-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BSz9DsSZwDVBmjbH4cCfZpsCosGlhlpFkchsZmehWnmt3wmNihowKlQdBb4ww1vf oPYV+790LEHES1mU2ORH7w== 0000854856-96-000005.txt : 19960604 0000854856-96-000005.hdr.sgml : 19960604 ACCESSION NUMBER: 0000854856-96-000005 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960603 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRANKLIN MULTI INCOME TRUST CENTRAL INDEX KEY: 0000854856 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05873 FILM NUMBER: 96575951 BUSINESS ADDRESS: STREET 1: 777 MARINERS ISLAND BLVD CITY: SAN MATEO STATE: CA ZIP: 94404 BUSINESS PHONE: 4155703000 MAIL ADDRESS: STREET 1: FRANKLIN MULTI INCOME TRUST STREET 2: 777 MARINERS ISLAND BLVD CITY: SAN MATEO STATE: CA ZIP: 94404 N-30D 1 MESSAGE FROM THE PRESIDENT Trust's Objective The Franklin Multi-Income Trust seeks to provide high current income consistent with preservation of capital, as well as growth of income through dividend increases and capital appreciation. In seeking to achieve these objectives, the Trust invests primarily in lower-rated, higher-yielding bonds and securities. To reduce the volume of mail shareholders receive and to reduce expenses, only one copy of most Fund reports, such as the Fund's annual and semi-annual reports, may be mailed to a household. Additional reports may be obtained, without charge, by calling Fund Information at 1-800/DIAL BEN (1-800/342-5236). May 15, 1996 Dear Shareholder: We are pleased to update you on the Franklin Multi-Income Trust in the annual report for the period ended March 31, 1996. Moderate growth, mild inflation and declining interest rates characterized most of the period under review. These conditions were especially true in the U.S., where the Federal Reserve Board lowered the federal funds rate on three separate occasions during the reporting period. This economic environment contributed to solid performance for most financial markets, including the utility stocks and corporate bonds in which the Trust invests. However, interest rates did rise following stronger-than-expected employment reports released in March and April, which caused temporary weakness in the financial markets. While there was still no clear evidence of increasing inflation, hopes for immediate federal funds rate reductions dimmed as the economy began to show signs of improvement. In early 1995, we determined that utility stocks were undervalued on a relative price basis. In response, we increased the Trust's utility stock holdings to 51.4% of total net assets at the end of the period, up significantly from 32.9% on March 31, 1995. We added to existing holdings in CINergy Corp., and initiated new positions in BellSouth Corp., SCANA Corp., PECO Energy,and Public Service Co. of Colorado. Throughout the latter half of the fiscal year, interest rates declined and prices of utility stocks increased. In fact, the price of the unmanaged Standard & Poor's Utility Index increased +20.5% to 190.84 on March 31, 1996, from 158.38 one year earlier. Our emphasis on utility stocks improved the Trust's performance. For instance, the market value of our holdings in Texas Utilities (2.4% of total net assets) increased over 30.3% during the reporting period. Franklin Multi-Income Trust Top 10 Company Holdings As a percentage of total net assets March 31, 1996 Company % of total Industry net assets SCANA Corp. 3.94% Utility (stock) Allegheny Power System, Inc. 3.62% Utility (stock) FPL Group, Inc. 2.77% Utility (stock) CINergy Corp. 2.76% Utility (stock) Central & Southwest Co. 2.71% Utility (stock) American Electric Power 2.68% Utility (stock) Dominion Resources 2.61% Utility (stock) Public Service Co. of Colorado 2.61% Utility (stock) Wisconsin Energy 2.54% Utility (stock) Comcast Cellular Corp. 2.37% Wireless Communications For a complete list of portfolio holdings, please see page 9 of this report. Corporate bonds, which comprised 64.4% of the Trust's total net assets on March 31, 1996, also performed well during the fiscal year. The portfolio's corporate bond holdings represented 21 industries at the close of the reporting period, and several of these bonds recorded strong returns. In particular, the Trust's bond holdings in the cable television and media/broadcasting sector (11.2% of total net assets) continued to rally after Congress passed the Telecommunications Act of 1996 in February. The law is designed to increase competition and integration in the communications and media markets. Our selection of debt securities of potential takeover candidates had a significant impact on the Trust, helping to improve its performance. Mergers often lead to increased value for the purchased company's bonds. For example, the value of the Trust's Continental Cable bonds