UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08271
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FRANKLIN FLOATING RATE TRUST
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(Exact name of registrant as specified in charter)
ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)
MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
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Date of fiscal year end: 07/31
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Date of reporting period: 1/31/05
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ITEM 1. REPORTS TO STOCKHOLDERS.
JANUARY 31, 2005
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SEMIANNUAL REPORT AND SHAREHOLDER LETTER | INCOME
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WANT TO RECEIVE
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FRANKLIN
FLOATING RATE TRUST Eligible shareholders can
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franklintempleton.com.
See inside for details.
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[LOGO](R)
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
FRANKLIN o Templeton o Mutual Series
FRANKLIN TEMPLETON INVESTMENTS
GAIN FROM OUR PERSPECTIVE
Franklin Templeton's distinct multi-manager
structure combines the specialized expertise of
three world-class investment management
groups-- Franklin, Templeton and Mutual Series.
SPECIALIZED EXPERTISE Each of our portfolio management groups
operates autonomously, relying on its own
research and staying true to the unique
investment disciplines that underlie its
success.
FRANKLIN. Founded in 1947, Franklin is a
recognized leader in fixed income investing and
also brings expertise in growth- and
value-style U.S. equity investing.
TEMPLETON. Founded in 1940, Templeton pioneered
international investing and, in 1954, launched
what has become the industry's oldest global
fund. Today, with research offices in over 25
countries, they offer investors the broadest
global reach in the industry.
MUTUAL SERIES. Founded in 1949, Mutual Series
is dedicated to a unique style of value
investing, searching aggressively for
opportunity among undervalued stocks, arbitrage
situations and distressed companies.
TRUE DIVERSIFICATION Because our management groups work
independently and adhere to distinctly
different investment approaches, Franklin,
Templeton and Mutual Series funds typically
have a low overlap of securities. That's why
our funds can be used to build truly
diversified portfolios covering every major
asset class.
RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with exceptional
risk-adjusted returns over the long term, as
well as the reliable account services that have
helped us become one of the most trusted names
in financial services.
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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[GRAPHIC OMITTED]
Not part of the semiannual report
CONTENTS
SHAREHOLDER LETTER ........................................................ 1
SEMIANNUAL REPORT
Franklin Floating Rate Trust .............................................. 3
Performance Summary ....................................................... 8
Your Fund's Expenses ...................................................... 10
Financial Highlights and Statement of Investments ......................... 12
Financial Statements ...................................................... 29
Notes to Financial Statements ............................................. 32
Shareholder Information ................................................... 43
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SEMIANNUAL REPORT
FRANKLIN FLOATING RATE TRUST
YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Floating Rate Trust seeks 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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PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL
1-800/342-5236 FOR MOST RECENT MONTH-END PERFORMANCE.
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PORTFOLIO BREAKDOWN
Based on Total Net Assets as of 1/31/05
Senior Floating Rate Interests 89.8%
Corporate Bonds 1.5%
Equities 0.7%
Asset-Backed Securities 0.4%
Short-Term Investments & Other Net Assets 7.6%
We are pleased to bring you Franklin Floating Rate Trust's semiannual report for
the period ended January 31, 2005.
PERFORMANCE OVERVIEW
Franklin Floating Rate Trust posted a +2.08% cumulative total return for the six
months ended January 31, 2004, as shown in the Performance Summary beginning on
page 8. The share price, as measured by net asset value (NAV), rose from $8.98
per share on July 31, 2004, to $9.00 at period-end. The Fund made dividend
distributions totaling $0.165184 per share.(1) You can find the Fund's long-term
performance data in the Performance Summary.
ECONOMIC AND MARKET OVERVIEW
During the six months ended January 31, 2005, the domestic economy expanded
steadily across most industries, sectors and regions. Gross domestic product
(GDP) rose at annualized rates of 4.0% and 3.8% during the third and fourth
quarters of 2004. Major contributors to GDP during fourth quarter 2004 were
personal spending, capital equipment spending, inventory investment and
government spending. However, the trade deficit dragged on economic growth as
the real deficit widened to an annualized $631.9 billion in fourth quarter 2004,
from $583.2 billion in the third quarter.(2)
(1) 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. All Fund distributions
will vary depending upon current market conditions, and past distributions are
not indicative of future trends.
(2) Source: Bureau of Economic Analysis.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 13.
Semiannual Report | 3
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WHAT ARE SYNDICATED BANK LOANS?
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Syndicated bank loans are typically 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.
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The labor market firmed and unemployment dropped from 5.5% to 5.2% during the
reporting period.(3) An improving business and employment environment
contributed to increased consumer confidence. However, consumers still held an
uncertain outlook for future income and business conditions.
The core inflation rate rose to 2.3% for the 12 months ended January 31, 2005.
Including volatile food and energy costs, the inflation rate was 3.0%. Aiming to
keep inflation tame, the Federal Reserve Board (Fed) raised the federal funds
target rate from 1.25% to 2.25%, the highest level in more than three years. The
Fed said it will respond to changes in economic prospects as needed to fulfill
its obligation to maintain price stability.
Despite a generally robust economy and improving corporate fundamentals,
investors had to digest a wide range of information during the six-month period,
including rising inflation, the dollar's value, a contentious presidential
election and ongoing concerns about terrorism, war and reconstruction in Iraq.
Disappointing earnings from a number of blue chip companies applied downward
pressure, but initial public offering (IPO) activity was strong, and investor
sentiment improved later in the period despite the mixed signals. After U.S.
elections concluded, the markets enjoyed a strong rally. The blue chip stocks of
the Dow Jones Industrial Average gained 4.57% for the period under review, while
the broader Standard & Poor's 500 Composite Index (S&P 500) rose 8.15%, and the
technology-heavy NASDAQ Composite Index increased 9.60%.(4)
Similar to the rise in the federal funds target rate during the period under
review, the three-month London InterBank Offered Rate (LIBOR) also increased
from 1.69% to 2.75%. In this rising interest rate environment, the bank loan
market remained strong, buoyed by solid demand and adequate supply, leading to
robust new issue volume. Fueled by vigorous merger and acquisition activity,
many leveraged buyout transactions (LBOs) occurred, where equity sponsor groups
borrowed large amounts of capital looking to take over companies.
Demand exceeded supply in the marketplace, which favored issuers, and allowed
them ready access to capital. An expanding institutional investor base as well
as renewed appetite from traditional banks boosted demand. Issuers also
benefited from tightening loan spreads, with many issuers able to reprice their
loans at
(3) Source: Bureau of Labor Statistics.
(4) Source: Standard & Poor's Micropal. The Dow Jones Industrial Average is
price weighted based on the average market price of 30 blue chip stocks of
companies that are generally industry leaders. The S&P 500 consists of 500
stocks chosen for market size, liquidity and industry group representation. Each
stock's weight in the index is proportionate to its market value. The S&P 500 is
one of the most widely used benchmarks of U.S. equity performance. The NASDAQ
Composite Index measures all domestic and international common stocks listed on
The NASDAQ Stock Market. The index is market value weighted and includes over
3,000 companies.
4 | Semiannual Report
lower interest rates. During the period, companies incurred additional debt to
finance future growth, acquisition opportunities and capital expenditures. Other
issuers were able to take out loans to pay dividends to their equity sponsors,
and some were able to raise financing in the form of riskier second-lien loans,
where their loans are subordinated to other lenders who have a first claim on
assets.
Supported by an improving economy, default rates remained low by historical
measures during the reporting period. Investors seemed to take comfort in the
low default rate environment and the favorable outlook for corporate loan
fundamentals. They also seemed to find comfort in the likelihood that short-term
interest rates would continue to rise in 2005, and that corporate loans may
allow them a way to minimize interest-rate risk by shortening duration.
INVESTMENT STRATEGY
We rely on independent and proprietary credit analysis to select corporate loan
and corporate debt securities that meet our rigorous investment criteria. We
seek to invest in companies with the ability to generate substantial free cash
flow, that are in industries with strong barriers to entry, and that possess
significant asset coverage and collateral for our debt. We also prefer companies
with dominant market shares, strong management teams and stable growth
prospects, according to our analysis.
MANAGER'S DISCUSSION
Although loan spreads tightened during the six-month period, short-term interest
rates increased, which helped to improve the Fund's yield during the period. In
addition, many of our loans also appreciated in price, which also improved the
Fund's share price.
The Fund remained selective in its loan selection process, focusing on sectors
and companies that fit our investment strategy. Our investments in Novelis,
Constellation Brands, Texas Genco and Venetian Casino Resorts all fit this
strategy. During the period, these loans performed well, generating income and
even appreciating in price, following our purchase of these credits.
We invested in Novelis because it is the world's leading aluminum-rolled
products producer. It is one of the largest producers in Europe, South America,
the Asia-Pacific region and North America. With operations on four continents
comprising operating facilities in 12 countries, Novelis is the only company of
its size and scope focused solely on aluminum-rolled products markets.
TOP 10 SECTORS/INDUSTRIES
1/31/05
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% OF TOTAL
NET ASSETS
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Cable & Satellite Television 8.6%
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Movies & Entertainment 5.8%
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Auto Parts: Original Equipment
Manufacturer 4.6%
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Electric Utilities 4.1%
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Broadcasting 3.7%
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Publishing: Books & Magazines 2.4%
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Medical & Nursing Services 2.3%
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Wireless Communications 2.3%
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Miscellaneous Commercial Services 2.2%
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Aerospace & Defense 2.1%
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Semiannual Report | 5
TOP 10 HOLDINGS
1/31/05
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COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
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Adelphia 1.9%
CABLE & SATELLITE TELEVISION
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Tenneco Automotive Inc. 1.2%
AUTO PARTS: ORIGINAL EQUIPMENT
MANUFACTURER
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Regal Cinemas Inc. 1.0%
MOVIES & ENTERTAINMENT
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Allied Waste North America Inc. 1.0%
ENVIRONMENTAL SERVICES
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NTL Investment Holdings 1.0%
CABLE & SATELLITE TELEVISION
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Novelis 1.0%
ALUMINUM
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Constellation Brands Inc. 0.9%
BEVERAGES: ALCOHOLIC
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Solo Cup Co. 0.9%
OTHER CONSUMER SPECIALTIES
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Valor Telecom 0.9%
SPECIALTY TELECOMMUNICATIONS
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UPC Distribution Holdings B.V. 0.9%
CABLE & SATELLITE TELEVISION
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Another market leader we invested in was Constellation Brands, which helped
finance the company's acquisition of Robert Mondavi. Constellation Brands is a
leading international producer and marketer of beverage alcohol brands with a
broad portfolio across wine, spirits and imported beer. The acquisition
broadened the company's product portfolio and improved its market position and
international reach.
The Fund also invested in Texas Genco, one of the country's largest wholesale
power producers. We liked Texas Genco's credit profile, particularly with regard
to its asset coverage, since its primary power plants are pledged to lenders as
collateral. The company has a significant portion of its power contracted out
over the next four years, with the potential for strong, lower-risk cash flows.
Lastly, we invested in Venetian Casino Resorts, which owns the Venetian Casino
located on the Las Vegas strip. The Venetian is directly connected to the Sands
Expo and Convention Center, and is located near the Las Vegas Convention Center.
Trade shows continue to play an increasingly prominent role in driving occupancy
at Las Vegas hotels, and the Venetian is equipped to cater to this demand. Not
only has the company shown strong revenue growth and improved credit statistics,
lenders also have strong asset coverage, with the Venetian's casino and hotel
pledged to lenders as collateral.
However, not all sectors and companies were immune to pressure. During third
quarter 2004, some automotive suppliers faced a number of challenges, including
steel price inflation, lower automobile production and the ending of original
equipment manufacturer (OEM) accelerated-payment programs. As a result, in
October 2004, the Fund decided to sell its small position in Tower Automotive, a
producer of auto body structures, frames and other metal stamped components,
since the company seemed more vulnerable to the sector's challenges. In
anticipation of potential future volatility from the credit, the Fund sold the
position near its original purchase price.
The Fund remained committed to a longer-term strategy of avoiding lower quality
credits with higher default risk, even at the expense of near-term performance.
We continued to focus on a conservative investment strategy that may lessen the
Fund's share price volatility over a credit cycle.
6 | Semiannual Report
Thank you for your continued participation in Franklin Floating Rate Trust. We
look forward to serving your future investment needs.
/s/ Richard S. Hsu
[PHOTO]
Richard S. Hsu, CFA
/s/ Madeline Lam
[PHOTO]
Madeline Lam
Portfolio Managers
Franklin Floating Rate Trust
THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF JANUARY 31, 2005, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE, BUT THE ADVISER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.
DIVIDEND DISTRIBUTIONS*
8/1/04-1/31/05
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MONTH DIVIDEND PER SHARE
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August 2.6474 cents
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September 2.2670 cents
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October 2.6601 cents
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November 3.2534 cents
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December 2.8982 cents
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January 2.7923 cents
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TOTAL 16.5184 CENTS
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* 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. All Fund distributions
will vary depending upon current market conditions, and past distributions are
not indicative of future trends.
