Annual
Report
July 31, 1998
Franklin Floating Rate Trust
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and remember that all securities markets move
both up and down, as do mutual fund share prices. We appreciate your past
support and look forward to serving your investment needs in the years ahead.
Charles B. Johnson
Chairman
Franklin Floating Rate Trust
CONTENTS
Shareholder Letter ........................................... 1
Performance Summary .......................................... 6
The Fund's
Repurchase Offers ............................................ 8
Financial Highlights &
Statement of Investments ..................................... 10
Financial Statements ......................................... 14
Notes to
Financial Statements......................................... 18
Independent
Auditor's Report............................................. 21
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 11 of
this report.
SHAREHOLDER LETTER
Your Fund's Objective: Franklin Floating Rate Trust's primary objective is to
provide as high a level of current income and preservation of capital as is
consistent with investment primarily in leveraged corporate loans and corporate
debt securities with floating interest rates.
Dear Shareholder:
It's a pleasure to bring you Franklin Floating Rate Trust's first annual report
for the shortened fiscal year beginning October 10, 1997, when operations
commenced, and ending July 31, 1998.
Economic Overview
During the period under review the U.S. economy continued its remarkable
expansion, demonstrating strong growth with few signs of inflation. Interest
rates continued to decline, with the 30-year Treasury yield ending the period at
5.72%, down from 6.44% when the fund launched on October 10, 1997. However, by
the period's end, the preliminary, annualized, second quarter Gross Domestic
Product gain of 1.6% reflected some economic slowdown due to the Asian financial
crisis. Meanwhile, the domestic equity markets turned in strong -- although
volatile -- results. On July 31, 1998, the Dow Jones(R) Industrial Average stood
at 8883, compared with 8045 on October 10, 1997, the beginning of the reporting
period.
Portfolio Notes
In an investment climate favorable to investing in syndicated bank loan
securities, Franklin Floating Rate Trust began operations on October 10, 1997,
and first made shares available to the public on April 1, 1998. During the
reporting period, volumes in the syndicated loan primary market remained strong
as companies looked to the capital markets to raise money for mergers,
acquisitions and refinancings. Senior secured high yield loan issuance totaled
$80.4 billion in the second quarter of 1998 and $140.1 billion for the first
half of the year, both record levels for their time periods. Although overall
syndicated loan volume declined slightly in the first half of the year, senior
secured high yield lending continued to grow, representing 30% of the entire
loan market at the end of the reporting period.
This growth is all the more impressive considering that demand from banks, the
traditional investors in these types of loans, grew more slowly than issuance in
the senior secured high yield sector. Senior secured high yield lending
continued its shift from a borrower's to a lender's market, with yield-seeking,
institutional investors becoming more influential. In the second quarter, the
market for term loans targeted at institutional buyers was nearly 40% larger
than its last quarterly record, reached in the fourth quarter of 1997, mainly
because of growing demand from institutions and retail floating rate funds.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
The continuing merger and acquisition mania that swept through a number of
industries was the main source of growth in the supply of senior secured high
yield loans. Financing related to M&A transactions drove $34.8 billion worth of
deals in the second quarter, comprising 43% of the senior secured high yield
loan market. The telecommunications and health care industries led the way, with
17.9% and 14.4% respectively, of the institutional loan market.
These trends in corporate debt issuance provided the fund with many investment
opportunities; Franklin Floating Rate Trust was invited to participate in 98
different debt deals in the primary market, involving more than $73 billion in
credit facilities. At the end of the period under review, the fund's portfolio
was composed of 41 loans in 18 industries.
The fund took advantage of the continued consolidation trend in several
industries. In the radio market, the fund helped finance Capstar Broadcasting
Corporation's acquisition of SFX Broadcasting. With 300 stations nationwide,
Capstar is currently the largest radio broadcaster in the U.S. In the chemical
industry, the fund participated in Lyondell Petrochemical Company's acquisition
of ARCO Chemical Company from Atlantic Richfield. The financing, which included
the largest institutional term loan to date ($1.25 billion), reflected the
growing importance of institutional lenders and created one of the largest
vertically integrated petrochemical companies in the world.
Bridge Information Systems, another one of our top holdings, is a global
provider of high-quality, real-time and historical financial data. The company
recently acquired Dow Jones Markets, the real-time financial information
subsidiary of Dow Jones & Company and one of the top three global providers of
such information. The acquisition should give the company entry into the
European business market, and also make Bridge the second-largest provider of
electronic financial information, behind Reuters Holdings PLC, with annual
revenues close to $1 billion.
