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
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(Address of principal executive offices) (Zip code)
Craig S. Tyle, 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: 7/31/08
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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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2008 2007 2006 2005 2004
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year $9.51 $9.77 $9.85 $9.84 $9.69
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Income from investment operations/a:
Net investment income 0.549 0.655 0.565 0.398 0.334
Net realized and unrealized gains (losses) (0.493) (0.258) (0.076) 0.013 0.151
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Total from investment operations 0.056 0.397 0.489 0.411 0.485
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Less distributions from net investment income (0.056) (0.657) (0.569) (0.401) (0.335)
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Net asset value, end of year $9.02 $9.51 $9.77 $9.85 $9.84
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Total return 0.64% 4.09% 5.09% 4.23% 5.08%
RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates 1.00% 0.95% 0.95% 0.95% 0.98%
Expenses net of waiver and payments by affiliates/b 0.60% 0.60% 0.60% 0.60% 0.60%
Net investment income 6.16% 6.70% 5.76% 4.08% 3.34%
SUPPLEMENTAL DATA
Net assets, end of year (000's) $447,246 $1,069,720 $ 1,140,854 $1,121,133 $757,987
Portfolio turnover rate 28.10% 77.72% 78.29% 72.38% 54.41%
a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.
b Benefit of expenses reduction rounds to less than 0.01%.
The accompanying notes are an integral part of these financial statements.
ANNUAL REPORT
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
STATEMENT OF INVESTMENTS, JULY 31, 2008
PRINCIPAL % OF NET
COUNTRY AMOUNT/a VALUE ASSETS
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b,c SENIOR FLOATING RATE INTERESTS
AEROSPACE & DEFENSE
BE Aerospace Inc., Term Loan B, 5.75% - 5.91%, 7/28/14 United States $ 1,400,000 $ 1,402,041 0.31
Hawker Beechcraft Inc.,
Synthetic L/C, 4.801%, 3/26/14 United States 106,198 99,287 0.02
Term Loan B, 4.801%, 3/26/14 United States 1,817,752 1,699,457 0.38
ILC Industries Inc., June 2006 Term Loan, 4.801%, 2/24/12 United States 724,488 691,886 0.16
Spirit Aerosystems Inc. (Onex Wind Finance LP), Term B-1
Loan, 4.538%, 12/31/11 United States 2,967,212 2,894,886 0.65
TransDigm Inc., Term Loan B, 4.801%, 6/23/13 United States 4,400,000 4,281,200 0.96
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11,068,757 2.48
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APPLICATION SOFTWARE
CCC Information Services Group Inc. Term Loan B, 5.06%,
2/10/13 United States 1,564,108 1,540,647 0.35
Dealer Computer Services Inc. (Reynolds & Reynolds), First
Lien Term Loan, 4.801%, 10/26/12 United States 5,352,687 4,981,344 1.11
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6,521,991 1.46
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ASSET MANAGEMENT & CUSTODY BANKS
Nuveen Investments Inc., Term Loan B, 5.46% - 5.463%
11/13/14 United States 1,895,250 1,757,844 0.39
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AUTO PARTS & EQUIPMENT
Affinia Group Inc., Term Loan B, 5.799%, 11/30/11 United States 2,262,586 2,115,518 0.47
Cooper Standard Automotive Inc.,
Term Loan B, 5.313%, 12/23/11 Canada 1,587,998 1,480,808 0.33
Term Loan C, 5.313%, 12/23/11 United States 3,054,028 2,847,881 0.64
Dayco Products LLC (Mark IV), Replacement Term Loan,
7.14% - 7.72%, 6/23/11 United States 3,422,332 2,455,523 0.55
Federal Mogul Corp., Term Loan B, 4.398% - 4.408%, 12/27/14 United States 2,743,108 2,167,055 0.48
Key Safety Systems Inc., Term Loan B, 4.71% - 5.06%, 3/10/14 United States 4,236,823 3,527,155 0.79
TRW Automotive Inc., Tranche B-1 Term Loan, 4.188% -
4.313%, 2/09/14 United States 1,368,167 1,323,702 0.30
United Components Inc., Term Loan D, 4.58%, 6/29/12 United States 2,311,626 2,230,719 0.50
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18,148,361 4.06
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BROADCASTING
Charter Communications Operating LLC,
d Incremental Term Loan, 8.50%, 3/06/14 United States 2,346,500 2,322,826 0.52
Term Loan, 4.67% - 4.80%, 3/06/14 United States 1,998,357 1,763,342 0.40
Citadel Broadcasting Corp., Term Loan B, 4.095% - 4.435%,
6/12/14 United States 7,022,642 5,758,566 1.29
CSC Holdings Inc. (Cablevision), Incremental Term Loan,
4.206%, 3/29/13 United States 4,604,963 4,374,715 0.98
DIRECTTV Holdings LLC, Term Loan C, 5.25%, 4/13/13 United States 3,700,000 3,700,463 0.83
Discovery Communications Inc., Term Loan B, 4.801%, 5/14/14 United States 975,791 955,543 0.21
Entravision Communications Corp., Term Loan B, 4.29%, 3/29/13 United States 3,263,007 3,028,478 0.68
Gray Television Inc., Term Loan B, 3.97% - 4.29%, 12/31/14 United States 2,342,362 1,999,782 0.45
Insight Midwest Holdings, Term Loan B, 4.47%, 4/02/14 United States 3,307,500 3,190,176 0.71
LBI Media Inc., Term Loan B, 3.963%, 3/31/12 United States 977,500 845,538 0.19
MCC Iowa,
Term Loan E, 6.50%, 1/03/16 United States 1,850,000 1,843,063 0.41
Tranche D-1 Term Loan, 4.21% - 4.22%, 1/31/15 United States 1,970,731 1,805,682 0.40
Tranche D-2 Term Loan, 4.21% - 4.22%, 1/31/15 United States 1,513,206 1,386,475 0.31
Mediacom LLC, Term Loan C, 4.21% - 4.22%, 1/31/15 United States 764,523 700,494 0.16
ANNUAL REPORT
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
PRINCIPAL % OF NET
COUNTRY AMOUNT/a VALUE ASSETS
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Mission Broadcasting Inc., Term Loan B, 4.551%, 10/01/12 United States $ 743,523 $ 678,465 0.15
Nexstar Broadcasting Inc., Term Loan B, 4.416%, 10/01/12 United States 703,745 642,167 0.14
Spanish Broadcasting System Inc., Term Loan B, 4.56%, 6/11/12 United States 1,935,000 1,518,975 0.34
Univision Communications Inc., Initial Term Loan, 4.7131% -
5.049%, 9/29/14 United States 7,100,000 5,829,768 1.30
UPC Financing Partnership, Term Loan N, 4.211%, 12/31/14 United States 4,000,000 3,761,000 0.84
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46,105,528 10.31
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BUILDING PRODUCTS
Goodman Global Holdings Inc., Term Loan B, 7.50%, 2/13/14 United States 1,447,500 1,432,120 0.32
NCI Building Systems Inc., Term Loan B, 3.96% - 3.97%, 6/18/10 United States 1,625,721 1,585,078 0.35
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3,017,198 0.67
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CASINOS & GAMING
Ameristar Casinos Inc., Term Loan B, 5.017%, 11/10/12 United States 1,979,695 1,880,711 0.42
CCM Merger Inc. (MotorCity Casino), Term Loan B, 4.638% -
4.808%, 7/13/12 United States 810,724 745,866 0.17
Green Valley Ranch Gaming LLC, Term Loan B, 4.644% -
4.801%, 2/16/14 United States 3,305,648 2,650,029 0.59
Las Vegas Sands LLC,
Delayed Draw I Term Loan, 4.55%, 5/23/14 United States 156,318 135,432 0.03
Term Loan B, 4.55%, 5/23/14 United States 530,204 459,361 0.10
d Penn National Gaming Inc., Term Loan B, 4.21% - 4.55%,
10/03/12 United States 1,996,154 1,920,585 0.43
VML U.S. Finance LLC (Venetian Macau),
Delay Draw, 5.06%, 5/25/12 Macau 1,976,190 1,910,905 0.43
New Project Term Loans, 5.06%, 5/25/13 Macau 1,000,000 966,964 0.22
Term Loan B, 5.06%, 5/24/13 Macau 523,810 506,505 0.11
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11,176,358 2.50
COAL & CONSUMABLE FUELS
Alpha Natural Resources LLC, Term Loan B, 4.551%, 10/26/12 United States 1,008,709 1,003,666 0.22
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COMMERCIAL PRINTING
Cenveo Corp.,
Delayed Draw Term Loan, 4.551%, 6/21/13 United States 24,084 22,684 0.01
Term Loan C, 4.551%, 6/21/13 United States 1,517,383 1,429,185 0.31
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1,451,869 0.32
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COMMODITY CHEMICALS
Lyondell Chemical Co.,
Tranche B-1, 7.00%, 12/20/14 United States 1,147,125 955,452 0.22
Tranche B-2, 7.00%, 12/20/14 United States 2,244,375 1,885,899 0.42
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2,841,351 0.64
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COMMUNICATIONS EQUIPMENT
CommScope Inc., Term Loan B, 4.963% - 5.301%, 12/26/14 United States 1,733,078 1,670,254 0.37
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CONSTRUCTION & ENGINEERING
CONTECH Construction Products Inc., Term Loan B, 4.47% -
4.77%, 1/31/13 United States 2,954,143 2,584,875 0.58
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CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS
Bucyrus International Inc., Tranche B Dollar Term Loan,
4.077% - 4.291%, 5/04/14 United States 1,283,278 1,238,363 0.28
ANNUAL REPORT
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
PRINCIPAL % OF NET
COUNTRY AMOUNT/a VALUE ASSETS
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Oshkosh Truck Corp.,
Term Loan A, 3.96% - 4.18%, 12/06/11 United States $ 1,162,500 $ 1,063,688 0.24
Term Loan B, 4.21% - 4.43%, 12/606/13 United States 5,184,744 4,746,472 1.06
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7,048,523 1.58
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CONSTRUCTION MATERIALS
Headwaters Inc., Term Loan B, 4.46%, 4/30/11 United States 1,134,074 1,094,381 0.24
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CONSUMER ELECTRONIC
DEI Sales Inc., Term Loan B, 6.47%, 9/22/13 United States 1,051,686 709,888 0.16
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DATA PROCESSING & OUTSOURCED SERVICES
Affiliated Computer Services Inc.,
Additional Term Loan, 4.459% - 4.463%, 3/20/13 United States 832.542 808,216 0.18
Term Loan B, 4.46%, 3/20/13 United States 1,267,500 1,230,465 0.28
Emdeon Business Services LLC, First Lien Term Loan, 4.81%,
11/16/13 United States 1,368,424 1,293,161 0.29
First Data Corp.,
Term Loan B-1, 5.212% - 5.552%, 9/24/14 United States 1,742.003 1,606,750 0.36
Term Loan B-2, 5.212% - 5.552%, 9/24/14 United States 272,661 251,487 0.06
infoGROUP Inc.