Semiannual Report | 7
PERFORMANCE SUMMARY AS OF 1/31/05
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses. Capital
gain distributions are net profits realized from the sale of portfolio
securities. The performance table does not reflect any taxes due on Fund
dividends, capital gain distributions, if any, or any realized gains on the sale
of Fund shares. Total return reflects reinvestment of the Fund's dividends and
capital gain distributions, if any, and any unrealized gains or losses.
PRICE AND DISTRIBUTION INFORMATION
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CHANGE 1/31/05 7/31/04
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Net Asset Value (NAV) +$0.02 $9.00 $8.98
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DISTRIBUTIONS (8/1/04-1/31/05)
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Dividend Income $0.165184
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PERFORMANCE(1)
SHARES REPURCHASED WITHIN 12 MONTHS OF INVESTMENT ARE SUBJECT TO 1% EARLY
WITHDRAWAL CHARGE. CUMULATIVE TOTAL RETURN EXCLUDES THE EARLY WITHDRAWAL CHARGE.
AVERAGE ANNUAL TOTAL RETURNS AND VALUE OF $10,000 INVESTMENT INCLUDE THE EARLY
WITHDRAWAL CHARGE.
6-MONTH 1-YEAR 5-YEAR INCEPTION (10/10/97)
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Cumulative Total Return(2) +2.08% +5.38% +21.80% +42.14%
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Average Annual Total Return(3) +1.08% +4.38% +4.02% +4.93%
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Value of $10,000 Investment(4) $10,108 $10,438 $12,180 $14,214
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Avg. Ann. Total Return (12/31/04)(5) +5.15% +4.11% +4.93%
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Distribution Rate(6) 3.67%
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30-Day Yield(7) 3.38%
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PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU
MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY
DIFFER FROM FIGURES SHOWN.
FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.
8 | Semiannual Report
PERFORMANCE SUMMARY (CONTINUED)
ENDNOTES
FRANKLIN FLOATING RATE TRUST IS A NON-DIVERSIFIED FUND, WHICH MEANS IT CAN BE
MORE SUSCEPTIBLE TO ADVERSE ECONOMIC, POLITICAL AND REGULATORY CHANGES. THE
LOANS IN WHICH THE FUND INVESTS TEND TO BE RATED BELOW INVESTMENT GRADE.
INVESTING IN HIGHER-YIELDING, LOWER-RATED LOANS INVOLVES GREATER RISK OF
DEFAULT, WHICH COULD RESULT IN LOSS OF PRINCIPAL -- A RISK THAT MAY BE
HEIGHTENED IN A SLOWING ECONOMY. BECAUSE THE TIME REQUIRED TO TRADE OR LIQUIDATE
LOANS COULD BE LONGER THAN FOR MOST SECURITIES, THE SECONDARY MARKET FOR THESE
TYPES OF LOANS IS CONSIDERED ILLIQUID. THE FUND IS STRUCTURED AS A CONTINUOUSLY
OFFERED, CLOSED-END FUND AND DOES NOT OFFER DAILY REDEMPTIONS. THE FUND HAS A
FUNDAMENTAL POLICY TO PROVIDE INVESTORS ACCESS TO THEIR MONEY BY MAKING
QUARTERLY TENDER OFFERS FOR 5%-25% OF THE FUND'S OUTSTANDING SHARES. HOWEVER, IN
UNUSUAL CIRCUMSTANCES, THE FUND MAY SUSPEND OR POSTPONE A TENDER OFFER SUBJECT
TO APPROVAL BY THE FUND'S BOARD OF TRUSTEES. THE FUND'S PROSPECTUS ALSO INCLUDES
A DESCRIPTION OF THE MAIN INVESTMENT RISKS.
1. Past expense reductions by the Fund's manager increased the Fund's total
returns. If the manager had not taken this action, the Fund's total returns
would have been lower.
2. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the early withdrawal charge.
3. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the early withdrawal
charge. Six-month return has not been annualized.
4. These figures represent the value of a hypothetical $10,000 investment in the
Fund over the periods indicated and include the early withdrawal charge.
5. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.
6. The distribution rate is based on an annualization of the 2.7923 cent per
share January dividend and the $9.00 NAV on 1/31/05.
7. Yield is based on the earnings of the Fund's portfolio for the 30 days ended
1/31/05.
Semiannual Report | 9
YOUR FUND'S EXPENSES
As a Fund shareholder, you can incur two types of costs:
o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and
o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.
The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.
ACTUAL FUND EXPENSES
The first line (Actual) for each share class listed in the table below provides
actual account values and expenses. The "Ending Account Value" is derived from
the Fund's actual return, which includes the effect of Fund expenses.
You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:
1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.
2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.
In this illustration, the estimated expenses paid this period are $64.50.
HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS
Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.
10 | Semiannual Report
YOUR FUND'S EXPENSES (CONTINUED)
PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.
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BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 7/31/04 VALUE 1/31/05 PERIOD* 7/31/04-1/31/05
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Actual $1,000 $1,021 $6.83
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Hypothetical (5% return before expenses) $1,000 $1,018 $6.82
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* Expenses are equal to the annualized expense ratio of 1.34%, multiplied by the
average account value over the period, multiplied by 184/365 to reflect the
one-half year period.
Semiannual Report | 11
FRANKLIN FLOATING RATE TRUST
FINANCIAL HIGHLIGHTS
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SIX MONTHS ENDED
JANUARY 31, 2005 YEAR ENDED JULY 31,
(UNAUDITED) 2004 2003 2002 2001 2000
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period . $ 8.98 $ 8.42 $ 8.30 $ 9.24 $ 9.85 $ 9.98
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Income from investment operations:
Net investment income ............... 142 .266 .330 .568(c) .875 .839
Net realized and unrealized gains
(losses) ........................... 043 .572 .179 (.927)(c) (.606) (.130)
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Total from investment operations ..... 185 .838 .509 (.359) .269 .709
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Less distributions from net investment
income .............................. (.165) (.278) (.389) (.581) (.879) (.839)
----------------------------------------------------------------------------------------
Net asset value, end of period ....... $ 9.00 $ 8.98 $ 8.42 $ 8.30 $ 9.24 $ 9.85
========================================================================================
Total return (a) ..................... 2.08% 9.95% 6.36% (3.95)% 2.80% 7.39%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .... $1,301,620 $1,257,676 $1,160,979 $1,779,930 $2,832,188 $2,541,497
Ratios to average net assets:
Expenses ............................ 1.34%(b) 1.36% 1.35% 1.32% 1.36% 1.35%
Net investment income ............... 3.14%(b) 3.02% 4.26% 6.58%(c) 9.07% 8.51%
Portfolio turnover rate .............. 34.93% 86.50% 55.96% 62.21% 84.15% 66.27%
(a) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.
(b) Annualized.
(c) Effective August 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing
all premium and discount on fixed-income securities, as required. The
effect of this change was as follows:
Net investment income per share ................................... $(.008)
Net realized and unrealized gains (losses) per share .............. .008
Ratio of net investment income to average net assets .............. .07%
Per share data and ratios for prior periods have not been restated to reflect
this change in accounting policy.
12 | See notes to financial statements. | Semiannual Report
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------------------
BONDS 1.5%
BROADCASTING 1.0%
Paxson Communications Corp., senior secured note, 144A, FRN, 5.41%,
1/15/10 .............................................................. United States $10,450,000 $10,606,750
Comcorp Holdings Inc., PIK, 12.50%, 6/04/10 ........................... United States 2,858,912 2,129,889
-----------
12,736,639
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FINANCIAL CONGLOMERATES .1%
Finova Group Inc., 7.50%, 11/15/09 .................................... United States 4,077,620 1,896,094
-----------
STEEL .4%
Ispat Inland ULC, senior secured note, FRN, 9.31%, 4/01/10 ............ United States 5,000,000 5,512,500
-----------
TOTAL BONDS (COST $20,773,160) ......................................... 20,145,233
-----------
(a) SENIOR FLOATING RATE INTERESTS 89.8%
ADVERTISING/MARKETING SERVICES .3%
Adams Outdoor Advertising Inc.,
Second Lien Term Loan, 6.17%, 4/05/12 ............................... United States 1,000,000 1,018,750
Term Loan, 4.92%, 10/05/11 .......................................... United States 2,985,000 3,027,909
-----------
4,046,659
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AEROSPACE & DEFENSE 2.1%
Anteon International Corp., Term Loan B, 4.31%, 12/19/10 .............. United States 2,970,056 3,009,968
CACI International Inc., Term Loan B, 3.95%, 4/23/11 .................. United States 992,500 1,005,526
DRS Technologies Inc., Term Loan B, 3.74 - 4.39%, 11/04/10 ............ United States 1,508,898 1,524,460
ILC Industries Inc.,
First Lien Term Loan, 5.40%, 8/04/10 ................................ United States 990,000 1,007,345
Second Lien Term Loan, 8.15%, 2/05/11 ............................... United States 500,000 505,850
K&F Acquisition Inc., Term Loan B, 4.95 - 6.75%, 11/18/12 ............. United States 975,000 991,860
Standard Aero Holdings Inc., Term Loan B, 4.969 - 5.05%, 8/24/12 .. United States 1,227,692 1,247,259
Titan Corp., Term Loan B, 5.37 - 7.25%, 6/30/09 ....................... United States 10,229,793 10,376,846
TransDigm Inc., Term Loan B, 4.67%, 7/22/10 ........................... United States 990,019 1,004,560
United Defense Industries Inc., Term Loan B, 4.56 - 4.58%, 8/13/09 United States 761,483 771,319
Vought Aircraft Industries Inc.,
L/C Term Loan, 5.02%, 12/22/10 ...................................... United States 1,000,000 1,016,250
Term Loan B, 5.08%, 12/22/11 ........................................ United States 5,000,000 5,081,250
-----------
27,542,493
-----------
AIRLINES .2%
Northwest Airlines Inc., Term Loan B, 9.10%, 11/23/10 ................. United States 2,500,000 2,557,500
-----------
ALUMINUM 1.0%
Novelis Corp., U.S. Term Loan, 4.125%, 12/30/11 ....................... United States 7,805,769 7,876,240
Novelis Inc., CAD Term Loan, 4.125%, 12/30/11 ......................... Canada 4,494,231 4,536,054
-----------
12,412,294
-----------
APPAREL/FOOTWEAR .2%
St. John Knits Inc., Term Loan B, 6.063%, 7/31/07 ..................... United States 2,019,426 2,040,882
-----------
Semiannual Report | 13
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
-----------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
-----------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
AUTO PARTS: ORIGINAL EQUIPMENT MANUFACTURER 4.6%
Accuride Corp., Term Loan B, 4.875%, 1/31/12 .................... United States $ 1,500,000 $ 1,515,525
Cooper Standard Automotive Inc.,
Term Loan B, 4.75%, 12/23/11 .................................. United States 2,012,500 2,034,301
Term Loan C, 4.75%, 12/23/11 .................................. United States 3,237,500 3,272,572
Dayco Products LLC, Term Loan B, 5.12 - 5.77%, 6/18/11 .......... United States 5,273,500 5,359,194
Exide Technologies,
USD EURO Borrower, 5.875 - 6.125%, 5/04/10 .................... United States 1,000,000 975,000
USD US Borrower, 5.875 - 6.125%, 5/04/10 ...................... United States 1,000,000 975,000
GenCorp Inc.,
L/C Term Loan, 5.58%, 11/30/10 ................................ United States 1,275,000 1,294,922
Term Loan B, 5.58%, 11/30/10 .................................. United States 425,000 432,703
Grand Vehicle Works, Term Loan B, 5.56 - 5.58%, 7/23/10 ......... United States 1,243,750 1,218,875
Hayes Lemmerz, Term Loan, 5.92 - 6.69%, 6/03/09 ................. United States 8,545,000 8,685,394
Hilite International Inc., Term Loan B, 6.72 - 6.986%, 3/31/09 .. United States 782,697 785,374
Key Plastics LLC and Key Safety, Inc.