In the health care area, the fund invested in Sun Healthcare Group, one of the
nation's largest providers of long-term and subacute care, with over 495
facilities and 47,620 beds in the U.S., the U.K., Spain, Australia and Germany.
Our investment helped finance the acquisitions of Regency Health Services and
Retirement Care Associates, consolidating nearly 180 nursing homes from the two
businesses. Sun reported record first-quarter earnings in 1998, as the company's
core operating divisions continued to flourish with Regency's successful
integration.
The burgeoning wireless telecommunications industry provided another
opportunity. There, the fund invested in the refinancing of Nextel
Communications, Inc., a leading provider of integrated digital wireless services
to business users.
During the period, the trust's net asset value (NAV) rose slightly from $10.00
per share to $10.04. While the fund attempts to maintain a relatively stable
NAV, small value fluctuations in the credits in which the fund invests --
particularly as they begin to trade in the secondary market -- can cause ups and
downs.
As we become more fully invested over the coming months, we will seek to add
solid market leaders to our current holdings. We believe that the fund, with its
relatively stable net asset value and potential for high current income, is an
attractive alternative for diversifying a heavily weighted stock or bond
portfolio.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of July 31, 1998, the end of our shortened reporting period.
However, market and economic conditions are changing constantly, which can be
expected to affect our strategies and the fund's portfolio composition. Although
historical performance is no guarantee of future results, these insights may
help you understand our investment and management philosophy.
We appreciate your participation in this new trust, and welcome any comments or
suggestions you may have.
Sincerely,
Charles B. Johnson
Chairman
Franklin Floating Rate Trust
Chauncey Lufkin
Portfolio Manager
Franklin Floating Rate Trust
PERFORMANCE SUMMARY
Franklin Floating Rate Trust's share price, as measured by net asset value,
increased four cents, from $10.00 on October 10, 1997, to $10.04 on July 31,
1998. During the ten-month reporting period, shareholders received distributions
of 48.1859 cents ($0.481859) per share in dividend income. Distributions will
vary based on the earnings of the fund's portfolio, and past distributions are
not predictive of future trends.
Based on an annualization of the current monthly per-share dividend of 5.6983
cents ($0.056983) and the maximum offering price of $10.04 on July 31, 1998,
your fund's distribution rate was 6.81%. The fund posted a 5.33% cumulative
total return for the 10-month period ended July 31, 1998. Cumulative total
return measures the change in value of an investment, assuming reinvestment of
all distributions and does not include the early withdrawal charge.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Floating Rate Trust
Period ended 7/31/98
Since
Inception
10/10/97
- ------------------------------------------------------------------
Cumulative Total Return1 5.33%
Aggregate Total Return2 4.33%
30-Day Standardized Yield3 7.03%
1. Cumulative total return measures the change in value of an investment over
the period indicated and does not include the early withdrawal charge.
2. Aggregate total return measures the change in value over the period indicated
and includes the 1% early withdrawal charge, assuming shares were redeemed
within 12 months of purchase. Since these shares have existed for less than one
year, average annual total returns are not provided.
All total return calculations assume reinvestment of dividends and capital
gains, if any, at net asset value.
3. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended July 31, 1998.
Past performance is not predictive of future results.
THE FUND'S REPURCHASE OFFERS
The fund intends to 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, how-ever, first accept any requests to
repurchase all of a shareholder's shares if the amount of the request is 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 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
10/10/97 through 7/31/98
Repurchase Repurchase % of Shares Number of
Request Deadline Offer Amount Tendered Shares Tendered
- ---------------------------------------------------------------------
4/9/98 5% 0 0
7/7/98 25% 0.255% 30,935.665
<TABLE>
<CAPTION>
FRANKLIN FLOATING RATE TRUST
Financial Highlights
Period Ended
July 31, 1998*
-----------
<S> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ........................................................ $10.00
-----------
Income from investment operations:
Net investment income ...................................................................... 0.48
-----------
Net realized and unrealized gains .......................................................... 0.04
-----------
Total from investment operations ............................................................ 10.52
-----------
Less distributions from net investment income ............................................... (0.48)
-----------
Net asset value, end of period .............................................................. $10.04
===========
Total return** .............................................................................. 5.33%
Ratios/supplemental data
Net assets, end of period (000's) ........................................................... $168,537
Ratios to average net assets:
Expenses ................................................................................... 1.32%***
Expenses excluding waiver and payments by affiliate ........................................ 1.76%***
Net investment income ...................................................................... 6.06%***
Portfolio turnover rate ..................................................................... 45.32%
*For the period October 10, 1997 (effective date) to July 31, 1998.
