UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-09869
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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: 1/31/04
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Item 1. Reports to Stockholders.
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED
JANUARY 31, 2004 YEAR ENDED JULY 31,
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(UNAUDITED) 2003 2002 2001 2000b
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period $9.69 $9.58 $9.88 $10.05 $10.00
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Income from investment operations:
Net investment income .179 .464 .545 .861 .288
Net realized and unrealized gains (losses) .108 .111 (.300) (.173) .050
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Total from investment operations .287 .575 .245 .688 .338
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Less distributions from net investment
income (.177) (.465) (.545) (.861) (.288)
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Net asset value, end of period $9.80 $9.69 $9.58 $9.88 $10.05
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Total return a 2.99% 6.19% 2.52% 7.13% 3.42%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $411,343 $218,647 $265,940 $218,545 $37,370
Ratios to average net assets:
Expenses .60%c .60% .60% .62% 1.00%c
Expenses excluding waiver and payments by affiliate .99%c 1.02% .98% 1.01% 2.27%c
Net investment income 3.63%c 4.86% 5.55% 8.34% 8.62%c
Portfolio turnover rate 31.61% 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, JANUARY 31, 2003 (UNAUDITED)
SHARES VALUE % OF NET
ASSETS
- --------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS
WIRELESS COMMUNICATIONS
a Arch Wireless Inc. 8,235 $ 182,735 0.04
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SPECIALTY TELECOMMUNICATIONS
a Global Crossing Ltd. 539 16,418 0.00
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TOTAL COMMON STOCKS (COST $130,795) 199,153 0.04
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PRINCIPAL
AMOUNT
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BONDS (COST $809,641)
WIRELESS COMMUNICATIONS
Arch Wireless Inc., Senior sub. note, 12.00%, 5/15/09 $ 865,790 999,987 0.24
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b SENIOR FLOATING RATE INTERESTS
AEROSPACE & DEFENSE
DRS Technologies Inc., Term Loan B, 3.58 - 3.73%, 11/04/10 1,995,000 2,016,197 0.49
Titan Corp., Term Loan B, 4.35 - 6.00%, 2/23/06 985,000 987,360 0.24
Vought Aircraft Industries, Term Loan X, 4.10%, 12/01/06 678,110 679,381 0.17
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3,682,938 0.90
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ALTERNATIVE POWER GENERATION
Headwaters Inc., Term Loan B, 5.41 - 7.25%, 9/12/07 449,788 450,912 0.11
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APPAREL/FOOTWEAR
St. John Knits Inc., Term Loan B, 4.875%, 7/31/07 995,546 998,657 0.24
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AUTO PARTS: ORIGINAL EQUIPMENT MANUFACTURER
Dayco Products LLC, Term Loan B, 4.35 - 4.43%, 5/31/07 543,627 545,665 0.13
Eagle Picher Industries Inc., Term Loan B, 4.671%, 8/07/09 995,000 1,006,194 0.24
Federal Mogul Corp., Term Loan, 4.125 - 4.25% 2/06/05 1,000,000 998,020 0.24
Hayes Lemmerz, Term Loan, 4.90 - 4.98%, 6/03/09 2,992,500 3,045,805 0.74
Hilite International Inc., Term Loan B, 5.64 - 5.76%, 3/31/09 907,319 911,856 0.22
Intermet Corp., Term Loan B, 5.35%, 1/07/09 2,500,000 2,495,313 0.61
Key Plastics Inc.,
Term Loan B, 6.60 - 8.00%, 4/25/09 370,000 375,550 0.09
Term Loan C, 11.10 - 11.17%, 4/25/10 1,000,000 1,005,000 0.25
Progressive Moulded Products, Term Loan B2, 4.625%, 6/30/08 995,000 1,003,084 0.24
Tenneco Automotive Inc.,
Term Loan, 4.42%, 12/12/10 1,241,379 1,258,448 0.31
Term Loan B, 4.44%, 12/12/10 2,758,621 2,804,599 0.68
TRW Automotive Acquisition Corp., Term Loan D1, 3.688%, 2/28/11 2,000,000 2,035,000 0.50
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17,484,534 4.25
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AUTOMOTIVE AFTERMARKET
United Components Inc., Term Loan C, 3.92%, 6/20/10 990,000 998,346 0.24
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BEVERAGES: ALCOHOLIC
Southern Wine & Spirits of America Inc., Term Loan B, 3.39%, 6/21/08 1,982,531 2,005,661 0.49
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BEVERAGES: NON-ALCOHOLIC
Dr. Pepper Bottling Co. of Texas, Term Loan, 3.61%, 12/18/10 2,500,000 2,535,417 0.62
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BROADCASTING
Cumulus Media Inc., Term Loan D, 3.625%, 3/28/10 992,500 1,005,372 0.24
Emmis Operating Co., Term Loan B, 3.375%, 8/31/09 997,500 1,010,523 0.25
c Paxson Communications Corp., 144A, Term Loan, 3.89%, 1/15/10 4,600,000 4,643,125 1.13
Radio One Inc., Term Loan A, 1.93%, 6/30/07 1,700,000 1,678,750 0.41
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8,337,770 2.03