First Lien Term Loan, 4.78 - 5.09%, 7/31/10 ................... United States 2,402,841 2,444,891
Term Loan C, 8.15 - 8.33%, 7/31/11 ............................ United States 2,000,000 2,015,000
Metaldyne Corp., Term Loan D, 7.06%, 12/31/09 ................... United States 1,301,148 1,303,858
Plastech Engineered Products Inc., First Lien Term Loan, 5.31%,
3/11/10 ........................................................ United States 1,453,448 1,463,441
Progressive Moulded Products, Term Loan B, 4.844 - 5.23%, 8/13/11 Canada 997,500 1,000,617
Tenneco Automotive Inc.,
L/C Term Loan, 5.40%, 12/12/10 ................................ United States 4,655,172 4,746,335
Term Loan B, 5.35%, 12/12/10 .................................. United States 10,241,379 10,441,936
TRW Automotive Inc.,
Term Loan B, 4.375%, 10/31/10 ................................. United States 7,500,000 7,523,438
Term Loan E, 3.875%, 10/31/10 ................................. United States 2,000,000 2,009,376
-----------
59,497,752
-----------
AUTOMOTIVE AFTERMARKET .4%
Affinia Group Inc., Term Loan B, 5.44%, 11/30/11 ................ United States 4,000,000 4,068,000
United Components Inc., Term Loan C, 4.78%, 6/30/10 ............. United States 773,333 784,114
-----------
4,852,114
-----------
BEVERAGES: ALCOHOLIC 1.0%
Constellation Brands Inc., Term Loan B, 6.00%, 12/22/11 ......... United States 12,000,000 12,165,000
Southern Wine & Spirits of America Inc., Term Loan B, 4.81%,
7/02/08 ........................................................ United States 987,388 1,002,425
-----------
13,167,425
-----------
BEVERAGES: NON-ALCOHOLIC .4%
Dr. Pepper Bottling Co. of Texas, Term Loan, 4.47 - 4.754%,
12/18/10 ....................................................... United States 3,138,134 3,191,482
Sunny Delight Beverages Co., First Lien Term Loan, 6.59 - 6.79%,
8/23/10 ........................................................ United States 2,000,000 1,954,860
-----------
5,146,342
-----------
14 | Semiannual Report
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
BROADCASTING 2.7%
Alliance Atlantis Communications Inc., Term Loan B, 4.294%,
12/17/11 ...................................................... United States $ 3,100,000 $ 3,138,750
Cumulus Media Inc.,
Term Loan E, 4.25%, 3/28/10 ................................. United States 1,393,000 1,415,636
Term Loan F, 4.063%, 3/28/10 ................................ United States 3,740,625 3,757,768
Emmis Operating Co., Term Loan B, 4.17%, 11/10/11 .............. United States 8,250,000 8,346,822
Entravision Communications Corp.,
Multi-Draw Term Loan, 4.31%, 2/24/12 ........................ United States 1,500,000 1,516,563
Term Loan B, 4.31%, 2/24/12 ................................. United States 5,000,000 5,055,210
Gray Television Inc., Term Loan C, 4.30 - 4.31%, 12/31/10 ...... United States 1,750,000 1,769,477
Mission Broadcasting Inc., Term Loan D, 4.31%, 12/31/10 ........ United States 3,494,626 3,509,915
NEP Supershooters LP, First Lien Term Loan, 6.56%, 2/03/11 ..... United States 1,496,250 1,520,564
Nexstar Finance LLC, Term Loan D, 4.31%, 12/31/10 .............. United States 1,908,249 1,923,754
Sinclair Broadcasting,
Term Loan A, 4.33%, 6/30/09 ................................. United States 1,500,000 1,507,032
Term Loan C, 4.33%, 12/31/09 ................................ United States 1,500,000 1,514,063
-----------
34,975,554
-----------
BUILDING PRODUCTS 1.6%
Atrium Cos. Inc., Term Loan, 5.20 - 5.30%, 12/15/11 ............ United States 1,000,000 1,013,333
Building Materials Holding Corp., Term Loan B, 5.313%, 8/13/10 . United States 985,000 992,387
Headwaters Inc., Term Loan B, 5.75 - 5.92%, 4/30/11 ............ United States 4,609,375 4,675,635
Masonite International Corp.,
Term Loan C, 5.188 - 5.375%, 8/31/08 ........................ United States 2,825,971 2,832,595
Term Loan C2, 4.688 - 4.875%, 8/31/08 ....................... United States 992,491 992,442
NCI Building Systems Inc., Term Loan B, 4.39%, 6/07/10 ......... United States 3,855,963 3,908,982
Norcraft Cos. LP, Term Loan, 5.58%, 10/21/09 ................... United States 611,111 615,016
Nortek Inc., Term Loan, 4.62 - 6.75%, 8/25/11 .................. United States 3,990,000 4,060,655
Ply Gem Industries Inc., Incremental Term Loan, 4.59%, 2/12/11 . United States 1,000,000 1,012,500
-----------
20,103,545
-----------
CABLE/SATELLITE TELEVISION 8.6%
Bresnan Broadband Holdings LLC,
Term Loan A, 5.74 - 6.48%, 3/31/10 .......................... United States 1,250,000 1,265,235
Term Loan B, 5.94 - 6.14%, 9/30/10 .......................... United States 1,000,000 1,015,781
(b),(h) Century Cable (Adelphia),
Discretionary Term Loan, 7.25%, 12/31/09 .................... United States 3,000,000 2,981,562
Term Loan, 7.25%, 6/30/09 ................................... United States 1,000,000 994,375
Charter Communications Operating LLC, Term Loan B, 5.89 - 5.98%,
4/27/11 ....................................................... United States 9,452,500 9,435,618
DirecTV Holdings LLC, Term Loan, 4.45 - 4.48%, 3/06/10 ......... United States 9,085,102 9,209,841
Grapeclose Ltd. (Inmarsat),
Term Loan B, 5.502%, 10/10/10 ............................... United Kingdom 5,271,912 5,300,154
Term Loan C, 6.002%, 10/10/11 ............................... United Kingdom 5,284,303 5,331,296
Insight Midwest Holdings LLC,
Additional Term Loan, 5.438%, 12/31/09 ...................... United States 3,960,000 4,026,825
Term Loan B, 5.438%, 12/31/09 ............................... United States 2,970,000 3,020,119
Semiannual Report | 15
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
CABLE/SATELLITE TELEVISION (CONT.)
(i) Intelsat (Bermuda) Ltd., Senior Term Loan Facility, 4.375%, 7/31/12 .. Bermuda $ 857,143 $ 872,143
Mediacom Broadband Inc., Term Loan B1, 4.89 - 5.29%, 9/12/10 ......... United States 2,985,000 3,025,486
Mediacom LLC Group, Term Loan B, 4.47 - 5.16%, 4/01/13 ............... United States 5,000,000 5,022,320
New Skies Satellites B.V., Term Loan, 5.25 - 5.438%, 5/02/11 ......... Netherlands 7,000,000 7,075,831
NTL Investment Holdings, Term Loan B, 5.204%, 5/13/12 ................ United Kingdom 12,500,000 12,625,000
(b),(h) Olympus Cable Holdings (Adelphia), Term Loan B, 7.25%, 9/30/10 ....... United States 2,000,000 1,988,906
Panamsat Corp., Term Loan B, 5.25%, 8/01/11 .......................... United States 5,954,819 6,007,781
Stratos Global Corp., Term Loan B, 4.81%, 11/30/10 ................... United States 1,000,000 1,011,250
(b),(h) UCA-HHC (Adelphia), Term Loan, 6.50%, 3/31/08 ........................ United States 20,935,000 20,662,845
UPC Distribution Holdings B.V., Term Loan C2, 8.09%, 3/31/09 ......... Netherlands 11,385,000 11,477,503
------------
112,349,871
------------
CASINOS/GAMING 1.8%
Alliance Gaming Corp., Term Loan B, 5.65%, 8/22/09 ................... United States 1,809,326 1,805,635
Ameristar Casinos Inc.,
Term Loan B, 4.625%, 12/06/06 ..................................... United States 1,000,000 1,015,417
Term Loan B1, 4.625%, 12/20/06 .................................... United States 2,655,911 2,696,857
Boyd Gaming Corp., Term Loan B, 3.92 - 4.53%, 6/30/11 ................ United States 1,990,000 2,017,985
Global Cash Access LLC, Term Loan, 5.33%, 3/10/10 .................... United States 935,577 951,365
Greektown Casinos LLC, Term Loan D, 5.69 - 6.078%, 12/31/05 .......... United States 4,323,358 4,366,591
(c) Herbst Gaming Inc., Term Loan B, 4.89%, 1/04/11 ...................... United States 1,500,000 1,523,907
Isle of Capri, Term Loan B, 4.45 - 4.659%, 4/25/08 ................... United States 822,500 826,304
Isle of Capri Black Hawk LLC, Term Loan C, 5.16 - 5.61%, 12/31/07 .... United States 984,938 986,494
Marina District Finance Co. Inc., Term Loan B, 3.93%, 10/14/11 ....... United States 5,133,333 5,185,735
Penn National Gaming Inc., Term Loan D, 5.06 - 5.08%, 3/03/09 ........ United States 1,633,409 1,642,295
------------
23,018,585
------------
CATALOG/SPECIALTY DISTRIBUTION .1%
Affinity Group Inc.,
Term Loan B1, 5.474 - 5.53%, 6/17/09 .............................. United States 229,694 232,278
Term Loan B2, 5.474%, 6/17/09 ..................................... United States 574,235 580,695
Oriental Trading Co. Inc., Term Loan B, 5.375%, 7/29/10 .............. United States 914,732 919,687
------------
1,732,660
------------
CHEMICALS: MAJOR DIVERSIFIED 1.8%
BCP Crystal US Holdings Corp., Term Loan B, 5.06 - 5.126%,
4/06/11 ............................................................. United States 6,819,375 6,947,239
Huntsman International LLC, Term Loan B, 5.00%, 12/31/10 ............. United States 7,655,847 7,776,426
Huntsman LLC, Term Loan B, 6.05%, 3/31/10 ............................ United States 1,200,000 1,221,300
Invista Canada Co., Term Loan B2, 5.313%, 4/29/11 .................... Canada 2,428,706 2,452,653
Invista SARL, Term Loan B1, 5.313%, 4/29/11 .......................... Luxembourg 5,383,059 5,483,991
------------
23,881,609
------------
CHEMICALS: SPECIALTY 1.4%
Brenntag, Term Loan B2, 4.73%, 2/27/12 ............................... United States 1,500,000 1,514,850
Ineos Group Ltd., Term Loan C, 5.67%, 6/30/09 ........................ United States 2,154,834 2,175,641
Nalco Co., Term Loan B, 4.52 - 4.92%, 11/04/10 ....................... United States 8,659,533 8,790,023
16 | Semiannual Report
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
CHEMICALS: SPECIALTY (CONT.)