2007 Term Loan B, 4.81%, 2/10/12 United States 1,397,000 1,316,945 0.29
Term Loan, 4.81%, 2/10/12 United States 2,886,595 2,756,698 0.62
Lender Processing Services Inc., Term Loan B, 4.963%, 7/02/14 United States 1,600,000 1,602,000 0.36
Metavante Corp., Term Loan B, 4.623%, 11/01/14 United States 2,397,500 2,250,653 0.50
SunGard Data System Inc., New U.S. Term Loan, 4.508%, 2/28/14 United States 2,429,776 2,296,741 0.51
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15,413,116 3.45
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DIVERSIFIED CHEMICALS
Celanese U.S. Holdings LLC, Dollar Term Loan, 4.283%, 4/02/14 United States 3,252,582 3,067,301 0.69
Huntsman International LLC, Term Loan B, 4.213%, 4/19/14 United States 3,840,275 3,611,917 0.81
d Ineous U.S. Finance LLC,
Term Loan B2, 4.885%, 12/16/13 United States 1,303,500 1,090,052 0.24
Term Loan C2, 5.385%, 12/23/14 United States 1,303,500 1,090,052 0.24
Invista Canada Co., Term Loan B2, 4.301%, 4/29/11 Canada 666,883 633,539 0.14
Invista SARL, Term Loan B1, 4.301%, 4/29/11 Luxembourg 1,274,486 1,210,762 0.27
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10,703,623 2.39
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DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES
Affinion Group Inc. Term Loan B, 4.963% - 5.178%, 10/17/12 United States 3,736,171 3,585,166 0.80
d ARAMARK Corp.,
Synthetic L/C, 2.44%, 1/26/14 United States 272,708 259,686 0.06
Term Loan B, 4.676%, 1/26/14 United States 4,292,605 4,087,624 0.92
Audatex North America Inc., Domestic Term Loan C, 4.788%,
5/16/14 United States 1,085,286 1,020,169 0.23
Getty Images Inc., Initial Term Loan, 7.25%, 7/02/15 United States 900,000 894,657 0.20
Language Lines Inc., Term Loan B, 6.06%, 6/11/11 United States 1,276,215 1,199,642 0.27
Nielsen Finance LLC (VNU) Inc.), Dollar Term Loan, 4.734%,
8/09/13 United States 6,149,299 5,731,116 1.28
Protection One, Inc., Term Loan C, 4.71% - 4.72&, 3/31/12 United States 911,941 848,105 0.19
TDS Investor Corp. (Travelport)
Delayed Draw Term Loan, 4.713%, 8/23/13 United States 3,734,079 3,145,962 0.70
Synthetic L/C, 5.056%, 8/23/13 United States 210,056 176,973 0.04
Term Loan B, 4.713%, 8/23/13 United States 993,256 836,818 0.19
ANNUAL REPORT
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
PRINCIPAL % OF NET
COUNTRY AMOUNT/a VALUE ASSETS
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West Corp.,Inc.,
Term Loan B-2, 4.838% - 5.171%, 10/24/13 United States $ 3,142,169 $ 2,830,900 0.63
Term Loan B-3, 8.50%, 10/24/13 United States 997,500 993,759 0.22
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25,610,577 5.73
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EDUCATION SERVICES
Bright Horizons Family Solution Inc., Term Loan B, 7.50%,
5/21/15 United States 2,400,000 2,367,751 0.53
Education Management LLC, Term Loan C, 4.563%, 6/01/13 United States 3,425,511 3,145,965 0.71
Laureate Education Inc., Closing Date Term Load, 5.708%,
8/17/14 United States 1,122,446 1,043,173 0.23
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6,556,889 1.47
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ELECTRONIC EQUIPMENT MANUFACTURERS
Senus Metering Systems Inc.,
Term Loan B1, 4.46% - 4.786%, 12/17/10 United States 3,292,357 3,111,277 0.69
Term Loan B2, 4.46%, 12/17/10 United States 84,849 80,183 0.02
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3,191,460 0.71
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ELECTRONICS MANUFACTURING SERVICES
FCI USA,
Term Loan B1, 4.835%, 11/01/13 United States 1,345,848 1,281,079 0.29
Term Loan C1, 4.835%, 11/03/14 United States 1,345,848 1,292,875 0.29
Flextronics International USA Inc.,
Term Loan A, 5.308% - 5.041%, 10/01/14 United States 1,230,637 1,118,727 0.25
Term Loan A-1 5.041%, 10/01/14 United States 353,631 321,473 0.07
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4,014,154 0.90
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ENVIRONMENTAL & FACILITIES SERVICES
Allied Waste North America Inc.,
Credit Link, 4.297%, 3/28/14 United States 707,067 694,840 0.15
Term Loan B, 3.96% - 4.57%, 3/28/14 United States 1,176,019 1,155,683 0.26
Duratek Inc. (EnergySolutions), Term Loan B, 5.47%, 6/07/13 United States 810,499 792,262 0.18
EnergySolutions LLC
Synthetic L/C, 2.46%, 6/07/13 United States 108,318 105,880 0.02
Synthetic L/C, (add-On), 2.46%, 6/07/13 United States 1,000,000 977,500 0.22
Term Loan B, 5.47%, 6/07/13 United States 1,689,330 1,651,320 0.37
e EnviroSolutions Inc., Initial Term Loan, PIK, 11.50%, 7/07/12 United States 2,207,941 2,003,707 0.45
Safety-Kleen Systems Inc.,
Synthetic L/C, 2.50, 8/02/13 United States 305,085 295,029 0.07
Term Loan B, 5.00%, 8/02/13 United States 1,149,025 1,111,154 0.25
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8,787,375 1.97
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FOOD RETAIL
Pantry Inc.,
Delayed Draw Term Loan, 4.22%, 5/14/14 United States 246,744 222,069 0.05
Term Loan B, 4.22%, 5/14/14 United States 857,110 771,399 0.17
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993,468 0.22
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GENERAL MERCHANDISE STORES
Dollar General Corp., Tranche B-1 Term Loan, 5.213% - 5.549%,
7/07/14 United States 1,400,000 1,300,104 0.29
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HEALTH CARE EQUIPMENT
DJO Finance LLC, Term Loan B, 5.463% - 5.801% 5/20/14 United States 3,233,750 3,144,822 0.70
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ANNUAL REPORT
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
PRINCIPAL % OF NET
COUNTRY AMOUNT/a VALUE ASSETS
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HEALTH CARE FACILITIES
Community Health System Inc., Term Loan, 4.713% - 4.899%,
7/25/14 United States $ 5,297,656 $ 5,023,561 1.12
HCA Inc., Term Loan B-1, 5.051%, 11/18/13 United States 3,673,261 3,459,242 0.77
Health Management Associates Inc., Term Loan B, 4.551%, 2/28/14 United States 1,884,634 1,746,232 0.39
HealthSouth Corp.,
Delayed Draw Term Loan, 4.463%, 3/14/14 United States 953,895 891,494 0.20
Initial Term Loan, 4.463%, 3/14/14 United States 2,756,836 2,576,492 0.58
Synthetic L/C, 2.609%, 3/14/14 United States 254,372 237,732 0.05
Vanguard Health Holding Co. II LLC, Replacement Term Loan,
5.051%, 9/23/11 United States 3,325,349 3,211,020 0.72
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19,417,075 4.65
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HEALTH CARE SERVICES
AMR Holdco/EmCare Holdco, Term Loan B, 4.461% - 4.696%,
2/10/12 United States 1,335,953 1,300,885 0.29
DaVita Inc., Term Loan B-1, 3.97% - 4.30%, 10/05/12 United States 5,477,225 5,283,567 1.18
Fresenius Medical Care Holdings Inc., Term Loan B, 4.019%
4.184%, 3/31/1 United States 1,993,750 1,941,725 0.44
U.S. Oncology Inc., Term Loan B, 5.549% - 5.551%, 8/20/11 United States 1,914,781 1,845,370 0.41
VICAR Operting Inc., Incremental Term Loan, 4.00%, 5/16/11 United States 888,750 866,531 0.19
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11,238,078 2.51