appreciated sharply following announcement of the company's scheduled merger with U.S. West. Health care securities (5.2% of total net assets) also performed strongly during the reporting period, as ongoing consolidation continued to drive this sector. Two of the Trust's major holdings, OrNda Healthcorp (1.81% of total net assets) and Tenet Healthcare (1.39% of total net assets), performed particularly well, and we anticipate they should provide the Trust with solid upside potential. This discussion reflects the strategies we employed for the Trust during the past 12 months, and includes our opinions for that period. Since economic and market conditions are constantly changing, our strategies, and our evaluations, conclusions and decisions regarding portfolio holdings will change as new circumstances arise. Although past performance of a specific investment or sector cannot guarantee future performance, such information can be useful in analyzing securities we purchase for the Trust. As you may know, high yields reflect higher credit risks associated with certain lower-rated securities in the Trust's portfolio. Looking forward, we anticipate continued low levels of inflation, low interest rate volatility and moderate economic growth for the rest of 1996. Should the economy slow considerably during the coming year, we may emphasize utility stocks, which tend to be more sensitive to interest rate movement, rather than corporate bonds, which are usually more sensitive to broader economic trends. Nevertheless, we maintain a positive outlook for both high yield corporate bonds and utility stocks. As always, we appreciate your continued support, welcome your comments, and look forward to serving you in the years to come. Sincerely, Charles B. Johnson President Franklin Multi-Income Trust Performance Summary The Franklin Multi-Income Trust's closing price on the New York Stock Exchange (NYSE) rose to $9.00 per share on March 31, 1996, from $8.75 per share on March 31, 1995. The Trust's net asset value (as opposed to market price) per share increased to $10.62 on March 31, 1996, from $9.60 on March 31, 1995. During the reporting period, shareholders received income distributions totaling 87.6 cents ($0.876) per share, including dividend income of 76.8 cents ($0.768) per share, a short-term capital gain of 7.5 cents ($0.075) per share and a long-term capital gain of 3.3 cents ($0.033) per share. Based on an annualization of the current monthly dividend of 6.4 cents ($0.064) per share and the NYSE closing price of $9.00 on March 31, 1996, the Trust's distribution rate was 8.53%. Distributions will vary based on the earnings of the securities in the Trust's portfolio, and past distributions are not indicative of future trends. The Trust reported a cumulative total return of +12.87% for the one-year period ended March 31, 1996. Total return reflects the change in the Trust's market price on the NYSE. Based on the change in net asset value, total return for the same period was +20.13%. All total return calculations assume reinvestment of dividends and capital gains according to the terms specified in the Trust's dividend reinvestment plan. Franklin Multi-Income Trust Cumulative Total Returns1 Periods Ended March 31, 1996 Since One- Five- Inception Year Year (10/09/89) Based on 12.87% 124.98% 111.77% market value Based on net 20.13% 137.13% 143.28% asset value Distribution Rate2 8.53% 1Cumulative total returns show the change in value of an investment over the periods indicated. These figures assume reinvestment of dividends and capital gains according to the terms specified in the Trust's dividend reinvestment plan. 2Distribution rate is based on an annualization of the Trust's current 6.4 cent per share monthly dividend and its NYSE closing price of $9.00 on March 31, 1996. Past performance is not predictive of future results. PORTFOLIO OPERATIONS The following persons are primarily responsible for the day-to-day management of the Trust's portfolio: Edward Jamieson since 1989 and Christopher Molumphy since 1991. Edward Jamieson Senior Vice President Franklin Advisers, Inc. Mr. Jamieson holds a bachelor of arts degree in sociology from Bucknell University and a master's degree in accounting and finance from the University of Chicago Graduate School of Business. He has been with Advisers since 1987 and for the two years prior thereto, he was treasurer of Beatrice Consumer Products, Inc. and an executive with Pepsico, Inc.'s Corporate Treasury where he served as Director of International Treasury. He is a member of several securities industry-related committees and associations. Christopher Molumphy Senior Portfolio Manager Franklin Advisers, Inc. Mr. Molumphy holds a bachelor of arts degree in economics from