Rockwood Specialties Group Inc., Term Loan D, 4.95%, 7/30/11 ..... United States $ 5,300,000 $ 5,365,778
Westlake Chemical Corp., Term Loan B, 4.45 - 4.65%, 7/31/10 ...... United States 335,000 339,332
------------
18,185,624
------------
COAL .3%
CONSOL Energy Inc., Tranche B Credit-Linked Deposits L/C Facility,
4.78%, 6/08/10 .................................................. United States 1,000,000 1,013,900
Foundation Coal, Term Loan B, 4.56 - 4.78%, 7/30/11 .............. United States 2,170,745 2,204,120
International Coal Group LLC, Term Loan B, 5.36%, 11/09/10 ....... United States 997,500 1,013,709
------------
4,231,729
------------
COMMERCIAL PRINTING/FORMS .1%
American Reprographics, Term Loan B, 7.25%, 6/17/09 .............. United States 948,000 959,850
------------
CONSTRUCTION MATERIALS .2%
St. Marys Cement Inc., Term Loan B, 4.56%, 12/04/09 .............. Canada 2,970,000 3,005,269
------------
CONSUMER SUNDRIES .6%
Central Garden & Pet Co., Term Loan, 4.328%, 5/14/09 ............. United States 1,970,000 1,984,775
Del Laboratories Inc., Term Loan B, 6.50%, 7/15/11 ............... United States 1,250,000 1,267,187
NBTY Inc., Term Loan C, 4.375%, 7/22/09 .......................... United States 663,885 671,546
United Industries Corp.,
Second Lien Term Loan, 8.75%, 10/31/11 ......................... United States 1,144,250 1,147,111
Term Loan B, 6.75%, 4/30/11 .................................... United States 2,980,771 2,988,223
------------
8,058,842
------------
CONTAINERS/PACKAGING 1.4%
ACI Operations Property Ltd., Term Loan A, 4.95%, 4/01/07 ........ Australia 684,735 697,180
Berry Plastics Corp., Term Loan C, 4.22%, 7/22/10 ................ United States 1,414,706 1,436,517
Graham Packaging Co.,
First Lien Term Loan, 5.00 - 5.125%, 10/07/11 .................. United States 8,000,000 8,119,288
Second Lien Term Loan, 6.813%, 4/07/12 ......................... United States 1,000,000 1,028,375
Graphic Packaging International Corp., Term Loan C, 5.06 - 5.44%,
8/08/10 ......................................................... United States 3,650,194 3,720,752
Greif Brothers Corp., Term Loan B, 4.23%, 8/15/09 ................ United States 195,434 197,713
Kerr Group Inc., Term Loan B, 6.06 - 7.75%, 8/11/10 .............. United States 1,717,487 1,737,668
Owens-Brockway Glass Container Inc., Term Loan B, 5.23%, 4/01/08 . United States 1,619,836 1,649,195
------------
18,586,688
------------
DATA PROCESSING SERVICES .3%
InfoUSA Inc.,
Term Loan A, 5.06%, 3/25/09 .................................... United States 875,000 885,106
Term Loan B, 7.00%, 3/30/09 .................................... United States 2,610,000 2,640,146
------------
3,525,252
------------
Semiannual Report | 17
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
DRUG STORE CHAINS 1.2%
The Jean Coutu Group (PJC) Inc., Term Loan B, 4.875 - 5.00%,
7/28/11 ......................................................... Canada $ 9,476,250 $ 9,627,283
Rite Aid Corp., Term Loan, 4.17 - 4.31%, 8/23/09 ................. United States 5,985,000 6,035,501
------------
15,662,784
------------
ELECTRIC UTILITIES 4.1%
AES Corp., Term Loan B, 4.25 - 4.44%, 4/30/08 .................... United States 1,857,143 1,889,257
Calpine Corp., Second Lien Term Loan, 8.41%, 7/15/07 ............. United States 6,835,227 6,108,984
Calpine Generating Co., First Priority Term Loan, 6.14%, 3/22/09 . United States 2,500,000 2,562,812
Cogentrix Delaware Holdings Inc., Term Loan, 4.828%, 2/19/09 ..... United States 3,970,000 4,013,511
Coleto Creek WLE LP,
Term Loan B, 4.828%, 7/31/11 ................................... United States 1,741,250 1,773,172
Term Loan C, 6.23%, 7/31/12 .................................... United States 1,000,000 1,021,667
Dynegy Holdings Inc., Term Loan B, 6.39%, 5/27/10 ................ United States 4,975,000 5,068,281
Midwest Generation LLC, Term Loan, 5.47 - 5.814%, 4/27/11 ........ United States 1,803,675 1,831,857
(c) NRG Energy Inc.,
Credit Linked Deposit, 4.325%, 12/24/11 ........................ United States 3,150,000 3,170,475
Term Loan B, 4.515%, 12/24/11 .................................. United States 4,050,000 4,076,325
Pike Electric Inc.,
Term Loan B, 4.688%, 7/02/12 ................................... United States 2,860,000 2,910,945
Term Loan C, 4.75%, 12/10/12 ................................... United States 1,900,000 1,929,688
Quanta Services Inc., Term Loan B, 2.51 - 5.51%, 12/15/08 ........ United States 2,970,000 3,012,694
Reliant Energy Inc., Term Loan B, 4.895 - 5.068%, 4/30/10 ........ United States 6,000,000 6,047,676
Texas Genco LLC, First Lien Term Loan, 4.48%, 12/14/11 ........... United States 7,253,846 7,353,587
TNP Enterprises Inc., Term Loan, 7.568%, 12/31/06 ................ United States 985,000 1,004,700
------------
53,775,631
------------
ELECTRICAL PRODUCTS .1%
Enersys Capital Inc., Term Loan D, 3.921 - 4.54%, 3/17/11 ........ United States 1,442,750 1,456,485
------------
ELECTRONIC COMPONENTS .2%
Seagate Technology HDD Holdings, Term Loan B, 4.563%, 5/13/07 .... Cayman Islands 2,089,328 2,125,565
Seagate Technology (US) Holdings, Term Loan B, 4.563%, 5/13/07 ... United States 835,673 850,166
------------
2,975,731
------------
ELECTRONICS/APPLIANCES .4%
Directed Electronics Inc., Term Loan, 6.65 - 8.50%, 6/15/10 ...... United States 2,672,612 2,698,504
Juno Lighting Inc., First Lien Term Loan, 4.89 - 7.00%, 10/21/10 . United States 2,198,295 2,230,281
------------
4,928,785
------------
ENGINEERING & CONSTRUCTION 1.0%
URS Corp., Term Loan B, 4.46%, 8/22/08 ........................... United States 2,802,259 2,818,899
Washington Group International Inc., Synthetic Term Loan, 2.478%,
10/01/07 ........................................................ United States 9,700,000 9,715,617
------------
12,534,516
------------
18 | Semiannual Report
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
ENVIRONMENTAL SERVICES 1.7%
Allied Waste North America Inc.,
L/C Term Loan, 5.15%, 1/15/10 .................................. United States $ 2,121,428 $ 2,151,593
Term Loan B, 4.95 - 5.24%, 1/15/10 ............................. United States 10,037,169 10,197,583
Term Loan C, 5.24 - 5.27%, 1/15/10 ............................. United States 981,531 997,277
Duratek Inc., Term Loan B, 6.125 - 6.75%, 12/16/09 ............... United States 1,478,261 1,480,571
(c) Envirocare of Utah LLC, Term Loan B, 5.794%, 1/07/12 ............. United States 3,500,000 3,548,125
Envirosolutions Inc.,
(i)Delay Draw, 7.06%, 3/01/09 .................................... United States 698,182 698,182
Term Loan B, 7.06%, 3/01/09 ................................... United States 2,135,454 2,130,116
IESI Corp., Term Loan B, 4.504 - 4.68%, 1/07/12 .................. United States 900,000 914,625
------------
22,118,072
------------
FINANCE/RENTAL/LEASING .5%
United Rentals (North America) Inc.,
L/C Term Loan, 2.169%, 2/11/11 ................................. United States 1,053,334 1,069,463
Term Loan B, 4.81%, 2/11/11 .................................... United States 5,293,333 5,375,216
------------
6,444,679
------------
FOOD DISTRIBUTORS .2%
OSI Group LLC,
Dutch Term Loan, 4.81%, 9/02/11 ................................ Netherlands 748,125 759,191
German Term Loan, 4.81%, 9/02/11 ............................... Germany 598,500 607,353
U.S. Term Loan, 4.81%, 9/02/11 ................................. United States 1,346,625 1,366,545
------------
2,733,089
------------
FOOD: MAJOR DIVERSIFIED 1.8%
Birds Eye Foods Inc. (Agrilink Foods), Term Loan B, 5.31%, 8/08/08 United States 7,432,119 7,526,804
Del Monte Corp., Term Loan B, 4.96%, 12/20/10 .................... United States 634,374 638,339
Dole Food Co. Inc., Term Loan D, 4.50 - 6.50%, 9/28/08 ........... United States 1,315,856 1,337,595
Luiginos Inc., Term Loan, 5.438 - 5.625%, 4/02/11 ................ United States 4,183,393 4,193,851
Pinnacle Foods Holding Corp., Term Loan B, 5.81 - 6.37%, 11/25/10 United States 9,925,000 9,880,139
------------
23,576,728
------------
FOOD: MEAT/FISH/DAIRY .4%
American Seafoods, Term Loan B, 5.81%, 4/15/09 ................... United States 1,267,645 1,286,264
Land O'Lakes Inc., Term Loan B, 5.71%, 10/11/08 .................. United States 695,661 705,895
Michael Foods Inc., Term Loan B, 4.63 - 5.09%, 11/21/10 .......... United States 1,838,586 1,870,761
Pierre Foods Inc., Term Loan B, 4.48%, 6/30/10 ................... United States 910,000 920,238
------------
4,783,158
------------
FOOD: SPECIALTY/CANDY 1.1%
Doane Pet Care Co., Term Loan, 6.37 - 6.56%, 11/05/09 ............ United States 997,500 1,014,956
Herbalife International Inc., Term Loan B, 4.87 - 5.16%, 12/20/10 United States 1,000,000 1,017,188
Leiner Health Products Inc., Term Loan B, 5.56%, 6/09/11 ......... United States 1,990,000 2,019,850
Meow Mix Co.,
First Lien Term Loan, 6.81 - 7.02%, 8/21/09 .................... United States 3,740,585 3,734,742
Second Lien Term Loan, 9.85%, 8/21/09 .......................... United States 1,000,000 955,000
Semiannual Report | 19
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
FOOD: SPECIALTY/CANDY (CONT.)
Nellson Neutraceuticals Inc.,
First Lien Term Loan, 9.25%, 10/04/09 .......................... United States $ 2,266,913 $ 2,215,907
Second Lien Term Loan, 11.75%, 4/04/10 ......................... United States 1,000,000 872,500
Otis Spunkmeyer Inc., Term Loan B, 6.375%, 6/24/11 ............... United States 1,856,667 1,878,817
Reddy Ice Group Inc., Term Loan, 5.078%, 8/15/09 ................. United States 987,500 1,000,256
------------
14,709,216
------------
FOREST PRODUCTS .1%
Roseburg Forest Products (RLC Industries), Term Loan B, 4.078%,
2/24/10 ......................................................... United States 1,954,464 1,960,572
------------
HOME FURNISHINGS 1.2%
Knoll Inc., Term Loan, 5.40%, 10/01/11 ........................... United States 3,689,412 3,732,025
National Bedding Co., Term Loan B, 4.98 - 6.75%, 12/20/10 ........ United States 6,381,590 6,475,322
Sealy Mattress Co., Term Loan C, 4.45 - 4.65%, 4/02/12 ........... United States 1,877,717 1,905,883
Simmons Holdings Inc., Term Loan C, 4.75 - 6.75%, 12/19/11 ....... United States 3,427,407 3,477,389
------------
15,590,619
------------
HOME IMPROVEMENT CHAINS .2%
Harbor Freight Tools USA Inc., Term Loan B, 4.69 - 4.91%, 7/15/10 United States 1,995,000 2,002,232
------------
HOMEBUILDING .8%
Associated Materials Inc., Term Loan B, 5.00 - 5.17%, 12/30/11 ... United States 1,000,000 1,016,350
Builders FirstSource Inc., Term Loan, 5.58%, 3/17/10 ............. United States 1,657,475 1,658,801
CONTECH Construction Products Inc., Term Loan B, 4.94%, 10/31/11 . United States 1,000,000 1,016,875
Goodman Global Holdings Inc., Term Loan B, 4.81%, 12/15/11 ....... United States 1,000,000 1,016,250
LandSource Communities Development LLC, Term Loan B, 5.063%,
3/31/10 ......................................................... United States 6,000,000 6,095,628
------------
10,803,905
------------
HOSPITAL/NURSING MANAGEMENT 2.1%
Ardent Health Services LLC, Term Loan B, 4.80%, 8/12/11 .......... United States 4,488,750 4,526,626
Beverly Enterprises Inc., Term Loan B, 4.73 - 5.42%, 10/22/08 .... United States 1,975,000 1,998,463
Community Health Systems Inc., Term Loan B, 4.15%, 8/19/11 ....... United States 1,995,000 2,013,081
Iasis Healthcare LLC, Term Loan B, 4.81%, 6/22/11 ................ United States 9,203,750 9,347,558
MedCath Corp., Term Loan B, 5.11 - 6.50%, 6/30/11 ................ United States 2,487,500 2,513,930
National Mentor Inc., Term Loan B, 5.47 - 7.50%, 11/01/11 ........ United States 1,197,000 1,219,070
Triad Hospitals Inc., Term Loan B, 4.83%, 9/30/08 ................ United States 737,622 750,120
Vanguard Health Holding Co. II LLC, Term Loan B, 5.79%, 9/23/11 .. United States 4,738,125 4,828,448
------------
27,197,296
------------
HOTEL/RESORTS/CRUISELINES .8%
Venetian Casino Resorts LLC, Term Loan B, 4.90%, 8/01/11 ......... United States 8,377,273 8,525,618
Wyndham International Inc., Term Loan B, 7.188%, 6/30/06 ......... United States 1,776,863 1,787,599
------------
10,313,217
------------
HOUSEHOLD/PERSONAL CARE .7%
Jarden Corp., Term Loan B, 6.25%, 1/25/12 ........................ United States 2,200,000 2,222,785
Prestige Brands Inc., Term Loan B, 5.294%, 6/24/11 ............... United States 3,473,750 3,510,659
20 | Semiannual Report
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
HOUSEHOLD/PERSONAL CARE (CONT.)
