SHAREHOLDER LETTER
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YOUR FUND'S GOAL: FRANKLIN FLOATING RATE TRUST'S PRIMARY GOAL IS TO PROVIDE AS
HIGH A LEVEL OF CURRENT INCOME AND PRESERVATION OF CAPITAL AS IS CONSISTENT WITH
INVESTMENT PRIMARILY IN SENIOR SECURED CORPORATE LOANS AND CORPORATE DEBT
SECURITIES WITH FLOATING INTEREST RATES.
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Dear Shareholder:
This semiannual report for Franklin Floating Rate Trust covers the period ended
January 31, 2002.
ECONOMIC OVERVIEW
After a sluggish start to 2001, the U.S. economy slowed further and entered a
recession in the second half of the year as businesses cut down on expenditures
and scaled back production. The terrorist attacks of September 11 only
exacerbated the downturn. The Federal Reserve Board (the Fed), having
anticipated the potential slowdown early in the year, continued its campaign of
cutting short-term interest rates, lowering the federal funds target rate to
just 1.75% on January 31, 2002, from 3.75% at the beginning of the period.
The dollar value, number of shares or principal value, and complete legal titles
of all portfolio holdings are listed in the Fund's Statement of Investments
(SOI). The SOI begins on page 10.
CONTENTS
Shareholder Letter ................ 1
Performance Summary ............... 8
Financial Highlights &
Statement of Investments .......... 9
Financial Statements .............. 21
Notes to
Financial Statements .............. 24
[graphic omitted]
FUND CATEGORY
Global
Growth
Growth & Income
Income
Tax-Free Income
WHAT ARE SYNDICATED BANK LOANS?
SYNDICATED BANK LOANS ARE TYPICALLY SECURED, FLOATING RATE LOANS TO CORPORATE
BORROWERS MADE BY A GROUP, OR SYNDICATE, OF BANKS AND OTHER LENDERS. A GROUP OF
LENDERS PROVIDES CAPITAL TO COMPANIES FOR VARIED PURPOSES, SUCH AS MERGER AND
ACQUISITION ACTIVITY, LEVERAGED BUYOUTS OR REFINANCINGS. BORROWING RATES ARE
GENERALLY PEGGED TO AN INDEX, SUCH AS LIBOR, THE LONDON INTERBANK OFFERED RATE.
Long-term interest rates were flat during the six months under review, with the
10-year Treasury note yield ending the period where it began, at 5.07%.
Short-term interest rates, as measured by the 3-month London InterBank Offered
Rate (LIBOR), the benchmark underlying many of the Trust's floating rate loans,
fell substantially, to 1.88% on January 31, 2002, down from 3.67% on July 31,
2001. Equity markets fluctuated wildly during the period, but remained range
bound. At period-end, the Dow Jones Industrial Average stood at 9920.00,
compared with 10522.80 at the beginning of the period.1
SYNDICATED BANK LOAN MARKET
The second half of 2001 was challenging for the bank loan asset class, as yield
and asset value declines negatively impacted returns. September and October were
two of the worst-performing months ever for the syndicated bank loan market with
returns of -2.00% and -1.60%. Loan prices began to fall following the events of
September 11, as investors priced in the certainty of a recession and realized
that loan credit quality would most likely continue to deteriorate. Investors
shunned higher risk, single B-rated names in favor of loans closer to
investment-grade quality. Although the new-issue market did not shut down
completely, most lower-rated deals remained on the sidelines. Moody's(R), an
independent credit rating agency, added to this dire outlook when it increased
its peak default rate forecast. The market punished specific sectors, including
lodging and transportation, whose
1. Source: Standard & Poor's Micropal. The Dow Jones Industrial Average is
price-weighted based on the average market price of 30 blue chip stocks. Total
return, calculated by Wilshire Associates, Inc., includes reinvested dividends.
2
businesses fell due to the attacks, and telecommunications, which was suffering
from overcapacity and too little demand.
In November, the loan market recovered, taking its cue from the equity and high
yield bond market recoveries in October, and posted a 1.60% gain. The secondary
market's turnaround benefited from strong money inflows largely due to a number
of new institutional investors. The dearth of primary market issuance after
September forced investors to look to the secondary market for opportunities as
well.
Although financial markets seemed to have stabilized since September 11, the
economic slowdown and difficult environment for loans persisted throughout the
period. In particular, credit quality continued to deteriorate. According to
Standard & Poor's Portfolio Management Data, 11 issuers defaulted during the
fourth quarter, setting a new quarterly record for high yield bond and loan
defaults. Credit agency downgrades also outpaced upgrades by 9.5 times among
high yield borrowers.
Borrowers started to demand concessions from lenders through amendments and
waivers to help them get through the difficult times. Furthermore, low interest
rates, as a result of the Fed's attempts to stimulate the economy, reduced
yields. Short-term interest rates plummeted to their lowest levels in decades,
with the three-month LIBOR falling below 2.00%, sharply reducing the interest
paid by borrowers.
TOP 10 HOLDINGS
1/31/02
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
-----------------------------------------------
Conseco Inc. 4.3%
LIFE & HEALTH INSURANCE
Wyndham International Inc. 2.1%
HOTEL, RESORTS & CRUISELINES
Washington Group
International Inc. 2.0%
ENGINEERING & CONSTRUCTION
Cricket Communications Inc. 1.9%
WIRELESS COMMUNICATIONS
UPC Distribution Holdings BV 1.9%
CABLE & SATELLITE TELEVISION
Blockbuster Inc. 1.8%
MOVIES & ENTERTAINMENT
Wyndham International Inc. 1.5%
HOTEL, RESORTS & CRUISELINES
Nextel Communications Inc. 1.3%
WIRELESS COMMUNICATIONS
Charter Communications
Operating LLC 1.3%
CABLE & SATELLITE TELEVISION
Integrated Health
Services Inc. 1.3%
MANAGED HEALTH CARE
3
DIVIDEND DISTRIBUTIONS*
8/1/01-1/31/02
DIVIDEND
MONTH PER SHARE
-----------------------------
August 6.0170 cents
September 5.5148 cents
October 6.3636 cents
November 4.7512 cents
December 5.0032 cents
January 4.6816 cents
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TOTAL 32.3314 CENTS
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the Fund during the reporting
period.
PORTFOLIO NOTES
Within this challenging environment, Franklin Floating Rate Trust posted a
-0.70% cumulative total return for the six months ended January 31, 2002, as
shown in the Performance Summary on page 8. The Fund's share price, as measured
by net asset value, declined from $9.24 on July 31, 2001, to $8.85 at
period-end, with the bulk of the decline occurring after the September 11
attacks.
During the six months under review, we continued to pursue our strategy of
focusing on providing loans to companies with strong franchise value and asset
coverage. Consistent with that approach, we added to our investments in the bank
debt of Mission Energy Holding, parent company of Edison Mission Energy (EME),
one of the world's largest independent electricity producers. EME's portfolio of
power projects includes 33 domestic and 40 international power projects with
aggregate generation capacity of 28,036 megawatts. EME also markets energy and
manages risks associated with energy price fluctuations. A significant portion
of the capacity and output from EME's facilities is sold under long-term
contracts, providing more predictable revenue streams.
As a subsidiary of California utility Edison International, EME approached the
bank loan market during a difficult period, with the entire California utility
sector under pressure and facing uncertainty. Under these circumstances, the
company had to pay lenders a significant interest rate over LIBOR. Eventually,
the improvement in California's energy market, which also benefited EME's credit
profile, caused the loans to trade at a significant premium over the par price,
resulting in a healthy profit for the Fund.
4
The Trust also added to investments in the $900 million senior secured credit
facility of Extended Stay America (ESA), which the company used to refinance
outstanding debt. ESA, the fastest-growing hotel chain in U.S. history, operates
432 extended-stay lodging hotels in 41 states. ESA has a different business
model than a typical hotel, which we view as more defensive. Three-quarters of
the company's customers travel by car, and the average length of stay is
significantly longer than at a typical leisure hotel. Also, ESA is
geographically dispersed with a broad customer base and does not cater to large
groups in urban areas. We believe ESA is well-positioned to weather further
economic weakness due to its strong balance sheet, ample liquidity and unique
business model.