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HEALTH CARE SUPPLIES
Bausch and Lomb, Inc.,
f Delayed Draw Term Loan, 6.051%, 4/28/15 United States 156,168 152,329 0.03
Parent Term Loan B, 6.051%, 4/28/15 United States 1,035,917 1,010,451 0.23
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1,162,780 0.26
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Home Furnishings
National Bedding Co. LLC, Term Loan, 4.463 -4.776%, 2/28/13 United States 1,007,991 795,473 0.18
Sealy Mattress Co., Revolver, 4.198% - 6.25%, 4/14/11 United States 375,000 333,750 0.08
Simmons Bedding Company, Term Loan D, 4.813% - 7.25%, 12/19/11 United States 2,255,627 2,117,470 0.47
------------------------
3,246,693 0.73
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HOUSEHOLD PRODUCTS
Central Garden & Pet Co., Term Loan B, 3.97%, 9/30/12 United States 2,627,832 2,332,201 0.52
Prestige Brands Inc., Term Loan B, 4.713% - 5.043%, 4/06/11 United States 866,895 847,390 0.19
------------------------
3,179,591 0.71
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HOUSEWARES & SPECIALTIES
Jarden Corp.,
Term Loan B1, 4.551%, 1/24/12 United States 612,654 583,298 0.13
Term Loan B2, 4.551%, 1/24/12 United States 3,329,023 3,169,506 0.71
Jostens IH Corp. (Visant Holding Corp.), Term Loan C,
5.171%, 12/21/11 United States 1,824,366 1,783,318 0.40
------------------------
5,536,122 1.24
------------------------
HUMAN RESOURCE & EMPLOYMENT SERVICES
Allied Security Holdings LLC, Term Loan D, 7.00%, 6/30/10 United States 846,825 808,718 0.18
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ANNUAL REPORT
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
PRINCIPAL % OF NET
COUNTRY AMOUNT/a VALUE ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADER
Dynegy Holdings Inc.,
Term L/C Facility, 3.963%, 4/02/13 United States $ 2,791,915 $ 2,602,065 0.58
Term Loan B, 3.963%, 4/02/13 United States 305,586 284,806 0.06
NRG Energy Inc.,
Credit Link, 2.701%, 2/01/13 United States 1,759,818 1,678,426 0.38
Term Loan, 4.301%, 2/01/13 United States 3,592,655 3,426,495 0.77
Texas Competitive Electric Holdings Co., LLC
Term Loan B-2, 5.961% - 6.478%, 10/10/14 United States 4,960,013 4,674,812 1.04
Term Loan B-3, 6.234% - 6.478%, 10/10/14 United States 992,500 932,330 0.21
------------------------
13,598,934 3.04
------------------------
INDUSTRIAL CONGLOMERATES
TriMas Co. LLC,
Term Loan B, 4.71% - 5.045%, 8/02/13 United States 2,910,251 2,619,225 0.58
Tranche B-1 L/C, 4.686%, 8/02/11 United States 683,559 615,203 0.14
------------------------
3,234,428 0.72
------------------------
INDUSTRIAL MACHINERY
CI Acquisition Inc. (Chart Industries), Term Loan B, 4.458% -
4.50%, 10/17/12 United States 962,662 936,188 0.21
Husky Injection Molding Systems Ltd. (Ontario Inc.), Term Loan,
5.801%, 12/14/12 Canada 1,293,500 1,293,500 0.29
Mueler Water Products Inc., Term Loan B, 4.213% - 4.551% 5/24/14 United States 2,115,945 1,987,225 0.44
RBS Global Inc. (Rexnord Corp.),
Incremental Tranche B-2, 4.791%, 7/22/13 United States 1,280,500 1,216,475 0.27
Term Loan, 5.286%, 7/22/13 United States 3,703,279 3,513,486 0.79
------------------------
8,946,874 2.00
------------------------
INTEGRATED TELECOMMUNICATION SERVICES
GCI Holdings Inc., Add-on Term Loan, 6.72%, 8/31/12 United States 1,695,697 1,668,142 0.37
NTELOS Inc., Term Loan B-1, 5.27%, 8/24/11 3 United States 1,765,746 1,729,328 0.39
Wind Telecomunicazioni SpA,
Term Loan B-2, 5.01%, 12/12/14 Italy 3,150,000 3,021,048 0.68
Term Loan C-2, 5.76%, 12/12/15 Italy 3,150,000 3,020,441 0.67
Windstream Corp., Tranche B-1, 4.29%, 7/17/13 United States 1,667,608 1,615,235 0.36
------------------------
11,054,194 2.47
------------------------
INTERNET RETAIL
d FTD Group Inc., Term Loan B, 4.21%, 8/04/14 United States 2,000,000 1,990,000 0.45
------------------------
IT CONSULTING & OTHRE SERVICES
Acxion Corp., Term Loan B, 4.208% - 4.834%, 9/14/12 United States 512,344 498,255 0.11
------------------------
LEISURE FACILITIES
24 Hour Fitness Worldwide Inc., Term Loan B, 4.97%, 6/08/12 United States 2,353,599 2,224,151 0.50
------------------------
LEISURE PRODUCTS
PlayPower Inc., Term Loan B, 5.55%, 6/30/12 United States 629,528 580,739 0.13
------------------------
LIFE & HEALTH INSURANCE
Conseco Inc., Term Loan, 4.463%, 10/10/13 United States 1,948,345 1,708,455 0.38
------------------------
METAL & GLASS CONTAINERS
Anchor Glass Container Corp., Term Loan, 7.75%, 6/20/14 United States 1,263,214 1,245,845 0.28
------------------------
ANNUAL REPORT
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
PRINCIPAL % OF NET
COUNTRY AMOUNT/a VALUE ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
MOVIES/ENTERTAINMENT
Cinemark USA Inc., Term Loan, 4.43%, 10/05/13 United States $ 3,946,332 $ 3,729,991 0.83
Regal Cinemas Corp., Term Loan, 4.301%, 10/27/13 United States 4,002,853 3,780,470 0.85
Zuffa LLC, Term Loan B, 4.50%, 6/19/15 United States 2,834,369 2,380,870 0.53
------------------------
9,891,331 2.10
------------------------
OFFICE SERVICES & SUPPLIES
Acco Brands Corp., Term Loan B, 4.428% - 4.553%, 8/17/12 United States 973,241 953,777 0.21
------------------------
OIL & GAS DRILLING
Dresser Inc., Term Loan B, 4.713% - 5.219%, 5/04/14 United States 3,745,638 3,602,057 0.81
------------------------
OIL & GAS EQUIPMENT & SERVICES
Helix Energy Solutions Group, Term Loan B, 4.463% - 4.788%,
7/01/13 United States 1,808,501 1,755,753 0.39
OIL & GAS EXPLORATION & PRODUCTION
ATP Oil and Gas Corp.,
Tranche B-1, 8.50%, 7/15/14 United States 509,091 495,515 0.11
Tranche B-2, 8.50%, 7/15/14 United States 290,909 283,151 0.06
------------------------
778,666 0.16
------------------------
OIL & GAS REFINING & MARKETING
Alon Refinig Krotz Springs Inc., Term Loan, 10.75%, 7/03/14 United States 530,000 510,787 0.12
Citgo Petroleum Corp., Term Loan B, 3.767%, 11/15/12 United States 1,445,704 1,351,734 0.30
------------------------
1,862,521 0.42
------------------------
OIL & GAS STORAGE & TRANSPORTATION
Niska Gas Storage Canada ULC (C/R Gas),
Asset Sale Term Loan, 4.843%, 5/13/11 Canada 34,888 32,533 0.01
Canadian Term Loan, 4.534%, 5/12/13 Canada 534,095 498,043 0.11
Niska Gas Storage U.S. LLC (C/R Gas),
Delay Draw, 4.844%, 5/12/13 United States 58,792 54,824 0.01
U.S. Term Loan, 44.11%, 5/12/13 United States 86,792 80,933 0.02
------------------------
666,333 0.15
------------------------
PACKAGED FOODS & MEATS
Bumble Bee Foods LLC, Term Loan B, 5.008% - 5.123%, 5/02/12 United States 800,000 770,000 0.17
Dean Foods Co., Term Loan B, 3.97% - 4.31%, 4/02/14 United States 4,828,850 4,573,829 1.02
OSI Group LLC
German Term Loan, 4.801%, 9/02/11 Germany 427,778 422,431 0.10
Netherlands Term Loan, 4.801%, 9/02/11 Netherlands 534,722 598,038 0.11
U.S. Term Loan, 4.801%, 9/02/11 United States 962,500 950,469 0.21
------------------------
7,244,767 1.62
------------------------
PAPER PACKAGING
Graham Packaging Co. LP, New Term Loan, 4.875% - 5.063. 10/07/11 United States 892,555 852,179 0.19
Graphic Packaging International Inc.