**Total return does not reflect the contingent deferred sales charge and is not
annualized.
***Annualized
See notes to financial statements.
FRANKLIN FLOATING RATE TRUST
Statement of Investments, July 31, 1998
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
b Long Term Investments 86.4%
Automotive 5.9%
Breed Technologies, Inc., Term Loan B, 8.075%, 4/27/06 ........................ $ 5,000,000 $ 5,018,750
Exide Corporation, Term Loan B, 8.188%, 3/18/08 ............................... 4,985,000 4,991,232
-------------
10,009,982
-------------
Broadcasting 5.9%
Capstar Broadcasting, Term Loan A, 7.75- 7.813%, 11/30/04 ..................... 10,000,000 9,987,500
-------------
Cable 4.9%
Intermedia Partners Group, Term Loan A, 8.563%, 4/30/08 ....................... 2,500,000 2,506,250
NTL Investment Holdings, Ltd., 8.688%, 1/31/99 ................................ 5,789,473 5,789,474
-------------
8,295,724
-------------
Chemicals 6.0%
Lyondell Petrochemical Co., Term Loan B, 8.156%, 6/30/05 ...................... 10,000,000 10,037,500
-------------
Commercial Services 4.1%
Outsourcing Solutions, Inc., Term Loan C, 8.625- 8.687%, 10/15/04 ............. 6,984,442 6,984,443
-------------
Consumer Products 4.1%
Boyds Collections, Ltd., Term Loan B, 8.188- 8.195%, 4/30/06 .................. 4,849,999 4,850,000
Sealy Mattress Company,
Axel B, 8.188- 8.25%, 12/15/04 ................................................ 755,757 759,537
Axel C, 8.438- 8.50%, 12/15/05 ................................................ 544,242 546,964
Axel D, 8.688- 8.75%, 12/15/06 ................................................ 695,454 698,932
-------------
6,855,433
-------------
Entertainment 5.4%
Regal Cinemas, Inc.,
Term Loan B, 7.938%, 5/26/06 .................................................. 1,882,352 1,891,765
Term Loan C, 8.188%, 5/24/07 .................................................. 2,117,647 2,128,235
United Artist Theaters,
Term Loan B, 8.50%, 4/21/06 ................................................... 2,000,000 1,997,500
Term Loan C, 8.75%, 4/21/07 ................................................... 3,000,000 3,003,750
-------------
9,021,250
-------------
Healthcare 7.1%
Paracelsus Healthcare Corp., Term Loan B, 8.406%, 3/31/04 ..................... 4,000,000 3,994,000
Sun Healthcare Group,
cRevolver, 8.16- 9.50%, 11/12/03 ............................................... 2,381,027 2,369,123
Term Loan A, 8.16%, 11/12/03 .................................................. 909,791 905,242
Term Loan B, 8.41%, 11/12/04 .................................................. 1,379,659 1,383,108
Term Loan C, 8.66%, 11/12/05 .................................................. 1,379,659 1,383,108
Vencor Operating, Inc., Term Loan B, 8.66%, 1/15/08 ........................... 2,083,333 1,947,916
-------------
11,982,497
-------------
Industrial 5.5%
Fisher Scientific International,
Term Loan B, 8.188%, 1/21/05 .................................................. $2,553,303 $ 2,559,687
Term Loan C, 8.438%, 1/21/05 .................................................. 1,766,886 1,771,304
Thermadyne Manufacturing,
Term Loan B, 8.19- 8.25%, 5/23/05 ............................................. 2,500,000 2,512,500
Term Loan C, 8.44- 8.50%, 5/22/06 ............................................. 2,500,000 2,512,500
-------------
9,355,991
-------------
Information Systems 5.9%
Bridge Information Systems, Inc., Term Loan B, 8.688%, 5/29/05 ................ 10,000,000 10,018,750
-------------
Metals/Mining 2.8%
P&L Coal Holdings Corp., Term Loan B, 8.063- 8.125%, 6/09/06 .................. 4,615,383 4,638,462
-------------
Packaging 3.0%
Graham Packaging Co.
