SHAREHOLDER LETTER
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Your Fund's Goal: Franklin Floating Rate Trust's primary goal is to provide as
high a level of current income and preservation of capital as is consistent with
investment primarily in senior secured corporate loans and corporate debt
securities with floating interest rates.
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Dear Shareholder:
We are pleased to bring you Franklin Floating Rate Trust's annual report for the
period ended July 31, 2001.
ECONOMIC OVERVIEW
The U.S. economy weakened markedly during the fiscal year ended July 31, 2001,
as a slowdown in growth, perhaps sharpened by political uncertainty over the
presidential election, started in the technology sector and quickly spread to
other industries. The Federal Reserve Board (the Fed) moved quickly and
forcefully to cut interest rates during the late winter and spring with a series
of half-percent reductions, but by period-end it was not yet clear if an
economic recovery had taken hold. As of July 31, 2001, the federal funds target
rate stood at 3.75%, down from 6.50% one year earlier.
Short-term interest rates declined significantly over the past 12 months due to
the Fed's aggressive monetary easing stance. Accordingly, the three-month London
InterBank Offered Rate
The dollar value, number of shares or principal value, and complete legal titles
of all portfolio holdings are listed in the Fund's Statement of Investments
(SOI). The SOI begins on page 11.
CONTENTS
Shareholder Letter ....................................................... 1
Performance Summary ...................................................... 7
The Fund's
Repurchase Offers ........................................................ 8
Financial Highlights &
Statement of Investments ................................................. 10
Financial Statements ..................................................... 24
Notes to
Financial Statements ..................................................... 28
Independent
Auditors' Report ......................................................... 33
[FUND CATEGORY PYRAMID GRAPHIC]
WHAT ARE SYNDICATED BANK LOANS?
Syndicated bank loans are typically secured, floating rate loans to corporate
borrowers made by a group, or syndicate, of banks and other lenders. A group of
lenders provides capital to companies for varied purposes, such as merger and
acquisition activity, leveraged buyouts or refinancings. Borrowing rates are
generally pegged to an index, such as LIBOR, the London InterBank Offered Rate.
(LIBOR), the benchmark used to set the interest rates of most leveraged loans,
declined from 6.72% at the beginning of the reporting period, to 3.67% on July
31, 2001. Long-term rates stayed relatively constant over the same period,
however, with the yield on the 30-year Treasury bond declining slightly from
5.78% to 5.52%. Equity markets were extremely volatile during the year, although
the Dow Jones(R) Industrial Average did not move significantly, starting the
period under review at 10606.95 and ending at 10522.81.(1)
SYNDICATED BANK LOAN MARKET
The first six months of the Fund's fiscal year were difficult, as the slowing
economy and relatively high interest rates created a challenging business
climate for leveraged companies that issue syndicated bank loans. Default rates
increased markedly, hitting levels not seen since the last recession of 1991-92,
and new issuance and secondary market trading activity slowed.
Signs of a turnaround seemed to appear at the beginning of 2001 when the Fed
unexpectedly and aggressively cut interest rates, spurring a sharp rebound in
the closely linked high yield (junk bond) market. Unfortunately, that recovery
turned out to be short-lived -- although some companies were able to refinance
or issue new debt, investor interest seemed focused on old economy industries
(including foods, pharmaceuticals, health care and insurance) that were
perceived as more stable, instead of riskier industries such as technology and
telecommunications.
By the spring of 2001, the outlook for the syndicated loan market grew hazy
again as the expected recovery failed to take hold
1. Source: Standard & Poor's Micropal. The unmanaged Dow Jones Industrial
Average is a price-weighted index based on the average market price of 30 blue
chip stocks.
2
and a number of defaults, particularly in telecommunications-related loans, cast
a shadow across the asset class. By early summer, leveraged loan market
conditions started to improve a bit as lower interest rates and increased
investor enthusiasm stabilized the market. New-issue volume increased
significantly in May and June, and although telecommunications credits remained
out of favor, investors showed continued willingness to invest in old economy
companies, contributing to a broad rally.
Still, the year under review was certainly a difficult period for the leveraged
loan asset class, with returns coming in much lower than in recent years. After
several years of ideal conditions -- strong economic growth with relatively high
interest rates -- bank loans faced a weakening economy and significantly lower
short-term interest rates. Loan credit quality fell across the board, forcing
markdowns of some positions; loan yields also dropped.
Although it may seem like a very poor market environment, we believe there are
some hopeful signs amid the fallout. Banks are tightening credit standards on
new deals coming to market, and lower interest rates could help borrowers by
reducing interest expense. In addition, market dislocations have created
opportunities for nimble investors to invest in loans from strong companies at
very attractive prices.
PORTFOLIO NOTES
The cable television industry remained one of our favorites, and was increased
to 6.5% of the Fund's total net assets by July 31, 2001. We invested
significantly in several new issues in the
TOP 10 HOLDINGS
7/31/01
COMPANY % OF TOTAL
INDUSTRY NET ASSETS
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Conseco Inc. 3.6%
Financial Conglomerates
Wyndham International Inc. 3.3%
Hotels & Resorts
Charter Communications
CCVI, CCVIII and
Charter Communications
Operating LLC 2.7%
Cable Television
Nextel Communications Inc. 2.6%
Cellular Telephone
Finova Capital Corp. 2.4%
Finance Companies
Allied Waste Industries Inc. 2.2%
Environmental Services
Burns Philip 2.1%
Packaged Foods
Ventas Realty LP 2.0%
Real Estate Investment Trusts
VoiceStream Holding LLC 2.0%
Cellular Telephone
AEI Resources 1.5%
Coal & Mining
3
DIVIDEND DISTRIBUTIONS*
8/1/00 - 7/31/01
DIVIDEND
MONTH PER SHARE
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August 7.7683 cents
September 7.2199 cents
October 8.0619 cents
November 7.6140 cents
December 7.3861 cents
January 8.8942 cents
February 7.1895 cents
March 7.0741 cents
April 7.1329 cents
May 6.8257 cents
June 6.3358 cents
July 6.3884 cents
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TOTAL 87.8908 CENTS
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions include all accrued income earned by the Fund during the reporting
period.
latter half of the reporting period, including issuers such as Mediacom, Insight
and Videotron. In a slowing economy, one always has to be worried about
declining revenues as consumers cut spending, but we feel that cable provides
excellent value to subscribers, and could be one of the last things consumers
would be willing to give up. Cable companies are also starting to benefit from
potentially higher-margin services like digital cable, Internet access and
telephony.
A year ago we wrote to you about the problems the movie exhibition industry had
been facing due to overcapacity and inadequate demand growth. Although the
industry remains overbuilt, the news has improved for senior lenders like your
Fund. A private investor based in Colorado, Philip Anschutz, saw value in the
assets of two movie theater chains, United Artists and Regal Cinemas, and began
to buy their bank debt in an effort to obtain a controlling stake of the
companies' equity in a negotiated restructuring. The news of his interest,
combined with better-than-expected box office revenues and the industry's
aggressive moves to shut down unprofitable theaters, moved movie theater company
loan prices up significantly, benefiting the Fund.
During the reporting period, we invested in the $1 billion senior credit
facilities of White Mountains, a holding company specializing in insurance. One
of the borrower's subsidiaries, CGU, ranks among the top 20 U.S. property and
casualty insurers. Folksamerica Holding Company, a CGU subsidiary, provides
reinsurance to property and casualty risk insurers throughout North America. We
were attracted to the company's strong franchise, favorable geographic mix, and
proven management team
4
led by Jack Byrne, former CEO of GEICO insurance. In addition, White Mountains
has an attractive conservative capital structure whose senior credit facilities
were rated investment grade by independent credit rating agencies Moody's(R) and
S&P(R), with cash flow expected to cover interest expense on company debt more
than threefold. In addition, the company, which is not publicly traded, has
strong equity sponsorship in the form of several institutional investors,
including Warren Buffett's Berkshire Hathaway.
Lastly, we continued to position the Fund defensively by favoring industries
such as hospitals in the health care sector, since hospital services should
still experience strong demand regardless of economic conditions. During the
year under review, we invested in Triad Hospitals, the nation's third-largest
hospital management company. Triad owns and operates 49 hospitals and 14
ambulatory surgery centers located in small cities and selected high-growth
urban markets. Currently, Iasis Healthcare also remains one of our top holdings
in this sector. Iasis owns and/or operates 14 hospitals and four surgery
centers, primarily in three major markets, Phoenix, Salt Lake City and Tampa-
St. Petersburg, which have had strong demographic trends. We feel investments
like Triad and Iasis will hold up relatively better in a recession and that
these loans have significant asset coverage (in the form of the hospitals
pledged to us as collateral) to mitigate any downside risk.