During the reporting period, we also invested in the $225 million term loan of
the Newkirk Master Limited Partnership, a real estate joint venture owned by
three well-respected investment companies. The Newkirk partnerships own 242
properties throughout 35 states and are well diversified across various property
types including retail, office and industrial, with virtually no lodging
exposure. We considered this investment attractive because of its strong
management team and property diversification, and the fact that approximately
80% of the properties are leased to investment grade tenants, giving us
confidence that there will be a reliable stream of lease payments to service the
term debt.
As the economic downturn became more pronounced, we began to position the Fund
more defensively and made various investments in the food industry. We
participated in one of the industry's larger mergers when Suiza Foods Company
acquired Dean
5
Foods and formed a national dairy and foods company. As a result of the merger,
the new Dean Foods company is now the country's largest fluid milk processor and
third-largest ice cream processor. We noted that the $25 billion U.S. dairy
industry is a mature but highly fragmented industry with excess capacity and
that these factors have driven consolidation in recent years. We liked the
company because the combined entity is the only company in the U.S. with a
nationwide capacity for fluid dairy product distribution.
Looking forward, we will maintain our strategy of holding loans from companies
that we believe possess defensive market positions and strong asset coverage in
industries that we feel will do well even during periods of economic decline.
With its relatively stable share price and potential for high, current income,
we believe the Fund is an attractive investment for investors seeking to
diversify portfolios heavily weighted in equities.
6
We appreciate your investment in Franklin Floating Rate Trust and welcome any
comments or suggestions you might have.
Sincerely,
/S/SIGNATURE
Charles B. Johnson
Chairman
Franklin Floating Rate Trust
/S/SIGNATURE
Chauncey Lufkin
Portfolio Manager
Franklin Floating Rate Trust
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A NOTE ABOUT
DUPLICATE MAILINGS
YOU WILL RECEIVE THE FUND'S SHAREHOLDER REPORT EVERY SIX MONTHS. TO REDUCE FUND
EXPENSES, WE TRY TO IDENTIFY RELATED SHAREHOLDERS IN A HOUSEHOLD AND SEND ONLY
ONE COPY OF THE REPORT. THIS PROCESS, CALLED "HOUSEHOLDING," WILL CONTINUE
INDEFINITELY UNLESS YOU INSTRUCT US OTHERWISE. IF YOU PREFER NOT TO HAVE THESE
DOCUMENTS HOUSEHOLDED, PLEASE CALL US AT 1-800/632-2301. AT ANY TIME YOU MAY
VIEW CURRENT SHAREHOLDER REPORTS ON OUR WEBSITE.
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January 31, 2002, the end of the reporting period. The information provided is
not a complete analysis of every aspect of any country, industry, security or
the Fund. Our strategies and the Fund's portfolio composition will change
depending on market and economic conditions. Although historical performance is
no guarantee of future results, these insights may help you understand our
investment and management philosophy.
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7
PERFORMANCE SUMMARY AS OF 1/31/02
DISTRIBUTIONS AND RETURNS WILL VARY BASED ON EARNINGS OF THE FUND'S PORTFOLIO
AND ANY PROFITS REALIZED FROM THE SALE OF THE PORTFOLIO'S SECURITIES, AS WELL AS
THE LEVEL OF THE FUND'S OPERATING EXPENSES. ALL TOTAL RETURNS INCLUDE REINVESTED
DISTRIBUTIONS AT NET ASSET VALUE. THE PERFORMANCE TABLE DOES NOT REFLECT THE
DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE
REDEMPTION OF FUND SHARES.
PRICE AND DISTRIBUTION INFORMATION
CHANGE 1/31/02 7/31/01
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Net Asset Value (NAV) -$0.39 $8.85 $9.24
DISTRIBUTIONS (8/1/01-1/31/02)
Dividend Income $0.323314
PERFORMANCE
INCEPTION
6-MONTH 1-YEAR 3-YEAR (10/10/97)
--------------------------------------------------------------------------------------------------
Cumulative Total Return 1 -0.70% -0.28% +13.96% +23.10%
Average Annual Total Return 2 -1.66% -1.20% +4.45% +4.94%
Avg. Ann. Total Return (12/31/01) 3 -0.99% +4.55% +4.99%
Distribution Rate 4 6.22%
30-Day Standardized Yield 5 7.91%
For updated performance figures, see "Prices and Performance" at
franklintempleton.com, or call Franklin Templeton Investments at 1-800/342-5236.
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Shares repurchased within 12 months of investment are subject to 1% early
withdrawal charge. The Fund's manager agreed in advance to waive a portion of
its management fees. If the manager had not taken this action, the Fund's total
return would have been lower. The fee waiver may be discontinued at any time,
upon notice to the Fund's Board of Trustees.
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1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the early withdrawal charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1% early withdrawal
charge, assuming shares were redeemed within 12 months of purchase. Six-month
return has not been annualized.
3. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.
4. The distribution rate is based on the annualization of daily distributions
totaling 4.5274 cents per share during the last 30 days of January and the $8.85
NAV on 1/31/02.
5. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 1/31/02.
8 Past performance does not guarantee future results.
FRANKLIN FLOATING RATE TRUST
Financial Highlights
SIX MONTHS ENDED
JANUARY 31, 2002 YEAR ENDED JULY 31,
-------------------------------------------
(UNAUDITED) 2001 2000 1999 1998 A
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ..................... $9.24 $9.85 $9.98 $10.04 $10.00
------------------------------------------------------------
Income from investment operations:
Net investment income ................................... .322 .875 .839 .700 .482
Net realized and unrealized gains (losses) .............. (.389) (.606) (.130) (.060) .040
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Total from investment operations ......................... (.067) .269 .709 .640 .522
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Less distributions from net investment income ............ (.323) (.879) (.839) (.700) (.482)
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Net asset value, end of period ........................... $8.85 $9.24 $9.85 $ 9.98 $10.04
============================================================
Total return b ........................................... (.70)% 2.80% 7.39% 6.62% 5.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ........................$2,185,553 $2,832,188 $2,541,497 $1,106,363 $168,537
Ratios to average net assets:
Expenses ................................................ 1.38% c 1.36% 1.35% 1.39% 1.32% c
Expenses excluding waiver and payments by affiliate ..... 1.38% c 1.36% 1.35% 1.41% 1.76% c
Net investment income ................................... 7.28% c 9.07% 8.51% 6.93% 6.06% c
Portfolio turnover rate .................................. 28.58% 84.15% 66.27% 63.29% 45.32%
a For period October 10, 1997 (effective date) to July 31, 1998.
b Total return does not reflect the contingent deferred sales charge and is not
annualized for periods less than one year.
