding senior floating rate interests.
c The fund discontinues accruing income on defaulted securities. See Note 7.
d See Note 1(b) regarding joint repurchase agreement.
</FN>
See notes to financial statements.
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 2003
Assets:
Investments in securities:
Cost $185,641,221
-------------------
Value 185,995,169
Repurchase agreement, at value and cost 30,649,682
Cash 1,125,480
Receivables:
Investment securities sold 2,152,772
Capital shares sold 2,333,256
Interest 719,849
Other assets
7,361
-------------------
Total assets 222,983,569
-------------------
Liabilities:
Payables:
Investment securities purchased 3,455,000
Affiliates 79,186
Distributions to shareholders 762,580
Other liabilities 40,067
-------------------
Total liabilities 4,336,833
-------------------
Net assets, at value $218,646,736
-------------------
Net assets consist of:
Undistributed net investment income (loss) $ (23,123)
Net unrealized appreciation (depreciation) 353,948
Accumulated net realized gain (loss) (9,755,238)
Capital shares 228,071,149
-------------------
Net assets, at value $218,646,736
-------------------
Net asset value and maximum offering price per share ($218,646,736 / 22,559,483 shares
outstanding) $ 9.69
-------------------
See notes to financial statements.
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2003
Investment income:
Interest $11,088,403
-----------------
Expenses:
Management fees (Note 4) 1,626,195
Administrative fees (Note 4) 303,261
Custodian fees 1,963
Professional fees 66,834
Other 74,590
-----------------
Total expenses 2,072,843
Expenses waived/paid by affiliate (Note 4) (853,197)
-----------------
Net expenses 1,219,646
-----------------
Net investment income 9,868,757
-----------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments (6,995,225)
Net unrealized appreciation (depreciation) on investments 8,380,408
-----------------
Net realized and unrealized gain (loss) 1,385,183
-----------------
Net increase (decrease) in net assets resulting from operations $11,253,940
-----------------
See notes to financial statements.
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JULY 31, 2003 AND 2002
2003 2002
---------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income $ 9,868,757 $ 14,702,030
Net realized gain (loss) from investments (6,995,225) (2,585,685)
Net unrealized appreciation (depreciation) on investments 8,380,408 (5,712,584)
---------------------------------------------
Net increase (decrease) in net assets resulting from operations 11,253,940 6,403,761
Distributions to shareholders from net investment income (9,890,428) (14,724,890)
Capital share transactions: (Note 2) (48,656,880) 55,716,667
---------------------------------------------
Net increase (decrease) in net assets (47,293,368) 47,395,538
Net assets :
Beginning of year 265,940,104 218,544,566
---------------------------------------------
End of year $218,646,736 $265,940,104
---------------------------------------------
Undistributed net investment income included in net assets:
End of year $ (23,123) $ (4,408)
---------------------------------------------
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Franklin Floating Rate Master Trust (the Trust) is registered under the
Investment Company Act of 1940 as a non-diversified, open-ended investment
company. The Trust is organized as a partnership and consists of one series, the
Franklin Floating Rate Master Series (the Fund). Shares of the Fund are issued
in the form of partnership interests 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. The Fund
values its securities based on quotations provided by banks, broker/dealers or
pricing services experienced in such matters. 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. 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, 2003, all repurchase agreements had been entered into on that
date.
C. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS
The Fund may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Fund will generally purchase these securities with the intention of holding the
securities, it may sell the securities before the settlement date. Sufficient
assets have been segregated for these securities.
D. SENIOR FLOATING RATE INTERESTS
Senior secured corporate loans pay interest at rates which are periodically
reset by reference to a base lending rate plus a spread. These base lending
rates are generally the prime rate offered by a designated U.S. bank or the
London InterBank Offered Rate (LIBOR).
E. 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.
F. 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. Discounts and premiums
on securities purchased are amortized over the lives of the respective
securities. Facility fees are recognized as income over the expected term of the
loan. The Fund's net investment income is proportionally allocated to the
partners daily and distributed monthly.
G. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.
H. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Fund. Additionally, in the normal course of business, the Fund
enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.
I. UNFUNDED LOAN COMMITMENTS
The Fund may enter into certain credit agreements, all or a portion of which may
be unfunded. The Fund is obligated to fund these loan commitments at the
borrowers' discretion.
At July 31, 2003, there were no unfunded loan commitments.