Looking forward, we will maintain our strategy of holding loans from companies
that we believe possess defensive market
5
positions and strong asset coverage in industries that we feel will do well even
during periods of economic decline. With its relatively stable share price and
potential for high, current income, we believe the Fund is an attractive
investment for investors seeking to diversify portfolios heavily weighted in
equities.
We appreciate your investment in Franklin Floating Rate Trust and welcome your
comments or suggestions.
Sincerely,
/s/ Charles B. Johnson
Charles B. Johnson
Chairman
Franklin Floating Rate Trust
/s/ Chauncey Lufkin
Chauncey Lufkin
Portfolio Manager
Franklin Floating Rate Trust
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This discussion reflects our views, opinions and portfolio holdings as of July
31, 2001, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change depending
on market and economic conditions. Although historical performance is no
guarantee of future results, these insights may help you understand our
investment and management philosophy.
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6
PERFORMANCE SUMMARY AS OF 7/31/01
Distributions and returns will vary based on earnings of the Fund's portfolio
and any profits realized from the sale of the portfolio's securities, as well as
the level of the Fund's operating expenses. All total returns include reinvested
distributions at net asset value.
PRICE AND DISTRIBUTION INFORMATION
CHANGE 7/31/01 7/31/00
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Net Asset Value (NAV) -$0.61 $9.24 $9.85
DISTRIBUTIONS (8/1/00 - 7/31/01)
Dividend Income $0.878908
PERFORMANCE
INCEPTION
1-YEAR 3-YEAR (10/10/97)
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Cumulative Total Return(1) +2.80% +17.69% +23.96%
Average Annual Total Return(2) +1.86% +5.58% +5.81%
Avg. Ann. Total Return (6/30/01)(3) +3.19% +5.92% +6.08%
Distribution Rate(4) 7.87%
30-Day Standardized Yield(5) 7.85%
For updated performance figures, see "Prices and Performance" at
franklintempleton.com, or call Franklin Templeton Investments at 1-800/342-5236.
Past performance does not guarantee future results.
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SHARES REPURCHASED WITHIN 12 MONTHS OF INVESTMENT ARE SUBJECT TO 1% EARLY
WITHDRAWAL CHARGE.
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1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include the early withdrawal charge.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the 1% early withdrawal
charge, assuming shares were redeemed within 12 months of purchase.
3. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.
4. The distribution rate is based on the annualization of daily distribution
(5.9746 cents per share) during the last 30 days in July and the $9.24 NAV on
7/31/01.
5. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 7/31/01.
7
THE FUND'S REPURCHASE OFFERS
The Fund will make quarterly repurchase offers for a portion of its shares. With
any repurchase offer, shareholders may elect to tender (have the Fund
repurchase) all, a portion or none of their shares. With each repurchase offer,
shareholders will be notified in writing about the offer, how to request that
the Fund repurchase their shares and the deadline for submitting repurchase
requests.
Each quarter the Board of Trustees will set the amount of the repurchase offer,
as a percentage of outstanding shares. This amount is known as the repurchase
offer amount and will generally be between 5% and 25% of the Fund's outstanding
shares. If repurchase requests exceed the repurchase offer amount, the Fund will
prorate requests. The Fund may, however, first accept any requests to repurchase
all of a shareholder's shares if the shareholder owns less than 100 shares. The
Board will also determine the date by which the Fund must receive shareholders'
repurchase requests, which is known as the repurchase request deadline. The
Board will base these decisions on investment management considerations, market
conditions, liquidity of the Fund's assets, shareholder servicing and
administrative considerations and other factors it deems appropriate. Each
8
repurchase request deadline will occur within the period that begins 21 days
before, and ends 21 days after, the end of the quarterly interval. The
repurchase price of the shares will be the net asset value as of the close of
the NYSE on the date the Board sets as the repurchase pricing date. The maximum
number of days between the repurchase request deadline and the repurchase
pricing date is 14 days.
SUMMARY OF REPURCHASE OFFERS - 8/1/00 THROUGH 7/31/01
REPURCHASE REPURCHASE % OF SHARES NUMBER OF
REQUEST DEADLINE OFFER AMOUNT TENDERED* SHARES TENDERED*
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1. 10/2/00 25% 5.24% 15,715,936.939
2. 12/22/00 25% 7.09% 22,821,259.481
3. 4/2/01 25% 11.49% 39,010,970.250
4. 7/2/01 25% 8.77% 28,669,786.561
*In connection with the repurchase offers, due to the limited number of shares
tendered, the Fund did not have to consider whether to repurchase an additional
amount of shares, not in excess of 2% of the shares outstanding, and did not
need to repurchase any shares on a pro rata basis as described in the Prospectus
and Repurchase Offer/Request Form.
9
FRANKLIN FLOATING RATE TRUST
Financial Highlights
YEAR ENDED JULY 31,
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2001 2000 1999 1998(a)
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PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year $ 9.85 $ 9.98 $ 10.04 $ 10.00
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Income from investment operations:
Net investment income .875 .839 .700 .482
Net realized and unrealized gains (losses) (.606) (.130) (.060) .040
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Total from investment operations .269 .709 .640 .522
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Less distributions from net investment income (.879) (.839) (.700) (.482)
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Net asset value, end of year $ 9.24 $ 9.85 $ 9.98 $ 10.04
==============================================================
Total return(b) 2.80% 7.39% 6.62% 5.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $2,832,188 $2,541,497 $1,106,363 $168,537
Ratios to average net assets:
Expenses 1.36% 1.35% 1.39% 1.32%(c)
Expenses excluding waiver and payments by affiliate 1.36% 1.35% 1.41% 1.76%(c)
Net investment income 9.07% 8.51% 6.93% 6.06%(c)
Portfolio turnover rate 84.15% 66.27% 63.29% 45.32%
(a) For period October 10, 1997 (effective date) to July 31, 1998.
(b) Total return does not reflect the contingent deferred sales charge and is
not annualized for periods less than one year.
(c) Annualized
10 See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2001
PRINCIPAL
AMOUNT* VALUE
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(a) SENIOR FLOATING RATE INTERESTS 99.4%
APPAREL
St. John Knits International Inc., Term Loan B, 6.813%, 7/31/07 $ 853,772 $ 848,436
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AUTO PARTS: O.E.M. 3.0%
Dayco Products LLC, Term Loan B, 7.109 - 7.305%, 5/31/07 10,672,535 10,399,052
Exide Corp., Term Loan B, 8.196 - 8.759%, 12/18/05 18,229,816 17,105,638
SPX Corp.,
Term Loan B, 6.438 - 6.875%, 12/31/06 8,118,844 8,139,864
Term Loan C, 6.625 - 7.125%, 12/31/07 18,927,500 18,989,601
Tenneco Automotive Inc.,
Term Loan B, 8.09%, 11/04/07 17,205,000 14,608,129
Term Loan C, 8.34%, 5/04/08 17,205,000 14,640,388
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83,882,672
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BOOKS/MAGAZINES 1.1%
American Media Inc., Term Loan B, 7.42 - 8.41%, 4/01/07 997,490 1,001,075
PEI Holdings, Term Loan B, 8.055 - 8.306%, 3/15/06 7,123,144 6,873,834
Primedia Inc., Term Loan B, 6.54%, 6/30/09 11,000,000 10,942,250
Reiman Publications Co., Term Loan B, 7.50 - 7.625%, 11/30/05 3,459,384 3,473,440
Weekly Reader, Term Loan, 8.01 - 8.04%, 11/08/06 9,825,000 9,382,875
------------
31,673,474
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BROADCASTING 2.8%
Benedek Broadcasting Corp., Term Loan B, 6.96%, 11/20/07 17,000,000 15,342,500
Comcorp Broadcasting Inc., Term Loan, 6.75 - 7.26%, 6/30/02 4,583,902 4,469,304
(c) Comcorp Holdings Inc., Term Loan, 11.25%, 8/28/01 5,000,000 4,875,000
Corus Entertainment, Term Loan B, 7.00%, 9/01/07 3,900,000 3,909,750
Emmis Communications Corp., Term Loan B, 6.75 - 7.174%, 8/31/09 2,000,000 2,007,322
Entravision Communications Corp., Term Loan B, 6.563%, 12/31/08 3,000,000 3,018,000
Nassau Broadcasting Partners LP, Term Loan B, 11.25%, 6/30/07 5,816,111 5,656,168
Quorum Broadcasting Co., Term Loan B, 7.46 - 7.75%, 9/30/07 8,286,221 7,913,341
Sinclair Broadcast Group Inc.,
Incremental Term Loan B, 6.71%, 9/30/09 15,000,000 15,121,875
(d) Revolver, 7.103 - 7.156%, 9/15/05 7,391,962 7,133,242
Telemundo Group, Term Loan B, 7.19%, 3/31/08 4,000,000 4,019,500
White Knight Broadcasting Inc., Term Loan B, 7.26%, 6/30/07 4,674,768 4,557,899
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78,023,901
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BUILDING MATERIALS .3%
Formica Corp., Term Loan B, 7.21 - 7.76%, 4/30/06 6,912,500 5,599,125
Magnatrax Corp., Term Loan B, 7.82%, 11/15/05 4,227,931 3,868,558
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9,467,683
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BUILDING PRODUCTS .5%
Tapco International Inc.,
Term Loan B, 6.96%, 7/23/07 7,517,045 7,291,534
Term Loan C, 7.21%, 7/23/08 6,292,045 6,103,284
Therma-Tru Corp., Term Loan B, 7.75%, 5/11/07 964,571 955,528
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14,350,346
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11
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2001 (cont.)