Rayovac Corp., Term Loan C, 4.78 - 8.00%, 9/30/09 ................ United States $ 2,032,775 $ 2,040,682
Springs Industries Inc., Term Loan B, 5.313%, 12/07/10 ........... United States 2,000,000 2,025,626
------------
9,799,752
------------
INDUSTRIAL CONGLOMERATES .9%
Invensys (BTR Dunlop),
Bonding Facility, 5.439%, 3/05/09 .............................. United States 1,945,920 1,965,379
Term Loan B, 6.091%, 9/05/09 ................................... United States 1,235,723 1,257,348
SPX Corp., Term Loan B, 4.625%, 9/30/09 .......................... United States 2,318,194 2,334,132
TriMas Corp., Term Loan B, 6.188%, 12/06/09 ...................... United States 5,712,841 5,794,072
------------
11,350,931
------------
INDUSTRIAL MACHINERY 1.9%
Colfax Corp., Term Loan B, 4.813%, 11/30/11 ...................... United States 2,500,000 2,529,168
Dresser Inc., Unsecured Term Loan, 5.84%, 3/01/10 ................ United States 1,500,000 1,518,750
Dresser-Rand Group Inc., Term Loan B, 4.56%, 10/26/11 ............ United States 2,197,140 2,232,019
Flowserve Corp., Term Loan C, 5.15 - 5.438%, 6/30/09 ............. United States 653,831 666,091
Gleason Corporation, Term Loan, 5.13 - 5.299%, 7/20/11 ........... United States 4,000,000 4,069,880
Itron Inc., Term Loan B, 4.75 - 6.50%, 11/24/10 .................. United States 1,622,432 1,640,008
Mueller Group, Term Loan, 5.15%, 4/14/11 ......................... United States 6,047,707 6,119,523
Rexnord Corp., Term Loan, 5.23 - 7.00%, 11/25/09 ................. United States 1,700,000 1,733,286
Sensus Metering Systems Inc., Term Loan, 4.421 - 5.403%, 12/17/10 United States 3,920,000 3,945,315
------------
24,454,040
------------
INDUSTRIAL SPECIALTIES .6%
Ionics Inc., Term Loan B, 5.31%, 2/01/11 ......................... United States 5,223,870 5,241,830
Polypore Inc., Term Loan B, 4.828%, 11/13/11 ..................... United States 2,238,750 2,272,331
------------
7,514,161
------------
INFORMATION TECHNOLOGY SERVICES 1.3%
Relizon Co.,
Incremental Term Loan, 5.33%, 2/20/11 .......................... United States 337,172 338,226
Term Loan B, 5.33 - 5.54%, 2/20/11 ............................. United States 3,088,765 3,098,418
Transfirst Holdings, Term Loan B, 6.563%, 3/31/10 ................ United States 4,975,000 5,009,203
Worldspan LP, Term Loan, 6.188 - 8.00%, 6/30/07 .................. United States 919,805 927,853
Xerox Corp., Term Loan, 4.33%, 9/30/08 ........................... United States 7,500,000 7,580,273
------------
16,953,973
------------
INSURANCE BROKERS/SERVICES .3%
Alliant Resources Group Inc., Term Loan B, 5.67 - 6.06%, 8/31/11 . United States 3,731,250 3,784,887
------------
INVESTMENT BANKS/BROKERS .2%
Refco Group Ltd. LLC, Term Loan B, 5.27%, 8/05/11 ................ United States 2,050,000 2,074,856
------------
LIFE/HEALTH INSURANCE .8%
Conseco Inc., Term Loan, 6.078%, 6/22/10 ......................... United States 9,600,000 9,804,000
------------
Semiannual Report | 21
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
MAJOR PHARMACEUTICALS .6%
Warner Chilcott Holdings Co.,
Term Loan B, 5.23%, 1/18/12 .................................... Puerto Rico $ 4,640,238 $ 4,680,260
Term Loan C, 5.23%, 1/18/12 .................................... United States 1,869,789 1,885,916
Term Loan D, 5.23%, 1/18/12 .................................... Bermuda 863,790 871,240
------------
7,437,416
------------
MAJOR TELECOMMUNICATIONS .8%
Alaska Communications Systems Holdings Inc, Term Loan, 6.50%,
2/01/12 ......................................................... United States 4,650,000 4,684,875
Consolidated Communications Inc., Term Loan B, 4.83 - 5.06%,
10/14/11 ........................................................ United States 2,483,333 2,525,239
(d) E.Spire Communications, Term Loan C, 9.50%, 8/01/06 .............. United States 16,877,867 --
Qwest Corp., Term Loan A, 7.39%, 6/30/07 ......................... United States 3,000,000 3,132,588
(d) Winstar Communications Inc., DIP, 7.75%, 2/20/49 ................. United States 3,926,973 393
------------
10,343,095
------------
MANAGED HEALTH CARE .9%
Multiplan Inc., Term Loan, 5.31%, 3/04/09 ........................ United States 2,222,222 2,255,489
Pacificare Health Systems Inc., Term Loan B, 4.063 - 4.25%,
12/13/10 ........................................................ United States 9,400,000 9,443,080
------------
11,698,569
------------
MARINE SHIPPING .2%
Horizon Lines LLC, Term Loan, 5.39%, 7/07/11 ..................... United States 2,288,500 2,317,106
US Shipping Partners LP, Term Loan, 4.56%, 4/25/09 ............... United States 478,966 484,355
------------
2,801,461
------------
MEDIA CONGLOMERATES .3%
Canwest Media Inc., Term Loan E, 4.70%, 5/15/09 .................. Canada 3,330,237 3,367,502
------------
MEDICAL DISTRIBUTORS .5%
VWR International Inc., Term Loan B, 5.17%, 4/07/11 .............. United States 6,407,334 6,524,268
------------
MEDICAL SPECIALTIES .6%
Conmed Corp., Term Loan C, 4.75 - 5.01%, 12/15/09 ................ United States 493,501 499,156
Cooper Companies Inc., Term Loan B, 4.188%, 11/19/11 ............. United States 2,000,000 2,028,750
Fisher Scientific International Inc., Term Loan B, 4.08%, 6/30/11 United States 1,990,000 2,007,413
Kinetic Concepts Inc., Term Loan B2, 4.31%, 8/11/10 .............. United States 1,971,639 1,988,069
PerkinElmer Inc., Term Loan B, 4.474%, 12/26/08 .................. United States 886,667 897,750
------------
7,421,138
------------
MEDICAL/NURSING SERVICES 2.3%
Alliance Imaging Inc., Term Loan C1, 4.75 - 5.00%, 12/29/11 ...... United States 2,242,491 2,264,216
Davita Inc., Term Loan B, 4.17 - 4.775%, 6/30/10 ................. United States 9,508,731 9,544,389
Insight Health Services, Delay Draw, 6.56%, 10/17/08 ............. United States 7,200,000 7,222,500
MedQuest Inc., Term Loan B, 6.31%, 7/31/09 ....................... United States 985,000 999,159
22 | Semiannual Report
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
MEDICAL/NURSING SERVICES (CONT.)
Sheridan Healthcare, Term Loan B, 5.79 - 5.89%, 11/09/10 ......... United States $ 1,500,000 $ 1,549,050
Team Health Inc., Term Loan B, 5.81%, 3/23/11 .................... United States 4,723,794 4,738,556
US Oncology Inc., Term Loan B, 4.875 - 5.51%, 8/20/11 ............ United States 3,980,000 4,035,971
------------
30,353,841
------------
MISCELLANEOUS COMMERCIAL SERVICES 2.2%
Buhrmann US Inc., Term Loan C1, 4.94%, 12/23/10 .................. United States 5,247,132 5,309,626
CCC Information Services Group Inc., Term Loan B, 5.559%, 8/15/10 United States 3,619,239 3,664,479
Corrections Corp. (Prison Realty), Term Loan D, 4.53 - 4.95%,
3/31/08 ......................................................... United States 3,634,550 3,695,883
DS Waters Enterprises LP, Term Loan, 6.67 - 7.266%, 11/07/09 ..... United States 3,864,615 3,626,702
Global Imaging Systems Inc., Term Loan B, 4.28 - 4.71%, 5/15/10 .. United States 987,537 999,882
JohnsonDiversey Inc., Term Loan B, 4.43 - 4.64%, 5/03/08 ......... United States 4,103,244 4,176,976
Language Lines Inc., Term Loan B, 6.77%, 6/11/11 ................. United States 3,407,895 3,451,209
Mitchell International Inc., Term Loan B, 5.55%, 8/15/11 ......... United States 1,890,253 1,916,836
US Investigations Services Inc., Term Loan C, 6.01%, 12/31/08 .... United States 2,296,886 2,325,597
------------
29,167,190
------------
MISCELLANEOUS MANUFACTURING .1%
Day International Group Inc., Term Loan D, 6.06 - 6.08%, 1/01/10 . United States 1,203,809 1,207,541
Norcross Safety Products, Term Loan, 4.92%, 3/20/09 .............. United States 751,731 762,302
------------
1,969,843
------------
MOVIES/ENTERTAINMENT 5.8%
24 Hour Fitness Inc., Term Loan, 6.063 - 6.25%, 7/01/09 .......... United States 3,321,823 3,352,250
Brooklyn Basketball LLC (New Jersey), Term Loan B, 6.063%, 8/16/08 United States 2,000,000 2,000,000
Carmike Cinemas Inc., Term Loan, 5.828%, 2/02/09 ................. United States 1,584,000 1,639,440
CH Operating LLC, Term Loan B, 7.063%, 6/21/07 ................... United States 2,801,724 2,794,720
Cinemark USA Inc., Term Loan, 4.21 - 4.35%, 3/31/11 .............. United States 992,500 1,014,017
Cinram International, Term Loan D, 5.40%, 9/30/09 ................ Canada 7,040,305 7,156,913
Hollywood Entertainment Corp., Term Loan, 6.08%, 3/31/08 ......... United States 1,875,000 1,885,547
Loews Cineplex Entertainment Corp., Term Loan B, 4.44 - 4.814%,
7/30/11 ......................................................... United States 1,995,000 2,024,458
Metro-Goldwyn-Mayer Studio Inc., Term Loan B, 5.06%, 4/30/11 ..... United States 8,478,750 8,501,007
Mets II LLC, Term Loan, 5.77%, 8/23/05 ........................... United States 3,000,000 3,010,890
New Jersey Devils LLC, Term Loan, 6.27%, 9/30/06 ................. United States 1,900,000 1,907,790
Rainbow National Services LLC, Term Loan B, 5.19%, 3/31/12 ....... United States 8,500,000 8,632,813
Regal Cinemas Inc., Term Loan B, 4.56%, 11/10/10 ................. United States 13,472,884 13,646,913
Shinn Acquisition LLC (Hornets), Term Loan, 9.50%, 6/30/07 ....... United States 2,250,000 2,255,130
Six Flags Theme Parks, Term Loan B, 4.90%, 6/30/09 ............... United States 1,801,831 1,833,363
Warner Music, Term Loan B, 4.97 - 5.38%, 2/28/11 ................. United States 11,150,275 11,302,432
Yankee Holdings, Term Loan, 4.486 - 4.90%, 6/25/07 ............... United States 785,714 799,464
Yankee Nets, Term Loan, 4.24 - 5.03%, 6/25/07 .................... United States 1,714,286 1,744,286
------------
75,501,433
------------
Semiannual Report | 23
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
OIL & GAS PIPELINES .3%
El Paso Corp.,
L/C Term Loan, 2.30%, 11/22/09 ................................. United States $ 1,687,500 $ 1,703,715
Term Loan B, 5.188%, 11/22/09 .................................. United States 2,801,250 2,833,347
------------
4,537,062
------------
OIL & GAS PRODUCTION .4%
Williams Production RMT Co., Term Loan C, 4.99%, 5/30/08 ......... United States 4,925,250 4,982,974
------------
OIL REFINING/MARKETING .8%
Getty Petroleum Marketing, Term Loan B, 5.80%, 5/19/10 ........... United States 1,933,333 1,970,792
Lyondell-Citgo Refining LP, Term Loan, 4.38 - 4.591%, 5/21/07 .... United States 995,000 1,006,194
Magellan Midstream Holdings LP, Term Loan B, 5.09%, 12/10/11 ..... United States 2,241,114 2,271,929
Tesoro Petroleum Corp.,
L/C Term Loan, 2.48%, 4/30/07 .................................. United States 2,000,000 2,008,340
Term Loan, 7.99%, 4/15/08 ...................................... United States 482,500 496,975
(c) Universal Compression Inc., Term Loan B, 4.34%, 1/14/12 .......... United States 3,000,000 3,042,189
------------
10,796,419
------------
OTHER CONSUMER SERVICES .6%
Alderwoods Group Inc., Term Loan B1, 3.94 - 4.54%, 8/19/10 ....... United States 1,201,830 1,212,947
Coinstar Inc., Term Loan, 4.84%, 7/01/11 ......................... United States 1,662,822 1,691,921
Knowledge Learning Corp., Term Loan B, 5.05%, 1/07/12 ............ United States 2,700,000 2,725,312
Weight Watchers,
Additional Term Loan B, 4.16%, 3/31/10 ......................... United States 990,000 1,002,685
Term Loan B, 4.25%, 3/31/10 .................................... United States 997,500 1,009,138
------------
7,642,003
------------
OTHER CONSUMER SPECIALTIES 1.8%
(c) Alliance Laundry Systems LLC, Term Loan B, 4.84%, 1/15/12 ........ United States 2,400,000 2,431,001
American Safety Razor Co., Term Loan, 5.64 - 5.98%, 4/22/11 ...... United States 1,409,779 1,416,828
Home Interiors & Gifts Inc., Term Loan, 7.17%, 4/02/11 ........... United States 2,418,155 2,344,401
Jostens Intermediate Holding Corp., Term Loan B, 4.809%, 10/01/11 United States 4,200,000 4,247,624
Sola International Inc., Term Loan, 5.08%, 12/05/09 .............. United States 962,500 964,483
Solo Cup Co., Term Loan B, 4.66 - 5.06%, 2/27/11 ................. United States 11,929,900 12,157,319