2. SHARES OF BENEFICIAL INTEREST
At July 31, 2003, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:
YEAR ENDED JULY 31,
-------------------------------------------------------------------
2003 2002
-------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------
Shares sold 5,371,074 $ 51,648,778 11,650,219 $114,303,425
Shares redeemed (10,574,183) (100,305,658) (6,013,547) (58,586,758)
-------------------------------------------------------------------
Net increase (decrease) (5,203,109) $ (48,656,880) 5,636,672 $ 55,716,667
===================================================================
3. REVOLVING CREDIT FACILITY
The Fund participates in a $200 million senior unsecured revolving credit
facility to fund shareholder redemptions or meet unfunded loan commitments. The
facility agreement ends on December 19, 2003. Interest is charged at the Federal
Funds Rate plus .50%. Facility fees paid are amortized on a straight line basis
over the term of the commitment. Annual commitment fees of .09% are charged on
the unused portion of the facility and allocated among the participating funds
based on net assets.
During the year ended July 31, 2003, the Fund did not utilize the facility.
4. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Fund are also officers and/or directors of
the following entities:
ENTITY AFFILIATION
- ---------------------------------------------------------------------------------------
Franklin Advisers Inc. (Advisers) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin/Templeton Investor Services LLC (Investor Services) Transfer agent
Franklin/Templeton Distributors Inc. (Distributors) Principal underwriter
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 an administrative fee to FT Services based on the average 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
FT Services and Advisers agreed in advance to waive administrative fees and
management fees, as noted in the Statement of Operations.
At July 31, 2003, the shares of the Fund were owned by the following entities:
PERCENTAGE OF
OUTSTANDING
ENTITY SHARES SHARES
- ---------------------------------------------------------------------------
Franklin Floating Rate Fund PLC 22,539,483 99.92%
Franklin Resources Inc. 10,000 .04%
Templeton Investment Counsel Inc. 10,000 .04%
----------------------------------
TOTAL 22,559,483 100.00%
==================================
5. INCOME TAXES
Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of organization costs, defaulted
securities and bond premiums.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of bond premiums.
At July 31, 2003, net unrealized appreciation (depreciation) based on the cost
of investment for income tax purposes of $216,314,026 were as follows:
Unrealized appreciation 2,011,343
Unrealized depreciation (1,680,518)
-----------
Net unrealized appreciation (depreciation) $ 330,825
===========
6. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended July 31, 2003 aggregated $141,396,749 and $187,476,405, respectively.
At July 31, 2003, the Fund did not participate in any soft commission
arrangements.
7. CREDIT RISK AND DEFAULTED SECURITIES
The Fund has 85.03% of its portfolio invested in below investment grade and
comparable quality unrated high yield securities, which tend to be more
sensitive to economic conditions than higher rated securities. The Fund held
defaulted securities and/or securities for which income has been deemed
uncollectible.
The Fund discontinues accruing income on these securities and provides an
estimate for losses on interest receivable. At July 31, 2003, the value of these
securities was $107,269 representing .05% of the Fund's net assets. For
information as to specific securities, see the accompanying Statement of
Investments.
8. PARTNERSHIP DISTRIBUTIONS
For the year ended July 31, 2003, the Fund made the following distributions:
PAYMENT DATE AMOUNT PER SHARE
8/30/2002 $0.039028
9/30/2002 $0.037055
10/31/2002 $0.041903
11/30/2002 $0.041838
12/31/2002 $0.039575
1/31/2003 $0.039972
2/28/2003 $0.037008
3/31/2003 $0.039287
4/30/2003 $0.038771
5/30/2003 $0.038097
6/30/2003 $0.036180
7/31/2003 $0.035837
Daily distribution information is available at the registered office upon
request.
9. OTHER CONSIDERATIONS
Advisers, as the Fund's Manager, may serve as a member of various bondholders'
steering committees, on credit committees, or may represent the Fund in certain
corporate restructuring negotiations. Currently the Manager serves in one or
more of these capacities for Adelphia Communications Corp. As a result of this
involvement, the Advisers may be in possession of certain material non-public
information. If the Fund's Manager, while in possession of such information,
seeks to sell any of its holdings in these securities it will comply with all
applicable federal securities laws.
10. RECENT LITIGATION
On July 6, 2003, Adelphia Communications Corp. ("Adelphia") and related parties,
along with its Official Committee of Unsecured Creditors, filed an adversary
proceeding in the Adelphia bankruptcy case in the U.S. Bankruptcy Court (SDNY)
against more than 360 banks, financial services companies, insurance companies,
investment banks, mutual funds and other parties that had arranged for the sale
of, or purchased the bank debt of, Adelphia or its related parties. Named
Defendants included Franklin Advisers Inc., Franklin CLOs I-III, Franklin
Floating Rate Daily Access Fund, Franklin Floating Rate Master Series, and
Franklin Floating Rate Trust.