PRINCIPAL
AMOUNT* VALUE
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(a)SENIOR FLOATING RATE INTERESTS (CONT.)
CABLE TELEVISION 7.5%
Century Cable (Adelphia),
Discretionary Term Loan, 6.79 - 6.86%, 12/31/09 $ 7,500,000 $ 7,507,500
Discretionary Term Loan, 6.79 - 6.86%, 6/30/09 12,000,000 12,019,380
Charter Communications CCVI,
Term Loan A, 5.76%, 5/12/08 1,125,000 1,109,883
Term Loan B, 6.51%, 11/12/08 20,000,000 19,942,500
Charter Communications CC VIII, Term Loan B, 6.54%, 2/14/08 22,000,000 21,991,750
Charter Communications Operating LLC,
Incremental Term Loan, 6.26%, 9/18/08 21,500,000 21,438,188
Term Loan B, 6.21%, 3/18/08 13,000,000 12,962,625
Insight Midwest Holdings LP, Term Loan, 6.563%, 12/31/09 3,000,000 3,025,125
MCC Iowa (Broadband), Term Loan B, 6.26 - 6.29%, 9/30/10 9,000,000 9,000,000
Mediacom Illinois, Term Loan B, 6.34%, 12/31/08 5,000,000 5,007,815
Mediacom Southeast, Delay Draw, 6.32 - 6.34%, 8/01/08 2,500,000 2,503,907
Pegasus Media Communications Corp., Term Loan B, 7.313%, 4/30/05 17,412,500 17,231,114
UCA-HHC (Adelphia), Term Loan, 6.313%, 3/31/08 26,000,000 26,010,842
UPC Distribution Holdings BV, Term Loan B, 8.00%, 3/31/09 53,000,000 43,106,649
Videotron Itee, Term Loan B, 6.598 - 8.50%, 12/01/09 10,000,000 10,075,000
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212,932,278
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CASINOS/GAMING 2.3%
Ameristar Casinos Inc.
Term Loan B, 7.438%, 12/31/06 8,773,600 8,811,984
Term Loan C, 7.688%, 12/20/07 7,598,150 7,631,392
Boyd Gaming Corp., Term Loan B, 6.46 - 7.35%, 6/15/03 1,936,500 1,929,238
Greektown Casinos, Term Loan B, 7.75 - 8.125%, 9/16/04 8,977,500 8,999,944
Hollywood Casino Corp., Term Loan, 10.51%, 5/01/06 5,000,000 5,112,500
Scientific Games Corp., Term Loan B, 8.063 - 9.58%, 9/30/07 32,256,250 32,014,328
------------
64,499,386
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CELLULAR TELEPHONE 8.7%
Alamosa Holdings Inc., Term Loan, 7.875%, 2/15/08 20,000,000 19,800,000
Alec Holdings Inc.
Term Loan B, 6.75%, 11/04/07 2,631,579 2,542,763
Term Loan C, 7.063%, 5/14/08 2,368,421 2,277,632
American Cellular Inc., Term Loan C, 7.11%, 2/25/09 3,390,736 3,351,777
Centennial Cellular Operating Co.
Term Loan B, 6.73 - 6.96%, 5/31/07 7,813,407 7,692,542
Term Loan C, 6.98 - 7.24%, 11/30/07 4,479,546 4,413,052
Dobson Operating Company LLC, Term Loan B, 6.78%, 1/31/07 4,432,500 4,357,148
Microcell Connexions Inc.,
Term Loan B, 6.71%, 3/01/06 5,601,575 4,957,394
Term Loan E, 7.08%, 3/01/06 5,000,000 4,425,000
Nextel Communications Inc.,
Term Loan A, 6.54 - 6.563%, 12/31/07 7,968,750 7,141,992
Term Loan B, 7.415%, 1/29/08 13,250,000 12,458,843
Term Loan C, 7.75%, 7/29/08 18,250,000 17,160,293
Term Loan D, 7.125%, 3/31/09 39,000,000 35,916,581
12
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2001 (CONT.)
PRINCIPAL
AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------------
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
CELLULAR TELEPHONE (CONT.)
Nextel Operations Inc.,
Leveraged Lease I, 9.188%, 3/15/05 $ 3,696,756 $ 3,687,515
Leveraged Lease II, 7.35%, 2/08/07 13,719,070 13,684,772
Nextel Partners Inc., Term Loan C, 8.18%, 7/29/08 20,000,000 19,133,340
Rural Cellular Corp.,
Term Loan B, 7.10%, 10/03/08 7,500,000 7,362,504
Term Loan C, 7.35%, 4/03/09 7,500,000 7,356,249
Sygnet Wireles Inc., Term Loan C, 7.53%, 12/23/07 1,681,180 1,653,160
Telecorp PCS Inc., Term Loan B, 6.79%, 11/17/08 5,000,000 4,921,875
Tritel Holding Corp., Term Loan B, 8.40%, 12/31/07 5,000,000 5,007,815
VoiceStream Holding LLC
Term Loan A, 6.78%, 6/30/09 1,683,333 1,682,281
Term Loan B, 6.83%, 6/30/09 7,500,000 7,503,518
Vendor Term Loan B, 6.83%, 6/30/07 47,316,667 47,287,093
------------
245,775,139
------------
CHEMICALS: AGRICULTURAL .2%
IMC Global Inc., Term Loan B, 7.50 - 7.875%, 11/17/06 5,000,000 5,016,665
------------
CHEMICALS: MAJOR DIVERSIFIED .4%
Lyondell Chemical Co.,
Term Loan B, 7.49%, 6/30/05 1,567,589 1,575,456
Term Loan E, 7.585 - 8.915%, 6/30/06 9,675,018 9,829,643
------------
11,405,099
------------
CHEMICALS: SPECIALTY 1.1%
Huntsman International LLC,
Term Loan B, 6.75 - 7.125%, 6/30/07 700,000 696,209
Term Loan C, 7.063%, 6/30/08 700,000 695,712
Noveon Inc., Term Loan B, 7.438 - 7.50%, 9/30/08 5,000,000 4,989,285
RK Polymers LLC, Term Loan B, 9.25%, 3/07/09 25,000,000 24,531,250
------------
30,912,456
------------
COAL/MINING 1.5%
(c)AEI Resources,
Revolver, 9.00%, 12/31/03 1,104,539 1,027,221
Term Loan A, 9.00%, 12/31/03 1,473,570 1,370,420
Term Loan B, 11.50%, 9/30/05 44,507,626 41,058,284
------------
43,455,925
------------
COMMUNICATIONS .6%
Spectrasite Communications Inc., Term Loan B, 7.55 - 7.74%, 2/22/07 18,000,000 16,967,808
------------
COMPUTER/VIDEO CHAINS .7%
Blockbuster Inc.,
(d) Revolver, 5.19 - 5.25%, 7/01/04 11,389,615 10,820,135
Term Loan B, 5.28 - 6.184%, 7/01/04 9,019,231 8,692,284
------------
19,512,419
------------
13
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2001 (CONT.)