c Annualized
See notes to financial statements. 9
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2002 (UNAUDITED)
PRINCIPAL
AMOUNT* VALUE
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LONG TERM INVESTMENTS 98.0%
a SENIOR FLOATING RATE INTERESTS 97.0%
ADVERTISING/MARKETING SERVICES .1%
Adams Outdoor Advertising Inc., Term Loan B, 5.41%, 12/26/07 ........... $ 3,000,000 $ 3,027,189
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AEROSPACE & DEFENSE .8%
Alliant Techsystems Inc., Term Loan B, 4.938%, 4/20/09 ................. 2,813,287 2,849,334
Fairchild Holdings, Term Loan B, 4.84 - 4.853%, 4/30/06 ................ 8,560,063 7,383,055
Veridian Corp., Term Loan, 5.52 - 5.58%, 9/14/06 ....................... 4,924,938 4,912,626
Vought Aircraft Industries, Term Loan X, 4.83%, 12/01/06 ............... 2,600,000 2,505,750
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17,650,765
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AGRICULTURAL COMMODITIES/MILLING .1%
Hines Nurseries Inc., Term Loan B, 5.563%, 2/28/05 ..................... 2,970,000 2,892,038
--------------
APPAREL
St. John Knits International Inc., Term Loan B, 4.813 -
5.063%, 7/31/07 ...................................................... 765,451 765,451
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AUTO PARTS: O.E.M. 3.5%
Dayco Products LLC, Term Loan B, 4.966 - 5.41%, 5/31/07 ................ 4,231,718 4,196,455
Exide Corp., Term Loan B, 7.08 - 7.499%, 12/18/05 ...................... 18,097,909 13,731,788
Metaldyne Inc., Term Loan B, 7.75%, 11/28/08 ........................... 20,664,493 19,579,607
SPX Corp.,
Term Loan B, 4.375 - 4.438%, 12/31/06 ................................. 2,731,709 2,732,277
Term Loan C, 4.688%, 12/31/07 ......................................... 9,232,395 9,238,987
Tenneco Automotive Inc.,
Term Loan B, 5.95%, 11/04/07 .......................................... 15,368,975 13,985,767
Term Loan C, 6.20%, 5/04/08 ............................................ 15,368,975 13,985,767
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77,450,648
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BROADCASTING 2.9%
Benedek Broadcasting Corp., Term Loan B, 7.00%, 11/20/07 ............... 19,000,000 17,955,000
Comcorp Broadcasting Inc., Term Loan, 5.25 - 5.86%, 3/31/03 ............ 3,457,005 2,921,169
c Comcorp Holdings Inc., Term Loan, 4.75 - 11.875%, 9/30/03 .............. 4,718,652 3,987,261
Corus Entertainment, Term Loan B, 5.10%, 9/01/07 ....................... 3,860,606 3,870,258
Emmis Communications Corp., Term Loan B, 5.375 - 5.688%, 8/31/09 ....... 1,949,027 1,958,219
Nassau Broadcasting Partners LP, Term Loan B, 9.25%, 6/30/07 ........... 5,778,111 5,619,213
Quorum Broadcasting Co., Term Loan B, 9.25%, 9/30/07 ................... 8,236,221 7,536,142
Sinclair Broadcast Group Inc.,
Incremental Term Loan B, 5.93%, 9/30/09 ............................... 5,000,000 5,030,000
Revolver, 1.75 - 5.374%, 9/15/05 ...................................... 12,011,938 11,426,356
White Knight Broadcasting Inc., Term Loan B, 5.25 -
5.86%, 3/31/03 ....................................................... 3,525,555 2,979,094
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63,282,712
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BUILDING PRODUCTS .8%
Formica Corp., Term Loan B, 8.23 - 9.88%, 4/30/06 ...................... 14,617 12,180
Magnatrax Corp., Term Loan B, 6.511%, 11/15/05 ......................... 4,196,711 3,756,056
Tapco International Inc.,
Term Loan B, 5.15 - 5.154%, 7/23/07 ................................... 7,478,693 7,216,939
Term Loan C, 5.40 - 5.404%, 7/23/08 ................................... 6,259,943 6,040,845
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17,026,020
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10
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2002 (UNAUDITED) (CONT.)
PRINCIPAL
AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
a SENIOR FLOATING RATE INTERESTS (CONT.)
CABLE/SATELLITE TELEVISION 9.2%
Century Cable (Adelphia),
Discretionary Term Loan, 4.89%, 6/30/09 ................................$ 12,500,000 $ 12,404,688
Discretionary Term Loan, 4.87%, 12/31/09 ............................... 9,000,000 8,919,495
Charter Communications CCVI,
Revolver, 0.50%, 5/12/08 ............................................... 875,000 846,563
Term Loan A, 2.97%, 5/12/08 ............................................ 1,125,000 1,093,359
Term Loan B, 4.22%, 11/12/08 ........................................... 20,000,000 19,735,220
Charter Communications CCVIII, Term Loan B, 4.63%, 2/02/08 .............. 18,000,000 17,781,138
Charter Communications Operating LLC,
Incremental Term Loan, 4.48%, 9/18/08 .................................. 28,750,000 28,369,379
Term Loan B, 4.52%, 3/18/08 ............................................ 5,000,000 4,933,805
Mediacom Illinois, Term Loan B, 4.71%, 12/31/08 ......................... 5,000,000 5,028,515
Olympus Cable Holdings, Term Loan B, 4.75%, 9/30/10 ..................... 9,000,000 8,931,879
Pegasus Media Communications Corp., Term Loan B, 5.438%, 4/30/05 ........ 17,325,000 16,798,025
UCA-HHC (Adelphia), Term Loan, 4.375%, 3/31/08 .......................... 26,000,000 25,842,908
UPC Distribution Holdings BV, Term Loan B, 6.371%, 3/31/09 .............. 48,500,000 40,497,500
Videotron Itee, Term Loan B, 4.59 - 4.625%, 12/01/09 .................... 10,000,000 9,984,380
--------------
201,166,854
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CASINOS/GAMING .9%
Ameristar Casinos Inc.,
Term Loan B, 5.688%, 12/20/06 .......................................... 1,801,706 1,818,597
Term Loan C, 5.938%, 12/20/07 .......................................... 1,599,038 1,609,032
Boyd Gaming Corp., Term Loan B, 5.02 - 5.37%, 6/15/03 ................... 1,921,500 1,922,701
Greektown Casinos LLC., Term Loan B, 5.875 - 6.125%, 11/16/04 ........... 3,878,323 3,863,779
Hollywood Casino Corp., 8.451%, 5/01/06 ................................. 5,000,000 5,125,000
Scientific Games Corp., Term Loan B, 6.125 - 6.375%, 9/30/07 ............ 6,073,586 6,084,974
--------------
20,424,083
--------------
CHEMICALS: SPECIALTY 1.2%
Arteva B.V. (Kosa), Term Loan B, 5.409% 12/31/06 ........................ 3,785,452 3,691,762
Hercules Inc., Term Loan D, 5.16%, 11/15/05 ............................. 1,980,000 1,976,907
Ineos Group Ltd., Term Loan C, 5.405%, 6/30/09 .......................... 7,500,000 7,406,250
Noveon Inc., Term Loam B, 5.625 - 5.875%, 9/30/08 ....................... 4,975,000 4,978,627
RK Polymers LLC, Term Loan B, 6.25 - 7.813%, 3/07/09 .................... 7,687,671 7,654,038
--------------
25,707,584
--------------
COMMERCIAL PRINTING/FORMS .4%
Mail-Well Inc., Term Loan B, 4.904 - 6.13%, 2/22/07 ..................... 8,221,996 7,973,631
--------------
CONSUMER SUNDRIES .4%
American Greetings Corp., Term Loan B, 6.596%, 6/15/06 .................. 2,982,500 2,937,763
Church & Dwight Co., Term Loan B, 4.38%, 5/27/09 ........................ 1,000,000 1,007,875
Playtex Products Inc.,
Revolver, 0.50 - 2.75%, 5/31/07 ........................................ 2,777,778 2,800,347
Term Loan A, 4.52 - 4.934%, 5/31/07 ..................................... 1,688,889 1,686,778
--------------
8,432,763
--------------
11
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2002 (UNAUDITED) (CONT.)
PRINCIPAL
AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
a SENIOR FLOATING RATE INTERESTS (CONT.)
