o 020*P4
SUPPLEMENT DATED JANUARY 1, 1999
TO THE PROSPECTUS OF
FRANKLIN FLOATING RATE TRUST
DATED DECEMBER 1, 1998
The prospectus is amended as follows:
I. All references in the prospectus to "Class I" are replaced with "Class A"
and all references to "Class II" are replaced with "Class C."
II. The first paragraph of the section "Leverage and Borrowings" on page 16 is
replaced with the following:
The fund is authorized to borrow money in an amount up to 33 1/3% of its
total assets (measured by adding the amount borrowed to the fund's other
assets). The fund has arranged a credit facility with a bank, which permits
it to borrow funds to meet unfunded commitments in connection with
investments or to make Tender Offers for Common Shares. However, the fund
will only borrow money under this facility for temporary, extraordinary or
emergency purposes.
III. The first paragraph of the section "Leverage" on page 28 is replaced with
the following:
The fund is authorized to borrow money in amounts of up to 33 1/3% of the
value of its total assets at the time of the borrowings. The fund's
borrowings create an opportunity for greater total return to the fund and,
ultimately, the fund's shareholders, but, at the same time, increase
exposure to losses. In addition, interest payments and fees paid by the
fund on any borrowings may offset or exceed the return earned on the
borrowed funds. The fund has arranged a credit facility with a bank, which
permits it to borrow funds to meet unfunded commitments in connection with
investments or to make Tender Offers for Common Shares. The fund may also
issue one or more series of preferred shares but it does not presently
intend to do so. See "What Are the Risks of Investing in the Fund? -
Effects of Leverage."
IV. The first paragraph of the section "Effects of Leverage" on page 31 is
replaced with the following:
The fund is authorized to borrow money in an amount up to 33 1/3% of its
total assets (measured by adding the amount borrowed to the fund's other
assets). The fund has arranged a credit facility with a bank, which permits
it to borrow funds to meet unfunded commitments in connection with
investments or to make Tender Offers for Common Shares. However, the fund
will only borrow money under this facility for temporary, extraordinary or
emergency purposes. See "Periodic Offers By the Fund to Repurchase Common
Shares from Shareholders."
V. In the section "Special Considerations of Repurchases" on page 46,
(a) the second paragraph is replaced with the following:
The fund has arranged a credit facility with a bank under which it may
borrow to finance the repurchase of Common Shares through Tenders Offers.
Any such borrowings will comply with the fund's investment restrictions on
borrowing. See "What Are the Risks of Investing in the Fund? - Effects of
Leverage" above, and "Investment Restrictions" in the SAI.
(b) and the fourth sentence of the fourth paragraph is replaced with the
following:
In addition, when the fund borrows money for the purpose of financing a
Tender Offer, interest on the borrowings will reduce the fund's net
investment income.
VI. The fifth item in the section "Exchange Restrictions" on page 51 is
replaced with the following:
o Generally exchanges may only be made between identically registered
accounts, unless you send written instructions with a signature
guarantee. You may, however, exchange Common Shares from a fund
account requiring two or more signatures into an identically
registered money fund account requiring only one signature for all
transactions. PLEASE NOTIFY US IN WRITING IF YOU DO NOT WANT THIS
OPTION TO BE AVAILABLE ON YOUR ACCOUNT. Additional procedures may
apply. Please see "Transaction Procedures and Special Requirements."
VII. The reference to $50,000 in the section "Signature Guarantees" on page 60
is replaced with $100,000.
Please keep this supplement for future reference.