PRINCIPAL
AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------------
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
CONSUMER SERVICES .6%
Argosy Gaming Co., Term Loan B, 8.25%, 7/31/08 $ 5,000,000 $ 5,050,000
Sotheby's Holdings Inc., Term Loan B, 6.77 - 6.81%, 8/11/02 10,000,000 9,950,000
Stewart Enterprises Inc., Term Loan B, 7.195 - 7.205%, 6/30/06 3,000,000 3,008,751
------------
18,008,751
------------
CONSUMER SPECIALTIES .1%
Holmes Products Corp., Term Loan B, 8.00%, 2/05/07 1,903,071 1,341,665
------------
CONSUMER SUNDRIES .2%
Playtex Products Inc., Term Loan A, 6.82%, 5/31/07 2,222,222 2,231,018
United Industries Corp., Term Loan, 7.79%, 1/20/06 4,012,182 3,758,078
------------
5,989,096
------------
CONTAINERS/PACKAGING 3.9%
Crown, Cork & Seal Company Inc., Term Loan B, 7.31%, 3/04/02 20,000,000 19,875,000
Graham Packaging Co.,
Term Loan B, 6.938%, 1/31/06 2,678,855 2,538,772
Term Loan C, 7.188%, 1/31/07 2,219,622 2,110,954
Term Loan D, 7.188 - 8.25%, 1/31/07 13,162,500 12,511,576
Greif Brothers Corp., Term Loan B, 6.95%, 3/01/08 9,640,359 9,675,788
Impress Metal Packaging LTD., Term Loan G, 6.962%, 12/31/06 497,500 493,769
Owens-Illinois Inc., Term Loan, 6.30 - 6.33%, 3/31/04 32,197,968 30,199,021
Stone Container Corp.,
Term Loan F, 7.125%, 12/31/05 11,583,478 11,624,506
Term Loan G, 7.438%, 12/31/06 8,841,334 8,862,332
Term Loan H, 7.438%, 12/31/06 7,582,366 7,600,375
Tekni-Plex Inc., Term Loan B, 7.25%, 6/21/08 4,950,000 4,793,248
------------
110,285,341
------------
DIVERSIFIED COMMERCIAL SERVICES 2.0%
Buhrmann, US Inc., Term Loan B, 8.68%, 10/24/07 26,957,364 26,878,730
Mascotech Inc., Term Loan B, 7.75%, 11/28/08 22,977,000 21,272,865
Outsourcing Solutions Inc., Term Loan B, 7.77%, 6/01/06 4,912,500 4,634,123
Stream International Inc., Term Loan, 8.94%, 10/29/06 2,450,000 2,433,156
(c)US Office Products Co.,
Multi-Draw Term Loan, 6.75%, 6/09/05 1,009,065 148,837
Revolver, 6.75 - 10.00%, 6/09/05 4,559,761 672,566
Term Loan A, 6.75%, 6/09/06 1,761,514 259,823
------------
56,300,100
------------
DIVERSIFIED MANUFACTURING 1.0%
Foamex International Inc.,
Term Loan B, 7.75%, 6/30/05 1,528,418 1,421,429
Term Loan C, 8.00%, 6/30/06 1,389,476 1,292,213
Term Loan D, 8.50%, 12/31/06 7,136,540 6,636,982
General Cable Corp., Term Loan B, 6.875%, 6/30/07 3,648,142 3,616,220
14
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2001 (CONT.)
PRINCIPAL
AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------------
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
DIVERSIFIED MANUFACTURING (CONT.)
Mediapak Holdings Corp.,
Term Loan B, 7.21%, 1/14/06 $ 5,773,745 $ 4,185,966
Term Loan C, 7.46%, 1/14/07 5,773,745 4,185,965
Superior Telecom Inc., Term Loan B, 7.875%, 11/27/05 9,423,549 7,175,363
------------
28,514,138
------------
DRUG STORE CHAINS .5%
Rite Aid Corp., Term Loan, 7.313 - 7.375%, 3/15/05 10,500,000 10,502,625
Shoppers Drug Mart, Term Loan C, 6.875 - 6.938%, 2/04/08 2,536,654 2,554,887
------------
13,057,512
------------
ELECTRIC UTILITIES: CENTRAL .3%
Western Resources Inc., Term Loan, 6.585%, 3/17/03 8,890,101 8,925,661
------------
ELECTRIC UTILITIES: EAST .1%
AES New York Funding LLC., Term Loan, 6.563%, 9/19/01 3,000,000 2,999,064
------------
ELECTRIC UTILITIES: SOUTH 1.5%
AES Texas Funding III, Term Loan, 6.563%, 3/31/02 41,326,154 41,287,430
------------
ELECTRONIC COMPONENTS .8%
Seagate Technology Holdings Inc., Term Loan B, 7.063%, 11/22/06 22,367,500 22,135,438
------------
ENGINEERING & CONSTRUCTION 1.4%
URS Corp.,
Term Loan B, 7.125%, 6/09/06 882,995 887,410
Term Loan C, 7.375%, 6/09/07 882,995 887,410
(c)Washington Group Inc., Term Loan B, 9.00%, 7/07/07 54,161,297 37,732,387
------------
39,507,207
------------
ENVIROMENTAL SERVICES 3.0%
Allied Waste Industries Inc.,
Term Loan B, 6.563 - 6.688%, 7/30/06 29,383,378 29,294,993
Term Loan C, 6.813 - 7.00%, 7/30/07 34,260,850 34,157,793
Environmental Systems, Products Holdings Inc.,
PIK Loan, 7.205 - 7.24%, 12/31/04 8,732,941 4,948,670
Term Loan, 7.705 - 7.784%, 12/31/04 21,262,818 17,825,322
------------
86,226,778
------------
FARMING/SEEDS/MILLING .1%
Hines Nursery, Term Loan B, 7.563 - 7.875%, 2/28/05 2,990,000 2,885,350
------------
FINANCE COMPANIES 3.0%
ARES IV, Term Loan D, 144A, 9.75%, 12/22/12 1,400,000 1,377,688
Centurion II, Tranche D, 10.03%, 11/12/12 2,500,000 2,462,500
Clydesdale CLO, Tranche D1 144A, 10.629%, 3/22/13 2,000,000 1,940,625
(c)Finova Capital Corp.,
Citibank Facility, 9.00%, 5/02/03 42,500,000 39,489,597
Revolver, 8.75%, 5/16/03 30,000,000 27,875,010
15
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2001 (CONT.)
PRINCIPAL
AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------------
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
FINANCE COMPANIES (CONT.)
First Dominion Funding II, sub. floating rate deb, Series A-D 144A, 9.35%, 4/25/14 $ 3,000,000 $ 2,838,750
Helm Holding Corp., Term Loan B, 7.543%, 10/18/06 5,970,000 5,731,200
Highland CLO I, Term Loan D 144A, 9.929%, 6/01/11 2,000,000 1,913,125
------------
83,628,495
------------
FINANCIAL CONGLOMERATES 3.6%
Conseco Inc., Term Loan, 6.21 - 6.32%, 9/30/01 105,986,785 100,952,411
------------
FOOD CHAINS .3%
Buffets Inc., Term Loan B, 7.50 - 7.563%, 1/15/07 1,473,333 1,484,690
Winn-Dixie Stores, Term Loan B, 6.563%, 3/31/07 7,481,250 7,536,192
------------
9,020,882
------------
FOOD: MAJOR DIVERSIFIED .1%
Interstate Brands Corp., Term Loan B, 6.01 - 6.031%, 7/19/07 2,000,000 2,012,500
------------
FOOD: SPECIALTY/CANDY .1%
Cott Corp. (BCB USA Corp.), Term Loan, 6.79%, 12/31/06 2,000,000 2,016,250
------------
HOSPITAL/NURSING MANAGEMENT 4.1%
Genesis Health Ventures Inc.,
(d)Revolver, 7.08 - 7.25%, 9/30/03 32,516,160 24,110,733
Term Loan B, 7.33%, 9/30/04 2,718,167 2,050,517
Term Loan C, 7.58%, 9/30/05 2,006,977 1,514,013
HCA - Healthone LLC, Term Loan B, 7.28%, 6/30/05 6,728,699 6,766,548
Healthsouth Corp., Term Loan, 5.71%, 6/22/03 18,000,000 17,505,000
Iasis Healthcare Corp.,
Term Loan A, 7.20 - 7.23%, 9/30/04 4,916,667 4,894,134
Term Loan B, 7.95 - 7.98%, 9/30/06 8,854,562 8,866,418
(c)Integrated Health Services Inc.,
Revolver, 11.75%, 9/30/03 32,042,554 18,825,001
Term Loan B, 11.75%, 9/30/04 7,984,042 4,743,024
Term Loan C, 11.75%, 12/31/05 4,973,403 2,954,515
(c)Mariner Post-Acute Network Inc.
Revolver, 9.00%, 3/31/04 6,643,607 4,427,964
Term Loan A, 9.00%, 3/31/04 14,841,211 9,949,800
Term Loan B, 9.00%, 3/31/05 2,500,000 1,677,678
Term Loan C, 9.00%, 3/31/06 2,500,000 1,677,678
(c)Multicare Companies Inc.,
Term Loan B, 9.75%, 9/30/04 2,473,839 1,935,779
Term Loan C, 9.75%, 9/30/05 602,883 471,756
Triad Hospitals Inc., Term Loan B, 6.81%, 9/30/08 4,000,000 4,043,000
------------
116,413,558
------------
HOTEL/RESORTS 4.7%
Extended Stay America Inc., Term Loan B, 6.563%, 7/01/07 16,000,000 16,113,328
Sunburst Hospitality Corp.,
Term Loan, 7.81%, 12/21/05 22,846,154 22,760,481
Term Loan 1, 7.81%, 1/04/03 1,753,567 1,746,991
16
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2001 (CONT.)
PRINCIPAL
AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------------
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
HOTEL/RESORTS (CONT.)