Incremental Term Loan, 5.535% - 5.884%, 5/16/14 United States 895,500 861,566 0.19
Term Loan B, 4.785% - 4.80%, 5/16/14 United States 1,200,000 1,129,285 0.25
Rock-Tenn Co., Term Loan B, 5.75%, 3/05/14 United States 1,246,875 1,241,420 0.28
Smurfit-Stone Container Canada Inc.
Term Loan C, 4.50% - 4.688%, 11/01/11 Canada 1,060,485 1,029,405 0.23
Term Loan C-1, 4.50%, 11/01/11 Canada 291,281 282,744 0.07
ANNUAL REPORT
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
PRINCIPAL % OF NET
COUNTRY AMOUNT/a VALUE ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Smurfit-Stone Container Enterprises,
L/C Term Loan, 2.713%, 11/01/11 United States $ 375,517 $ 364,512 0.08
Term Loan B, 4.50% - 4.688%, 11/01/11 United States 369,663 358,828 0.08
-----------------------
6,119,939 1.37
------------------------
PAPER PRODUCTS
Georgia-Pacific Corp.,
Additional Term Loan, 4.446% - 4.551%, 12/20/12 United States 909,173 859,691 0.19
Term Loan B, 4.399% - 4.551%, 12/20/12 United States 4,583,593 4,334,131 0.97
NewPage Corp., Term Loan, 6.56%, 12/22/14 United States 1,146,500 1,135,988 0.26
Verso Paper Holdings LLC, Term Loan B, 4.551%, 8/01/13 United States 1,003,755 950,222 0.21
-----------------------
7,280,032 1.63
------------------------
PERSONNEL PRODUCTS
Chattem Inc., Term Loan B, 4.411% - 4.541%, 1/02/13 United States 926,166 905,328 0.20
Herbalife Internaional Inc., Term Loan B, 4.31%, 7/21/13 United States 1,154,060 1,090,586 0.25
------------------------
1,995,914 0.45
------------------------
PHARMACEUTICALS
Mylan Inc., Term Loan B, 5.75%, 10/02/14 United States 1,094,500 1,085,470 0.24
------------------------
PROPERTY & CASUALTY INSURANCE
Affirmative Insurance Holdings Inc., Term Loan, 6.149% -
6.299%, 1/31/14 United States 636,636 544,324 0.12
------------------------
PUBLISHING
Canwest Mediaworks LP, Credit D, 4.649%, 7/10/14 Canada 2,545,796 2,373,955 0.53
Dex Media East LLC, Term Loan B, 4.64% - 4.81%, 10/24/14 United States 500,000 454,500 0.10
Dex Media West LLC, Term Loan B, 7.00%, 10/24/14 United States 3,179,073 3,013,167 0.67
Idearc Inc., Term Loan B, 4.47% - 4.80%, 11/17/14 United States 4,496,747 3,366,939 0.75
d Newsday LLc, Floating Rate Term Loan, 7.9958%, 8/01/13 United States 2,400,000 2,400,000 0.54
Tribune Co.,
Term Loan B, 5.786%, 5/16/14 United States 5,734,035 4,117,754 0.92
Term Loan X, 5.541%, 5/16/09 United States 675,229 654,296 0.15
Wenner Media LLC, Term Loan B, 4.551%, 10/02/13 United States 856,326 800,665 0.18
------------------------
17,181,276 3.84
------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT
CB Richard Ellis Services Inc., Term Loan B, 3.958%, 12/20/13 United States 1,919,071 1,751,152 0.39
------------------------
RESTAURANTS
Arby's Restaurant Holdings LLC, Term Loan B, 4.713% - 5.051,
7/25/12 United States 2,264,559 2,136,234 0.48
OSI Restaurant Partners LLC (Outback),
Pre-funded Revolving Credit, 2.596%, 6/14/13 United States 127,868 107,409 0.02
Term Loan B, 5.125%, 6/14/14 United States 1,602,764 1,346,321 0.30
------------------------
3,589,964 0.80
------------------------
RETAIL REITS
Capital Automotice REIT, Term Loan B, 4.23%, 12/15/10 United States 1,001,400 952,081 0.21
Macerich Co., Term Loan B, 4.00%, 4/25/10 United States 3,485,417 3,311,146 0.74
------------------------
4,263,227 0.95
------------------------
SEMICONDUCTORS
Fairchild Semiconductor Corp.,
Incremental Term Loan, .301%, 6/26/13 United States 1,695,750 1,691,511 0.38
Initial Term Loan, 4.301%, 6/26/13 United States 1,920,984 1,839,342 0.41
ANNUAL REPORT
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
PRINCIPAL % OF NET
COUNTRY AMOUNT/a VALUE ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Marvell Technology Group Ltd., Term Loan, 4.963%, 11/08/09 Bermuda $ 2,707,938 $ 2,599,620 0.58
------------------------
6,130,473 1.37
------------------------
SPECIALIZED CONSUMER SERVICES
FTD Inc., Term Loan B, 4.213%, 7/28/13 United States 1,216,999 1,189,616 0.27
------------------------
SPECIALTY CHEMICALS
Dollar General Corp., Term Loan, 8.108%, 7/06/13 United States 6,000,000 5,593,740 0.52
Pantry Inc., Term Loan B, 7.07%, 5/14/14 United States 2,421,323 2,308,344 0.22
------------------------
8,434,989 0.79
------------------------
SPECIALTY TELECOMMUNICATIONS
Brenntay Holding GmbH & Co., KG,
Acquisition Facility, 5.071%, 1/20/14 Germany 451,636 414,376 0.09
Term Loan B2, 5.071%, 1/20/14 United States 1,848,364 1,695,874 0.38
Cognis GmbH, Term Loan C, 4.814%, 9/15/13 Germany 2,300,000 2,123,188 0.48
Hexion Specialty Chemicals BV, Term Loan C-2, 5.063%, 5/03/13 Netherlands 1,027,584 896,567 0.20
Hexion Specialty Chemicals BV, Term Loan C-1, 5.063%, 5/03/13 United Stated 4,730,428 4,127,298 0.92
ISP Chemco LLC, Term Loan B, 4.00% - 4.25%, 6/04/14 United States 979,553 905,270 0.20
Nalco Co., Term LOan B, 4.22% - 4.92%, 11/04/10 United States 1,096,469 1,085,504 0.24
Oxbow Carbon LLC
Delayed Draw Term Loan, 4.801%, 5/08/14 United States 279,060 261,270 0.06
Term Loan B, 4.46% - 4.801%, 5/08/14 United States 3,117,128 2,918,411 0.65
Polypore Inc., Incremental Term Loan, 4.72%, 7/03/14 United States 847,859 796,988 0.18
PQ Corp., Term Loan, 5.92% - 6.05%, 7/30/14 United Stated 2,300,000 2,162,720 0.49
Rockwood Specialties Group Inc., Term Loan E, 4.299%, 7/30/12 United States 1,685,288 1,626,001 0.36
Vertellus Specialties Inc., Term Loan, 7.063%, 12/10/12 United States 1,520,139 1,485,936 0.33
------------------------
20,449,403 4.58
------------------------
SYSTEMS SOFTWARE
Macrovision Solutions Corp., Term Loan B, 7.25%, 5/02/13 United States 1,400,000 1,401,750 0.31
------------------------
TRADING COMPANIES & DISTRIBUTORS
Ashtead Group PLC, Term Loan, 4.50%, 8/31/11 United Kingdom 1,475,200 1,399,596 0.31
Bakercorp., Term Loan C, 4.713% - 5.267%, 5/08/14 United States 4,863,713 4,468,537 1.00
Interline Brands
Delayed Draw Term Loan, 4.19%, 6/23/13 United States 1,005,547 955,270 0.21
Term Loan B, 4.19%, 6/23/13 United States 694,570 659,841 0.15
RSC Holdings III, ABL Term Loan, 4.55% - 4.56%, 11/27/12 United States 3,438,750 3,262,514 0.73
------------------------
10,745,758 2.40
------------------------
TRUCKING
Avis Budget Car Rental LLC, Term Loan, 4.05%, 4/19/12 United States 994,486 872,817 0.20
Hertz Group
Credit Link, 2.801%, 12/21/12 United States 163,883 151,182 0.03
Term Loan B, 4.21%, 12/21/12 United States 904,065 834,000 0.19
------------------------
1,857,999 0.42
------------------------
WIRELESS TELECOMMUNICATION SERVICES
Alltel Communication Inc., Term Loan B-3, 5.208%, 5/18/15 United States 3,176,000 3,164,589 0.71
Intelsat Corp. (Panamsat),
Tranche B-2-A, 5.288%, 1/03/14 United States 2,267,992 2,147,034 0.48
Tranche B-2-B, 5.288%, 1/03/14 United States 2,267,309 2,146,386 0.48
Tranche B-2-C, 5.288%, 1/03/14 United States 2,267,309 2,146,386 0.48
------------------------
9,604,395 2.15
------------------------
TOTAL SENIOR FLOATING RATE INTERESTS (COST $433,712,746) 407,583,261 91.13