The Complaint alleges that the purchasers of this bank debt knew, or should have
known, that the loan proceeds would not benefit Adelphia, but instead would be
used to enrich Adelphia insiders. It seeks avoidance of the loans and recovery
of intentionally fraudulent transfers.
Although it is not possible to predict the outcome of these matters at this
early stage of the proceedings, the Fund's management does not expect that the
result will have a material adverse effect on the financial condition of the
Fund.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees
of Franklin Floating Rate Master Series
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations, and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin Floating Rate Master
Series (hereafter referred to as "the Fund") at July 31, 2003, the results of
its operations 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 of America. 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 of America, which require that we plan
and perform the audits 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, 2003 by correspondence with the custodian and brokers,
provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
September 4, 2003
BOARD MEMBERS AND OFFICERS
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Trust, principal occupations during the
past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Each board member will serve until
that person's successor is elected and qualified.
INDEPENDENT BOARD MEMBERS
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------
FRANK H. ABBOTT, III (82) Trustee Since 1999 113 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Director, Abbott Corporation (an investment company); and FORMERLY, Director, MotherLode Gold Mines
Consolidated (gold mining) (until 1996) and Vacu-Dry Co. (food processing) (until 1996).
- -----------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (71) Trustee Since 1999 140 Director, Bar-S Foods (meat packing
One Franklin Parkway company).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and
President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers)
(until 1998).
- -----------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (71) Trustee Since 1999 141 None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch.
- -----------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (51) Trustee Since 1999 90 Director, Amerada Hess Corporation
One Franklin Parkway (exploration and refining of oil
San Mateo, CA 94403-1906 and gas); Hercules Incorporated
(chemicals, fibers and resins);
Beverly Enterprises, Inc. (health
care); H.J. Heinz Company
(processed foods and allied
products); RTI International
Metals, Inc. (manufacture and
distribution of titanium); and
Canadian National Railway
(railroad).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and
Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to
the Secretary and Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
- -----------------------------------------------------------------------------------------------------------------------------
Annual Report| 33
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (74) Trustee Since 1999 113 Director, The California Center for
One Franklin Parkway Land Recycling (redevelopment).
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture
capital).
- -----------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (75) Trustee Since 1999 140 Director, White Mountains Insurance
One Franklin Parkway Group, Ltd. (holding company);
San Mateo, CA 94403-1906 Martek Biosciences Corporation;
MedImmune, Inc. (biotechnology);
Overstock.com (Internet services);
and Spacehab, Inc. (aerospace
services); and FORMERLY, Director,
MCI Communication Corporation
(subsequently known as MCI
WorldCom, Inc. and WorldCom, Inc.)
(communications services)
(1988-2002).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River Corporation
(financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and President, National
Association of Securities Dealers, Inc. (1970-1987).
- -----------------------------------------------------------------------------------------------------------------------------
INTERESTED BOARD MEMBERS AND OFFICERS
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (70) Trustee and Since 1999 140 None
One Franklin Parkway Chairman of
San Mateo, CA 94403-1906 the Board
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Chief Executive Officer, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice
President, Franklin Templeton Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or
director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the
investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR.(62) Trustee, Trustee and 123 None
One Franklin Parkway President and President since
San Mateo, CA 94403-1906 Chief Executive 1999 and Chief
Officer - Executive Officer
Investment - Investment
Management Management
since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------
34 |Annual Report
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------
MARK BOYADJIAN (39) Vice President Since April 2003 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Templeton Worldwide, Inc.; and officer of three of the investment companies in Franklin Templeton
Investments.
- -----------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (58) Vice President Since 1999 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory
Services, Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin
Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------
RICHARD D'ADDARIO (54) Vice President Since 2002 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President and Director of Research, Franklin Advisers, Inc.; and officer of four of the investment companies in
Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (43) Vice President Since 1999 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin Mutual Advisers, LLC;
Executive Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice President and Chief
Operating Officer, Templeton Investment Counsel, LLC; President and Director, Franklin Advisers, Inc.; Executive Vice
President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief Financial
Officer, Franklin Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director or trustee,
as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in
Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (55) Senior Vice Since 2002 Not Applicable None
500 East Broward Blvd. President
Suite 2100 and Chief
Fort Lauderdale, FL Executive
33394-3091 Officer -
Finance and
Administration
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the
investment companies in Franklin Templeton Investments.