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BUILDING PRODUCTS
Associated Materials Inc., Term Loan, 3.87 - 4.03%, 8/27/09 736,842 745,439 0.18
Atrium Cos. Inc., Term Loan, 3.87%, 11/30/08 2,250,000 2,280,994 0.55
Building Materials Holding Corp., Term Loan B, 4.438%, 8/13/10 995,000 998,731 0.24
c Masonite International Corp., Term Loan C2, 3.375%, 8/31/08 1,000,000 1,007,500 0.25
Norcraft Cos. LP, Term Loan, 4.36%, 10/21/09 3,000,000 3,030,000 0.73
Tapco International,
Term Loan B, 4.17%, 7/23/07 482,323 483,228 0.12
Term Loan C, 4.42%, 7/23/08 482,323 483,227 0.12
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9,029,119 2.19
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CABLE/SATELLITE TELEVISION
c Atlantic Broadband Finance LLC, Term Loan B, 4.37%, 8/06/11 1,250,000 1,250,000 0.30
Bresnan Broadband Holdings LLC, Term Loan, 5.42 - 5.48%, 9/30/10 1,000,000 1,009,375 0.25
Century Cable (Adelphia), Discretionary Term Loan, 6.00%, 12/31/09 1,000,000 990,375 0.24
Charter Communications CCVIII, Term Loan B, 3.66%, 2/02/08 970,151 958,428 0.23
Charter Communications Operating LLC, Term Loan B, 3.87%, 9/18/08 972,633 959,934 0.23
DirecTV Holdings LLC, Term Loan, 3.87 - 3.92%, 3/06/10 3,000,000 3,036,564 0.74
Insight Midwest Holdings,
Additional Term Loan, 4.00%, 12/31/09 1,000,000 1,006,719 0.24
Term Loan, 3.938%, 12/31/09 1,000,000 1,006,719 0.24
MCC Iowa (Broadband), Term Loan B1, 3.68%, 9/12/10 1,000,000 1,011,181 0.25
Olympus Cable Holdings (Adelphia), Term Loan B, 6.00%, 9/30/10 2,000,000 1,982,916 0.48
PanAmSat Corp., Term Loan B1, 3.60%, 9/30/10 538,462 546,987 0.13
Pegasus Media & Communications, Term Loan D, 9.00%, 7/31/06 1,995,000 2,048,201 0.50
UPC Distribution Holdings BV, Term Loan C2, 6.65%, 3/31/09 2,000,000 1,995,000 0.49
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17,802,399 4.32
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CASINOS/GAMING
Alliance Gaming Corp., Term Loan B, 3.96%, 8/22/09 1,500,000 1,514,205 0.37
Greektown Casinos LLC, Term Loan D, 6.50%, 12/31/05 3,551,663 3,584,221 0.87
Isle of Capri, Term Loan B, 3.36 - 3.43%, 4/25/08 982,500 991,250 0.24
Isle of Capri Black Hawk, Term Loan C, Term Loan B, 5.11 - 5.18%,
4/15/06 992,381 996,413 0.24
Green Valley Ranch Gaming LLC, Term Loan B, 3.913%, 12/05/10 1,000,000 1,012,500 0.25
Marina District Finance Co. Inc., Term Loan B, 5.18 - 5.22%, 12/31/07 997,500 1,010,385 0.25
Penn National Gaming Inc., Term Loan D, 3.60 - 3.63%, 3/03/09 667,021 673,818 0.16
Scientific Games Corp., Term Loan C, 3.85%, 12/31/09 3,992,500 4,054,883 0.99
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13,837,675 3.37
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CATALOG/SPECIALTY DISTRIBUTION
Affinity Group Inc., 283,571 284,458
Term Loan B1, 5.125%, 6/23/09 0.07
Term Loan B2, 5.125% - 5.165%, 6/23/09 708,929 711,144 0.17
c Oriental Trading Co. Inc., Term Loan B, 3.938%, 7/29/10 2,000,000 2,012,500 0.49
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3,008,102 0.73
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CHEMICALS: MAJOR DIVERSIFIED
Huntsman International,
Term Loan B, 5.438 - 5.50%, 6/30/07 1,750,034 1,769,503 0.43
Term Loan C, 5.75%, 6/30/08 1,749,966 1,770,990 0.43
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3,540,493 0.86
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CHEMICALS: SPECIALTY
FMC Corp., Term Loan B, 3.60%, 10/21/07 990,000 1,002,622 0.25
Kraton Polymers LLC, Term Loan B, 3.75%, 12/24/10 2,000,000 2,032,500 0.50
c Nalco Co., Term Loan B, 3.62%, 11/04/10 7,000,000 7,088,228 1.72
Noveon Inc., Term Loan B, 3.938 - 4.00%, 12/31/09 2,000,000 2,022,500 0.49
Rockwood Specialties Group Inc., Term Loan C, 3.87%, 7/23/10 995,000 1,000,597 0.24
Sovereign Specialty Chemicals Inc., Term Loan B, 5.712%, 12/31/07 990,000 965,250 0.23
Westlake Chemical Corp., Term Loan B, 4.92 - 4.938%, 7/31/10 995,000 1,009,303 0.25
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15,121,000 3.68
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COMMERCIAL PRINTING/FORMS
American Reprographics, Term Loan B, 4.12%, 6/17/09 2,000,000 2,030,000 0.49
CSG Systems Inc., Term Loan B, 4.68%, 12/31/07 962,815 967,178 0.24
Moore Holdings USA Inc., Term Loan B2, 3.125 - 3.188%, 3/14/10 995,000 998,938 0.24
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3,996,116 0.97
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CONSTRUCTION MATERIALS
St. Marys Cement Inc., Term Loan B, 3.69%, 11/24/09 2,500,000 2,528,125 0.61
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CONSUMER SUNDRIES
NBTY Inc., Term Loan C, 3.125%, 7/22/09 995,006 1,003,713 0.24
Playtex Products Inc., Term Loan C, 4.62 - 4.72%, 5/31/09 1,359,850 1,364,525 0.33
Rayovac Corp., Term Loan B, 4.85 - 4.93%, 10/01/09 721,546 727,107 0.18
Scotts Co., Term Loan B, 3.125 - 3.188%, 9/30/10 1,500,000 1,520,492 0.37