Wyndham International Inc.,
Increasing Rate Note, 8.625%, 6/30/04 $ 39,234,773 $ 38,880,562
(d)Revolver, 6.813 - 6.875%, 6/30/05 2,530,000 2,454,100
Term Loan B, 8.125%, 6/30/06 52,500,000 51,504,704
------------
133,460,166
------------
INDUSTRIAL MACHINERY/COMPONENTS .8%
Blount International Inc., Term Loan B, 8.085 - 9.645%, 6/30/06 14,665,147 13,235,295
Gleason Corp., Term Loan B, 7.25 - 7.50%, 2/18/08 4,950,000 4,925,249
Thermadyne LLC,
Term Loan B, 6.78%, 5/22/05 2,366,653 2,055,043
Term Loan C, 7.03%, 5/22/06 2,366,653 2,055,043
------------
22,270,630
------------
MARINE SHIPPING .5%
Great Lakes Transportation, Term Loan, 7.75 - 7.813%, 3/23/08 13,790,000 13,514,200
------------
MARINE TRANSPORTATION .1%
American Commercial Lines LLC,
Term Loan B, 8.063%, 6/30/06 1,412,371 1,274,665
Term Loan C, 8.313%, 6/30/07 1,963,578 1,772,129
------------
3,046,794
------------
MEDIA CONGLOMERATES .7%
(c)Bridge Information Systems Inc.,
Multi-Draw, 9.50%, 5/29/03 3,477,728 1,534,547
(d)Revolver, 9.25%, 7/07/03 2,606,551 1,162,522
Term Loan A, 9.50%, 5/29/03 1,267,199 565,171
Term Loan B, 8.75%, 7/07/05 38,477,417 17,160,927
------------
20,423,167
------------
MEDICAL/NURSING SERVICES 1.6%
American HomePatient Inc., Term Loan, 7.375%, 12/31/02 37,418,450 31,384,724
Apria Healthcare Group Inc., Term Loan B, 6.80%, 7/20/07 5,000,000 5,006,250
Maxxim Medical Inc.,
Term Loan B, 8.063%, 5/12/06 2,098,825 1,739,401
Term Loan C, 8.313%, 5/12/07 2,098,825 1,739,401
(d)NCS HealthCare Inc., Revolver, 9.00%, 5/31/02 8,413,469 6,772,843
------------
46,642,619
------------
MEDICAL SPECIALTIES .2%
Alliance Imaging Inc.,
Term Loan B, 7.813%, 11/02/07 1,791,045 1,794,403
Term Loan C, 8.063%, 11/02/08 2,208,955 2,213,097
Hanger Orthopedic Group Inc., Term Loan B, 9.658%, 12/31/06 2,930,251 2,529,783
------------
6,537,283
------------
17
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2001 (CONT.)
PRINCIPAL
AMOUNT* VALUE
--------------------------------------------------------------------------------------------------------------------------
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
METAL FABRICATIONS .7%
Fairchild Holdings, Term Loan B, 6.831 - 6.85%, 12/15/04 $ 8,607,457 $ 8,327,714
Mueller Group,
Term Loan B, 7.45 - 7.75%, 8/16/05 967,719 971,752
Term Loan C, 7.70 - 8.00%, 8/16/06 967,719 971,752
Term Loan D, 7.72 - 8.00%, 8/16/07 9,281,503 9,339,512
------------
19,610,730
------------
MILITARY/GOVERNMENT/TECHNICAL .5%
Alliant Techsystems Inc., Term Loan B, 6.75%, 4/20/09 5,985,000 6,067,916
Titan Corp., Term Loan B, 6.70 - 6.88%, 2/23/06 1,992,424 1,979,971
Veridian Corp., Term Loan, 7.54 - 8.99%, 9/14/06 4,949,938 4,949,938
------------
12,997,825
------------
MOVIES/ENTERTAINMENT 3.3%
(d)AMC Entertainment Inc., Revolver, 6.293 - 8.25%, 4/10/04 352,941 330,441
AMF Bowling Inc.,
Axel A, 10.00%, 3/31/03 4,035,232 3,321,501
Axel B, 10.50%, 3/31/04 6,811,311 5,593,789
(d)Revolver, 11.50%, 3/31/02 2,113,834 1,727,006
Term Loan A, 9.50%, 3/31/02 4,825,664 3,944,980
Dreamworks Film Trust II, Term Loan B, 6.47%, 1/15/09 2,700,000 2,712,658
Fitness Holdings Worldwide Inc.,
Term Loan B, 8.00%, 11/02/06 4,940,000 4,693,000
Term Loan C, 8.25%, 11/20/07 10,197,743 9,687,856
Hoops LP (Van Grizzlies) Term Loan, 8.41%, 9/30/05 10,000,000 10,006,250
(d)Loew's Cineplex Entertainment Corp., Revolver, 8.50%, 7/31/03 4,964,422 4,592,091
Phoenix Suns, Term Loan B, 5.83 - 6.886%, 3/31/05 10,000,000 9,981,250
(c)Regal Cinemas Inc.,
(d)Revolver, 8.00%, 5/26/05 20,971,299 20,581,841
Term Loan A, 6.75%, 5/26/05 3,717,532 3,648,494
Term Loan C, 8.25%, 5/24/07 164,994 161,930
Six Flags (Premier Parks) Inc., Term Loan B, 6.85%, 11/03/05 2,500,000 2,526,875
United Artists Theaters, Term Loan, 7.78%, 2/02/05 1,958,908 1,897,081
Washington Football Inc.,
Term Loan A, 5.90%, 10/22/04 400,000 400,375
Term Loan B, 6.615 - 6.665%, 10/22/04 8,600,000 8,640,317
------------
94,447,735
------------
NEWSPAPERS .9%
Canwest Media Inc.,
Term Loan B, 8.90%, 5/15/08 10,977,054 11,056,637
Term Loan C, 9.15%, 5/15/09 6,857,946 6,907,666
Trader.Com, (Netherlands)
Term Loan B, 6.775%, 12/31/06 4,480,281 4,334,672
Term Loan C, 7.275%, 12/31/07 3,019,719 2,921,578
------------
25,220,553
------------
18
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2001 (CONT.)
PRINCIPAL
AMOUNT* VALUE
-----------------------------------------------------------------------------------------------------------------------------------
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
NON-U.S. UTILITIES .9%
AES EDC Funding II, Term Loan, 6.955%, 10/06/03 .................................. $ 26,000,000 $ 25,939,055
--------------
OTHER METALS/MINERALS .2%
Better Minerals & Aggregates, Term Loan B, 7.563%, 9/30/07 ....................... 4,868,421 4,539,803
--------------
OTHER TELECOMMUNICATIONS 6.4%
(c)360 Networks Inc., Term Loan, 10.25%, 12/15/07 ................................... 19,000,000 5,913,750
Arch Wireless Inc., ..............................................................
Term Loan B-1, 7.313 - 7.438%, 6/30/06 ........................................ 89,263,388 20,084,262
Term Loan B, 7.125%, 6/30/05 .................................................. 3,208,042 721,809
Term Loan C, 10.688%, 6/30/06 ................................................. 30,269,970 6,810,743
Cricket Communications Inc., Term Loan, 8.563%, 6/30/07 .......................... 55,000,000 39,600,000
E.Spire Communications Inc., Term Loan C, 10.75%, 8/01/06 ........................ 16,877,867 13,080,347
Global Crossing Holdings Ltd., Term Loan B, 6.46%, 8/15/06 ....................... 10,000,000 9,428,750
ICG Communications Inc., Term Loan B, 9.50%, 3/31/06 ............................. 2,399,045 2,351,064
ITC Deltacom Inc., Term Loan B, 6.665%, 9/05/07 .................................. 4,937,500 4,011,719
Level 3 Communications Inc., Term Loan A, 6.60%, 9/30/07 ......................... 16,363,636 12,886,364
Mcleod USA Inc., Term Loan B, 7.06%, 5/30/08 ..................................... 15,000,000 12,455,625
Northpoint Communications Group Inc., Term Loan, 10.25%, 3/31/04 ................. 11,929,408 3,280,587
RCN Corp., Tranche B, 7.75%, 6/03/07 ............................................. 21,000,000 15,776,250
Satelites Mexicanos, Term Loan C 144A, 8.21%, 6/30/04 (Mexico) ................... 5,530,000 5,129,075
(c)Teligent Inc.,
Conversion Term Loan, 10.25%, 6/30/06 ......................................... 18,500,000 3,385,500
Multi-Draw Term Loan, 9.865 - 10.25%, 6/30/06 ................................. 17,500,000 3,202,500
Time Warner Telecom Inc., Term Loan B, 8.74%, 12/15/07 ........................... 5,000,000 4,896,875
(c)WCI Capital Corp., Term Loan B, 12.25%, 3/31/07 .................................. 30,500,000 5,664,277
Winstar Communications Inc., DIP, 6.71 - 7.71%, 12/31/02 ......................... 5,833,333 5,818,750
XO Communications Inc., Term Loan B, 7.813%, 6/30/07 ............................. 10,500,000 7,361,666
--------------
181,859,913
--------------
PACKAGE GOODS/CONTAINERS .3%
Pliant Corp., Term Loan B, 7.625%, 5/31/08 ....................................... 7,857,143 7,518,304
--------------
PACKAGED FOODS 3.3%
Agrilink Foods,
Term B, 7.73%, 9/30/04 ........................................................ 6,694,962 6,460,639
Term C, 7.98%, 9/30/05 ........................................................ 6,863,289 6,623,075
Aurora Foods Inc.,
(d)Revolver, 7.36 - 7.581%, 6/30/05 .............................................. 4,870,459 4,736,522
Term Loan, 7.25%, 6/30/05 ..................................................... 430,721 418,876
Term Loan A, 7.525%, 6/30/05 .................................................. 561,467 550,237
Term Loan B, 8.025%, 9/30/06 .................................................. 4,367,746 4,282,213
B&G Foods Inc., Term Loan B, 7.81 - 8.65%, 3/31/06 ............................... 998,333 969,007
Burns Philip,
Citibank Revolver, 5.076%, 8/17/01 ............................................ 7,965,870 7,945,956
IBJ Australia, 5.09%, 8/17/01 ................................................. 31,311,417 31,233,137
Sakura Finance, 5.09%, 8/17/01 ................................................ 19,775,574 19,726,136
19
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2001 (CONT.)