--------------------------
ANNUAL REPORT
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
PRINCIPAL % OF NET
COUNTRY AMOUNT/a VALUE ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENT (COST $38,140,339)
g REPURCHASE AGREEMENT
Joint Repurchase Agreement, 2.09%, 8/01/08
(Maturity Value $38,142,553) United States $ 38,140,339 $ 38,140,339 8.53
ABN AMRO Bank, NV, New York Branch
(Maturity Value $3,219,994)
Banc of America Securities LLC (Maturity Value $3,219,994)
Barclays Capital Inc. (Maturity Value $3,219,994)
BNP Paribas Securities Corp. (Maturity Value $3,219,994)
Credit Suisse Securities (USA) LLC (Maturity Value $3,219,994)
Deutsche Bank Securities Inc. (Maturity Value $3,219,994)
Dresdner Kleinwort Securities LLC (Maturity Value $3,219,994)
Goldman, Sachs & Co. (Maturity Value $3,219,994)
Lehman Brothers Inc. (Maturity Value $2,722,619)
Merrill Lynch Government Securities Inc. (Maturity
Value $3,219,994)
Morgan Stanley & Co. Inc. (Maturity Value $3,219,994)
UBS Securities LLC (Maturity Value $3,219,994)
Collateralized by U.S. Government Agency Securities,
2.375% - 6.25%, 8/04/08 - 5/06/13; h/U.S. Government
Agency Discount Notes, 12/08/08 - 5/29/09;
h/Treasury Bill, 12/11/08; and U.S. Treasury Notes,
3.375% - 4.625%, 5/15/09 - 6/30/13
--------------------------
TOTAL INVESTMENTS (COST $471,853,085) 445,723,600 99.66
OTHER ASSETS, LESS LIABILITIES 1,522,827 0.34
--------------------------
NET ASSETS $ 447,246,427 100.00
--------------------------
SELECTED PORTFOLIO ABBREVIATIONS
L/C Letter of Credit
PIK Payment-In-Kind
REIT Real Estate Investment Trust
a/The principal amount is stated in U.S. dollars unless otherwise indicated.
b/The coupon rate shown represents the rate at period end.
c/See Note 1(d) regarding senior floating rate interests.
d/A portion or all of the security purchased on a when-issued or delayed
delivery basis. See Note 1(c).
e/Income may be received in additional securities and/or cash.
f/See Note 8 regarding unfunded loan commitments.
g/See Note 1(b) regarding repurchase agreement.
h/The security is traded on a discount basis with no stated coupon rate.
The accompanying notes are an integral part of these financial statements.
ANNUAL REPORT
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
Financial Statements
Statement of Assets and Liabilities
July 31, 2008
Assets:
Investments in securities:
Cost - Unaffiliated issuers.. $433,712,746
Cost - Repurchase agreements............. 38,140,339
------------------
Total cost of investments............... $471,853,085
------------------
Value - Unaffiliated issuers............ $407,583,261
Value - Repurchase agreements............ 38,140,339
------------------
Total value of investments.............. 445,723,600
Cash..................................... 845,279
Receivables:
Investment securities sold.................... 6,351,902
Capital shares sold...................... 1,932,120
Interest................................. 2,458,727
------------------
Total assets..................... 457,311,628
------------------
Liabilities:
Payables:
Investment securities purchased............ 7,808,925
Affiliates................................. 171,734
Distributions to shareholders.............. 1,823,558
Unrealized loss on unfunded loan commitments (Note 8)....129,696
Accrued expenses and other liabilities...... 131,288
------------------
------------------
Total liabilities................... 10,065,201
------------------
Net assets, at value............... $447,246,427
------------------
Net assets consist of:
Paid-in capital................................ $526,779,411
Distributions in excess of net investment income.... (30,735)
Net unrealized appreciation (depreciation).......... (26,259,181)
Accumulated net realized gain (loss)................ (53,243,068)
------------------
Net assets, at value........................ $447,246,427
------------------
Net asset value and maximum offering price per share
($447,246,427 + 49,562,235 shares outstanding)...... $9.02
------------------
Annual Report The accompanying notes are an integral part of these financial
statements.
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
Financial Statements (continued)
Statement of Operations
for the year ended July 31, 2008
Investment income:
Interest...................................... $42,433,612
------------------
Expenses:
Management fees (Note 3a).................... 5,030,553
Administrative fees (Note 3b)................ 862,612
Custodian fees (Note 4)...................... 9,035
Reports to shareholders...................... 8,041
Professional fees............................ 215,741
Trustees' fees and expenses.................. 60,984
Other........................................ 90,554
------------------
Total expenses....................... 6,277,520
Expense reductions (Note 4).......... (13,233)
Expenses waived/paid by affiliates (Note
3d)................................. (2,496,281)
------------------
Net expenses..................... 3,768,006
------------------
Net investment income.......... 38,665,606
------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments...... (40,055,119)
Net change in unrealized appreciation
(depreciation) on investments................. 2,152,125
------------------
Net realized and unrealized gain (loss)......... (37,902,994)
------------------
Net increase (decrease) in net assets resulting... $762,612
from operations ------------------
Annual Report The accompanying notes are an integral part of these financial
statements.
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
Financial Statements (continued)
Statements of Changes in Net Assets
Year Ended July 31,
2008 2007
-----------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income.................... $ 38,665,606 $ 72,617,623
Net realized gain (loss) from
investments.............................. (40,055,119) (2,377,692)
Net change in unrealized
appreciation (depreciation) on
investments............................ 2,152,125 (27,572,215)
------------------- -------------------
Net increase (decrease) in net
assets resulting from operations........... 762,612 42,667,716
------------------ ------------------
Distributions to shareholders from net
investment income............................ (38,661,719) (72,772,124)
Capital share transactions (Note 2).......... (584,574,579) (41,029,763)
------------------ -------------------
Net increase (decrease) in net.......... (622,473,686) (71,134,171)
assets
Net assets:
Beginning of year........................... 1,069,720,113 1,140,854,284
------------------ ------------------
End of year................................ $ 447,246,427 $ 1,069,720,113
------------------ ------------------
Distributions in excess of net investment income included in net assets:
End of year.................................. $ (30,735) $ (249,002)
================== ==================
Annual Report The accompanying notes are an integral part of these financial
statements.