Containers/Packaging 2.3%
Crown Cork & Seal Co. Inc., Term Loan, 5.29%, 8/04/02 .................. $ 12,000,000 $ 11,940,000
Graham Packaging Co.,
Term Loan B, 4.438%, 1/31/06 .......................................... 2,664,975 2,614,265
Term Loan C, 4.688%, 1/31/07 .......................................... 2,208,122 2,166,106
Term Loan D, 4.875 - 7.038%, 1/31/07 .................................. 9,095,000 8,921,940
Impress Metal Packaging Ltd., Term Loan G, 5.234%, 12/31/06 ............ 492,500 477,725
Pliant Corp., Term Loan B, 5.938%, 5/31/08 ............................. 2,857,143 2,834,523
Stone Container Corp.,
Term Loan F, 5.188%, 12/31/05 ......................................... 7,522,081 7,522,668
Term Loan G, 5.438%, 12/31/06 ......................................... 4,408,001 4,402,098
Term Loan H, 5.438%, 12/31/06 ......................................... 3,515,700 3,510,992
Tekni-Plex Inc., Term Loan B, 5.313%, 6/21/08 .......................... 4,925,000 4,818,290
--------------
49,208,607
--------------
Department Stores .7%
JC Penney Co. Inc., Revolver, 0.50%, 10/03/02 .......................... 15,000,000 14,250,000
--------------
Drug Store Chains .6%
Rite Aid Corp., Term Loan, 5.25 - 5.375%, 3/15/05 ...................... 10,500,000 10,337,250
Shoppers Drug Mart, Term Loan C, 4.875%, 2/04/08 ....................... 2,536,654 2,549,865
--------------
12,887,115
--------------
Electrical Products .5%
Neptune Technology Group Inc., Term loan B, 5.435%, 11/01/08 ........... 4,000,000 4,045,000
Superior Telecom Inc., Term Loan B, 6.688%, 11/27/05 ................... 9,132,822 6,174,436
--------------
10,219,436
--------------
Electronic Components .6%
Seagate Technology International, Term Loan B, 5.188%, 11/22/06 ........ 13,260,126 13,280,851
--------------
Engineering & Construction 2.8%
URS Corp.,
Term Loan B, 4.875 - 6.75%, 6/09/06 ................................... 880,742 858,724
Term Loan C, 5.125 - 7.00%, 6/09/07 ................................... 880,742 858,724
Washington Group International Inc.,
Synthetic Term Loan, 3.10%, 7/23/04 ................................... 17,000,000 16,065,000
c Term Loan B, 7.00%, 7/07/07 ........................................... 52,269,286 43,697,123
--------------
61,479,571
--------------
Environmental Services 2.6%
Allied Waste Industries Inc.,
Term Loan B, 4.563 - 4.688%, 7/30/06 .................................. 15,083,383 14,909,577
Term Loan C, 4.875 - 5.50%, 7/30/07 ................................... 18,911,173 18,693,259
Environmental Systems, Products Holdings Inc.,
PIK Loan, 5.37 - 5.404%, 12/31/04 ..................................... 8,831,782 5,961,453
Term Loan, 5.846 - 6.096%, 12/31/04 .................................... 19,322,191 17,051,834
--------------
56,616,123
--------------
12
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2002 (UNAUDITED) (CONT.)
PRINCIPAL
AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
a SENIOR FLOATING RATE INTERESTS (CONT.)
Financial Conglomerates .7%
Ares IV, Term Loan D, 7.903%, 12/22/12 ................................. $ 1,364,358 $ 1,239,434
Centurion II, Tranche D, 7.999%, 11/12/12 .............................. 2,500,000 2,167,188
Clydesdale CLO, Tranche D, 8.27%, 3/22/13 .............................. 2,000,000 1,875,625
Finova Group Inc., 7.50%, 11/15/09 ..................................... 17,086,000 6,578,110
First Dominion Funding II, sub. floating rate deb.,
Series A-D 144A, 7.45%, 4/25/14 ...................................... 3,000,000 2,563,125
Highland CLO I, Term Loan D, 8.45%, 6/01/11 ............................ 2,000,000 1,755,000
--------------
16,178,482
--------------
Food Chains .1%
Winn-Dixie Stores, Term Loan B, 4.625%, 3/31/07 ........................ 1,536,012 1,543,213
--------------
Food: Major Diversified 1.6%
Agrilink Foods Inc.,
Term Loan B, 5.83 - 6.551%, 9/30/04 ................................... 4,220,323 4,098,989
Term Loan C, 6.08 - 6.801%, 9/30/05 ................................... 4,326,446 4,202,061
Aurora Food Holdings, Revolver, 0.50% - 5.61%, 6/30/05 ................. 5,996,960 5,614,654
CP Kelco,
Term Loan B, 5.659%, 3/31/08 .......................................... 3,316,667 3,150,833
Term Loan C, 5.909%, 9/30/08 .......................................... 1,108,333 1,052,917
International Multifoods Corp., Term Loan B, 4.74 - 5.00%, 2/28/08 ..... 2,000,000 2,005,000
Merisant Corp., Term Loan B, 5.19%, 3/17/07 ............................ 1,078,143 1,079,042
Nutrasweet,
Second Lien Term Loan, 7.188%, 5/24/09 ................................ 3,000,000 2,985,939
Term Loan B, 5.375 - 5.563%, 5/24/07 .................................. 1,661,216 1,661,216
Suiza Foods Corp., Term Loan B, 4.91%, 12/21/08 ........................ 10,000,000 10,076,790
--------------
35,927,441
--------------
Hospital/Nursing Management 4.9%
Genesis Health Ventures Inc.,
Delayed Draw, 5.37 - 5.86%, 3/30/07 ................................... 2,191,781 2,195,207
Floating Rate Note, 6.881%, 4/02/07 ................................... 5,380,442 5,333,363
Term Loan B, 5.93%, 3/30/07 ........................................... 7,788,699 7,856,850
Iasis Healthcare Corp.,
Term Loan A, 5.60 - 5.62%, 9/30/04 .................................... 4,583,333 4,553,734
Term Loan B, 6.35 - 6.37%, 9/30/06 .................................... 7,303,123 7,317,955
c Integrated Health Services Inc.,
Revolver, 0.50 - 9.75%, 9/15/03 ....................................... 29,034,999 16,245,082
Term Loan B, 9.75%, 9/15/03 ........................................... 49,467,986 28,093,710
Term Loan C, 9.75%, 9/15/03 ........................................... 15,973,403 9,071,567
c Mariner Post-Acute Network Inc.,
Revolver, 0.50 - 7.00%, 3/31/04 ....................................... 16,787,974 11,038,093
Term Loan A, 7.00%, 3/31/04 ........................................... 6,915,170 4,546,724
Term Loan B, 7.00%, 3/31/05 ........................................... 9,302,095 6,116,128
Term Loan C, 7.00%, 3/31/06 ........................................... 4,999,429 3,287,125
Triad Hospitals Inc., Term Loan B, 4.83%, 9/30/08 ...................... 997,273 1,009,303
--------------
106,664,841
--------------
13
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2002 (UNAUDITED) (CONT.)
PRINCIPAL
AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
a SENIOR FLOATING RATE INTERESTS (CONT.)