Stanford University and a master's degree in finance from the University of Chicago. He has been with Advisers since 1988. He is a Chartered Financial Analyst (CFA) and a member of several securities industry associations. DIVIDEND REINVESTMENT PLAN The Fund's Dividend Reinvestment Plan (the "Plan") offers you a prompt and simple way to reinvest dividends and/or capital gain distributions in shares of the Fund. The Shareholder Services Group ("TSSG" or "Plan Agent"), c/o Corporate Securities, 53 State St., Boston, Massachusetts 02109, acts as your Plan Agent in administering the Plan. All reinvestments are in full and fractional shares, carried to three decimal places. The complete terms and conditions of the Plan are contained in the Fund's prospectus, dated October 24, 1989, used in connection with its initial public offering. A copy of that prospectus may be obtained from the Fund at the address on the cover of this report. You are automatically enrolled in the Plan unless you elect to receive dividends or distributions in cash. If you own shares in your own name, you should notify the Plan Agent, in writing, if you wish to receive dividends or distributions in cash. If the Fund declares a dividend or capital gain distribution, you, as a participant in the Plan, will automatically receive an equivalent amount of shares of the Fund purchased on your behalf by the Plan Agent in the open market. If the market price exceeds the net asset value per share of the Fund, participants in the Plan will pay a price per share which exceeds the net asset value per share in connection with purchases through the Plan. All reinvestments are in full and fractional shares. The Fund does not issue new shares in connection with the Plan. There is no direct charge to participants for reinvesting dividends and distributions, since the Plan Agent's fees are paid by the Fund. Whenever shares are purchased through the exchange on which they are listed, each participant will pay a pro rata portion of brokerage commissions. The automatic reinvestment of dividends and distributions does not relieve shareholders of liability for any taxes which may be payable on dividends or distributions. Generally, income and capital gains resulting from dividends and distributions received in the form of shares of the Fund are realized notwithstanding the fact that cash is not received by shareholders. You will receive a monthly account statement from the Plan Agent showing total dividends and distributions, date of investment, shares acquired and price per share, and total shares of record held by you and by the Plan Agent for you. You are entitled to vote all shares of record, including shares purchased for you by the Plan Agent, and, if you vote by proxy, your proxy will include all such shares. As long as you participate in the Plan, the Plan Agent will hold the shares it has acquired for you in safekeeping, in non-certificated form. This convenience provides added protection against loss, theft or inadvertent destruction of certificates. You may withdraw from the Plan at any time, without penalty, by notifying the Plan Agent, in writing, at the address above. If you withdraw from the Plan, you will receive a certificate issued in your name for all full shares and the Plan Agent will convert any fractional shares you hold at the time of withdrawal to cash at the then current market price and send you a check for the proceeds. If you prefer, the Plan Agent will sell all of your full and fractional shares upon your withdrawal and send you the proceeds. If you hold shares in your own name, please address all notices, correspondence, questions, or other communications regarding the Plan to the Plan Agent at the address noted above. If shares are not held in your name, you should contact your brokerage firm, bank, or other nominee for more information. FRANKLIN MULTI-INCOME TRUST Statement of Investments in Securities and Net Assets, March 31, 1996
Shares/ Value Warrants (Note 2) Common Stocks & Warrants 54.5% Energy 1.6% 33,300 Ultramar Corp. ................................................................. $ 961,538 ------------- Industrial 1,000 aGulf States Steel, warrants ................................................... 10,000 518 aThermadyne Industries, Inc. ................................................... 9,713 ------------- 19,713 ------------- Lodging .1% 526 aHost Marriott Corp. ........................................................... 7,101 526 Marriott International, Inc. ................................................... 24,985 ------------- 32,086 ------------- Telecommunications 1.4% 120 Nippon Telegraph & Telephone Corp. ............................................. 