United Industries Corp., Term Loan B, 5.10%, 1/20/06 683,145 688,268 0.17
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5,304,105 1.29
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CONTAINERS/PACKAGING
ACI Operations Property Ltd., Term Loan, 3.95%, 4/01/07 1,000,000 1,005,750 0.25
Berry Plastics, Term Loan C, 3.67%, 6/30/10 997,500 1,007,475 0.25
Crown Cork & Seal Co. Inc., Term Loan B, 4.17%, 9/15/08 950,000 963,062 0.23
Graham Packaging Co., Term Loan B, 5.188%, 2/20/10 996,491 1,008,574 0.25
Graphic Packaging International Corp., Term Loan B, 3.92 - 3.93%,
8/08/10 2,487,500 2,526,367 0.61
Impress Metal, Term Loan G, 4.464%, 12/31/06 577,483 578,566 0.14
Kerr Group Inc., Term Loan B, 4.61%, 8/11/10 1,959,302 1,975,629 0.48
Owens-Brockway Glass Container Inc., Term Loan B, 3.88%, 4/01/08 4,000,000 4,039,168 0.98
Stone Container Corp.,
Term Loan B, 3.625%, 7/25/09 2,280,668 2,300,624 0.56
Term Loan C, 3.625%, 7/25/09 386,421 389,802 0.09
Tekni-Plex Inc., Term Loan B, 5.125%, 6/21/08 688,756 692,774 0.17
US Can Corp., Term Loan B, 5.37%, 10/04/08 613,015 615,041 0.15
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17,102,832 4.16
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DRUG STORE CHAINS
General Nutrition Centers Inc., Term Loan, 4.17 - 4.22%, 12/04/09 2,000,000 2,015,626 0.49
Rite Aid Corp., Term Loan B1, 4.10%, 4/30/08 1,000,000 1,022,000 0.25
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3,037,626 0.74
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ELECTRIC UTILITIES
c AES Corp., Term Loan B, 5.19 - 5.32%, 4/30/08 2,500,000 2,534,960 0.62
Calpine Corp., Term Loan, 6.87%, 7/15/07 1,990,000 1,971,967 0.48
Centerpoint Energy Inc., Term Loan B, 4.68%, 10/07/06 2,991,892 3,062,638 0.74
NRG Energy Inc., Term Loan B, 1.07 - 5.50%, 6/23/10 580,417 600,973 0.15
Quanta Services Inc., Term Loan B, 1.16 - 4.12%, 12/15/08 3,000,000 3,028,125 0.74
TNP Enterprises Inc., Term Loan, 6.245%, 12/31/06 995,000 1,001,841 0.24
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12,200,504 2.97
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ELECTRONIC COMPONENTS
Amkor Technology Inc., Term Loan, 7.00%, 1/31/06 1,189,504 1,206,479 0.29
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ELECTRONICS/APPLIANCES
Alliance Laundry Systems LLC, Term Loan, 4.652 - 6.50%, 7/31/09 813,471 817,200 0.20
Interline Brands, Term Loan B, 4.663%, 11/30/09 975,000 980,180 0.24
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1,797,380 0.44
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ENGINEERING & CONSTRUCTION
Washington Group, Term Loan, 1.034%, 10/01/07 3,000,000 3,006,900 0.73
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ENVIRONMENTAL SERVICES
Allied Waste North America Inc.,
Term Loan, 3.87%, 1/15/10 217,456 217,456 0.05
Term Loan B, 3.92 - 3.93%, 1/15/10 3,269,643 3,323,183 0.81
Term Loan C, 3.92%, 1/15/10 500,000 509,219 0.12
Duratek Inc., Term Loan B, 5.125%, 12/16/09 2,500,000 2,504,688 0.61
IESI Corp., Term Loan, 4.25 - 4.325, 10/10/10 997,500 1,009,969 0.25
Mactec Inc., Term Loan B, 6.75%, 2/22/08 457,181 205,731 0.05
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7,770,246 1.89
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RENTAL/LEASING
c Baker Tanks Inc., Term Loan B, 5.75%, 1/30/11 1,000,000 1,000,000 0.24
United Rentals Inc., Term Loan B, 4.09 - 4.21%, 9/30/07 1,294,245 1,302,233 0.32
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2,302,233 0.56
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FOOD DISTRIBUTORS
Land O'Lakes Inc., Term Loan B, 4.68%, 10/11/08 743,745 746,069 0.18
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FOOD RETAIL
Alimentation Couche Tard Inc., Term Loan B, 3.375%, 12/16/10 1,000,000 1,006,250 0.25
Pathmark Stores Inc., Term Loan B2, 5.625 - 5.688%, 6/30/07 345,361 347,779 0.08
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1,354,029 0.33
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FOOD: MAJOR DIVERSIFIED
B&G Foods Inc., Term Loan, 4.52%, 9/03/09 997,500 1,008,722 0.25
Birds Eye Foods Inc., Term Loan B, 3.85 - 3.913%, 8/08/08 939,015 949,285 0.23
Dole Food Inc., Term Loan C, 3.688 - 5.50%, 3/28/08 281,714 283,112 0.07
d Pinnacle Foods Holding Corp., Term Loan B, 1.25 - 3.85%, 11/25/10 2,000,000 2,021,250 0.49
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4,262,369 1.04
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FOOD: MEAT/FISH/DAIRY
American Seafoods, Term Loan B, 4.42%, 4/15/09 885,629 889,781 0.21
Michael Foods Inc.,
Term Loan B, 3.60 - 3.964%, 11/21/10 1,000,000 1,014,792 0.25
Term Loan C, 5.214%, 11/21/11 1,000,000 1,024,375 0.25
Suiza Foods Corp., Term Loan B, 3.17%, 7/15/08 995,000 1,007,533 0.25
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------------
3,936,481 0.96
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FOOD: SPECIALTY/CANDY
Atkins Nutritionals Inc.,