PRINCIPAL
AMOUNT* VALUE
-----------------------------------------------------------------------------------------------------------------------------------
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
PACKAGED FOODS (CONT.)
CP Kelco,
Term Loan B, 7.46%, 3/15/08 ................................................... $ 3,375,000 $ 3,253,078
Term Loan C, 7.71%, 9/15/08 ................................................... 1,125,000 1,084,359
Merisant Corp., Term Loan B, 7.00%, 3/31/07 ...................................... 1,083,630 1,085,437
Nutrasweet,
Second Lien Term Loan, 8.938%, 5/24/09 ........................................ 3,000,000 2,977,500
Term Loan B, 7.313%, 5/15/07 .................................................. 2,377,846 2,382,304
--------------
93,728,476
--------------
PRINTING/FORMS 2.0%
American Reprographics, Term Loan B, 7.52%, 4/10/08 .............................. 16,293,920 16,212,451
Dimac Holdings Inc.,
Term Loan A, 9.75%, 12/31/05 .................................................. 2,092,640 230,190
Term Loan B, 9.75%, 1/01/02 ................................................... 773,163 618,531
Dimac Marketing Partners,
Revolver, 9.75%, 7/01/03 ...................................................... 233,270 25,660
Term Loan A, 9.75%, 7/01/03 ................................................... 554,750 61,022
Term Loan B, 9.75%, 1/01/05 ................................................... 2,092,640 230,190
Mail-Well Inc., Term Loan B, 6.78 - 6.84%, 2/22/07 ............................... 8,263,839 7,902,296
Vertis,
Bridge Term Loan, 13.50%, 12/09/09 ............................................ 25,000,000 22,875,000
Term Loan B, 7.50 - 8.063%, 12/31/08 .......................................... 9,869,319 9,215,477
--------------
57,370,817
--------------
PROPERTY/CASUALTY INSURANCE 1.1%
White Mountain Insurance Group LTD., Term Loan B, 6.815%, 3/31/07 ................ 31,000,000 31,096,875
--------------
PULP & PAPER .7%
Alabama Pine & Pulp,
Term Loan A, 7.78%, 6/30/03 ................................................... 37,105,162 19,851,262
PIK Term Loan B, 7.78%, 6/30/05 ............................................... 3,820,187 233,986
PIK Term Loan C, 10.75%, 6/30/05 .............................................. 5,324,062 326,099
--------------
20,411,347
--------------
RAILROADS .1%
Kansas City Southern Industries Inc., Term Loan B, 6.83 - 6.875%, 1/11/07 ........ 1,741,250 1,757,574
--------------
REAL ESTATE INVESTMENT TRUSTS 3.5%
Corrections Corp. of America
Term Loan B, 8.33%, 12/31/02 .................................................. 18,692,306 17,913,454
Term Loan C, 8.34%, 12/31/02 .................................................. 25,036,094 23,992,915
Ventas Realty LP,
Term Loan A, 6.46%, 12/31/02 .................................................. 26,693,398 26,359,729
Term Loan B, 7.46%, 12/31/05 .................................................. 16,871,678 16,660,782
Term Loan C, 7.96%, 12/31/07 .................................................. 13,912,808 13,738,898
--------------
98,665,778
--------------
20
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2001 (CONT.)
PRINCIPAL
AMOUNT* VALUE
-----------------------------------------------------------------------------------------------------------------------------------
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
RENTAL/LEASING COMPANIES 2.3%
Ashtead Group PLC., Term Loan B, 6.83%, 6/30/07 .................................. $ 23,760,000 $ 23,566,950
Nations Rent Inc., Term Loan, 8.25%, 7/20/06 ..................................... 31,902,750 22,172,411
Rent-Way Inc., Term Loan B, 10.25%, 9/30/06 ...................................... 9,840,405 8,610,354
United Rentals Inc., Term Loan B, 6.79 - 6.85%, 9/30/07 .......................... 11,970,000 11,988,078
--------------
66,337,793
--------------
SEMICONDUCTORS .8%
ON Semiconductor Corp.,
(d)Revolver, 7.063%, 8/04/05 ..................................................... 892,857 720,982
Term Loan A, 7.00 - 7.75%, 8/04/05 ............................................ 131,277 106,007
Term Loan B, 7.438%, 8/04/06 .................................................. 9,629,630 7,763,889
Term Loan C, 8.313%, 8/04/07 .................................................. 10,370,370 8,361,111
Term Loan D, 7.563%, 8/04/07 .................................................. 9,000,000 7,211,250
--------------
24,163,239
--------------
SERVICES TO THE HEALTH INDUSTRY .1%
Dade Behring,
Term Loan B, 7.375%, 6/29/06 .................................................. 2,166,113 1,741,555
Term Loan C, 7.375%, 6/29/07 .................................................. 2,166,113 1,741,555
Unilab Corp., Term Loan, 7.313%, 11/23/06 ........................................ 856,024 857,897
--------------
4,341,007
--------------
SPECIALTY CHEMICALS .6%
Hercules Inc., Term Loan D, 6.99%, 11/15/05 ...................................... 1,990,000 1,972,090
Ineos Group Ltd., Term Loan C, 7.33%, 6/30/09 .................................... 7,500,000 7,495,313
Kosa BV, Term Loan B, 6.96%, 12/31/06 ............................................ 3,817,129 3,763,212
OM Group Inc., Term Loan B, 8.75%, 3/31/07 ....................................... 4,912,688 4,930,089
--------------
18,160,704
--------------
STEEL/IRON ORE .6%
Ispat Sidbec Inc. ................................................................
Term B, 7.46%, 7/16/04 ........................................................ 6,075,322 5,103,271
Term C, 7.96%, 1/16/05 ........................................................ 6,075,322 5,103,271
LTV Corp., Term Loan, 8.36 - 10.625%, 10/31/04 ................................... 9,376,333 8,087,087
--------------
18,293,629
--------------
TELECOMMUNICATIONS EQUIPMENT 1.7%
Acterna Dynatech Corp., Term Loan B, 6.96%, 9/30/07 .............................. 23,529,412 21,607,835
American Tower Corp., Term Loan B, 7.01%, 12/31/07 ............................... 2,500,000 2,466,355
Crown Castle Operating Co., Term Loan B, 6.46%, 3/15/08 .......................... 2,000,000 1,996,876
Pacific Crossing Ltd., Term Loan, 6.063%, 7/28/06 ................................ 23,150,642 21,259,998
--------------
47,331,064
--------------
TEXTILES .6%
Pillowtex Corp., Term Loan B, 6.21 - 7.71%, 12/31/04 ............................. 27,244,293 9,889,679
Synthetic Industries Inc., Bridge Loan, 14.25%, 6/14/08 .......................... 10,000,000 6,125,000
--------------
16,014,679
--------------
TOOLS/HARDWARE .1%
Shop Vac Corp., Term Loan, 6.43%, 6/30/07 ........................................ 3,000,000 3,007,500
--------------
21
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2001 (CONT.)
PRINCIPAL
AMOUNT* VALUE
-----------------------------------------------------------------------------------------------------------------------------------
(a)SENIOR FLOATING RATE INTERESTS (CONT.)