------------
23,561,656
------------
OTHER METALS/MINERALS .1%
(c) Murray Energy Corp., First Lien Term Loan, 5.938%, 1/31/10 ....... United States 1,800,000 1,831,500
------------
OTHER TRANSPORTATION .9%
Laidlaw International Inc., Term Loan B, 6.33%, 6/17/09 .......... United States 9,168,800 9,282,952
Sirva Woldwide Inc., Term Loan B, 4.58%, 12/01/10 ................ United States 2,200,000 2,178,000
------------
11,460,952
------------
PERSONNEL SERVICES .1%
Allied Security Holdings LLC, Term Loan, 6.81%, 6/30/10 .......... United States 1,177,143 1,193,246
------------
24 | Semiannual Report
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
PUBLISHING: BOOKS/MAGAZINES 2.4%
American Media Inc., Term Loan C, 5.313%, 4/01/07 ................ United States $ 894,004 $ 908,811
Dex Media West LLC, Term Loan B, 4.15 - 4.66%, 3/09/10 ........... United States 8,176,267 8,288,690
F&W Publications Inc., Term Loan B, 5.96%, 12/31/09 .............. United States 1,808,655 1,830,133
Primedia Inc., Term Loan B, 5.375%, 6/30/09 ...................... United States 4,906,204 4,860,208
Readers Digest Association, Term Loan B, 4.55%, 5/20/08 .......... United States 1,067,541 1,083,054
R.H. Donnelley Inc.,
Term Loan A3, 4.13 - 4.31%, 3/30/11 ............................ United States 939,451 946,284
Term Loan D, 4.19 - 4.36%, 6/30/11 ............................. United States 7,465,117 7,549,876
Transwestern Publishing Co.,
Additional Term Loan, 4.563%, 2/24/11 .......................... United States 2,760,000 2,798,814
Term Loan B, 3.938 - 6.25%, 2/25/11 ............................ United States 896,000 908,600
Weekly Reader, Second Lien Term Loan, 6.761%, 1/01/10 ............ United States 2,500,000 2,493,750
------------
31,668,220
------------
PUBLISHING: NEWSPAPERS 1.5%
Advertising Directory Solutions Inc., Term Loan B, 4.48%, 11/05/11 Canada 10,750,000 10,857,500
Freedom Communications, Term Loan B, 4.39 - 4.40%, 5/17/09 ....... United States 2,500,000 2,539,375
Herald Media, Term Loan B, 5.03%, 7/30/11 ........................ United States 2,111,881 2,144,879
Journal Register Co., Term Loan B, 3.42 - 4.23%, 8/13/12 ......... United States 3,000,000 3,019,689
MediaNews Group Inc., Term Loan C, 4.08%, 12/30/10 ............... United States 922,636 928,394
------------
19,489,837
------------
PULP & PAPER 2.0%
Appleton Papers Inc., Term Loan B, 4.33 - 4.79%, 6/01/10 ......... United States 895,500 906,134
Boise Cascade LLC, Term Loan B, 4.844%, 10/01/11 ................. United States 4,424,658 4,488,032
Boise Land and Timber Corp., Term Loan C, 4.844%, 10/01/10 ....... United States 4,075,342 4,085,066
Intertape Polymer Group Inc., Term Loan B, 4.69 - 4.96%, 8/01/11 . United States 3,790,500 3,840,251
Koch Cellulose LLC,
L/C Term Loan, 4.39%, 5/03/11 .................................. United States 643,132 651,774
Term Loan B, 4.80%, 5/03/11 .................................... United States 2,556,821 2,591,179
MDCP Acquisitions I (Jefferson Smurfit),
Term Loan B, 5.355%, 9/16/10 ................................... Irish Republic 1,000,000 1,003,880
Term Loan C, 5.855%, 9/16/11 ................................... Irish Republic 1,000,000 1,004,490
Smurfit-Stone Container Canada Inc., Term Loan C, 4.438%,
10/28/11 ........................................................ Canada 1,610,594 1,636,162
Smurfit-Stone Container Enterprises,
L/C Term Loan, 2.40%, 10/28/10 ................................. United States 654,975 665,618
Term Loan B, 4.438 - 4.688%, 10/28/11 .......................... United States 5,234,431 5,317,528
------------
26,190,114
------------
RAILROADS .3%
Kansas City Southern Railway Co., Term Loan B1, 4.15 - 4.328%,
3/31/08 ......................................................... United States 1,717,000 1,741,467
RailAmerica Inc.,
CAD Term Loan, 4.375%, 9/29/11 ................................. Canada 161,019 163,938
U.S. Term Loan, 4.375%, 9/29/11 ................................ United States 1,362,137 1,386,825
------------
3,292,230
------------
Semiannual Report | 25
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
REAL ESTATE DEVELOPMENT 1.0%
CNL Hotel & Resorts, Term Loan B, 4.90%, 12/30/06 ................ United States $ 5,200,000 $ 5,284,500
General Growth Properties Inc., Term Loan B, 4.64%, 11/12/09 ..... United States 3,500,000 3,528,073
(c) LNR Property Corp., Term Loan B, 5.59%, 12/31/07 ................. United States 3,600,000 3,621,377
------------
12,433,950
------------
REAL ESTATE INVESTMENT TRUSTS .6%
Crescent Real Estate Funding XII,
Term Loan, 4.64%, 1/12/06 ...................................... United States 2,904,593 2,932,732
Term Loan B, 4.64%, 3/05/06 .................................... United States 854,770 863,051
Newkirk Master LP, Term Loan, 6.974 - 7.08%, 11/24/06 ............ United States 3,943,700 3,984,372
------------
7,780,155
------------
RECREATIONAL PRODUCTS 1.0%
Amscan Holdings Inc., Term Loan B, 5.29 - 5.62%, 4/30/12 ......... United States 995,000 1,001,219
BRP Holdings LP, 4.97%, 12/18/10 ................................. United States 3,820,714 3,881,609
PlayPower Inc., Term Loan, 7.06%, 2/07/10 ........................ United States 850,000 857,140
Pure Fishing Inc., Term Loan B, 5.50 - 5.85%, 9/30/11 ............ United States 1,488,750 1,513,701
True Temper Sports Inc., Term Loan, 5.22 - 5.661%, 3/15/11 ....... United States 5,875,909 5,774,197
------------
13,027,866
------------
RESTAURANTS .5%
CKE Restaurants Inc., Term Loan, 4.938%, 4/30/09 ................. United States 602,829 611,872
Denny's Inc., Term Loan B, 5.59 - 6.01%, 9/27/09 ................. United States 1,000,000 1,023,438
Dominos Inc., Term Loan, 4.313%, 6/25/10 ......................... United States 2,387,768 2,417,066
Jack In The Box Inc., Term Loan B, 3.92 - 4.69%, 12/19/10 ........ United States 2,970,000 3,011,767
------------
7,064,143
------------
SEMICONDUCTORS .5%
Fairchild Semiconductor Corp., Term Loan, 4.438 - 4.688%,
12/31/10 ........................................................ United States 4,127,844 4,174,282
ON Semiconductor Corp., Term Loan G, 5.563%, 12/15/11 ............ United States 2,500,000 2,515,625
------------
6,689,907
------------
SERVICES TO THE HEALTH INDUSTRY .4%
Accredo Health Inc., Term Loan B, 4.23%, 8/02/11 ................. United States 3,980,000 4,013,583
Quintiles Transnational Corp., Term Loan B, 6.81 - 6.83%, 9/25/09 United States 1,678,750 1,708,128
------------
5,721,711
------------
SPECIALTY STORES .2%
Pantry Inc., Term Loan, 4.83%, 3/12/11 ........................... United States 2,428,344 2,461,481
------------
SPECIALTY TELECOMMUNICATIONS 1.9%
D&E Communications Inc., Term Loan B, 4.38 - 6.25%, 12/31/11 ..... United States 2,326,314 2,344,489
GCI Holdings Inc., Term Loan, 4.809%, 10/31/07 ................... United States 2,384,777 2,409,937
Iowa Telecommunications Services Inc., Term Loan B, 4.46 - 4.61%,
11/30/11 ........................................................ United States 6,750,000 6,825,937
26 | Semiannual Report
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
---------------------------------------------------------------------------------------------------------------------------
COUNTRY PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
(a) SENIOR FLOATING RATE INTERESTS (CONT.)
SPECIALTY TELECOMMUNICATIONS (CONT.)
(d) Pacific Crossing Ltd., Term Loan B, 6.50%, 7/28/06 .............. United States $21,138,343 $ 1,532,530
Valor Telecom, First Lien Term Loan, 5.98 - 6.078%, 10/30/11 .... United States 11,471,250 11,534,583
-------------
24,647,476
-------------
STEEL .4%
Copperweld Holding Co., Term Loan, 6.918%, 12/17/11 ............. United States 4,652,015 4,663,645
-------------
TOBACCO .1%
Commonwealth Brands Inc., Term Loan, 5.875%, 8/28/07 ............ United States 1,706,343 1,729,805
-------------
WHOLESALE DISTRIBUTORS .3%
Interline Brands, Term Loan B, 4.81%, 12/31/10 .................. United States 2,250,000 2,267,167
National Waterworks Inc., Term Loan C, 5.06%, 11/22/09 .......... United States 857,143 870,000
Nebraska Book Co., Term Loan C, 4.67%, 3/04/11 .................. United States 992,500 1,002,197
-------------
4,139,364
-------------
WIRELESS COMMUNICATIONS 1.7%
AAT Communications Corp., Term Loan B, 5.25 - 5.26%, 12/31/11 ... United States 3,000,000 3,041,250
Nextel Partners Inc., Term Loan C, 4.938%, 5/31/11 .............. United States 6,500,000 6,595,758
SBA Communications Corp., Term Loan, 4.81 - 5.52%, 10/31/08 ..... United States 9,454,994 9,590,909
SpectraSite Communications Inc., Term Loan B, 4.03% 5/30/12 ..... United States 1,750,000 1,764,949
Triton PCS Inc., Term Loan B, 5.75%, 12/31/09 ................... United States 1,000,000 1,014,688
-------------
22,007,554
-------------
TOTAL SENIOR FLOATING RATE INTERESTS (COST $1,196,611,609) ....... 1,168,780,879
-------------
ASSET-BACKED SECURITIES .4%
(e) Ares IV, 1A, D2, 144A, 7.919%, 12/22/12 ......................... Cayman Islands 1,400,000 1,204,000
(e) Centurion CDO II Ltd., 1A, D2, 144A, 7.68%, 11/12/12 ............ Cayman Islands 2,500,000 2,379,000
(e) Clydesdale CLO Ltd., 2001-1A, D1, 144A, 8.133%, 3/22/13 ......... Cayman Islands 2,000,000 1,976,200
-------------
TOTAL ASSET-BACKED SECURITIES (COST $5,780,000) .................. 5,559,200
-------------
---------------
SHARES/WARRANTS
---------------
COMMON STOCKS AND WARRANTS .7%
AUTO PARTS: ORIGINAL EQUIPMENT MANUFACTURER .0%
(f) Exide Technologies., wts., 3/18/06 ............................... United States 74,278 --
-------------
COMMERCIAL PRINTING/FORMS .0%
(f) Vertis Holdings Inc., wts., 6/30/11 .............................. United States 39,812 --
-------------
SPECIALTY TELECOMMUNICATIONS .1%
(f) IDT Corp. ........................................................ United States 53,428 782,186
-------------
STEEL .0%
(f) Copperweld Holding Co., A ........................................ United States 242 --
(f) Copperweld Holding Co., B ........................................ United States 1,741 --
-------------
--
-------------
Semiannual Report | 27
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JANUARY 31, 2005 (UNAUDITED) (CONTINUED)
------------------------------------------------------------------------------------------------------------------------------
COUNTRY SHARES/WARRANTS VALUE
------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS (CONT.)
WIRELESS COMMUNICATIONS .6%
(f) Leap Wireless International Inc. ................................. United States 38,068 $ 1,037,353
(f) USA Mobility Inc. ................................................ United States 178,746 6,354,420
(f) Teligent Inc. .................................................... United States 115 690,000
---------------
8,081,773
---------------
TOTAL COMMON STOCKS AND WARRANTS (COST $6,220,372) ............... 8,863,959
---------------
TOTAL LONG TERM INVESTMENTS (COST $1,229,385,141) ................ 1,203,349,271
---------------
SHORT TERM INVESTMENT (COST $124,520,703) 9.6%
(g) Franklin Institutional Fiduciary Trust Money Market Portfolio .... 124,520,703 124,520,703
---------------
TOTAL INVESTMENTS (COST $1,353,905,844) 102.0% ................... 1,327,869,974
OTHER ASSETS, LESS LIABILITIES (2.0)% ............................ (26,249,892)
---------------
NET ASSETS 100.0% ................................................ $ 1,301,620,082
===============
(a) See Note 1(c) regarding senior floating rate interests.
(b) See Note 13 regarding other considerations.
(c) See Note 1(b) regarding securities purchased on a when-issued or delayed
delivery basis.
(d) Defaulted securities. See Note 10.
(e) See Note 11 regarding restricted securities.
(f) Non-income producing.
(g) See Note 9 regarding investments in Franklin Institutional Fiduciary Trust
Money Market Portfolio.
(h) See Note 14 regarding fund litigation.
(i) See Note 12 regarding unfunded loan commitments.