Term Loan B, 8.375%, 1/31/06 .................................................. 2,725,260 2,732,074
Term Loan C, 8.625%, 1/31/07 .................................................. 2,258,072 2,263,718
-------------
4,995,792
-------------
Paper Forestry Products 1.8%
Repap New Brunswick, 9.438%, 6/04/00 .......................................... 3,000,000 3,000,000
-------------
Real Estate 1.7%
Ventas Realty Limited Partnership, Term Loan D, 8.41%, 4/03/03 ................ 2,890,151 2,832,347
-------------
Telecommunications 2.9%
Satelites Mexicanos, Term Loan C, 9.44%, 6/30/04 .............................. 4,954,000 4,929,230
-------------
Textiles 3.0%
Sun Apparel, Term Loan B, 8.656%, 9/30/04 ..................................... 5,000,000 4,987,500
Transportation 3.0%
American Commercial Lines,
Term Loan B, 8.188%, 6/30/06 .................................................. 2,116,564 2,121,855
Term Loan C, 8.438%, 6/30/07 .................................................. 2,883,436 2,890,645
-------------
5,012,500
-------------
Wireless Communications 12.2%
American Cellular Wireless,
Term Loan B, 8.53%, 6/30/07 ................................................... 2,500,000 2,509,375
Term Loan C, 8.78%, 12/31/07 .................................................. 2,500,000 2,509,375
Microcell Connexions, Inc., Term Loan B, 8.688%, 3/01/06 ...................... 5,601,575 5,615,579
Wireless Communications (cont.)
Nextel Communications, Inc., Term Loan B, 8.438%, 9/30/06 ..................... $ 5,000,000 $ 5,018,750
Telecorp PCS, Inc., Term Loan B, 8.91%, 1/17/08 ............................... 5,000,000 4,987,500
-------------
20,640,579
-------------
Other Senior Floating Rate Interests 1.2%
Wheeling-Pittsburgh, 8.938%, 11/15/06 ......................................... 2,000,000 2,000,000
-------------
Total Long Term Investments (Cost $145,402,223) 145,585,480
-------------
aRepurchase Agreement 7.9%
Joint Repurchase Agreement, 5.515%, 8/3/98, (Maturity Value $13,270,535)
(Cost $13,264,343)
BancAmerica Robertson Stephens ............................................... $13,264,343 13,264,343
Barclays Capital Group, Inc.
Bear, Stearns Securities Corp.
BT Alex Brown, Inc.
Chase Securities, Inc.
CIBC Wood Gundy Securities Corp.
Deutsche Bank Government Securities
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America, L.L.C.
Greenwich Capital Markets, Inc.
Paribas Corp.
SBC Warburg Dillon Read, Inc.
Collateralized by U.S. Treasury Bills and Notes
Total Investments (Cost $158,666,566) 94.3% ................................... 158,849,823
Other Assets, less Liabilities 5.7% ........................................... 9,687,127
-------------
Net Assets 100.0% ............................................................. $168,536,950
=============
a Investment is through participation in a joint account with other funds
managed by the investment advisor. At July 31, 1998, all repurchase agreements
had been entered into on that date.
b Senior secured corporate loans and senior debt securities in the Fund's
portfolio generally have variable rates which adjust to a base, such as the
London Inter-Bank Offered Rate ("LIBOR"), on 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.
c As of July 31, 1998, the Fund had unfunded loan commitments of $1,703,067,
which would be extended at the option of the borrower, pursuant to the Sun
Healthcare Revolver loan agreement.
FRANKLIN FLOATING RATE TRUST
Financial Statements
Statement of Assets and Liabilities
July 31, 1998
<S> <C>
Assets:
Investments in securities, at value (cost $158,666,566) ................................... $158,849,823
Cash ...................................................................................... 1,512,322
Receivables:
Capital shares sold ...................................................................... 7,146,812
Interest ................................................................................. 934,391
Affiliates ............................................................................... 85,730
Other assets .............................................................................. 106,082
--------------
Total assets ......................................................................... 168,635,160
--------------
Liabilities:
Other liabilities ......................................................................... 98,210
--------------
Net assets, at value ................................................................ $168,536,950
==============
Net assets consist of:
Net unrealized appreciation ............................................................... $ 183,257
Accumulated net realized gain ............................................................. 20,161
Capital shares ............................................................................ 168,333,532
--------------
Net assets, at value ................................................................ $168,536,950
==============
Net asset value and maximum offering price per share
($168,536,950 / 16,784,008 shares outstanding)* ........................................... $10.04
==============
*Tender offer redemption price is equal to net asset value less any applicable
early withdrawal charge (Note 2).
See notes to financial statements.