Hotel/Resorts/Cruiselines 5.1%
Extended Stay America Inc., Term Loan B, 4.77%, 7/01/07 ................ $ 9,000,000 $ 9,000,801
Sunburst Hospitality Corp., Term Loan, 5.77%, 12/21/05 ................. 16,870,651 16,195,825
Wyndham International Inc.,
Increasing Rate Note, 6.625%, 6/05/03 ................................. 36,312,167 32,635,560
Revolver, 2.00 - 5.625%, 6/30/05 ...................................... 10,000,000 8,575,000
Term Loan B, 6.625%, 6/30/04 ........................................... 50,872,071 44,894,602
--------------
111,301,788
--------------
Household/Personal Care .1%
Mary Kay Inc., Term Loan B, 5.739%, 10/03/07 ........................... 2,000,000 2,000,000
--------------
Industrial Machinery .3%
Blount International Inc., Term Loan B, 6.41 - 6.80%, 6/30/06 .......... 2,448,897 2,409,102
Gleason Corp., Term Loan B, 5.375 - 5.50%, 2/18/08 ..................... 4,594,372 4,594,372
--------------
7,003,474
--------------
Life/Health Insurance 4.3%
Conseco Inc., Term Loan, 4.25 - 4.4375%, 9/30/03 ....................... 110,839,350 94,767,644
--------------
Major Telecommunications 3.4%
Alec Holdings Inc.,
Term Loan B, 4.875%, 11/04/07 ......................................... 2,631,579 2,578,947
Term Loan C, 5.00%, 5/14/08 ........................................... 2,368,421 2,321,053
Allegiance Telecom Inc.,
Delayed Draw Term Loan, 6.28%, 12/31/06 ............................... 10,500,000 8,767,500
Revolver, 0.50 - 6.28%, 12/31/06 ...................................... 24,500,000 20,457,500
E.Spire Communications Inc., Term Loan C, 8.75%, 8/01/06 ............... 16,877,867 13,080,347
ICG Communications Inc., Term Loan B, 9.00%, 3/31/06 ................... 2,399,045 2,339,069
Mcleod USA Inc., Term Loan B, 5.23%, 5/31/08 ........................... 15,000,000 10,125,000
c Northpoint Communications Group Inc., Term Loan, 9.50%, 3/31/04 ........ 11,929,408 7,873,410
c WCI Capital Corp., Term Loan B, 10.25%, 3/31/07 ........................ 30,500,000 434,625
c Winstar Communications Inc., DIP, 7.75%, 12/31/02 ...................... 5,833,333 1,458,333
XO Communications Inc., Term Loan B, 7.00%, 6/30/07 .................... 10,500,000 6,544,997
--------------
75,980,781
--------------
Managed Health Care .4%
Pacificare Health Systems Inc., Term Loan, 5.69%, 1/02/03 .............. 9,615,385 9,092,548
--------------
Marine Shipping .6%
Great Lakes Transportation LLC, Term Loan, 5.75 - 5.938%, 3/23/08 ...... 13,721,050 13,446,629
--------------
Media Conglomerates .8%
c Bridge Information Systems Inc.,
Multi-Draw Term Loan, 7.50%, 5/29/03 .................................. 816,975 342,108
Term Loan A, 7.50%, 5/29/03 ........................................... 810,243 339,289
Term Loan B, 6.75%, 5/29/05 ........................................... 24,595,094 10,299,195
PEI Holdings, Term Loan B, 6.363 - 6.418%, 3/15/06 ..................... 7,079,622 6,831,835
--------------
17,812,427
--------------
14
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2002 (UNAUDITED) (CONT.)
PRINCIPAL
AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
a SENIOR FLOATING RATE INTERESTS (CONT.)
Medical/Nursing Services 1.0%
Alliance Imaging Inc.,
Term Loan B, 4.50 - 5.813%, 11/30/07 .................................. $ 242,450 $ 243,865
Term Loan C, 4.75 - 6.063%, 11/30/08 .................................. 234,119 235,484
American HomePatient Inc., Term Loan, 5.25%, 12/31/02 .................. 20,856,550 16,815,594
Maxxim Medical,
Term Loan B, 5.879%, 5/12/06 .......................................... 2,092,978 1,574,966
Term Loan C, 6.129%, 5/12/07 ........................................... 2,092,978 1,574,966
--------------
20,444,875
--------------
Medical Specialties .1%
Hanger Orthopedic Group Inc., Term Loan B, 6.158%, 12/31/06 ............ 2,665,257 2,643,602
--------------
Metal Fabrication .4%
Mueller Group, Term Loan D, 5.83 - 6.10%, 8/16/07 ...................... 8,237,046 8,226,749
--------------
Military/Government/Technical .1%
DRS Technologies Inc., Term Loan, 5.10 - 5.52%, 9/28/08 ................ 2,493,750 2,516,351
--------------
Miscellaneous Commercial Services 1.1%
Burhmann US Inc., Term Loan B, 5.50%, 10/26/07 ......................... 20,864,149 20,171,168
Outsourcing Solutions Inc., Term Loan B, 5.83%, 6/01/06 ................ 4,887,500 4,582,031
--------------
24,753,199
--------------
Miscellaneous Manufacturing .6%
General Cable Corp., Term Loan B, 5.125%, 5/27/07 ...................... 3,212,109 3,091,654
Mediapak Holdings Corp.,
Term Loan B, 5.645%, 1/14/06 .......................................... 5,744,287 4,595,429
Term Loan C, 5.895%, 1/14/07 ........................................... 5,744,287 4,595,429
--------------
12,282,512
--------------
Movies/Entertainment 5.5%
AMC Entertainment Inc., 0.50 - 1.50%, Revolver, 4/10/04 ................ 10,000,000 9,565,000
AMF Bowling Inc., Term Loan A, 7.50%, 3/31/02 .......................... 841,769 739,353
Blockbuster Inc., Revolver, 7/01/04 .................................... 41,465,384 39,837,868
Dreamworks Film Trust II, Term Loan B, 4.527%, 1/15/09 ................. 2,700,000 2,718,563
Fitness Holdings Worldwide Inc.,
Term Loan B, 6.063%, 11/02/06 ......................................... 4,920,000 4,149,198
Term Loan C, 6.313%, 11/02/07 ......................................... 10,156,456 8,565,275
Hoops LP (Memphis Grizzlies), Term Loan, 5.24%, 9/30/05 ................ 10,000,000 9,987,500
Loews Cineplex Entertainment Corp.,
DIP, 0.50 - 6.50%, 3/31/02 ............................................ 2,940,699 2,940,699
Revolver, 0.50 - 6.25%, 5/14/03 ....................................... 24,284,675 22,736,527
Phoenix Suns, Term Loan B, 4.105 - 4.36%, 3/31/05 ...................... 10,000,000 10,000,000
United Artist Theaters, Term Loan, 5.83%, 2/02/05 ...................... 1,870,154 1,857,491
Washington Football Group,
Holdings Term Loan, 5.398%, 10/22/04 .................................. 6,600,000 6,616,500
Operating Term Loan, 4.023%, 10/22/04 .................................. 300,000 300,000
--------------
120,013,974
--------------
15
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2002 (UNAUDITED) (CONT.)
PRINCIPAL
AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
a SENIOR FLOATING RATE INTERESTS (CONT.)
Other Consumer Services .5%
Sotheby's Holdings Inc., Term Loan B, 4.813 - 4.92%, 8/11/02 ........... $ 10,000,000 $ 9,850,000
--------------
Other Consumer Specialties .1%
Holmes Products Corp., Term Loan B, 6.063 - 6.125%, 2/05/07 ............ 1,791,353 1,446,518
--------------
Other Metals/Minerals .2%
Better Minerals & Aggregates, Term Loan B, 5.50 - 7.75%, 9/30/07 ....... 4,868,421 4,491,118
--------------
Other Transportation 1.6%
Eurotunnel Finance Ltd.,
Tier 1 Jr Debt, 7.03%, 7/01/25 (United Kingdom) ....................... 13,902,672 GBP 18,048,030
Tier 2 Jr Debt, 7.03%, 7/01/25 (United Kingdom) ....................... 14,000,000 GBP 16,100,128
--------------
34,148,158
--------------
Pharmaceuticals: Generic .1%
Alpharma Operating Corp., Term Loan B, 5.25%, 10/05/08 ................. 3,120,833 3,118,883
--------------
Printing/Forms 2.2%
American Reprographics, Term Loan B, 5.563%, 4/10/08 ................... 16,211,505 15,887,275
c Dimac Holdings, Term Loan A, 7.75%, 12/31/05 ........................... 2,092,640 230,190
c Dimac Marketing Partners,
Revolver, 7.75%, 7/01/03 .............................................. 233,270 25,660
Term Loan A, 7.75%, 7/01/03 ........................................... 520,564 57,262
Term Loan B, 7.75%, 1/01/05 ........................................... 2,003,533 220,389
Vertis,
Term Loan B, 6.063 - 6.85%, 12/09/08 .................................. 9,819,557 8,432,545
Bridge Term Loan, 12.881%, 12/09/09 ................................... 25,000,000 20,750,000
Yellow Book USA, Term Loan C, 5.33%, 3/31/10 ........................... 2,000,000 2,008,438
--------------
47,611,759
--------------
Property-Casualty Insurance 1.3%
White Mountain Insurance Group Inc., Term Loan B, 4.895%, 3/31/07 ...... 28,000,000 28,093,324
--------------
Publishing: Books/Magazines .9%
American Media Inc., Term Loam B, 6.84 - 6.87%, 4/01/07 ................ 992,490 999,313
Primedia Inc., Term Loan B, 4.563 - 4.688%, 6/30/09 .................... 10,945,000 10,343,025
Reiman Publications Co., Term Loan B, 5.625%, 11/30/05 ................. 3,436,592 3,462,367
Weekly Reader, Term Loan, 5.74 - 5.91%, 11/08/06 ....................... 4,787,755 4,620,184
--------------
19,424,889
--------------
Publishing: Newspapers .8%
Canwest Media Inc.,
Term Loan B, 5.511%, 5/15/08 .......................................... 6,619,732 6,686,519
Term Loan C, 5.761%, 5/15/09 .......................................... 4,135,695 4,177,420
Trader.Com, (Netherlands)
Term Loan B, 5.08%, 12/31/06 .......................................... 4,178,945 4,074,471
Term Loan C, 5.58%, 12/31/07 .......................................... 3,019,719 2,944,226
--------------
17,882,636
--------------
16
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2002 (UNAUDITED) (CONT.)