First Lien Term Loan, 4.40%, 11/21/09 1,000,000 1,006,250 0.25
Second Lien Term Loan, 6.90%, 11/21/09 1,000,000 1,011,250 0.25
Meow Mix Co.,
First Lien Term Loan, 4.67 - 4.73%, 8/21/09 1,490,625 1,494,352 0.36
Second Lien Term Loan, 7.72%, 8/21/09 2,000,000 1,977,500 0.48
Nellson Neutraceuticals Inc., Term Loan, 4.17%, 10/04/09 1,925,000 1,939,437 0.47
Otis Spunkmeyer Inc., Term Loan B, 5.35%, 2/20/09 942,375 949,442 0.23
Reddy Ice Group Inc., Term Loan, 4.10%, 7/31/09 831,250 840,429 0.20
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9,218,660 2.24
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HOME FURNISHINGS
Aero Products International, Term Loan, 5.67%, 12/16/08 859,223 844,187 0.21
Simmons Holdings Inc.,
Term Loan, 4.938%, 6/02/12 1,000,000 1,010,625 0.25
Term Loan B, 3.875 - 5.75%, 12/02/11 2,000,000 2,026,500 0.49
Tempur World Inc., Term Loan B, 4.663%, 8/15/09 995,000 1,001,840 0.24
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4,883,152 1.19
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HOMEBUILDING
Landsource Communities Development LLC, Term Loan B, 4.50%, 3/31/10 2,000,000 2,028,750 0.50
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HOSPITAL/NURSING MANAGEMENT
Beverly Enterprises Inc., Term Loan B, 4.37 - 4.42%, 10/22/08 997,500 1,008,722 0.25
Iasis Healthcare Corp., Term Loan B, 5.37%, 2/7/09 1,840,000 1,863,576 0.45
Triad Hospitals Inc., Term Loan B, 4.10%, 9/30/08 2,244,621 2,270,077 0.55
Vanguard Health Systems Inc., Term Loan B, 5.42%, 1/03/10 990,000 998,043 0.24
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6,140,418 1.49
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HOTEL/RESORTS/CRUISELINES
Extended Stay America Inc., Term Loan B, 4.85%, 7/01/07 1,889,875 1,920,349 0.47
Wyndham International Inc., Term Loan B, 5.875%, 6/30/06 972,948 944,976 0.23
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2,865,325 0.70
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INDUSTRIAL CONGLOMERATES
SPX Corp., Term Loan B, 3.438%, 9/30/09 2,041,705 2,057,975 0.50
Walter Industries Inc., Term Loan B, 5.36 - 5.413%, 4/14/10 451,741 454,424 0.11
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2,512,399 0.61
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INDUSTRIAL MACHINERY
Colfax Corp., Term Loan B, 4.875%, 5/30/09 1,839,193 1,848,389 0.45
Day International Group Inc., Term Loan B, 5.60 - 5.61%, 9/10/09 975,000 980,282 0.24
Flowserve Corp., Term Loan C, 3.875 - 3.938%, 6/30/09 664,961 670,779 0.16
c Itron Inc., Term Loan B, 5.25%, 11/24/10 1,500,000 1,515,000 0.37
Roper Industries Inc., Term Loan, 3.15%, 12/19/08 1,000,000 1,013,125 0.25
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6,027,575 1.47
---------------- ------------
INDUSTRIAL SPECIALTIES
Unifrax Corp., Term Loan B, 4.875%, 8/27/09 995,000 1,005,572 0.24
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INFORMATION TECHNOLOGY SERVICES
The Relizon Co., Term Loan B, 5.92 - 5.94%, 12/31/07 952,056 939,957 0.23
Worldspan LP, Term Loan, 4.875 - 4.938%, 6/30/07 904,000 904,942 0.22
Xerox Corp., Term Loan, 3.42%, 9/30/08 1,000,000 1,011,719 0.24
---------------- ------------
2,856,618 0.69
---------------- ------------
LIFE/HEALTH INSURANCE
Conseco Inc.,
Term Loan A, 7.25%, 9/01/09 769,231 775,000 0.19
Term Loan B, 9.50%, 9/01/09 230,769 233,077 0.06
---------------- ------------
1,008,077 0.25
---------------- ------------
MAJOR TELECOMMUNICATIONS
Alec Holdings Inc., Term Loan B, 4.50%, 8/20/10 2,000,000 2,015,000 0.49
Cincinnati Bell Inc., Term Loan D, 3.68%, 6/30/08 997,500 1,010,592 0.24
GCI Holdings Inc., Term Loan, 4.35%, 10/30/04 1,913,445 1,931,662 0.47
Qwest Corp., Term Loan, 6.50%, 6/30/07 1,000,000 1,051,250 0.26
---------------- ------------
6,008,504 1.46
---------------- ------------
MANAGED HEALTH CARE
Oxford Health Plans Inc., Term Loan B, 3.419 - 5.25%, 4/25/09 1,500,000 1,507,984 0.37
Pacificare Health Systems Inc., Term Loan, 3.93%, 6/03/08 995,000 1,006,816 0.24
---------------- ------------
2,514,800 0.61
---------------- ------------
MARINE SHIPPING
Great Lakes Dredge & Dock Corp., Term Loan B, 4.14 - 6.00%, 12/19/10 1,000,000 1,010,000 0.25
Great Lakes Transportation LLC, Term Loan, 5.125 - 5.188%, 3/23/08 745,014 746,877 0.18
Horizon Lines LLC, Term Loan, 4.15 - 4.33%, 2/27/09 941,429 950,401 0.23
Moran Transportation Co., Term Loan B, 4.163%, 8/07/09 995,000 1,007,437 0.24
---------------- ------------
3,714,715 0.90
---------------- ------------
MEDIA CONGLOMERATES
Canwest Media Inc., Term Loan D, 3.93%, 5/15/09 (Canada) 1,492,308 1,508,319 0.37
---------------- ------------
MEDICAL SPECIALTIES
Empi Inc., Term Loan B, 4.24%, 11/24/09 1,000,000 1,012,500 0.25
Fresenius Medical Care, Term Loan C, 3.413%, 2/21/10 995,000 1,008,993 0.25
Hanger Orthopedic Group Inc., Term Loan B, 3.913%, 9/30/09 997,500 1,007,787 0.24
Kinetic Concepts Inc., Term Loan B, 3.92%, 8/11/10 1,492,500 1,514,888 0.37