Statement of Operations
for the period October 10, 1997 (effective date) to July 31, 1998
<S> <C>
Investment income:
Interest ......................................................................... $4,106,613
Expenses:
Management fees (Note 3) ......................................................... 445,016
Administrative fees (Note 3) ..................................................... 83,313
Transfer agent fees (Note 3) ..................................................... 163,116
Registration and filing fees ..................................................... 121,275
Professional fees ................................................................ 135,434
Other ............................................................................ 32,900
----------
Total expenses .............................................................. 981,054
-----------
Expenses waived/paid by affiliate (Note 3) .................................. (245,420)
Net expenses ............................................................... 735,634
-----------
Net investment income ..................................................... 3,370,979
-----------
Realized and unrealized gains:
Net realized gain from investments ............................................... 20,161
Net unrealized appreciation on investments ....................................... 183,257
----------
Net realized and unrealized gain .................................................. 203,418
-----------
Net increase in net assets resulting from operations .............................. $3,574,397
===========
See notes to financial statements.
Statements of Changes in Net Assets
for the period October 10, 1997 (effective date) to July 31, 1998
<S> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................... $ 3,370,979
Net realized gain from investments ...................................................... 20,161
Net unrealized appreciation on investments .............................................. 183,257
--------------
Net increase in net assets resulting from operations ................................ 3,574,397
Distributions to shareholders from net investment income ................................. (3,370,979)
Capital share transactions (Note 2) ...................................................... 168,384,635
Reduction in capital shares due to offering costs (Note 1) ............................... (51,103)
--------------
Net increase in net assets .......................................................... 168,536,950
Net assets (there is no undistributed net investment income at beginning or end of period)
Beginning of period ...................................................................... --
--------------
End of period ............................................................................ $168,536,950
==============
See notes to financial statements.
Statement of Cash Flows
for the period October 10, 1997 (effective date) to July 31, 1998
Interest received ......................................................................... $ 3,055,124
Facility fees received .................................................................... 201,781
Operating expenses paid ................................................................... (906,092)
--------------
Cash provided- operations ................................................................ 2,350,813
==============
Investment purchases ......................................................................(5,043,796,015)
Investment sales .......................................................................... 4,885,093,181
--------------
Cash provided- investments ............................................................... (158,702,834)
==============
Distributions to shareholders ............................................................. (3,371,286)
Net proceeds from capital shares sold ..................................................... 161,235,629
--------------
Cash provided- financing activities ...................................................... 157,864,343
==============
Net change in cash ........................................................................ 1,512,322
Cash at beginning of period ............................................................... --
--------------
Cash at end of period ..................................................................... $ 1,512,322
==============
Reconciliation of Net Investment Income to Net Cash Provided by Operating Activities
for the period October 10, 1997 (effective date) to July 31, 1998
Net investment income ..................................................................... $ 3,370,979
Adjustments to reconcile net investment income to net cash provided by operating activities:
Interest and facility fees .............................................................. (849,708)
Operating expenses ...................................................................... (170,458)
--------------
Net cash provided by operating activities ................................................. $ 2,350,813
==============
See notes to financial statements.
</TABLE>
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 closed-end, continuously offered, non-diversified
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 or
broker/dealers 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. 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 all of its taxable income.
c. 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 and premium
from securities is amortized on an income tax basis. Facility fees received 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.
d. Organization Costs:
Organization costs are amortized on a straight line basis over five years.
e. Offering Costs:
Offering costs of $51,103 were charged to paid in capital at the end of the
initial offering period to the public.
f. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
The Fund may, on a quarterly basis, make tender offers at net asset value for
the repurchase of a portion of the common shares outstanding. The price will be
established as of the close of business on the day the tender offer ends. An
early withdrawal charge may be imposed on shares offered for tender which have
been held for less than twelve months.
At July 31, 1998 there were 35 million shares authorized ($.01 par value).
Transactions in the Fund's shares were as follows:
Period Ended
July 31, 1998 *
------------------------
Shares Amount
------------------------
Shares sold ..................16,956,054 $170,114,020
Shares issued in reinvestment
of distributions ............ 52,652 528,834
Shares redeemed .............. (224,698) (2,258,219)
------------------------
Net increase .................16,784,008 $168,384,635
========================
*For the period October 10, 1997 (effective date) to July 31, 1998.
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Fund are also officers and/or trustees of
Franklin Advisers, Inc. (Advisers), Franklin/
Templeton Distributors, Inc. (Distributors), Franklin Templeton Services, Inc.
(FT Services) and Franklin/Templeton Investor Services, Inc. (Investor
Services), the Fund's investment manager, principal underwriter, administrative
manager and transfer agent, respectively.