GLOSSARY OF TERMS
CDO - Collateralized Debt Obligation
CLO - Collateralized Loan Obligation
L/C - Line-of-Credit
FRN - Floating Rate Note
PIK - Payment-In-Kind
28 | See notes to financial statements. | Semiannual Report
FRANKLIN FLOATING RATE TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
January 31, 2005 (unaudited)
Assets:
Investments in securities:
Cost - Unaffiliated issuers
$ 1,229,385,141
Cost - Sweep Money Fund (Note 9) .......................... 124,520,703
---------------
Total cost of investments ................................. 1,353,905,844
===============
Value - Unaffiliated issuers .............................. 1,203,349,271
Value - Sweep Money Fund (Note 9) ......................... 124,520,703
---------------
Total value of investments ................................ 1,327,869,974
---------------
Cash ....................................................... 3,839,314
Receivables:
Investment securities sold ................................ 11,181,783
Capital shares sold ....................................... 477,442
Interest .................................................. 4,677,535
Unrealized gain on unfunded loan commitments (Note 12) .... 107,985
Other assets ............................................... 62,397
---------------
Total assets ........................................ 1,348,216,430
---------------
Liabilities:
Payables:
Investment securities purchased ........................... 42,987,483
Affiliates ................................................ 1,495,007
Distributions to shareholders ............................. 1,995,263
Other liabilities .......................................... 118,595
---------------
Total liabilities ................................... 46,596,348
---------------
Net assets, at value .............................. $ 1,301,620,082
===============
Net assets consist of:
Distributions in excess of net investment income ........... $ (182,451)
Net unrealized appreciation (depreciation) ................. (25,925,544)
Accumulated net realized gain (loss) ....................... (347,095,777)
Capital shares ............................................. 1,674,823,854
---------------
Net assets, at value .............................. $ 1,301,620,082
===============
Net asset value and maximum offering price per share
($1,301,620,082 / 144,699,983 shares outstanding) (a) ...... $ 9.00
===============
(a) Redemption price is equal to net asset value less contingent deferred
sales charges, if applicable, and redemption fees retained by the Fund.
Semiannual Report | See notes to financial statements. | 29
FRANKLIN FLOATING RATE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the six months ended January 31, 2005 (unaudited)
Investment income:
Dividends - Sweep Money Fund (Note 9) ............................. $ 1,339,999
Interest .......................................................... 28,011,749
------------
Total investment income .................................... 29,351,748
------------
Expenses:
Management fees (Note 5) .......................................... 4,923,346
Administrative fees (Note 5) ...................................... 781,011
Transfer agent fees (Note 5) ...................................... 2,772,309
Custodian fees (Note 6) ........................................... 12,142
Reports to shareholders ........................................... 47,234
Registration and filing fees ...................................... 23,019
Professional fees ................................................. 81,283
Trustees' fees and expenses ....................................... 1,179
Other ............................................................. 131,014
------------
Total expenses ............................................. 8,772,537
Expense reductions (Note 6) ................................ (13,429)
------------
Net expenses ............................................. 8,759,108
------------
Net investment income ................................... 20,592,640
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ......................... (22,188,881)
Net change in unrealized appreciation (depreciation) on investments 27,645,375
------------
Net realized and unrealized gain (loss) ............................ 5,456,494
------------
Net increase (decrease) in net assets resulting from operations .... $ 26,049,134
============
30 | See notes to financial statements. | Semiannual Report
FRANKLIN FLOATING RATE TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended January 31, 2005 (unaudited)
and the year ended July 31, 2004
-----------------------------------
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2005 JULY 31, 2004
-----------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income .............................................................. $ 20,592,640 $ 36,121,226
Net realized gain (loss) from investments and foreign currency transactions ........ (22,188,881) (27,919,702)
Net change in unrealized appreciation (depreciation) on investments ................ 27,645,375 105,394,762
-----------------------------------
Net increase (decrease) in net assets resulting from operations .............. 26,049,134 113,596,286
Distributions to shareholders from net investment income ............................ (23,884,705) (37,883,644)
Capital share transactions (Note 2) ................................................. 41,779,969 20,983,674
-----------------------------------
Net increase (decrease) in net assets ........................................ 43,944,398 96,696,316
Net assets:
Beginning of period ................................................................. 1,257,675,684 1,160,979,368
-----------------------------------
End of period ....................................................................... $ 1,301,620,082 $ 1,257,675,684
===================================
Undistributed net investment income (distributions in excess of net investment income)
included in net assets:
End of period ...................................................................... $ (182,451) $ 3,109,614
===================================
Semiannual Report | See notes to financial statements. | 31
FRANKLIN FLOATING RATE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The 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.
On December 6, 2004, the Fund's Board of Trustees approved a plan to merge the
Fund's net assets into the Franklin Floating Rate Daily Access Fund. Pending
shareholder approval, it is anticipated that the merger will take place on June
2, 2005.
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. Investments in open-end mutual funds are valued at the closing net asset
value.
Corporate debt securities and asset-backed securities generally trade in the
over-the-counter market rather than on a securities exchange. The Fund may
utilize independent pricing services, quotations from bond dealers, and
information with respect to bond and note transactions, to assist in determining
a current market value for each security. The Fund's pricing services may use
valuation models or matrix pricing which considers information with respect to
comparable bond and note transactions, quotations from bond dealers, or by
reference to other securities that are considered comparable in such
characteristics as rating, interest rate and maturity date, option adjusted
spread models, prepayment projections, interest rate spreads and yield curves,
to determine current value.
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 Fund 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 Fund'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.
32 | Semiannual Report
FRANKLIN FLOATING RATE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. SECURITY VALUATION (CONTINUED)
The Fund 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. Some 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. 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 Fund's Board of Trustees.
B. 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.
C. 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.
D. INCOME TAXES
No provision has been made for U.S. income taxes because the Fund's policy is to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code and to distribute substantially all of its taxable income. Fund
distributions to shareholders are determined on an income tax basis and may
differ from net investment income and realized gains for financial reporting
purposes.
Semiannual Report | 33
FRANKLIN FLOATING RATE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Discounts and premiums
on securities purchased are amortized over the lives of the respective
securities. Facility fees are recognized as income over the expected term of the
loan. Dividends from net investment income are normally declared daily and
distributed monthly to shareholders.
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 expenses during the reporting period. Actual results could differ from those
estimates.
G. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and trustees are
indemnified by the Fund against certain liability arising out of the performance
of their duties to the Fund. Additionally, in the normal course of business, the
Fund enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At January 31, 2005, there were an unlimited number of shares authorized ($.01
par value). Transactions in the Fund's shares were as follows:
-------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2005 JULY 31, 2004
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------
Shares sold ................. 16,490,988 $ 148,006,575 30,148,214 $ 266,060,960
Shares issued in reinvestment
of distributions ........... 1,789,404 16,071,285 2,769,859 24,316,522
Shares redeemed ............. (13,624,371) (122,297,891) (30,679,970) (269,393,808)
-------------------------------------------------------------
Net increase (decrease) ..... 4,656,021 $ 41,779,969 2,238,103 $ 20,983,674
=============================================================
34 | Semiannual Report
FRANKLIN FLOATING RATE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. TENDER SHARES
On a quarterly basis, the Fund may make tender offers, the amount of which is
determined by the Board of Trustees, for the repurchase of at least 5% but not
more than 25% of the shares outstanding. The repurchase price is the net asset
value on the tender offer expiration date.
4. CREDIT FACILITY
The Fund participates in a $200 million senior unsecured revolving credit
facility to fund shareholder redemptions or meet unfunded loan commitments. The
facility agreement ends on December 16, 2005. Interest is charged at the Federal
Funds Rate plus .50%. Facility fees paid are amortized on a straight line basis
over the term of the commitment. Annual commitment fees of .09% are charged on
the unused portion of the facility and allocated among the participating funds
based on net assets.
During the period ended January 31, 2005, the Fund did not utilize the facility.
5. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Fund are also officers and/or directors of
the following entities:
------------------------------------------------------------------------------------------
ENTITY AFFILIATION
------------------------------------------------------------------------------------------
Franklin Advisers Inc. (Advisers) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin Templeton Investor Services LLC (Investor Services) Transfer agent
Franklin Templeton Distributors Inc. (Distributors) Principal underwriter
A. MANAGEMENT FEES
The Fund pays an investment management fee to Advisers of .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 average daily
net assets of the Fund as follows:
--------------------------------------------------------------------------------
ANNUALIZED FEE RATE 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
Semiannual Report | 35
FRANKLIN FLOATING RATE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. TRANSACTIONS WITH AFFILIATES (CONTINUED)
C. UNDERWRITING AGREEMENTS
Distributors has advised the Fund that it has received contingent deferred sales
charges for the period of $67,560.
D. TRANSFER AGENT FEES
The Fund pays a transfer agent fee to Investor Services of .40% per year of the
average daily net assets of the Fund plus out of pocket expenses, totaling
$2,633,204 for the period ended January 31, 2005.
6. 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 period ended January 31, 2005, the
custodian fees were reduced as noted in the Statement of Operations.
7. INCOME TAXES
At July 31, 2004, the Fund had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:
Capital loss carryover expiring in:
2009 .......................................................... $ 2,115,134
2011 .......................................................... 199,627,510
2012 .......................................................... 107,803,681
------------
$309,546,325
============
At July 31, 2004, the Fund had deferred capital losses occurring subsequent to
October 31, 2003 of $15,040,779. For tax purposes, such losses will be reflected
in the year ending July 31, 2005.
Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of defaulted securities and bond premiums.
Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatment of wash sales, defaulted securities, and
bond premiums.
At January 31, 2005, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes were as follows:
Cost of investments ......................... $ 1,354,368,261
===============
Unrealized appreciation ..................... $ 20,493,236
Unrealized depreciation ..................... (46,991,523)
---------------
Net unrealized appreciation (depreciation) .. $ (26,498,287)
===============
36 | Semiannual Report
FRANKLIN FLOATING RATE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
8. INVESTMENT TRANSACTIONS
Purchases and sales of investments securities (excluding short-term securities)
for the period ended January 31, 2005 aggregated $473,887,918 and $399,031,109,
respectively.
9. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Advisers. Management fees paid by the Fund are reduced on assets invested in the
Sweep Money Fund, in an amount not to exceed the management fees paid by the
Sweep Money Fund.
10. CREDIT RISK AND DEFAULTED SECURITIES
The Fund has 88.24% of its portfolio invested in below investment grade and
comparable quality unrated high yield securities, which tend to be more
sensitive to economic conditions than higher rated securities. The risk of loss
due to default by the issuer may be significantly greater for the holders of
high yielding securities because such securities may be unsecured and
subordinated to other creditors of the issuer.
The Fund held defaulted securities and/or other securities for which the income
has been deemed uncollectible. At January 31, 2005, the value of these
securities was $1,532,923, representing .12% of the Fund's net assets. The Fund
discontinues accruing income on securities for which income has been deemed
uncollectible and provides an estimate for losses on interest receivable. For
information as to specific securities, see the accompanying Statement of
Investments.
11. RESTRICTED SECURITIES
At January 31, 2005, investments in securities included issues that are
restricted and illiquid. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual restrictions on resale, and are valued under methods approved
by the Board of Trustees as reflecting fair value. A security may also be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. At January 31, 2005, the Fund held
investments in restricted and illiquid securities as follows:
----------------------------------------------------------------------------------------------------------------
PRINCIPAL ACQUISITION
AMOUNT ISSUER DATE COST VALUE
----------------------------------------------------------------------------------------------------------------
$1,400,000 Ares IV, 1A, D2, 144A, 7.919%, 12/22/12 ..... 11/14/00 $ 1,400,000 $1,204,000
2,500,000 Centurion CDO II Ltd., 1A, D2, 144A, 7.68%,
11/12/12 ................................... 11/07/00 2,500,000 2,379,000
2,000,000 Clydesdale CLO Ltd., 2001-1A, D1, 144A,
8.133%, 3/22/13 ............................ 5/23/01 1,880,000 1,976,200
----------
TOTAL RESTRICTED SECURITIES (.43% OF NET ASSETS) ............................................. $5,559,200
==========
Semiannual Report | 37
FRANKLIN FLOATING RATE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
12. UNFUNDED LOAN COMMITMENTS
The Fund may enter into certain credit agreements, all or a portion of which may
be unfunded. The Fund is obligated to fund these loan commitments at the
borrowers' discretion.
At January 31, 2005, unfunded commitments were as follows:
-------------------------------------------------------------------------
UNFUNDED
BORROWER COMMITMENT
-------------------------------------------------------------------------
BCP Crystal US Holdings Corp. (Celanese), Delay Draw ... $ 670,625
EnviroSolutions Inc., Delay Draw ....................... 166,363
Intelsat (Bermuda) Ltd., Senior Term Loan Facility ..... 1,142,857
Texas Genco LLC, Delay Draw ............................ 2,996,154
US Shipping Partners LP, Delay Draw .................... 144,231
Vanguard Health Holding Co. II LLC, Delay Draw ......... 1,500,000
Venetian Casino Resorts LLC, Delay Draw ................ 1,322,727
Warner Chilcott Holdings Co., Delay Draw ............... 1,126,183
----------
$9,069,140
==========
Unfunded loan commitments are marked to market daily and any unrealized gain or
loss is included in the Statement of Assets and Liabilities and Statement of
Operations.