PRINCIPAL
AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
a SENIOR FLOATING RATE INTERESTS (CONT.)
Pulp & Paper 1.1%
Alabama Pine & Pulp,
PIK Term Loan B, 5.83%, 6/30/05 ....................................... $ 3,960,284 $ 306,922
PIK Term Loan C, 10.75%, 6/30/05 ...................................... 5,618,180 435,409
Revolver, 0.50 - 9.83%, 6/30/03 ....................................... 5,000,000 4,987,500
Term Loan A, 5.83%, 6/30/03 ............................................ 37,105,162 19,016,396
--------------
24,746,227
--------------
Railroads .2%
Helm Holding Corp., Term Loan B, 5.58 - 6.75%, 10/18/06 ................ 5,155,000 4,587,950
--------------
Real Estate Investment Trusts 3.1%
Corrections Corp. of America,
Term Loan B, 7.24%, 12/31/02 .......................................... 16,257,369 16,237,047
Term Loan C, 7.24%, 12/31/02 .......................................... 21,775,418 21,748,199
Newkirk Master LP, Term Loan, 9.25%, 1/30/05 ........................... 13,000,000 12,870,000
Ventas Realty LP,
Term Loan B, 5.16%, 12/31/05 .......................................... 6,840,316 6,834,974
Term Loan C, 6.16%, 12/31/07 ........................................... 9,912,808 9,908,674
--------------
67,598,894
--------------
Rental/Leasing 2.1%
Ashtead Group, Term Loan B, 6.60%, 6/30/07 ............................. 19,760,000 19,315,400
Nations Rent Inc., Term Loan, 6.25 - 7.00%, 7/20/06 .................... 31,851,548 18,712,784
Rent-A-Center Inc., Revolver, 0.25 - 1.25%, 7/31/04 .................... 3,108,808 3,015,544
Rent-Way Inc., Term Loan B, 7.909%, 9/30/06 ............................ 5,314,932 4,610,704
United Rentals Inc., Term Loan B, 9/30/07 .............................. 17,468 17,614
--------------
45,672,046
--------------
Semiconductors 1.1%
ON Semiconductor Corp.,
Revolver, 0.50 - 5.938%, 8/04/05 ...................................... 1,071,429 842,411
Term Loan A, 5.938%, 8/04/05 .......................................... 121,431 95,475
Term Loan B, 5.938%, 8/04/06 .......................................... 9,581,482 7,531,044
Term Loan C, 5.938%, 8/04/07 .......................................... 10,318,519 8,110,356
Term Loan D, 5.938%, 8/04/07 ........................................... 8,955,000 7,038,630
--------------
23,617,916
--------------
Specialty Stores .1%
Petco Animal Supplies Inc., Term Loan B, 5.33 - 5.37%, 10/02/08 ........ 1,994,872 1,999,859
--------------
Specialty Telecommunications 2.4%
c 360 Networks Inc., Term Loan, 8.25%, 12/15/07 .......................... 19,000,000 4,370,000
c Global Crossing Holdings Ltd., Term Loan B, 4.91%, 8/15/06 ............. 2,472,744 743,369
Level 3 Communications Inc.,
Revolver, 0.50%, 9/30/07 .............................................. 23,636,364 14,713,636
Term Loan A, 4.59%, 9/30/07 ........................................... 13,363,636 8,419,091
Pacific Crossing Ltd., Term Loan, 4.125%, 7/28/06 ...................... 23,025,712 9,785,927
RCN Corp., Term Loan B, 5.50%, 6/03/07 ................................. 21,000,000 15,120,000
--------------
53,152,023
--------------
17
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2002 (UNAUDITED) (CONT.)
PRINCIPAL
AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
a SENIOR FLOATING RATE INTERESTS (CONT.)
Steel .8%
Ispat Sidbec Inc.,
Term Loan B, 6.159%, 7/16/04 .......................................... $ 6,069,557 $ 4,855,646
Term Loan C, 6.659%, 1/16/05 .......................................... 6,069,557 4,855,646
c LTV Corp., Term Loan, 8.375%, 10/31/04 ................................. 9,376,333 8,063,647
--------------
17,774,939
--------------
Telecommunications Equipment .8%
Acterna Dynatech Corp., Term Loan B, 5.909%, 9/30/07 ................... 23,341,176 16,747,294
--------------
Textiles 1.3%
Foamex International Inc.,
Term Loan B, 6.25%, 6/30/05 ........................................... 1,520,458 1,479,912
Term Loan C, 6.50%, 6/30/06 ........................................... 1,382,239 1,345,379
Term Loan D, 6.625%, 12/31/06 ......................................... 7,099,563 6,910,239
Pillowtex Corp.,
DIP, 0.50%, 6/30/02 ................................................... 6,666,667 6,633,333
Term Loan B, 4.37 - 5.87%, 12/31/04 ................................... 26,457,839 9,524,822
c Synthetic Industries Inc., Bridge Loan, 12.25%, 6/14/08 ................ 10,000,000 2,500,000
--------------
28,393,685
--------------
Tools/Hardware .1%
Shop Vac Corp., Term Loan, 4.52%, 6/30/07 .............................. 2,985,000 2,970,075
--------------
Utilities 3.5%
AES EDC Funding II LLC, Term Loan, 4.858%, 10/06/03 .................... 25,000,000 23,437,500
AES New York Funding LLC, Term Loan, 6.875%, 2/28/05 ................... 21,000,000 20,881,875
Mission Energy Holding,
Term Loan A, 9.381%, 6/30/06 .......................................... 6,233,766 6,607,792
Term Loan B, 9.381%, 6/30/06 .......................................... 17,766,234 18,832,208
Western Resources Inc., Term Loan, 4.51 - 4.61%, 3/17/03 ............... 6,344,924 6,334,347
--------------
76,093,722
--------------
Wholesale Distributors .3%
Wilmar Industries Inc., Term Loan B, 5.90%, 9/29/07 .................... 7,406,250 6,665,625
--------------
Wireless Communications 10.9%
Alamosa Holdings Inc., Term Loan, 5.75%, 2/15/08 ....................... 13,513,514 13,344,595
American Cellular Inc., Term Loan C, 5.13%, 2/25/09 .................... 3,373,740 3,324,366
c Arch Wireless Inc.,
Term Loan B, 7.375%, 6/30/05 .......................................... 3,173,508 567,265
Term Loan B-1, 6.875%, 6/30/06 ........................................ 90,277,859 16,052,577
Term Loan C, 8.875%, 6/30/06 .......................................... 44,578,487 7,810,507
Centennial Cellular Operating Co.,
Term Loan C, 5.12 - 5.35%, 11/30/07 ................................... 4,456,572 3,877,217
Term Loan B, 5.10 - 5.14%, 5/31/07 .................................... 7,773,496 6,762,942
Cricket Communications Inc., Term Loan, 6.50%, 6/30/07 ................. 55,000,000 41,490,625
Microcell Connexions Inc.,
Term Loan B, 4.909%, 3/01/06 .......................................... 5,601,575 4,957,394
Term Loan E, 4.981%, 3/01/06 .......................................... 5,000,000 4,475,000
18
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2002 (UNAUDITED) (CONT.)