TRANSPORTATION 1.4%
Eurotunnel Finance Ltd.,
Tier 1 Jr Debt, 7.03%, 7/01/25 ................................................ $ 18,902,672 GBP $ 24,379,943
Tier 2 Jr Debt, 7.03%, 7/01/25 ................................................ 14,000,000 GBP 16,161,213
--------------
40,541,156
--------------
UTILITIES 1.0%
Mission Energy Holdings,
Term Loan A, 11.29%, 6/30/06 .................................................. 7,272,727 7,036,364
Term Loan B, 11.29%, 6/30/06 .................................................. 20,727,273 20,053,636
--------------
27,090,000
--------------
WHOLESALE DISTRIBUTORS .3%
Spartan Stores, Term Loan, 7.00 - 7.063%, 3/18/07 ................................ 1,978,375 1,975,902
Wilmar Industries Inc., Term Loan B, 7.79%, 3/31/07 .............................. 7,443,750 7,071,563
--------------
9,047,465
--------------
TOTAL SENIOR FLOATING RATE INTERESTS (COST $3,015,605,242) ....................... 2,815,619,194
--------------
SHARES
------------
COMMON STOCKS & WARRANTS .1%
COMMUNICATIONS AND MEDIA
Rivus Internet Group Inc ......................................................... 72,960 18,240
--------------
CONSUMER PRODUCTS .1%
United Artist Theatres ........................................................... 220,857 1,269,928
--------------
ENVIRONMENTAL SERVICES
Environmental Systems Products Holdings Inc. ..................................... 49,939 5
--------------
MANUFACTURING - METALS & MINERALS
Exide Corp. ...................................................................... 74,278 127,758
--------------
TOTAL COMMON STOCKS & WARRANTS (COST $1,411,052) ................................. 1,415,931
--------------
PREFERRED STOCKS
BANKS AND FINANCIAL SERVICES
Dimac Holdings Inc. 20% PIK pfd .................................................. 1,265,651 127
--------------
BUSINESS SERVICES
Environmental Systems Products Holdings Inc., pfd ................................ 8,032 923,683
--------------
TOTAL PREFERRED STOCKS (COST $356,100) ........................................... 923,810
--------------
TOTAL LONG TERM INVESTMENTS (COST $3,017,372,394) ................................ 2,817,958,935
==============
22
FRANKLIN FLOATING RATE TRUST
STATEMENT OF INVESTMENTS, JULY 31, 2001 (CONT.)
SHARES VALUE
-----------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS 2.9%
(b)Franklin Institutional Fiduciary Trust Money Market Portfolio (COST $82,162,797) . $ 82,162,797
--------------
TOTAL INVESTMENTS (COST $3,099,535,191) 102.4% ................................... 2,900,121,732
--------------
OTHER ASSETS, LESS LIABILITIES (2.4%) ............................................ (67,934,072)
--------------
NET ASSETS 100.0% ................................................................ $2,832,187,660
==============
CURRENCY ABBREVIATIONS:
GBP - British Pounds
* The principal amount is stated in U.S. dollars unless otherwise indicated.
(a) Senior secured corporate loans in the Fund's portfolio generally have
variable rates which adjust to a base, such as the London Inter-Bank Offered
Rate (LIBOR), on the set dates, typically every 30 days but not greater than
one year; and/or have interest rates that float at a margin above a widely
recognized base lending rate such as the Prime Rate of a designated U.S.
Bank.
(b) The Franklin Institutional Fiduciary Trust Money Market Portfolio (The
"Sweep Money Fund") is managed by Franklin Advisers, Inc.
(c) See Note 6 regarding defaulted securities.
(d) See Note 7 regarding unfunded loan commitments.
See notes to financial statements.
23
FRANKLIN FLOATING RATE TRUST
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2001
Assets:
Investments in securities:
Cost ....................................................................................................... $ 3,099,535,191
===============
Value ...................................................................................................... 2,900,121,732
Cash ........................................................................................................ 12,261,500
Receivables:
Investment securities sold ................................................................................. 55,122
Capital shares sold ........................................................................................ 7,895,831
Interest ................................................................................................... 16,208,801
Organization costs .......................................................................................... 29,476
---------------
Total assets ........................................................................................... 2,936,572,462
---------------
Liabilities:
Payables:
Investment securities purchased ............................................................................ 88,216,156
Affiliates ................................................................................................. 3,236,584
Shareholders ............................................................................................... 631,082
Deferred facility fees (Note 1) ............................................................................. 4,322,075
Distributions to shareholders ............................................................................... 6,681,796
Other liabilities ........................................................................................... 1,297,109
---------------
Total liabilities ...................................................................................... 104,384,802
---------------
Net assets, at value .................................................................................. 2,832,187,660
===============
Net assets consist of:
Undistributed net investment income ......................................................................... $ (1,298,001)
Net unrealized depreciation ................................................................................. (199,739,111)
Accumulated net realized loss ............................................................................... (12,620,940)
Capital shares .............................................................................................. 3,045,845,712
---------------
Net assets, at value .................................................................................. $ 2,832,187,660
===============
Net asset value and maximum offering price per share ($2,832,187,660 / 306,558,913 shares outstanding)(a) ... $9.24
===============
(a) Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
24
FRANKLIN FLOATING RATE TRUST
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2001
Investment income:
Dividends .................................................................................................. $ 9,274,806
Interest ................................................................................................... 296,940,868
-------------
Total investment income ............................................................................... 306,215,674
-------------
Expenses:
Management fees (Note 3) ................................................................................... 22,910,174
Administrative fees (Note 3) ............................................................................... 2,775,902
Transfer agent fees (Note 3) ............................................................................... 12,228,273
Custodian fees ............................................................................................. 28,146
Reports to shareholders .................................................................................... 103,727
Registration and filing fees ............................................................................... 1,283,002
Professional fees .......................................................................................... 428,060
Trustees' fees and expenses ................................................................................ 8,896
Amortization of organization costs ......................................................................... 24,804
Other ...................................................................................................... 212,511
-------------
Total expenses ........................................................................................ 40,003,495
-------------
Net investment income ................................................................................ 266,212,179
-------------
Realized and unrealized gains (losses):
Net realized loss from:
Investments ............................................................................................... (10,993,090)
Foreign currency transactions ............................................................................. (10,305)
-------------
Net realized loss ..................................................................................... (11,003,395)
Net unrealized appreciation (depreciation) on:
Investments and interest rate swap contracts .............................................................. (176,051,914)
Translation of assets and liabilities denominated in foreign currencies ................................... 5,394
-------------
Net unrealized depreciation ........................................................................... (176,046,520)
-------------
Net realized and unrealized loss ............................................................................ (187,049,915)
-------------
Net increase in net assets resulting from operations ........................................................ $ 79,162,264
=============
See notes to financial statements.
25
FRANKLIN FLOATING RATE TRUST
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JULY 31, 2001 AND 2000
2001 2000
------------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income .................................................................. $ 266,212,179 $ 155,940,461
Net realized gain (loss) from investments and foreign currency transactions ............ (11,003,395) 1,485,304
Net unrealized depreciation on investments and translation of assets and liabilities
denominated in foreign currencies ..................................................... (176,046,520) (27,283,820)
------------------------------------
Net increase in net assets resulting from operations ............................... 79,162,264 130,141,945
Distributions to shareholders from net investment income ................................ (268,509,479) (155,913,087)
Capital share transactions (Note 2) ..................................................... 480,038,146 1,460,904,863
------------------------------------
Net increase in net assets ......................................................... 290,690,931 1,435,133,721
Net assets:
Beginning of year ...................................................................... 2,541,496,729 1,106,363,008
------------------------------------
End of year ............................................................................ $ 2,832,187,660 $ 2,541,496,729
====================================
Undistributed net investment income included in net assets:
End of year ............................................................................ $ (1,298,001) $ --
------------------------------------
See notes to financial statements.
26
FRANKLIN FLOATING RATE TRUST
Financial Statements (continued)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JULY 31, 2001
Cash flow from operating activities:
Interest and facility fees received ....................................................................... $ 288,380,098
Operating expenses paid ................................................................................... (38,138,658)
---------------
Cash provided - operations ........................................................................... 250,241,440
===============
Cash flow from investing activities:
Investment purchases ...................................................................................... (5,419,988,636)
Investment sales and maturities ........................................................................... 4,941,906,276
---------------
Cash used - investments .............................................................................. (478,082,360)
===============
Cash flow from financing activities:
Distributions to shareholders ............................................................................. (83,574,408)
Net proceeds from capital shares sold ..................................................................... 324,594,959
---------------
Cash provided - financing activities ................................................................. 241,020,551
===============
Net increase in cash: ...................................................................................... 13,179,631
---------------
Cash at beginning of year ................................................................................. (918,131)
---------------
Cash at end of year ....................................................................................... $ 12,261,500
===============
RECONCILIATION OF NET INVESTMENT INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
FOR THE YEAR ENDED JULY 31, 2001
Net investment income ...................................................................................... $ 266,212,179
Amortization income ....................................................................................... (27,443,633)
Decrease in interest receivable ........................................................................... 4,702,614
Increase in other liabilities ............................................................................. 1,840,033
Facility fees received .................................................................................... 6,441,988
Amortization of offering costs ............................................................................ 24,804
Income in kind ............................................................................................ (1,536,545)
---------------
Cash provided - operations ................................................................................. $ 250,241,440
===============
See notes to financial statements.