Medex Inc., Term Loan B, 4.11 - 4.24%, 5/21/09 995,000 1,002,877 0.24
PerkinElmer Inc., Term Loan B, 3.35%, 12/26/08 775,635 783,068 0.19
---------------- ------------
6,330,113 1.54
---------------- ------------
MEDICAL/NURSING SERVICES
Alliance Imaging Inc., Term Loan C, 3.563 - 3.625%, 11/30/08 1,590,068 1,584,353 0.39
Ameripath Inc., Term Loan B, 5.60%, 3/27/10 948,056 950,426 0.23
AMN Healthcare Services Inc., Term Loan B, 4.17%, 10/02/08 1,000,000 1,012,500 0.25
Cross Country Healthcare Inc., Term Loan, 4.36 - 4.37%, 6/05/09 736,011 754,411 0.18
c DaVita Inc., Term Loan B, 3.369 - 3.463%, 3/31/09 3,989,226 4,034,104 0.98
Insight Health Services, Term Loan B, 4.61%, 10/17/08 977,494 982,382 0.24
MedQuest Inc., Term Loan B, 4.92%, 7/31/09 995,000 985,050 0.24
Team Health Inc., Term Loan B, 4.469%, 10/31/08 951,898 951,898 0.23
---------------- ------------
11,255,124 2.74
---------------- ------------
MISCELLANEOUS COMMERCIAL SERVICES
Corrections Corp. of America, Term Loan C, 3.92 - 3.93%, 3/31/08 984,773 997,082 0.24
DS Waters Enterprises LP, Term Loan, 3.875 - 3.938%, 11/07/09 2,150,000 2,183,594 0.53
Global Imaging Systems Inc., Term Loan, 3.61 - 3.68%, 6/20/09 995,000 1,001,219 0.24
Johnson Diversey Inc., Term Loan B, 3.87 - 3.913%, 5/03/08 893,042 902,111 0.22
Sirva Worldwide Inc., Term Loan, 3.62%, 12/01/10 976,470 978,912 0.24
Spectaguard Acquisition LLC, Term Loan, 7.50%, 4/25/10 958,553 953,396 0.23
U.S. Investigations Services Inc., Term Loan C, 4.67%, 1/10/09 1,454,718 1,463,810 0.35
------------
----------------
8,480,124 2.05
---------------- ------------
MISCELLANEOUS MANUFACTURING
Enersys Capital Inc., Term Loan B, 4.35 - 4.42%, 11/09/08 970,047 973,684 0.23
Mueller Group, Term Loan E, 3.86 - 3.92%, 5/31/08 987,469 993,376 0.24
Norcross Safety Products, Term Loan, 4.93%, 3/01/09 761,731 768,872 0.19
Trimas Corp., Term Loan B, 4.62 - 4.688%, 12/06/09 2,741,811 2,753,708 0.67
---------------- ------------
5,489,640 1.33
---------------- ------------
MOVIES/ENTERTAINMENT
24 Hour Fitness Inc., Term Loan, 4.75%, 7/01/09 1,000,000 998,125 0.24
c Carmike Cinemas Inc., Term Loan, 4.438%, 2/02/09 3,198,572 3,208,895 0.78
CH Operating LLC, Term Loan B, 5.625 - 5.688%, 6/21/07 448,276 448,276 0.11
Cinram International,
Term Loan B, 4.87%, 9/30/09 2,100,000 2,108,203 0.51
Term Loan C, 6.87%, 3/31/10 1,965,395 1,977,372 0.48
Detroit Red Wings Inc., Term Loan, 3.36%, 8/30/06 1,000,000 1,000,625 0.24
Hollywood Entertainment Corp., Term Loan, 4.60%, 3/31/08 625,000 629,981 0.15
Loews Cineplex Entertainment Corp., Term Loan A, 4.688%, 2/28/08 1,741,011 1,746,814 0.43
Mets II LLC, Term Loan, 4.35%, 8/23/05 1,000,000 1,000,000 0.24
c Minnesota Hockey Ventures Group LP Holding Co., Term Loan, 5.652%,
12/23/08 1,350,000 1,344,937 0.33
Minnesota Wild Hockey Club LP Option Co., Term Loan, 3.402%, 12/23/08 1,000,000 1,003,750 0.25
New Jersey Basketball LLC, Term Loan, 4.375%, 7/16/04 3,000,000 2,998,980 0.73
Rainbow Media Holdings Inc., Term Loan C, 3.44%, 12/31/09 2,992,495 3,020,861 0.73
Regal Cinemas Inc., Term Loan D, 3.688%, 6/30/09 974,194 986,574 0.24
Six Flags Theme Parks, Term Loan B, 3.62%, 6/30/09 3,650,000 3,667,111 0.89
Vivendi Universal Entertainment, Term Loan, 3.85%, 6/24/08 1,000,000 1,009,063 0.25
---------------- ------------
27,149,567 6.60
---------------- ------------
OIL & GAS PIPELINES
Magellan Midstream Holdings, Term Loan A, 4.60 - 4.67%, 6/17/08 749,218 758,583 0.18
---------------- ------------
OIL & GAS PRODUCTION
Williams Production RMT Co., Term Loan, 4.86%, 5/30/07 995,000 1,008,681 0.25
---------------- ------------
OIL REFINING/MARKETING
Citgo Petroleum Corp., Term Loan, 8.25%, 2/27/06 1,000,000 1,040,000 0.25
Pacific Energy Group LLC, Term Loan B, 3.37 - 3.476%, 7/26/09 1,000,000 1,006,563 0.25
Tesoro Petroleum Corp., Term Loan, 6.62 - 6.67%, 4/15/08 992,500 1,025,170 0.25
---------------- ------------
3,071,733 0.75
---------------- ------------
OILFIELD SERVICES/EQUIPMENT
Basic Energy Services LP, Term Loan B, 4.61 - 4.63%, 10/03/09 992,857 997,821 0.24
---------------- ------------
OTHER CONSUMER SPECIALTIES
Jarden Corp., Term Loan B, 3.92%, 8/21/08 1,496,250 1,508,407 0.36
Sola International Inc., Term loan, 3.62%, 12/05/09 1,000,000 1,015,000 0.25
---------------- ------------
2,523,407 0.61
---------------- ------------
OTHER PHARMACEUTICALS
aaiPHARMA Inc., Term Loan B, 4.40 - 5.03%, 11/26/09 975,000 986,781 0.24
---------------- ------------
OTHER TRANSPORTATION
Laidlaw International Inc., Term Loan, 5.50%, 6/17/09 2,949,592 2,988,305 0.73
Pacer International Inc., Term Loan, 3.875 - 5.75%, 6/06/10 839,216 847,258 0.21
Transcore Holdings Inc.,
c Term Loan B, 4.37%, 10/31/06 2,947,484 2,976,959 0.72
Term Loan C, 4.37 - 5.75%, 12/03/07 997,500 999,904 0.24
Travelcenters of America Inc., Term Loan B, 4.35 - 4.36%, 11/14/08 945,768 953,157 0.23
---------------- ------------
8,765,583 2.13