PRINCIPAL
AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
a SENIOR FLOATING RATE INTERESTS (CONT.)
Wireless Communications (cont.)
Nextel Communications Inc.,
Term Loan A, 4.07 - 4.188%, 12/31/07 .................................. $ 7,968,750 $ 6,921,425
Term Loan B, 5.563%, 1/29/08 .......................................... 11,750,000 10,460,438
Term Loan C, 5.688%, 7/29/08 .......................................... 16,750,000 14,911,688
Term Loan D, 5.083%, 3/31/09 .......................................... 33,000,000 28,824,246
Nextel Operations Inc.,
Leveraged Lease I, 7.375%, 3/15/05 .................................... 3,696,756 3,680,583
Leveraged Lease II, 5.25%, 2/08/07 .................................... 12,817,691 12,761,614
Nextel Partners Inc., Term Loan C, 6.36%, 7/29/08 ...................... 18,000,000 16,920,000
Rural Cellular Corp.,
Term Loan B, 5.48%, 10/03/08 .......................................... 5,988,093 5,784,923
Term Loan C, 5.73%, 4/03/09 ........................................... 5,988,093 5,784,923
Satelites Mexicanos, Term Loan C, 144A, 6.33%, 6/30/04 ................. 5,528,000 4,968,290
Spectrasite Communications Inc., Term Loan B, 5.85 - 6.17%, 2/22/07 .... 12,000,000 10,289,256
Sygnet Wireless Inc., Term Loan C, 5.62%, 12/23/07 ..................... 1,666,361 1,597,797
Telecorp PCS Inc., Term Loan B, 4.91%, 11/17/08 ........................ 5,000,000 4,986,720
c Teligent Inc.,
Conversion Term Loan, 9.50%, 6/30/06 .................................. 22,575,000 865,367
Multi-Draw Term Loan, 9.50 - 9.865%, 6/30/06 .......................... 21,125,000 809,785
Tritel Holding Corp., Term Loan B, 6.36%, 12/31/07 ..................... 5,000,000 5,003,124
---------------
237,232,667
---------------
TOTAL SENIOR FLOATING RATE INTERESTS ($2,441,257,180) .................. 2,119,662,178
---------------
19
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2002 (UNAUDITED) (CONT.)
PRINCIPAL
AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------
LONG TERM INVESTMENTS (CONT.)
Common Stocks & Warrants .9%
Auto Parts: O.E.M.
Exide Technologies., wts., 3/18/06 ..................................... 74,278 $ 102
---------------
Environmental Services
Environmental Systems Products Holdings Inc. ........................... 49,939 5
---------------
Medical/Nursing Services .8%
Genesis Health Ventures Inc. ........................................... 1,187,626 19,002,016
---------------
Movies/Entertainment .1%
United Artist Theaters ................................................. 220,857 1,269,928
---------------
Packaged Software
d Rivus Internet Group Inc. .............................................. 72,960 --
---------------
TOTAL COMMON STOCKS & WARRANTS (COST $29,171,810) 20,272,051
---------------
Preferred Stocks
Advertising/Marketing Services
Dimac Holdings, 20% PIK pfd. ........................................... 1,265,651 --
---------------
Environmental Services
Environmental Systems Products Holdings Inc., pfd. ..................... 8,032 843,362
---------------
TOTAL PREFERRED STOCKS (COST $356,100) 843,362
---------------
Convertible Preferred Stocks .1%
Medical/Nursing Services
Genesis Health Ventures Inc., 6.00%, cvt. pfd. ......................... 12,576 1,246,596
---------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $1,232,448) ................... 1,246,596
---------------
TOTAL LONG TERM INVESTMENTS (COST $2,472,017,538) ...................... 2,142,024,187
---------------
Short Term Investments 5.8%
b Franklin Institutional Fiduciary Trust Money Market Portfolio (COST $126,326,310) 126,326,310
---------------
TOTAL INVESTMENTS (COST $2,598,343,848) 103.8% ......................... 2,268,350,497
---------------
OTHER ASSETS, LESS LIABILITIES (3.8)% .................................. (82,797,662)
---------------
NET ASSETS 100.0% ...................................................... $2,185,552,835
---------------
CURRENCY ABBREVIATIONS:
GBP - British Pounds
* The principal amount is stated in U.S. Dollars unless otherwise indicated.
a Senior secured corporate loans in the Fund's portfolio generally have variable
rates which adjust to a base, such as the London Inter-Bank Rate (LIBOR), on
the set dates, typically every 30 days but not greater than one year; and/or
have interest rates that float at a margin above a widely recognized base
lending rate such as the Prime Rate of a designated U.S. bank.
b The Franklin Institutional Fiduciary Trust Money Market Portfolio (The "Sweep
Money Fund") is managed by Franklin Advisers, Inc.
c See Note 6 regarding defaulted securities.
d See Note 7 regarding restricted securities.
20 See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 2002 (UNAUDITED)
Assets:
Investments in securities:
Cost ................................................................................. $2,598,343,848
===============
Value ................................................................................ 2,268,350,497
Cash ................................................................................... 5,072,239
Receivables:
Investment securities sold ........................................................... 38,806,585
Capital shares sold .................................................................. 1,614,568
Interest ............................................................................. 7,811,648
Organization costs ..................................................................... 15,467
Other assets ........................................................................... 138,458
---------------
Total assets .................................................................... 2,321,809,462
---------------
Liabilities:
Payables:
Investment securities purchased ...................................................... 9,803,076
Affiliates ........................................................................... 2,337,633
Shareholders ......................................................................... 4,038,306
Distributions to shareholders .......................................................... 4,712,312
Unfunded loan commitments .............................................................. 114,497,242
Other liabilities ...................................................................... 868,058
---------------
Total liabilities ............................................................... 136,256,627
---------------
Net assets, at value ........................................................... $2,185,552,835
===============
Net assets consist of:
Undistributed net investment income .................................................... (1,580,403)
Net unrealized depreciation ............................................................ (329,806,677)
Accumulated net realized loss .......................................................... (1,269,760)
Capital shares ......................................................................... 2,518,209,675
---------------
Net assets, at value ........................................................... $2,185,552,835
===============
Net asset value and maximum offering price per share
($2,185,552,835 / 246,966,138 shares outstanding) a .................................. $ 8.85
===============
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements. 21
FRANKLIN FLOATING RATE TRUST
Financial Statements (CONTINUED)
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JANUARY 31, 2002 (UNAUDITED)
Investment income:
Dividends ............................................................................... $ 1,139,239
Interest ................................................................................ 108,092,914
--------------
Total investment income .......................................................... 109,232,153
--------------
Expenses:
Management fees (Note 3) ................................................................ 9,893,559
Administrative fees (Note 3) ............................................................ 1,245,202
Transfer agent fees (Note 3) ............................................................ 5,095,139
Custodian fees .......................................................................... 13,008
Reports to shareholders ................................................................. 36,785
Registration and filing fees ............................................................ 334,437
Professional fees ....................................................................... 276,190
Trustees' fees and expenses ............................................................. 1,749
Amortization of organization costs ...................................................... 14,009
Other ................................................................................... 268,368
--------------
Total expenses ................................................................... 17,178,446
Interest expense and commitment fees (Note 1) .................................... 152,659
--------------
Net expenses .................................................................... 17,331,105
---------------
Net investment income .......................................................... 91,901,048
==============
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................................ 11,472,174
Foreign currency transactions .......................................................... (120,994)
--------------
Net realized gain .............................................................. 11,351,180
Net unrealized appreciation (depreciation) on:
Investments ............................................................................ (130,311,066)
Translation of assets and liabilities denominated in foreign currencies ................ 185,266
--------------
Net unrealized depreciation .................................................... (130,125,800)
---------------
Net realized and unrealized loss ......................................................... (118,774,620)
---------------
Net decrease in net assets resulting from operations ..................................... $ (26,873,572)
==============
22 See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
Financial Statements (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JANUARY 31, 2002 (UNAUDITED)
AND THE YEAR ENDED JULY 31, 2001
SIX MONTHS YEAR
ENDED ENDED
JANUARY 31, 2002 JULY 31, 2001
-------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income .....................................................$ 91,901,048 $ 266,212,179
Net realized gain (loss) from investments and foreign currency transactions 11,351,180 (11,003,395)
Net unrealized depreciation on investments and translation of assets and
liabilities denominated in foreign currencies ............................ (130,125,800) (176,046,520)
-------------------------------
Net increase (decrease) in net assets resulting from operations ..... (26,873,572) 79,162,264
Distributions to shareholders from net investment income ................... (92,125,216) (268,509,479)
Capital share transactions (Note 2) ........................................ (527,636,037) 480,038,146
-------------------------------
Net increase (decrease) in net assets ............................... (646,634,825) 290,690,931
Net assets:
Beginning of period ........................................................ 2,832,187,660 2,541,496,729
===============================
End of period ..............................................................$2,185,552,835 $2,832,187,660
===============================
Undistributed net investment income included in net assets:
End of period ..............................................................$ (1,580,403) $ (1,298,001)
===============================
See notes to financial statements. 23
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Floating Rate Trust (the Fund) is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end, continuously offered
investment company. The Fund seeks current income and preservation of capital.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION:
The Fund invests primarily in senior secured corporate loans and senior secured
debt that meet credit standards established by Franklin Advisers, Inc. The Fund
values its securities based on quotations provided by banks, broker/dealers or
pricing services experienced in such matters. Restricted securities and
securities for which market quotations are not readily available are valued at
fair value as determined by management in accordance with procedures established
by the Board of Trustees.
B. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollars
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
C. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Discount from
securities is amortized on a yield to maturity basis. Facility fees received are
recognized as income over the expected term of the loan. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
E. ORGANIZATION COSTS:
Organization costs are amortized on a straight-line basis over five years.
24
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements (unaudited) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
F. 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 expense during the reporting period. Actual results could differ from those
estimates.
G. LINE OF CREDIT:
During the period ended January 31, 2002, the Fund borrowed $100 million under
various credit facilities and paid $122,757 in interest and commitment fee
expenses.
On December 21, 2001, the Fund terminated all existing credit facilities and
entered into, along with certain other Franklin Templeton Funds, a $200 million
senior unsecured credit facility for the purpose of funding shareholder
redemptions. The termination date of this agreement is December 20, 2002.
Interest expense is calculated on the Fund's borrowings at market rates.
Commitment fees are allocated amongst the participating funds based on the
relative proportion of net assets of each fund and are accrued at a rate of .09%
per year. At January 31, 2002, the Fund had not utilized this credit facility.
H. AUDIT GUIDE:
In November 2000, a revised AICPA Audit and Accounting Guide, Audits of
Investment Companies, was issued, and is effective for fiscal years beginning
after December 15, 2000. The revised Guide requires the Fund to amortize all
premium and discount on fixed-income securities. Such amortization is included
in net investment income but did not impact the net assets or the distributions
of the Fund. Prior to August 1, 2001, premiums on fixed income securities were
included in realized gains and losses. The cumulative effect of this accounting
change resulted in a reduction of $58,234 in the recorded cost of investments
and a corresponding increase in net unrealized appreciation.
The effect of this change for the period ended January 31, 2002 was to decrease
net investment income by $59,746, increase unrealized gains by $34,033, and
increase realized gains by $25,724. The statement of changes in net assets and
the financial highlights for prior periods have not been restated to reflect
this change in accounting policy.
2. SHARES OF BENEFICIAL INTEREST
The Fund may, on a quarterly basis, make tender offers at net asset value for
the repurchase of a portion of the common shares outstanding. The price will be
established as of the close of business on the day the tender offer ends. An
early withdrawal charge may be imposed on shares offered for tender which have
been held for less than twelve months.
25
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements (unaudited) (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST (CONT.)
At January 31, 2002, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Fund's shares were as follows:
PERIOD ENDED YEAR ENDED
JANUARY 31, 2002 JULY 31, 2001
------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------
Shares sold .................................... 16,520,350 $ 149,078,831 135,483,175 $ 1,307,595,804
Shares issued in reinvestment of distributions . 6,625,895 59,201,766 19,247,577 184,070,432
Shares redeemed ................................ (82,739,020) (735,916,634) (106,217,953) (1,011,628,090)
------------------------------------------------------------
Net increase (decrease) ........................ (59,592,775) $(527,636,037) 48,512,799 $ 480,038,146
============================================================
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Fund are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc.
(Distributors), Franklin Templeton Services, LLC (FT Services) and
Franklin/Templeton Investor Services, LLC (Investor Services), the Fund's
investment manager, principal underwriter, administrative manager and transfer
agent, respectively.
The Fund pays an investment management fee to Advisers of .80% per year of the
average daily net assets of the Fund.
Management fees were reduced on assets invested in the Sweep Money Fund.
Distributors received contingent deferred sales charges for the period of
$864,712.
The Fund pays an administrative fee to FT Services based on the net assets of
the Fund as follows:
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
---------------------------------------------------------------------
.150% First $200 million
.135% Over $200 million, up to and including $700 million
.100% Over $700 million, up to and including $1.2 billion
.075% In excess of $1.2 billion
The Fund pays a transfer agent fee to Investor Services of .40% per year of the
average daily net assets of the Fund.
4. INCOME TAXES
At January 31, 2002, the unrealized depreciation based on the cost of
investments for income tax purposes of $2,601,169,950 was as follows:
Unrealized appreciation .................... $ 25,897,647
Unrealized depreciation .................... (358,717,100)
--------------
Net unrealized depreciation ................ $(332,819,453)
==============
26
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements (unaudited) (CONTINUED)
4. INCOME TAXES (CONT.)
At July 31, 2001, the Fund had tax basis capital losses of $4,581,379 which may
be carried over to offset future capital gains. Such losses expire in 2008.
At July 31, 2001, the Fund has deferred capital losses occurring subsequent to
October 31, 2000 of $2,231,923. For tax purposes, such losses will be reflected
in the year ending July 31, 2002.
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of defaulted securities, foreign currency
transactions, and bond premiums.
Net realized capital losses differ for financial statement and tax purposes
primarily due to differing treatment of wash sales, foreign currency
transactions, and bond premiums.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended January 31, 2002 aggregated $702,869,234 and $1,185,559,917,
respectively.
6. CREDIT RISK AND DEFAULTED SECURITIES
The Fund has 6.05% of its portfolio invested in below investment grade and
comparable quality unrated high yield securities, which tend to be more
sensitive to economic conditions rather than higher rated securities. At January
31, 2002, the Fund held defaulted securities with a value aggregating
$189,145,791 representing 8.65% of the Fund's net assets. For information as to
specific securities, see the accompanying Statement of Investments.
For financial reporting purposes, the Fund discontinues accruing income on
defaulted bonds and provides an estimate for losses on interest receivable.
7. RESTRICTED SECURITIES
The fund may purchase securities through a private offering that generally
cannot be resold to the public without prior registration under the Securities
Act of 1933. The costs of registering such securities are paid by the issuer. At
January 31, 2002, the Fund held one restricted security as follows:
ACQUISITION
SHARES ISSUER DATE COST VALUE
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72,960 Rivus Internet Group Inc. ................ 5/10/00 $18,240 $--
27
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