13. OTHER CONSIDERATIONS
Advisers, as the Fund's Manager, may serve as a member of various bondholders'
steering committees, on credit committees, or may represent the Fund in certain
corporate restructuring negotiations. At January 31, 2005, the Manager serves in
one or more of these capacities for Adelphia Communications Corp. As a result of
this involvement, the Advisers may be in possession of certain material
non-public information. If the Fund's Manager, while in possession of such
information, seeks to sell any of its holdings in these securities it will
comply with all applicable federal securities laws.
14. FUND LITIGATION
On July 6, 2003, Adelphia Communications Corp. ("Adelphia") and related parties,
along with its Official Committee of Unsecured Creditors, filed an adversary
proceeding in the Adelphia bankruptcy case in the U.S. Bankruptcy Court (SDNY)
against more than 360 banks, financial services companies, insurance companies,
investment banks, mutual funds and other parties that had arranged for the sale
of, or purchased the bank debt of, Adelphia or its related parties. Named
Defendants included Franklin Advisers Inc., Franklin CLOs I - III, Franklin
Floating Rate Daily Access Fund, Franklin Floating Rate Master Series, and
Franklin Floating Rate Trust.
38 | Semiannual Report
FRANKLIN FLOATING RATE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
14. FUND LITIGATION (CONTINUED)
The Complaint alleges that the purchasers of this bank debt knew, or should have
known, that the loan proceeds would not benefit Adelphia, but instead would be
used to enrich Adelphia insiders. It seeks avoidance of the loans and recovery
of intentionally fraudulent transfers.
Discovery for this case has been stayed and pending motions have not been ruled
upon. Thus, it is not possible to predict its outcome at this early stage of the
proceedings. However, management of the Funds does not expect that the result
will have a material adverse effect on the financial condition of the Funds.
15. REGULATORY MATTERS
INVESTIGATIONS
As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), the California Attorney General's Office ("CAGO"), and the
National Association of Securities Dealers, Inc. ("NASD"), relating to certain
practices in the mutual fund industry, including late trading, market timing and
marketing support payments to securities dealers who sell fund shares, Franklin
Resources, Inc. and certain of its subsidiaries (as used in this section,
together, the "Company"), as well as certain current or former executives and
employees of the Company, received subpoenas and/or requests for documents,
information and/or testimony. The Company and its current employees provided
documents and information in response to those requests and subpoenas.
SETTLEMENTS
Beginning in August 2004, the Company entered into settlements with certain
regulators investigating the mutual fund industry practices noted above. The
Company believes that settlement of each of the matters described in this
section is in the best interest of the Company and shareholders of the Franklin,
Templeton, and Mutual Series mutual funds (the "funds").
On August 2, 2004, Franklin Resources, Inc. announced that its subsidiary,
Franklin Advisers, Inc., reached an agreement with the SEC that resolved the
issues resulting from the SEC investigation into market timing activity. In
connection with that agreement, the SEC issued an "Order Instituting
Administrative and Cease-and-Desist Proceedings Pursuant to Sections 203(e) and
203(k) of the Investment Advisers Act of 1940 and Sections 9(b) and 9(f) of the
Investment Company Act of 1940, Making Findings and Imposing Remedial Sanctions
and a Cease-and-Desist Order" (the "Order"). The SEC's Order concerned the
activities of a limited number of third parties that ended in 2000 and those
that were the subject of the first Massachusetts administrative complaint
described below.
Semiannual Report | 39
FRANKLIN FLOATING RATE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
15. REGULATORY MATTERS (CONTINUED)
SETTLEMENTS (CONTINUED)
Under the terms of the SEC's Order, pursuant to which Franklin Advisers, Inc.
neither admitted nor denied any of the findings contained therein, Franklin
Advisers, Inc. agreed to pay $50 million, of which $20 million is a civil
penalty, to be distributed to shareholders of certain funds in accordance with a
plan to be developed by an independent distribution consultant. At this time, it
is unclear which funds or which shareholders of any particular fund will receive
distributions. The Order also required Franklin Advisers, Inc. to, among other
things, enhance and periodically review compliance policies and procedures.
On September 20, 2004, Franklin Resources, Inc. announced that two of its
subsidiaries, Franklin Advisers, Inc. and Franklin Templeton Alternative
Strategies, Inc. ("FTAS"), reached an agreement with the Securities Division of
the Office of the Secretary of the Commonwealth of Massachusetts (the "State of
Massachusetts") related to its administrative complaint filed on February 4,
2004, concerning one instance of market timing that was also a subject of the
August 2, 2004 settlement that Franklin Advisers, Inc. reached with the SEC, as
described above.
Under the terms of the settlement consent order issued by the State of
Massachusetts, Franklin Advisers, Inc. and FTAS consented to the entry of a
cease-and-desist order and agreed to pay a $5 million administrative fine to the
State of Massachusetts (the "Massachusetts Consent Order"). The Massachusetts
Consent Order included two different sections: "Statements of Fact" and
"Violations of Massachusetts Securities Laws." Franklin Advisers, Inc. and FTAS
admitted the facts in the Statements of Fact.
On October 25, 2004, the State of Massachusetts filed a second administrative
complaint, alleging that Franklin Resources, Inc.'s Form 8-K filing, in which it
described the Massachusetts Consent Order and stated that "Franklin did not
admit or deny engaging in any wrongdoing", failed to state that Franklin
Advisers, Inc. and FTAS admitted the Statements of Fact portion of the
Massachusetts Consent Order (the "Second Complaint"). Franklin Resources, Inc.
reached a second agreement with the State of Massachusetts on November 19, 2004,
resolving the Second Complaint. As a result of the November 19, 2004 settlement,
Franklin Resources, Inc. filed a new Form 8-K. The terms of the Massachusetts
Consent Order did not change and there was no monetary fine associated with this
second settlement.
On November 17, 2004, Franklin Resources, Inc. announced that Franklin/Templeton
Distributors, Inc. ("FTDI") reached an agreement with the CAGO, resolving the
issues resulting from the CAGO's investigation concerning sales and marketing
support payments. Under the terms of the settlement, FTDI neither admitted nor
denied the allegations in the CAGO's complaint and agreed to pay $2 million to
the State of California as a civil penalty, $14 million to the funds, to be
allocated by an independent distribution consultant to be paid for by FTDI, and
$2 million to the CAGO for its investigative costs.
40 | Semiannual Report
FRANKLIN FLOATING RATE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
15. REGULATORY MATTERS (CONTINUED)
SETTLEMENTS (CONTINUED)
On December 13, 2004, Franklin Resources, Inc. announced that its subsidiaries
FTDI and Franklin Advisers, Inc. reached an agreement with the SEC, resolving
the issues resulting from the SEC's investigation concerning marketing support
payments to securities dealers who sell fund shares. In connection with that
agreement, the SEC issued an "Order Instituting Administrative and
Cease-and-Desist Proceedings, Making Findings, and Imposing Remedial Sanctions
Pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940,
Sections 9(b) and 9(f) of the Investment Company Act of 1940, and Section 15(b)
of the Securities Exchange Act of 1934" (the "Second Order").
Under the terms of the Second Order, in which FTDI and Franklin Advisers, Inc.
neither admitted nor denied the findings contained therein, they agreed to pay
the funds a penalty of $20 million and disgorgement of $1 (one dollar). FTDI and
Franklin Advisers, Inc. also agreed to implement certain measures and
undertakings relating to marketing support payments to broker-dealers for the
promotion or sale of fund shares, including making additional disclosures in the
funds' Prospectuses and Statements of Additional Information. The Second Order
further requires the appointment of an independent distribution consultant, at
the Company's expense, who shall develop a plan for the distribution of the
penalty and disgorgement to the funds.
The SEC's Second Order and the CAGO settlement agreement concerning marketing
support payments provide that the distribution of settlement monies are to be
made to the relevant funds, not to individual shareholders. The IDC has
substantially completed preparation of these distribution plans. The CAGO has
approved the distribution plan pertaining to the distribution of the monies owed
under the CAGO settlement agreement and, in accordance with the terms and
conditions of that settlement, the monies are expected to be disbursed promptly.
The SEC has not yet approved the distribution plan pertaining to the Second
Order. When approved, disbursements of settlement monies under the SEC's Second
Order will be made promptly in accordance with the terms and conditions of that
order.
OTHER LEGAL PROCEEDINGS
The Fund, in addition to the Company and other funds, and certain current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other relief, monetary damages, restitution, removal of fund trustees,
directors, advisers, administrators, and distributors, rescission of management
contracts and 12b-1 Plans, and/or attorneys' fees and costs. Specifically, the
lawsuits claim breach of duty with respect to alleged arrangements to permit
market timing and/or late trading activity, or breach of duty with respect to
the valuation of the portfolio securities of certain Templeton funds managed by
Semiannual Report | 41
FRANKLIN FLOATING RATE TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
15. REGULATORY MATTERS (CONTINUED)
OTHER LEGAL PROCEEDINGS (CONTINUED)
Franklin Resources, Inc. subsidiaries, resulting in alleged market timing
activity. The majority of these lawsuits duplicate, in whole or in part, the
allegations asserted in the February 4, 2004 Massachusetts administrative
complaint and the findings in the SEC's August 2, 2004 Order, as described
above. The lawsuits are styled as class actions, or derivative actions on behalf
of either the named funds or Franklin Resources, Inc.
In addition, the Company, as well as certain current and former officers,
employees, and directors, have been named in multiple lawsuits alleging
violations of various securities laws and pendent state law claims relating to
the disclosure of directed brokerage payments and/or payment of allegedly
excessive advisory, commission, and distribution fees, and seeking, among other
relief, monetary damages, restitution, rescission of advisory contracts,
including recovery of all fees paid pursuant to those contracts, an accounting
of all monies paid to the named advisers, declaratory relief, injunctive relief,
and/or attorneys' fees and costs. These lawsuits are styled as class actions or
derivative actions brought on behalf of certain funds.
The Company and fund management strongly believes that the claims made in each
of the lawsuits identified above are without merit and intends to vigorously
defend against them. The Company cannot predict with certainty, however, the
eventual outcome of the remaining governmental investigations or private
lawsuits, nor whether they will have a material negative impact on the Company.
Public trust and confidence are critical to the Company's business and any
material loss of investor and/or client confidence could result in a significant
decline in assets under management by the Company, which would have an adverse
effect on the Company's future financial results. If the Company finds that it
bears responsibility for any unlawful or inappropriate conduct that caused
losses to the Fund, it is committed to making the Fund or its shareholders
whole, as appropriate. The Company is committed to taking all appropriate
actions to protect the interests of its funds' shareholders.
42 | Semiannual Report
FRANKLIN FLOATING RATE TRUST
SHAREHOLDER INFORMATION
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund's proxy voting records are also made available online
at franklintempleton.com and posted on the 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 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.
Semiannual Report | 43
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LITERATURE REQUEST
LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. To ensure the highest quality of
service, we may monitor, record and access telephone calls to or from our
service departments. These calls can be identified by the presence of a regular
beeping tone.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II(1)
VALUE
Franklin Balance Sheet Investment Fund (2)
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund (2)
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund (3)
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Technology Fund
Franklin Utilities Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds
Allocation Fund
Franklin Templeton Perspectives Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund (4)
Franklin's AGE High Income Fund
Franklin Floating Rate Daily Access Fund
Franklin Income Fund
Franklin Limited Maturity U.S. Government Securities Fund (4),(5)
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund (4)
Templeton Global Bond Fund
TAX-FREE INCOME(6)
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund (7)
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term
Tax-Free Income Fund
Federal Intermediate-Term
Tax-Free Income Fund
New York Intermediate-Term
Tax-Free Income Fund
STATE-SPECIFIC
Alabama
Arizona
California (8)
Colorado
Connecticut
Florida (8)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts (7)
Michigan (7)
Minnesota (7)
Missouri
New Jersey
New York (8)
North Carolina
Ohio (7)
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance Products Trust (9)
(1) The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.
(2) The fund is only open to existing shareholders and select retirement
plans.
(3) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.
(4) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
(5) Formerly Franklin Short-Intermediate U.S. Government Securities Fund.
Effective 9/1/04, the fund's name changed; its investment goal and
strategy remained the same.
(6) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.
(7) Portfolio of insured municipal securities.
(8) These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).
(9) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
01/05 Not part of the semiannual report
[LOGO](R)
FRANKLIN(R) TEMPLETON(R) One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906
o WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at franklintempleton.com.
See inside for details.
SEMIANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN FLOATING RATE TRUST
INVESTMENT MANAGER
Franklin Advisers, Inc.
DISTRIBUTOR
Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com
SHAREHOLDER SERVICES
1-800/632-2301
Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
020 S2005 03/05
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 11(A), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers 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 Frank W. T. LaHaye and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 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. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.
ITEM 10. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 11. EXHIBITS.
(A) Code of Ethics
(B) (1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
(B) (2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN FLOATING RATE TRUST
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date: March 22, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date: March 22, 2005
By /s/Galen G. Vetter
Chief Financial Officer
Date: March 22, 2005