---------------- ------------
PROPERTY-CASUALTY INSURANCE
Infinity Property & Casualty Corp., Term Loan, 3.67%, 7/17/10 965,123 973,769 0.24
---------------- ------------
PUBLISHING: BOOKS/MAGAZINES
Advanstar Communications, Term Loan B, 5.60%, 10/11/07 69,699 69,873 0.02
CBD Media LLC, Term Loan, 4.37%, 12/31/09 937,500 947,656 0.23
DEX Media West LLC, Term Loan B, 3.85 - 3.99%, 3/09/10 2,863,091 2,907,111 0.71
F&W Publications Inc., Term Loan B, 4.92%, 12/31/09 1,295,549 1,304,456 0.32
c Primedia Inc., Term Loan B, 3.875 - 3.938%, 6/30/09 3,500,000 3,461,500 0.84
R.H. Donnelley Corp., Term Loan B2, 3.39 - 3.43%, 6/30/10 990,086 1,002,066 0.24
Readers Digest Association Inc., Term Loan A, 4.188 - 4.25%, 5/20/07 3,484,721 3,502,144 0.85
---------------- ------------
13,194,806 3.21
---------------- ------------
PUBLISHING: NEWSPAPERS
Medianews Group Inc., Term Loan B, 3.10%, 12/30/10 1,000,000 1,011,250 0.25
---------------- ------------
PULP & PAPER
Appleton Papers Inc., Term Loan D, 3.60%, 11/08/06 2,000,000 2,015,000 0.49
---------------- ------------
RAILROADS
Helm Holding Corp., Term Loan B, 4.62 - 4.672%, 10/18/06 803,253 793,212 0.19
Kansas City Southern Industries Inc., Term Loan B, 3.60 - 3.68%,
6/07/08 106,985 107,520 0.03
Trinity Industries Inc., Term Loan, 4.406 - 4.438%, 6/07/07 818,333 822,936 0.20
---------------- ------------
1,723,668 0.42
---------------- ------------
REAL ESTATE INVESTMENT TRUSTS
Newkirk Master LP, Term Loan, 5.60 - 5.713%, 11/24/06 1,941,539 1,962,168 0.48
---------------- ------------
RECREATIONAL PRODUCTS
c BRP Holdings LP, Term Loan, 6.00%, 12/18/10 5,000,000 5,059,375 1.23
PlayPower Inc., Term Loan, 5.42%, 2/07/10 925,000 928,469 0.23
---------------- ------------
5,987,844 1.46
---------------- ------------
RESTAURANTS
Buffets Inc., Term Loan B, 4.663%, 6/28/09 1,361,838 1,366,604 0.33
Dominos Inc., Term Loan, 3.75%, 6/25/10 1,741,025 1,769,753 0.43
Jack In The Box Inc., Term Loan B, 3.87 - 3.92%, 12/19/10 2,000,000 2,009,920 0.49
---------------- ------------
5,146,277 1.25
---------------- ------------
SEMICONDUCTORS
Fairchild Semiconductor Corp., Term Loan, 3.75%, 6/19/08 995,000 1,005,987 0.24
---------------- ------------
SERVICES TO THE HEALTH INDUSTRY
Alderwoods Group Inc., Term Loan B, 3.85 - 5.75%, 9/12/08 881,496 894,168 0.22
Medco Health Solutions Inc., Term Loan B, 3.43%, 6/30/10 1,496,250 1,519,636 0.37
NDC Health Corp., Term Loan B, 3.875 - 3.938%, 11/30/08 888,000 889,110 0.22
Quintiles Transnational Corp., Term Loan B, 5.42%, 9/25/09 1,995,000 2,037,394 0.49
---------------- ------------
5,340,308 1.30
---------------- ------------
SPECIALTY STORES
CSK Auto Inc., Term Loan B, 3.37%, 6/20/09 1,000,000 1,006,850 0.24
Pantry Inc., Term Loan, 5.42 - 6.00%, 3/31/07 2,425,286 2,476,823 0.60
PETCO Animal Supplies Inc., Term Loan D, 3.67%, 10/02/08 994,983 1,007,420 0.25
---------------- ------------
4,491,093 1.09
---------------- ------------
SPECIALTY TELECOMMUNICATIONS
c Grapeclose Ltd. (Inmarsat),
Term Loan B, 4.111%, 10/10/10 1,750,000 1,755,469 0.43
Term Loan C, 4.611%, 10/10/11 1,750,000 1,755,469 0.43
Time Warner Telecom Inc., Term Loan B, 10.67%, 12/15/07 792,000 797,445 0.19
Valor Telecom, Term Loan A, 3.61 - 3.64%, 6/30/07 961,569 962,771 0.24
---------------- ------------
5,271,154 1.29
---------------- ------------
STEEL
International Steel Group, Term Loan B, 5.10%, 5/05/07 953,359 953,359 0.23
Steel Dynamics Inc., Term Loan B, 4.14 - 4.18%, 3/15/08 1,247,233 1,262,564 0.31
---------------- ------------
2,215,923 0.54
---------------- ------------
TOBACCO
Commonwealth Brands Inc., Term Loan, 5.188%, 8/22/07 498,029 501,920 0.12
---------------- ------------
TRUCKING
Comcar Industries, Term Loan B, 6.10 - 7.50%, 12/31/09 1,500,000 1,492,500 0.36
Flexi-Van Leasing Inc., Term Loan B, 3.84 - 3.94%, 9/20/07 375,148 376,204 0.09
Yellow Corp., Term Loan,
2.87%, 5/24/07 1,363,636 1,375,568 0.34
2.86%, 5/24/07 1,636,364 1,650,682 0.40
------------
----------------
4,894,954 1.19
---------------- ------------
WHOLESALE DISTRIBUTORS
Amscan Holdings Inc., Term Loan, 6.50%, 6/20/07 990,000 998,250 0.24
National Waterworks Inc., Term Loan B, 3.92%, 11/22/09 979,592 990,612 0.24
---------------- ------------
1,988,862 0.48
---------------- ------------
WIRELESS COMMUNICATIONS
AAT Communications Corp., Term Loan A, 5.35 - 5.48%, 8/13/09 1,000,000 1,002,500 0.24
American Tower Corp, Term Loan A, 3.36 - 3.42%, 6/30/07 1,609,828 1,617,877 0.39
Crown Castle Operating Co., Term Loan B, 4.66%, 9/30/10 2,987,512 3,050,997 0.74
Dobson Cellular Systems Inc., Term Loan, 4.37 - 4.43%, 3/31/10 2,673,300 2,712,774 0.66
Nextel Communications Inc., Term Loan E, 3.438%, 12/15/10 1,000,000 1,013,203 0.25
Nextel Partners Operating Corp., Term Loan B, 4.125%, 11/30/10 3,000,000 3,036,750 0.74
Spectrasite Communications Inc., Term Loan C, 4.24%, 2/22/07 999,091 1,004,456 0.24
---------------- ------------