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Franklin Floating Rate Master Trust (Trust) is registered under the
Investment Company Act of 1940, as amended, (1940 Act) as a non-diversified,
open-end investment company, consisting of one fund, the Franklin Floating Rate
Master Series (Fund), which is organized as a partnership for federal income tax
purposes. The shares are exempt from registration under the Securities Act of
1933.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
Securities listed on a securities exchange or on the NASDAQ National Market
System are valued at the last quoted sale price or the official closing price of
the day, respectively. Over-the-counter securities and listed securities for
which there is no reported sale are valued within the range of the most recent
quoted bid and ask prices. Securities that trade in multiple markets or on
multiple exchanges are valued according to the broadest and most representative
market.
Senior secured corporate loans with floating or variable interest rates
generally trade in the over-the-counter market rather than on a securities
exchange. The Trust may utilize independent pricing services, quotations from
loan dealers and other financial institutions, and information with respect to
bond and note transactions, to assist in determining a current market value for
each security. The Trust's pricing services use independent market quotations
from loan dealers or financial institutions and may incorporate valuation
methodologies that consider multiple bond characteristics such as dealer quotes,
issuer type, coupon, maturity, weighted average maturity, interest rate spreads
and yield curves, cash flow and credit risk/quality analysis, to determine
current value.
The Trust has procedures to determine the fair value of individual securities
and other assets for which market prices are not readily available or which may
not be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. If such an event occurs, the securities may be valued
using fair value procedures, which may include the use of independent pricing
services. All security valuation procedures are approved by the Trust's 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 with other funds managed by the
investment manager or an affiliate of the investment manager and is used to
invest in one or more repurchase agreements. The value and face amount of the
joint repurchase agreement are allocated to the funds based on their 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 Fund, with the value of the underlying securities marked to market daily
to maintain coverage of at least 100%. The joint repurchase agreement held by
the Fund at year end had been entered into on July 31, 2008. The joint
repurchase agreement is valued at cost.
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.
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
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). Senior secured corporate loans often
require prepayment of principal from excess cash flows or at the discretion of
the borrower. As a result, actual maturity may be substantially less than the
stated maturity.
Senior secured corporate loans in which the Fund invests are generally readily
marketable, but may be subject to some restrictions on resale.
E. INCOME TAXES
No provision has been made for income taxes because all income, expenses, gains
and losses are allocated to the partners for inclusion in their individual
income tax returns.
The Fund has reviewed the tax positions, taken on federal income tax returns,
for each of the three open tax years and as of July 31, 2008, and has determined
that no provision for income tax is required in the Fund's financial statements.
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. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Facility fees are recognized as income over the expected term of the
loan. The Fund's net investment income is proportionately allocated to the
partners daily and distributed monthly. Net capital gains (or losses) realized
by the Fund will be allocated proportionately to each partner and will not be
distributed. Distributions to partners are determined according to income tax
regulations (tax basis). Distributable earnings determined on a tax basis may
differ from earnings recorded in accordance with accounting principles generally
accepted in the United States of America. These differences may be permanent or
temporary. Permanent differences are reclassified among capital accounts to
reflect their tax character. These reclassifications have no impact on net
assets or the results of operations. Temporary differences are not reclassified,
as they may reverse in subsequent periods.
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 Trust's organizational documents, its officers and trustees are
indemnified by the Trust against certain liabilities arising out of the
performance of their duties to the Trust. Additionally, in the normal course of
business, the Trust, on behalf of the Fund, enters into contracts with service
providers that contain general indemnification clauses. The Trust's maximum
exposure under these arrangements is unknown as this would involve future claims
that may be made against the Trust that have not yet occurred. Currently, the
Trust expects the risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At July 31, 2008, there were an unlimited number of shares authorized (without
par value). Transactions in the Fund's shares were as follows:
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
YEAR ENDED JULY 31,
2008 2007
-----------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------ -------------- ------------- -------------
Shares sold........................ 4,842,844 $44,297,914 31,322,400 $306,179,057
Shares redeemed................... (67,790,869) (628,872,493) (35,593,260) (347,208,820)
------------------- ---------------- --------------- --------------
Net increase (decrease) (62,948,025) $(584,574,579) (4,270,860) $(41,029,763)
=================== ================= ============== ===============
3. TRANSACTIONS WITH AFFILIATES
Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Trust are also officers and/or directors of the following
subsidiaries:
SUBSIDIARY AFFILIATION
- ---------- ----------------------
Franklin Advisers, Inc. (Advisers)........... Investment manager
Franklin Templeton Services, LLC (FT Services)....... Administrative manager
Franklin Templeton Investor Services, LLC
(Investor Services).............................. Transfer agent
A. MANAGEMENT FEES
The Fund pays an investment management fee to Advisers of 0.80% per year of the
average daily net assets of the Fund.
B. ADMINISTRATIVE FEES
The Fund pays an administrative fee to FT Services based on the Fund's average
daily net assets as follows:
ANNUALIZED
FEE RATE NET ASSETS
- --------------- ------------------------------------------------
0.150% Up to and including $200 million
0.135% Over $200 million, up to and including $700 million
0.100% Over $700 million, up to and including $1.2 billion
0.075% In excess of $1.2 billion
C. TRANSFER AGENT FEES
Investor Services, under terms of an agreement, performs shareholder servicing
for the Fund and is not paid by the Fund for the services.
D. WAIVER AND EXPENSE REIMBURSEMENTS
FT Services agreed in advance to voluntarily waive administrative fees.
Additionally, Advisers agreed in advance to voluntarily waive a portion of
management fees. Total expenses waived by FT Services and Advisers are not
subject to reimbursement by the Fund subsequent to the Fund's fiscal year end.
FT Services and Advisers may discontinue this waiver at any time upon notice to
the Fund's Board of Trustees.
E. OTHER AFFILIATED TRANSACTIONS
At July 31, 2008, the shares of the Fund were owned by the following entities:
ENTITY SHARES
- -----------------------------------------------------------------------
Franklin Floating Rate Fund, PLC............ 49,542,235
Franklin Resources,Inc..................... 10,000
Templeton Investment Counsel, LLC.......... 10,000
---------------
Total 49,562,235
===============
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
4. EXPENSE OFFSET ARRANGEMENT
The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the year ended July 31, 2008, the
custodian fees were reduced as noted in the Statement of Operations.
5. INCOME TAXES
At July 31, 2008, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments........ $ 472,302,250
==================
Unrealized appreciation...... $ 1,234,057
Unrealized depreciation........... (27,812,707)
------------------
Net unrealized appreciation (depreciation).... $ (26,578,650)
==================
Net investment income differs for financial statement and tax purposes primarily
due to differing treatment of bond discounts and premiums.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales and bond discounts and
premiums.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short term securities) for the
year ended July 31, 2008, aggregated $159,386,985 and $732,824,786,
respectively.
7. CREDIT RISK
The Fund has 84.06% of its portfolio invested in senior secured floating rate
notes rated below investment grade. These securities may be more sensitive to
economic conditions causing greater price volatility and are potentially subject
to a greater risk of loss due to default than higher rated securities.
8. 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. Funded portions of credit agreements are presented on the
Statement of Investments.
At July 31, 2008, unfunded commitments were as follows:
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
UNFUNDED
BORROWER COMMITMENT
- --------------------------------------------------------------------------------
Bausch and Lomb Inc., Delayed Draw Term Loan.................. $ 104,112
Community Health Systems Inc., Delayed Draw Term Loan......... 271,030
Conseco Inc., Revolver....................................... 4,000,000
Laureate Education Inc., Delayed Draw Term Loan.............. 167,545
Sealy Mattress Co., Revolver................................ 375,000
Ticketmaster, Term Loan B................................... 1,700,000
--------------
$ 6,617,687,687
===============
Unfunded loan commitments and funded portions of credit agreements are marked to
market daily and any unrealized gain or loss is included in the Statement of
Assets and Liabilities and Statement of Operations.
9. SHAREHOLDER DISTRIBUTIONS
For the year ended July 31, 2008, the Fund made the following distributions:
PAYMENT DATE AMOUNT PER SHARE
- ----------------------------------------------------------------------
08/31/2007 $0.056438
09/28/2007 $0.053764
10/31/2007 $0.056294
11/30/2007 $0.051925
12/31/2007 $0.051772
01/31/2008 $0.051420
02/29/2008 $0.043882
03/31/2008 $0.042617
04/30/2008 $0.034569
05/30/2008 $0.033476
06/30/2008 $0.033817
07/31/2008 $0.036414
----------------------
Total $0.546388
======================
Daily distribution information is available at the registered office upon
request.