27
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Floating Rate Trust (the Fund) is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end, continuously offered
investment company. The Fund seeks current income and preservation of capital.
The following summarizes the Fund's significant accounting policies.
a. SECURITY VALUATION:
The Fund invests primarily in senior secured corporate loans and senior secured
debt that meet credit standards established by Franklin Advisers, Inc.
Investment in these securities may be considered illiquid and prompt sale of
these securities at an acceptable price may be difficult.
The Fund values its securities based on quotations provided by banks,
broker/dealers or pricing services experienced in such matters. Restricted
securities and securities for which market quotations are not readily available
are valued at fair value as determined by management in accordance with
procedures established by the Board of Trustees.
b. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollars
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
c. INTEREST RATE SWAP
The Fund may enter into interest rate swap contracts to hedge the risk of
changes in interest rates. Interest rate swaps are agreements between two
parties to exchange cash flows based on a notional principal amount. The net
interest received or paid on interest rate swap agreements is accrued daily as
interest income/expense. Interest rate swaps are marked to market daily based
upon quotations from the market makers and the change, if any, is recorded as an
unrealized gain or loss in the Statement of Operations. When the swap contract
is terminated early, the Fund records a realized gain or loss equal to the
difference between the current realized value and the expected cash flows. The
risks of interest rate swaps include changes in market conditions and the
possible inability of the counterparty to fulfill their obligations under the
agreement.
d. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and
distribute substantially all of its taxable income.
28
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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. Discount from
securities is amortized on an income tax basis. Facility fees received are
recognized as income over the expected term of the loan. Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
f. ORGANIZATION COSTS:
Organization costs are amortized on a straight-line basis over five years.
g. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expense during the reporting period. Actual results could differ from those
estimates.
h. LINE OF CREDIT
The Fund has two unsecured lines of credit, which subject to limitations, allows
the fund to borrow up to an aggregate maximum amount of $75,000,000 to meet
shareholder redemptions. Borrowings under the lines of credit bear interest at
the Federal Funds Rate plus .50% per year.
2. SHARES OF BENEFICIAL INTEREST
The Fund may, on a quarterly basis, make tender offers at net asset value for
the repurchase of a portion of the common shares outstanding. The price will be
established as of the close of business on the day the tender offer ends. An
early withdrawal charge may be imposed on shares offered for tender which have
been held for less than twelve months.
At July 31, 2001, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:
YEAR ENDED JULY 31,
------------------------------------------------------------------------
2001 2000
------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------
Shares sold .......................................... 135,483,175 $ 1,307,595,804 179,578,847 $ 1,781,070,181
Shares issued in reinvestment of distributions ....... 19,247,577 184,070,432 11,364,798 112,540,752
Shares redeemed ...................................... (106,217,953) (1,011,628,090) (43,719,061) (432,706,070)
------------------------------------------------------------------------
Net increase ......................................... 48,512,799 $ 480,038,146 147,224,584 $ 1,460,904,863
========================================================================
29
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Fund are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc.
(Distributors), Franklin Templeton Services, LLC (FT Services) and
Franklin/Templeton Investor Services, LLC (Investor Services), the Fund's
investment manager, principal underwriter, administrative manager and transfer
agent, respectively.
The Fund pays an investment management fee to Advisers of .80% per year of the
average daily net assets of the Fund.
Management fees were reduced on assets invested in the Sweep Money Fund.
Distributors received contingent deferred sales charges for the year of
$1,707,896.
The Fund pays an administrative fee to FT Services based on the net assets of
the Fund as follows:
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
-----------------------------------------------------------------
.150% First $200 million
.135% Over $200 million, up to and including $700 million
.100% Over $700 million, up to and including $1.2 billion
.075% In excess of $1.2 billion
The Fund pays a transfer agent fee to Investor Services of .40% per year of the
average daily net assets of the Fund.
4. INCOME TAXES
At July 31, 2001, the unrealized depreciation based on the cost of investments
for income tax purposes of $3,105,342,828 was as follows:
Unrealized appreciation $ 57,099,959
Unrealized depreciation (262,646,707)
-------------
Net unrealized depreciation $(205,546,748)
=============
At July 31, 2001, the Fund had tax basis capital losses of $4,581,379 which may
be carried over to offset future capital gains. Such losses expire in 2008.
At July 31, 2001, the Fund has deferred capital losses occurring subsequent to
October 31, 2000 of $2,231,923. For tax purposes, such losses will be reflected
in the year ending July 31, 2002.
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of defaulted securities and foreign currency
transactions.
Net realized capital losses differ for financial statement and tax purposes
primarily due to differing treatment of wash sales and foreign currency
transactions.
30
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements (continued)
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended July 31, 2001 aggregated $2,853,743,643 and $2,311,517,463 respectively.
6. INTEREST RATE SWAP AGREEMENT
As of July 31, 2001, the Fund had the following interest rate swap contract
outstanding:
RATE PAID RATE RECEIVED UNREALIZED
MATURITY DATE NOTIONAL AMOUNT BY THE FUND BY THE FUND DEPRECIATION
--------------------------------------------------------------------------------
July 9, 2007 $4,000,000 10.125% 7.414% $(327,060)
7. CREDIT RISK AND DEFAULTED SECURITIES
The Fund has 94% of its portfolio invested in below investment grade and
comparable quality unrated high yield securities, which tend to be more
sensitive to economic conditions rather than higher rated securities. At July
31, 2001, the Fund held defaulted securities with a value aggregating
$264,153,799 representing 9.33% of the Fund's net assets. For information as to
specific securities, see the accompanying Statement of Investments.
For financial reporting purposes, the Fund discontinues accruing income on
defaulted bonds and provides an estimate for losses on interest receivable.
8. UNFUNDED LOAN COMMITMENTS
As of July 31, 2001, the Fund had unfunded loan commitments, which would be
extended at the option of the borrowers, pursuant to the following loan
agreements:
COMMITMENT UNFUNDED
SECURITY AMOUNT AMOUNT
--------------------------------------------------------------------------------
Allegiance Telecom Inc., Revolver ............. $35,000,000 $ 35,000,000
AMC Entertainment, Revolver ................... 10,000,000 9,647,059
AMF Bowling Inc., Revolver .................... 2,185,234 71,400
Aurora Foods Inc., Revolver ................... 5,798,166 927,707
Blockbuster Inc., Revolver .................... 33,350,002 21,960,387
Bridge Information Systems Inc., DIP .......... 2,000,000 2,000,000
Bridge Information Systems Inc., Revolver ..... 2,802,730 196,179
Charter Communications CCVI, Revolver ......... 875,000 875,000
Genesis Health Ventures Inc., Revolver ........ 32,572,735 56,575
ICG Communications ............................ 20,000,000 20,000,000
JC Penney Co., Revolver ....................... 27,500,000 27,500,000
Level 3 Communications Inc., Revolver ......... 23,636,364 23,636,364
Loew's Cineplex Entertainment Corp., Revolver . 4,998,389 33,966
31
FRANKLIN FLOATING RATE TRUST
Notes to Financial Statements (continued)
8. UNFUNDED LOAN COMMITMENTS (CONT.)
COMMITMENT UNFUNDED
SECURITY AMOUNT AMOUNT
--------------------------------------------------------------------------------
Pillowtex Corp., Revolver ..................... $10,000,000 $ 10,000,000
Playtex Products Inc., Revolver ............... 2,777,778 2,777,778
Regal Cinemas Inc., Revolver .................. 21,183,131 211,832
Rent-A-Center Inc., Revolver .................. 1,984,654 1,984,654
ON Semiconductor, Revolver .................... 1,071,429 178,572
Sinclair Broadcasting Group Inc., Revolver .... 12,520,111 5,128,149
VoiceStream Holdings LLC, Revolver ............ 20,000,000 20,000,000
Washington Group DIP .......................... 20,000,000 20,000,000
Wyndham International Inc., Revolver .......... 10,000,000 7,470,000
------------
$209,655,622
------------
32
FRANKLIN FLOATING RATE TRUST
Independent Auditors' Report
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF FRANKLIN FLOATING RATE TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations, cash
flows, and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of Franklin Floating Rate Trust
("the Fund") at July 31, 2001, the results of its operations and its cash flows
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at July 31, 2001 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
September 6, 2001
33
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