13,438,557 3.26
---------------- ------------
TOTAL SENIOR FLOATING RATE INTERESTS (COST $366,187,675) 369,658,098 89.88
---------------- ------------
TOTAL LONG TERM INVESTMENTS (COST $367,128,111) 370,857,238 90.16
---------------- ------------
e REPURCHASE AGREEMENT (COST $64,060,672)
Joint Repurchase Agreement, .979%, 2/02/04 (Maturity Value $64,065,900) 64,060,672 64,060,672 15.57
ABN AMRO Bank, N.V., New York Branch (Maturity Value $5,661,504)
Banc of America Securities LLC (Maturity Value $5,661,504)
Barclays Capital Inc. (Maturity Value $5,661,504)
Bear, Stearns & Co. Inc. (Maturity Value $3,018,785)
BNP Paribas Securities Corp. (Maturity Value $5,661,504)
Deutsche Bank Securities Inc. (Maturity Value $5,811,414)
Dresdner Keinwort Wasserstein Securities LLC (Maturity Value $5,661,504)
Goldman, Sachs & Co. (Maturity Value $5,661,504)
Greenwich Capital Markets Inc. (Maturity Value $5,661,504)
Lehman Brothers Inc. (Maturity Value $4,282,165)
Morgan Stanley & Co. Inc. (Maturity Value $5,661,504)
UBS Securities LLC (Maturity Value $5,661,504)
Collateralized by U.S. Treasury Bills, Notes, Bonds, and U.S. Government Agency
Securities
TOTAL INVESTMENTS (COST $431,188,783) 434,917,910 105.73
OTHER ASSETS, LESS LIABILITIES (23,574,504) (5.73)
---------------- ------------
NET ASSETS $ 411,343,406 100.00
---------------- ------------
a Non-income producing.
b See Note 1(d) regarding senior floating rate interests.
c See Note 1(c) regarding securities purchased on a delayed delivery basis.
d See Note 1(i) regarding unfunded loan commitments.
e See Note 1(b) regarding joint repurchase agreement.
See notes to financial statements.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 2004 (UNAUDITED)
Assets:
Investments in securities:
Cost $ 367,128,111
--------------------
Value
370,857,238
Repurchase agreement, at value and cost
64,060,672
Cash
369,891
Receivables:
Capital shares sold 1,658,660
Interest
1,084,191
Other assets
30,801
--------------------
Total assets 438,061,453
--------------------
Liabilities:
Payables:
Investment securities purchased 23,804,125
Affiliates
189,519
Distributions to shareholders
1,132,028
Unfunded commitments (Note 1i)
1,559,633
Other liabilities
32,742
--------------------
Total liabilities
26,718,047
--------------------
Net assets, at value $ 411,343,406
--------------------
Net assets consist of:
Undistributed net investment income (loss) $ 15,509
Net unrealized appreciation (depreciation)
3,729,127
Accumulated net realized gain (loss)
(9,747,297)
Capital shares
417,346,067
--------------------
Net assets, at value $ 411,343,406
--------------------
Net asset value and maximum offering price per share ($411,343,406 / 41,985,122 shares
outstanding) $ 9.80
--------------------
See notes to financial statements.
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JANUARY 31, 2004 (UNAUDITED)
Investment income:
Interest $ 6,678,948
-------------------
Expenses:
Management fees (Note 4) 1,258,627
Administrative fees (Note 4) 227,510
Custodian fees 1,038
Professional fees 27,383
Other
45,028
-------------------
Total expenses
1,559,586
Expenses waived/paid by affiliate (Note 4) (612,233)
-------------------
Net expenses 947,353
-------------------
Net investment income
5,731,595
-------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments
7,941
Net unrealized appreciation (depreciation) on investments
3,375,179
-------------------
Net realized and unrealized gain (loss) 3,383,120
-------------------
Net increase (decrease) in net assets resulting from operations $ 9,114,715
-------------------
See notes to financial statements.
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JANUARY 31, 2004 (UNAUDITED)
AND YEAR ENDED JULY 31, 2003
SIX MONTHS ENDED YEAR ENDED,
JANUARY 31, 2004 JULY 31, 2003
-----------------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income $ 5,731,595 $ 9,868,757
Net realized gain (loss) from investments 7,941 (6,995,225)
Net unrealized appreciation (depreciation) on investments 3,375,179 8,380,408
-----------------------------------------------
Net increase (decrease) in net assets resulting from
operations 9,114,715 11,253,940
Distributions to shareholders from net investment income (5,692,963) (9,890,428)
Capital share transactions (Note 2) 189,274,918 (48,656,880)
-----------------------------------------------
Net increase (decrease) in net assets
192,696,670 (47,293,368)
Net assets:
Beginning of period 218,646,736 265,940,104
-----------------------------------------------
End of period $ 411,343,406 $ 218,646,736
-----------------------------------------------
Undistributed net investment income included in net assets:
End of period $ 15,509 $ (23,123)
-----------------------------------------------
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 January 31, 2004, all repurchase agreements had been entered into on
January 30, 2004.