10. CREDIT FACILITY
Effective June 30, 2008, the Franklin Floating Rate Master Series entered into a
committed, senior, secured 364 day line of credit, up to a maximum amount of
$100 million (Committed Credit Facility) with a bank, for temporary liquidity
purposes. The Committed Credit Facility replaced an existing senior, secured,
uncommitted, advised line of credit (Advised Line) that the Fund and another
investment company had entered into with that bank. Interest on outstanding
draws under the terms of the Committed Credit Facility will be charged at the
Federal Funds Rate plus 0.60%, absent a default thereunder. Fees and other
expenses related to these facilities are charged over their term, as noted in
the Statement of Operations, of which $1,300 is interest expense. The Fund must
segregate eligible securities as collateral for any outstanding loan advances at
a ratio of 5:1. During the year ended July 31, 2008, the Fund utilized the
Advised Line as follows.
YEAR ENDED JULY 31, 2008
- ----------------------------------------------------------------
Amount outstanding $ -
Average borrowing/a $ 650,000
Average interest rate 3.58%
a/Loan was outstanding for 20 days during the fiscal year.
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
11. FUND LITIGATION
On July 6, 2003, Adelphia Communications Corp. ("Adelphia") and related parties,
along with its Official Committee of Unsecured Creditors, (collectively
"Plaintiffs") filed an adversary proceeding in the then-pending Adelphia
bankruptcy case in the U.S. Bankruptcy Court for the Southern District of New
York against more than 400 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 Floating Rate Daily Access Fund (individually
and as successor to the Franklin Floating Rate Trust's interests in the credit
facilities at issue), Franklin Floating Rate Trust, and Franklin Floating Rate
Master Series (collectively the "Franklin Defendants"), and Franklin CLOs I-III,
among other defendants. In addition, Advisers was originally named as a
defendant, but later dismissed from the lawsuit. The complaint alleged 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 and sought avoidance of the loans and recovery of fraudulent transfers
(the "Complaint"). The agent bank and investment bank defendants moved to
dismiss the Complaint, which the Bankruptcy Court granted in part and denied in
part, with leave to amend the Complaint. The reference to the bankruptcy was
withdrawn and the matter is now before the United States District Court for the
Southern District of New York.
On October 22, 2007, Plaintiffs filed an amended complaint, largely duplicating
the allegations in the original Complaint, and adding hundreds of additional
syndicate lender defendants (the "Amended Complaint"). The Franklin Defendants,
among others, moved to dismiss the Amended Complaint on December 20, 2007. On
June 17, 2008, the court granted the Franklin Defendants' motions and dismissed
the claims against them.
12. NEW ACCOUNTING PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 157, "Fair Value Measurement" (SFAS 157), which defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. SFAS 157 is effective for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. The
Trust believes the adoption of SFAS 157 will have no material impact on its
financial statements.
In March 2008, FASB issued FASB Statement No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133"
(SFAS 161), which expands disclosures about derivative investments and hedging
activities. SFAS 161 is effective for fiscal years beginning after November 15,
2008, and interim periods within those fiscal years. The Fund is currently
evaluating the impact, if any, of applying the various provisions of SFAS 161.
FRANKLIN FLOATING RATE MASTER TRUST
FRANKLIN FLOATING RATE MASTER SERIES
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders 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 (the "Fund") at July 31, 2008, 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 five years in the
period then ended, 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 the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 2008 by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
September 17, 2008
INDEPENDENT BOARD MEMBERS
- ----------------------- --------------------- ---------------- ----------------- ----------------------------
NUMBER OF
PORTFOLIOS IN
NAME, YEAR OF BIRTH FUND COMPLEX
AND ADDRESS POSITION LENGTH OF TIME OVERSEEN BY OTHER DIRECTORSHIPS HELD
SERVED BOARD MEMBER*
- ----------------------- --------------------- ---------------- ----------------- ----------------------------
Harris J. Ashton Trustee Since 1999 143 Bar-S Foods (meat packing
(1932) company).
One Franklin Parkway
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).
- -------------------------------------------------------------------------------------------------------------
Robert F. Carlson Trustee Since 2007 122 None
(1928)
One Franklin Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Retired; and FORMERLY, Vice President, senior member and past President, Board
of Administration, California Public Employees Retirement Systems (1971 -
January 2008) (CALPERS);, member and Chairman of the Board, Sutter Community
Hospitals; member, Corporate Board, Blue Shield of California; and Chief
Counsel, California Department of Transportation.
- -------------------------------------------------------------------------------------------------------------
Sam Ginn (1937) Trustee Since 2007 122 Chevron Corporation
One Franklin Parkway (global energy company)
San Mateo, CA and ICO Global
94403-1906 Communications (Holdings)
Limited (satellite
company).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Private investor; and FORMERLY, Chairman of the Board, Vodafone AirTouch, PLC
(wireless company); Chairman of the Board and Chief Executive Officer, AirTouch
Communications (cellular communications) (1993-1998) and Pacific Telesis Groups
(telephone holding company) (1988-1994).
- -------------------------------------------------------------------------------------------------------------
Edith E. Holiday Trustee Since 1999 143 Hess Corporation
(1952) (exploration and refining
One Franklin Parkway of oil and gas), H.J.
San Mateo, CA Heinz Company (processed
94403-1906 foods and allied
products), RTI
International Metals, Inc.
(manufacture and
distribution of titanium),
Canadian National Railway
(railroad) and White
Mountains Insurance Group,
Ltd. (holding company).
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).
- -------------------------------------------------------------------------------------------------------------
Frank W.T. LaHaye Trustee Since 1999 122 Center for Creative Land
(1929) Recycling (brownfield
One Franklin Parkway 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).
- -------------------------------------------------------------------------------------------------------------
Frank A. Olson (1932) Trustee Since 2005 143 Hess Corporation
One Franklin Parkway (exploration and refining
San Mateo, CA of oil and gas) and
94403-1906 Sentient Jet (private jet
service).
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of
the Board (1980-2000) and Chief Executive Officer (1977-1999)); and FORMERLY,
Chairman of the Board, President and Chief Executive Officer, UAL Corporation
(airlines).
- -------------------------------------------------------------------------------------------------------------
Larry D. Thompson Trustee Since 2007 143 None
(1945)
One Franklin Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary,
PepsiCo, Inc. (consumer products); and FORMERLY, Director, Delta Airlines
(aviation) (2003-2005) and Providian Financial Corp. (credit card provider)
(1997-2001); Senior Fellow of The Brookings Institution (2003-2004); Visiting
Professor, University of Georgia School of Law (2004); and Deputy Attorney
General, U.S. Department of Justice (2001-2003).
- -------------------------------------------------------------------------------------------------------------
John B. Wilson (1959) Lead Independent Trustee since 122 None
One Franklin Parkway Trustee 2007 and Lead
San Mateo, CA Independent
94403-1906 Trustee since
January 2008
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on
private and non-profit boards; and FORMERLY, Chief Operating Officer and Executive Vice President, Gap,
Inc. (retail) (1996-2000); Chief Financial Officer and Executive Vice President - Finance and Strategy,
Staples, Inc. (office supplies) (1992-1996); Executive Vice President - Corporate Planning, Northwest
Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm)
(1986-1990).
- -------------------------------------------------------------------------------------------------------------
INTERESTED BOARD MEMBERS AND OFFICERS
- ----------------------- --------------------- ---------------- ----------------- ----------------------------
NUMBER OF D
PORTFOLIOS IN
FUND COMPLEX
NAME, YEAR OF BIRTH LENGTH OF OVERSEEN BY
AND ADDRESS POSITION TIME SERVED BOARD MEMBER* OTHER DIRECTORSHIPS HEL
- ----------------------- --------------------- ---------------- ----------------- ----------------------------
**Charles B. Johnson Trustee and Since 1999 143 None
(1933) Chairman of the
One Franklin Parkway Board
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director,
Templeton Worldwide, 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 42 of the investment companies in Franklin Templeton
Investments.
- -------------------------------------------------------------------------------------------------------------
**Gregory E. Johnson Trustee Since 2007 94 None
(1961)
One Franklin Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide,
Inc.; Director, Templeton Asset Management Ltd.; and officer and/or director or trustee, as the case may
be, of some of the other subsidiaries of Franklin Resources, Inc. and of 33 of the investment companies in
Franklin Templeton Investments.
- -------------------------------------------------------------------------------------------------------------
Mark Boyadjian (1964) Vice President Since 2003 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Advisers, Inc. and Templeton Worldwide, Inc.; and officer of two of the
investment companies in Franklin Templeton Investments.
- --------------------------------------------------------------------------------------------------------------
James M. Davis Chief Compliance Chief Not Applicable Not Applicable
(1952) Officer and Vice Compliance
One Franklin Parkway President - AML Officer since
San Mateo, CA Compliance 2004 and Vice
94403-1906 President -
AML Compliance
since 2006
- ----------------------- --------------------- ---------------- ----------------- ----------------------------
- -------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of
Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Director of Compliance, Franklin Resources, Inc. (1994-2001).