The Fund pays investment management fees to Advisers of .80% per year of the
average daily net assets of the Fund.
The Fund pays administrative fees to FT Services, Inc. based on the Fund's
average daily net assets 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
Fees are further reduced on net assets over $1.2 billion.
Advisers agreed in advance to waive administrative and management fees for the
Fund, as noted in the Statement of Operations.
Distributors received early withdrawal charges for the period of $2,476.
At July 31, 1998, Franklin Resources, Inc. and Templeton Investment Counsel,
Inc. owned 22.6% and 14.9% of the Fund, respectively.
4. INCOME TAXES
At July 31, 1998, the unrealized appreciation based on the cost of investments
for income tax purposes of $158,666,566 was as follows:
Unrealized appreciation ................... $ 408,211
Unrealized depreciation ................... (224,954)
----------
Net unrealized appreciation ............... $ 183,257
==========
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period from the inception of the fund through
July 31, 1998 aggregated $169,408,045 and $23,897,613, respectively.
FRANKLIN FLOATING RATE TRUST
Independent Auditor's Report
To the Shareholders and Board of Trustees
of the Franklin Floating Rate Trust:
We have audited the accompanying statements of assets and liabilities of the
Franklin Floating Rate Trust (the Fund), including the Fund's statement of
investments, as of July 31, 1998, and the related statements of operations,
changes in net assets, cashflows, and the financial highlights for the period
October 10, 1997 (effective date) to July 31, 1998. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of July 31, 1998, by
correspondence with the custodians. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Franklin Floating Rate Trust as of July 31, 1998, the results of its operations,
the changes in its net assets, its cashflows, and its financial highlights for
the period October 10, 1997 (effective date) to July 31, 1998, in conformity
with generally accepted accounting principles.
PricewaterhouseCoopers LLP
San Francisco, California
September 4, 1998
Franklin Floating Rate Trust
Annual Report
July 31, 1998.
GRAPHIC MATERIAL (1)
This chart shows the portfolio breakdown by sector based on the percentage of
total net assets on 7/31/98 for the Franklin Floating Rate Trust.
Wireless....................12.25%
Health Care..................7.11%
Chemicals....................5.96%
Automotive...................5.94%
Information Systems..........5.94%
Broadcasting.................5.93%
Industrial...................5.55%
Entertainment................5.35%
Cable........................4.92%
Commercial Services..........4.14%
Consumer Products............4.07%
Metals/Mining................3.94%
Transportation...............2.97%
Packaging....................2.96%
Textiles.....................2.96%
Telecom......................2.92%
Paper/Forest Products........1.78%
Lodging/Real Estate..........1.68%
Cash & Short-Term
Investments.................13.63%
GRAPHIC MATERIAL (2)
This chart shows the top five holdings of the Franklin Floating Rate Trust
based on the percentage of total net assets on 7/31/98.
Lyondell Petrochemical Co..........................................5.96%
(Chemicals)
Loyondell is a leading
manufacturer of
petrochemicals and
polymers used to make
synthetic and plastic
products such as trash
bags, containers and
sports equipment.
Bridge Information Systems, Inc....................................5.94%
(Information Systems)
Bridge Information
Systems is the number
two provider (behind
Reuter's) of financial
information services
over the internet.
Capstar Broadcasting Corp..........................................5.93%
(Broadcasting)
Capstar Broadcasting is
the U.S.'s top radio
broadcaster by number
of stations. The
company focuses
primarily on midsized
markets.
Outsourcing Solutions Inc..........................................4.14%
(Commercial Services)
Outsourcing Solutions
is a collection-agency
company that has
flourished along with
the rapid growth in
outstanding consumer
credit. Their services
include billing,
contract management,
portfolio purchasing
and telephone services
such as customer
service and market
research.
Sun Healthcare Group, Inc..........................................3.58%
(Health Care)
Sun Healthcare provides
long-term, subacute and
related health care
services through about
580 facilities in the
U.S., the U.K., Spain,
Germany and Australia.
GRAPHIC MATERIAL (3)
This chart shows the dividend distributions for Franklin Floating Rate Trust
from 10/31/97 to 7/31/98.
Dividend
MONTH PER SHARE
October.....................2.7894 cents
November....................3.4946 cents
December....................4.3959 cents
January.....................4.3374 cents
February....................4.7695 cents
March.......................5.8093 cents
April.......................5.3510 cents
May.........................5.4095 cents
June........................6.0253 cents
July........................5.8040 cents
Total......................48.1859 cents