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
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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. These commitments are disclosed in the accompanying
Statement of Investments and Statement of Assets and Liabilities.
2. SHARES OF BENEFICIAL INTEREST
At January 31, 2004, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Fund's shares were as follows:
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2004 JULY 31, 2003
-------------------------------------------------------------------------
Shares Amount Shares Amount
-------------------------------------------------------------------------
Shares sold 21,081,60 $ 205,365,892 5,371,074 $ 51,648,778
-------------------------------------------------------------------------
Shares redeemed (1,655,961) (16,090,974) (10,574,183) (100,305,658)
-------------------------------------------------------------------------
Net increase (decrease) 19,425,639$ 189,274,918 (5,203,109) $ (48,656,880)
-------------------------------------------------------------------------
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 20, 2004. 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 period ended January 31, 2004, the Fund did not utilize the facility.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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 January 31, 2003, the shares of the Fund were owned by the following
entities:
PERCENTAGE OF
ENTITY SHARES OUTSTANDING SHARES
- -------------------------------------------------------------------------------
Franklin Floating Rate Fund PLC 41,965,122 99.96%
Franklin Resources Inc. 10,000 .02%
Templeton Investment Counsel Inc. 10,000 .02%
---------------------------------------------
TOTAL 41,985,122 100.00%
---------------------------------------------
5. INCOME TAXES
At January 31, 2004, net unrealized appreciation (depreciation) based on the
cost of investment for income tax purposes of $431,194,486 were as follows:
Unrealized appreciation $ 4,046,857
Unrealized depreciation
(323,433)
---------------------
Net unrealized appreciation (depreciation) $ 3,723,424
---------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Net realized gains (loss) differ for financial statement and tax purposes
primarily due to differing treatments of bond premiums.
6. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended January 31, 2004 aggregated $267,023,207 and $85,710,410,
respectively.
At January 31, 2004, the Fund did not participate in any soft commission
arrangements.
7. CREDIT RISK
The Fund has 98.50% 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.
8. PARTNERSHIP DISTRIBUTIONS
For the period ended January 31, 2004, the Fund made the following
distributions:
PAYMENT DATE AMOUNT PER SHARE
08/29/2003 $ 0.030857
09/30/2003 $ 0.029927
10/31/2003 $ 0.030294
11/28/2003 $ 0.030032
12/31/2003 $ 0.028570
01/30/2004 $ 0.027523
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 Manger serves in one or more
of these capacities for Adelphia Communications Corp. As a result of this
involvement, 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 and 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 funs 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.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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.
11. REGULATORY MATTERS
On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company"),
alleging violations of the Massachusetts Uniform Securities Act. The complaint
arises from activity that occurred in 2001 during which time an officer of a
Company subsidiary was negotiating an agreement with an investor relating to
investments in a mutual fund and a hedge fund.
The Fund, in addition to other entities within Franklin Templeton Investments,
including the Company and other funds, has been named in shareholder class
actions related to the matter described above. The Fund's management believes
that the claims made in the lawsuit are without merit and it intends to defend
vigorously against the allegations. It is anticipated that the Fund may be named
in additional similar civil actions related to the matter described above.
In addition, as part of ongoing investigations by the U.S. Securities and
Exchange Commission (the "SEC"), the U.S. Attorney for the Northern District of
California, the New York Attorney General, the California Attorney General, the
U.S. Attorney for the District of Massachusetts, the Florida Department of
Financial Services, and the Commissioner of Securities and the Attorney General
of the State of West Virginia, relating to certain practices in the mutual fund
industry, including late trading, market timing and sales compensation
arrangements, the Company and its subsidiaries, as well as certain current or
former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company and
its current employees are providing documents and information in response to
these requests and subpoenas. In addition, the Company has responded to requests
for similar kinds of information from regulatory authorities in some of the
foreign countries where the Company conducts its global asset management
business.
The Staff of the SEC has informed the Company that it intends to recommend that
the Commission authorize an action against the Fund's investment adviser
relating to the frequent trading issues that are the subject of the SEC's
investigation. These issues were previously disclosed as being under
investigation by government authorities and the subject of an internal inquiry
by the Company in its Annual Report on Form 10-K and on its public website. The
Company currently is in discussions with the SEC Staff in an effort to resolve
the issues raised in their investigation. Such discussions are preliminary and
the Fund's management has been advised that the Company cannot predict the
likelihood of whether those discussions will result in a settlement and, if so,
the terms of such settlement. The impact, if any, of these matters on the Fund
is uncertain at this time. If the Company finds that it bears responsibility for
any unlawful or improper conduct, it has committed to making the Fund or its
shareholders whole, as appropriate.
Item 2. Code of Ethics.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 11(A), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers financial
and accounting officer.
Item 3. Audit Committee Financial Expert.
(a)(1) The registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is Frank W.T. LaHaye, and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
Item 4. Principal Accountant Fees and Services. N/A
Item 5. Audit Committee of Listed Registrants. N/A
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. N/A
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. N/A
Item 9. Submission of Matters to a Vote of Security Holders. There have been no
changes to the procedures by which shareholders may recommend nominees to the
Registrant's Board of Trustees that would require disclosure herein.
Item 10. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(b) Changes in Internal Controls. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
Item 11. Exhibits.
(A) Code of Ethics for Principal Executive and Senior Financial Officers.
(B)(1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Diomedes Loo-Tam, Chief Financial Officer
(B)(2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Diomedes Loo-Tam, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN FLOATING RATE MASTER TRUST
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date March 31, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date March 31, 2004
By /s/Diomedes Loo-Tam
Chief Financial Officer
Date March 31, 2004