- -----------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (56) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources,
Inc.; officer of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive
Officer and Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
Annual Report| 35
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN (55) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President and Deputy General Counsel, Franklin Resources, Inc.; Senior Vice President, Templeton Worldwide, Inc.;
officer of some of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin
Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant and Senior
Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange
Commission (1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of
Massachusetts) (until 1979).
- -----------------------------------------------------------------------------------------------------------------------------
CHAUNCEY F. LUFKIN (45) Vice President Since 1999 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and Portfolio Manager, Franklin Advisers, Inc.; and officer of two of the investment companies in
Franklin Templeton Investments.
- ---------------------------------------------------------------------------------------------------------------------------
MICHAEL O. MAGDOL (66) Vice President Since 2002 Not Applicable Director, FTI Banque, Arch
600 Fifth Avenue -AML Chemicals, Inc. and Lingnan
Rockefeller Center Compliance Foundation.
New York, NY 10048-0772
- -----------------------------------------------------------------------------------------------------------------------------
KIMBERLEY H. MONASTERIO (39) Treasurer and Treasurer Not Applicable None
One Franklin Parkway Chief Financial since 2000
San Mateo, CA 94403-1906 Officer and Chief
Financial
Officer
since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; and officer of 51 of the investment companies in Franklin Templeton
Investments.
- -----------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (66) Vice President Since 2000 Not Applicable None
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some
of the subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000);
and Director, Templeton Asset Management Ltd. (until 1999).
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
*We base the number of portfolios on each separate series of the U.S. registered
investment companies within the Franklin Templeton Investments fund complex.
These portfolios have a common investment adviser or affiliated investment
advisers.
**Charles B. Johnson and Rupert H. Johnson, Jr. are considered interested
persons of the Trust under the federal securities laws due to their positions as
officers and directors and major shareholders of Franklin Resources Inc., which
is the parent company of the Trust's adviser and distributor.
Note: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers.
</FN>
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAS DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE FUND'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT
DIRECTOR AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE
COMMISSION RULES AND RELEASES.
THE FUND HAS ESTABLISHED PROXY VOTING POLICIES AND PROCEDURES ("POLICIES") THAT
THE FUND USES TO DETERMINE HOW TO VOTE PROXIES RELATING TO PORTFOLIO SECURITIES.
SHAREHOLDERS MAY VIEW THE FUND'S COMPLETE POLICIES ON-LINE AT
WWW.FRANKLINTEMPLETON.COM. ALTERNATIVELY, SHAREHOLDERS MAY REQUEST COPIES OF THE
POLICIES FREE OF CHARGE BY CALLING THE PROXY GROUP COLLECT AT 1-954-847-2268 OR
BY SENDING A WRITTEN REQUEST TO: FRANKLIN TEMPLETON COMPANIES, LLC, 500 EAST
BROWARD BOULEVARD, SUITE 1500, FORT LAUDERDALE, FL 33394, ATTENTION: PROXY
GROUP.
ITEM 2. CODE OF ETHICS
(A) THE REGISTRANT HAS ADOPTED A CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL
EXECUTIVE OFFICERS AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER.
(C) N/A
(D) N/A
(F) PURSUANT TO ITEM 10(A), THE REGISTRANT IS ATTACHING AS AN EXHIBIT A COPY OF
ITS CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL EXECUTIVE OFFICERS FINANCIAL
AND ACCOUNTING OFFICER.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. N/A
(A)(1) THE REGISTRANT HAS AN AUDIT COMMITTEE FINANCIAL EXPERT SERVING ON ITS
AUDIT COMMITTEE.
(2) THE AUDIT COMMITTEE FINANCIAL EXPERT IF FRANK W.T. LAHAYE AND HE IS
"INDEPENDENT" AS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A
ITEM 9. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 10. EXHIBITS
(A) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICER
(B)(1) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
KIMBERLEY H. MONASTERIO, CHIEF FINANCIAL OFFICER
(B(2) CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
KIMBERLEY H. MONASTERIO, CHIEF FINANCIAL OFFICER
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN FLOATING RATE MASTER TRUST
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date September 30, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date September 30, 2003
By /s/Kimberley H. Monasterio
Chief Financial Officer
Date September 30, 2003