- -------------------------------------------------------------------------------------------------------------
- ----------------------- --------------------- ---------------- ----------------- ----------------------------
Laura F. Fergerson Treasurer, Chief Treasurer Not Applicable Not Applicable
(1962) Financial Officer since 2004,
One Franklin Parkway and Chief Chief
San Mateo, Accounting Officer Financial
CA 94403-1906 Officer and
Chief
Accounting
Officer since
February 2008
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 46 of the
investment companies in Franklin Templeton Investments; and FORMERLY, Director
and member of Audit and Valuation Committees, Runkel Funds, Inc. (2003-2004);
Assistant Treasurer of most of the investment companies in Franklin Templeton
Investments (1997-2003); and Vice President, Franklin Templeton Services, LLC
(1997-2003).
- -------------------------------------------------------------------------------------------------------------
Jimmy D. Gambill Vice President Since February Not Applicable Not Applicable
(1947) 2008
500 East Broward
Blvd.
Suite 2100
Fort Lauderdale, FL
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer
of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in
Franklin Templeton Investments.
- -------------------------------------------------------------------------------------------------------------
David P. Goss (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and
director of one of the subsidiaries of Franklin Resources, Inc.; and officer of
46 of the investment companies in Franklin Templeton Investments.
- -------------------------------------------------------------------------------------------------------------
Rupert H. Johnson, President and Chief President Not Applicable Not Applicable
Jr. (1940) Executive Officer since 1999 and
One Franklin Parkway -Investment Chief
San Mateo, CA Management Executive
94403-1906 Officer -
Investment
Management
since 2002
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin
Advisers, Inc. and Templeton Worldwide, 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 44 of the investment companies in Franklin Templeton Investments.
- -------------------------------------------------------------------------------------------------------------
Karen L. Skidmore Vice President and Since 2006 Not Applicable Not Applicable
(1952) Secretary
One Franklin Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of
30 of the investment companies in Franklin Templeton Investments.
- -------------------------------------------------------------------------------------------------------------
Craig S. Tyle (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA
94403-1906
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer
of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the
investment companies in Franklin Templeton Investments; and FORMERLY, Partner,
Shearman & Sterling, LLP (2004-2005); and General Counsel, Investment Company
Institute (ICI) (1997-2004).
- -------------------------------------------------------------------------------------------------------------
Galen G. Vetter Senior Vice President Since February Not Applicable Not Applicable
(1951) and Chief Executive 2008
500 East Broward Officer -Finance and
Blvd. Administration
Suite 2100
Fort Lauderdale, FL
33394-3091
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of some of the
other subsidiaries of Franklin Resources, Inc. and of 46 of the investment
companies in Franklin Templeton Investments; and FORMERLY, Managing Director,
RSM McGladrey, Inc. (1999-2004); and Partner, McGladrey & Pullen, LLP (1979-1987
and 1991-2004).
- -------------------------------------------------------------------------------------------------------------
*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 manager or affiliated investment
managers.
**Charles B. Johnson is considered to be an interested person of the Trust under
the federal securities laws due to his position as officer and director and
major shareholder of Franklin Resources, Inc. (Resources), which is the parent
company of the Fund's investment manager and distributor. Gregory E. Johnson is
considered to be an interested person of the Trust under the federal securities
laws due to his position as an officer and director of Resources.
Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is
possible that after this date, information about officers may change.
BOARD REVIEW OF INVESTMENT MANAGEMENT AGREEMENT
SHAREHOLDER INFORMATION
At a meeting held February 25, 2008, the Board of Trustees ("Board"), including
a majority of non-interested or independent Trustees, approved renewal of the
investment management agreement for the Fund. It was noted that at regular Board
meetings during the course of the year, the Trustees had reviewed and discussed
portfolio performance and financial information for the FFRMT Fund, as well as
periodic reports on shareholder services, legal compliance, pricing, and other
services provided by the Manager and its affiliates. In addition, information
specifically furnished to the Trustees in connection with the contract renewals
being considered at the meeting included a Fund Profitability Analysis Report
and additional information. The Fund Profitability Analysis Report discussed the
profitability to Franklin Templeton Investments from its overall U.S. fund
operations, as well as on an individual fund-by-fund basis. Included in the
additional material prepared specifically for the meeting was information on a
fund-by-fund basis listing portfolio managers and other accounts they manage, as
well as information on management fees charged by the Manager and its
affiliates, including Management's explanation of differences where relevant, as
well as a three-year expense analysis with an explanation for any increase in
expense ratios. Additional information accompanying such report were a
memorandum prepared by Management describing project initiatives and capital
investments relating to the services provided to the FFRMT Fund by the Franklin
Templeton Investments organization, as well as a memorandum relating to
economies of scale and a comparative analysis concerning transfer agent fees
charged the Fund.
In considering such information, the independent Trustees received assistance
and met separately with independent counsel. The Fund Profitability Analysis
Report and other additional material prepared by Management were sent to each of
the Trustees on February 1, 2008. Such material was reviewed and discussed by
the independent Trustees among themselves and with Management in a telephonic
conference call that took place February 15, 2008. Questions raised in such
telephonic conference call were responded to by Management and were discussed at
a meeting of independent Trustees held prior to the Board meeting.
PROXY VOTING POLICIES AND PROCEDURES
The Fund's investment manager 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 online at franklintempleton.com. Alternatively, shareholders may
request copies of the Policies free of charge by calling the Proxy Group collect
at 1-954/527-7678 or by sending a written request to: Franklin Templeton
Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL
33394, Attention: Proxy Group. Copies of the Fund's proxy voting records are
also made available online at franklintempleton.com and posted on the U.S.
Securities and Exchange Commission's website at sec.gov and reflect the most
recent 12-month period ended June 30.
QUARTERLY STATEMENT OF INVESTMENTS
The Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
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 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal 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 John B. Wilson and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the principal
accountant in connection with statutory and regulatory filings or engagements
were $73,910 for the fiscal year ended July 31, 2008 and $77,190 for the fiscal
year ended July 31, 2007.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control with
the investment adviser that provides ongoing services to the registrant that are
reasonably related to the performance of the audit of their financial
statements.
(c) Tax Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance, tax
advice and tax planning were $0 for the fiscal year ended July 31, 2008 and
$11,200 for fiscal year end July 31, 2007.
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning were $0 for the fiscal year ended July
31, 2008 and $46,000 for the fiscal year ended July 31, 2007. The services for
which these fees were paid included tax compliance and advice.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $348 for the fiscal year ended July 31, 2008
and $0 for the fiscal year ended July 31, 2007. The services for which these
fees were paid include review of materials provided to the fund Board in
connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant other than
services reported in paragraphs (a)-(c) of Item 4 were $283,729 for the fiscal
year ended July 31, 2008 and $0 for the fiscal year ended July 31, 2007. The
services for which these fees were paid include review of materials provided to
the fund Board in connection with the investment management contract renewal
process.
(e) (1) The registrant's audit committee is directly responsible for approving
the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the
Fund by the auditors;
(iii) pre-approval of all non-audit related services to be provided to the
registrant by the auditors to the registrant's investment adviser or to any
entity that controls, is controlled by or is under common control with the
registrant's investment adviser and that provides ongoing services to the
registrant where the non-audit services relate directly to the operations or
financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a designated
member or members of the committee; provided the policies and procedures are
detailed as to the particular service and the committee is informed of each
service and such policies and procedures do not include delegation of audit
committee responsibilities, as contemplated under the Securities Exchange Act of
1934, to management; subject, in the case of (ii) through (iv), to any waivers,
exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs
(b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services
rendered by the principal accountant to the registrant and the registrant's
investment adviser and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant were $284,077 for the fiscal year ended July 31, 2008 and $57,200 for
the fiscal year ended July 31, 2007.
(h) The registrant's audit committee of the board has considered whether the
provision of non-audit services that were rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal accountant's
independence.
Item 5. Audit Committee of Listed Registrants. N/A
Item 6. Schedule of Investments. N/A
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. N/A
Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. N/A
Item 10. 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 11. 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 12. Exhibits.
(a) (1) Code of Ethics
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Galen G. Vetter, Chief Executive Officer - Finance and Administration, and
Laura F. Fergerson, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Galen G. Vetter, Chief Executive Officer - Finance and Administration, and Laura
F. Fergerson, Chief Financial Officer and Chief Accounting 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/GALEN G. VETTER
-----------------------------------
Galen G. Vetter
Chief Executive Officer - Finance and Administration
Date September 26, 2008
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/GALEN G. VETTER
-----------------------------------
Galen G. Vetter
Chief Executive Officer - Finance and Administration
Date September 26, 2008
By /s/LAURA F. FERGERSON
----------------------------------
Laura F. Fergerson
Chief Financial Officer and Chief Accounting Officer
Date September 26, 2008