877,419 ------------- Utilities 51.4% 74,000 Allegheny Power System, Inc. ................................................... 2,247,750 40,000 American Electric Power Co., Inc. .............................................. 1,670,000 10,000 Ameritech Corp. ................................................................ 545,000 22,000 BellSouth Corp. ................................................................ 814,000 59,000 Central & South West Corp. ..................................................... 1,681,500 57,200 CINergy Corp. .................................................................. 1,716,000 41,000 Dominion Resources, Inc. ....................................................... 1,624,625 60,600 DPL, Inc. ...................................................................... 1,446,825 20,000 Duke Power Co. ................................................................. 1,010,000 14,500 Edison International ........................................................... 248,313 34,000 Enova Corp...................................................................... 777,750 14,000 Enron Corp...................................................................... 516,250 16,500 Enron Global Power & Pipelines L.L.C. .......................................... 424,875 30,000 Entergy Corp. .................................................................. 840,000 38,000 FPL Group, Inc. ................................................................ 1,719,500 6,800 New England Electric System .................................................... 260,100 4,900 New Jersey Resources Corp. ..................................................... 141,488 39,600 Pacific Enterprises ............................................................ 1,024,650 50,000 PacifiCorp ..................................................................... 1,043,750 16,800 PECO Energy Co.................................................................. 447,300 46,000 Public Service Co. of Colorado ................................................. 1,621,500 25,000 Puget Sound Power & Light Co. .................................................. 637,500 3,500 SBC Communications, Inc......................................................... 184,188 89,000 SCANA Corp. .................................................................... 2,447,500 63,100 Southern Co. ................................................................... 1,506,513 36,000 Texas Utilities Co. ............................................................ 1,489,500 Utilities (cont.) 38,700 US West, Inc. .................................................................. $ 1,252,913 30,000 Wicor Inc. ..................................................................... 1,012,500 55,600 Wisconsin Energy Corp. ......................................................... 1,577,650 ------------- 31,929,440 ------------- Total Common Stocks & Warrants (Cost $27,857,076) ........................ 33,820,196 ------------- Partnership Units .1% Financial 1 a,bPG Partners I, L.P. (Cost $48,212)........................................... 90,480 ------------- Preferred Stocks 2.3% Cable Television 1.6% 10,142 cCablevision Systems Corp., Series L, 11.125% pfd., PIK......................... 1,009,144 ------------- Consumer Goods .7% 70,000 RJR Nabisco Holdings Corp., $0.6012 cvt. pfd., Series C ........................ 428,750 ------------- Total Preferred Stocks (Cost $1,488,673) ................................. 1,437,894 ------------- Face Amount Bonds 64.4% Automotive 1.5% $ 850,000 SPX Corp., senior sub. notes, 11.75%, 06/01/02 ................................. 903,125 ------------- Cable Television 6.2% 1,500,000 eBell Cablemedia, Plc., senior disc. notes, zero coupon to 07/15/99, (original accretion rate 11.95%), 11.95% thereafter, 07/15/04 ........................... 1,076,250 500,000 Century Communications Corp., senior notes, 9.50%, 03/01/05 .................... 512,500 500,000 Continental Cablevision, Inc., senior sub. deb., 11.00%, 06/01/07 .............. 566,250 500,000 Continental Cablevision, Inc., senior sub. deb., 9.00%, 09/01/08 ............... 547,500 1,000,000 Tele-Communications, Inc., senior sub. deb., 9.80%, 02/01/12 ................... 1,147,436 ------------- 3,849,936 ------------- Chemicals 3.3% 1,000,000 Harris Chemical North America, Inc., senior secured disc. notes, 10.25%, 07/15/01 990,000 100,000 IMC Global, Inc., senior deb., 9.45%, 12/15/11 ................................. 104,750 400,000 IMC Global, Inc., senior notes, 9.25%, 10/01/00 ................................ 418,000 300,000 IMC Global, Inc., senior notes, Series B, 10.125%, 06/15/01 .................... 322,500 200,000 IMC Global, Inc., senior notes, Series B, 10.75%, 06/15/03 ..................... 217,000 ------------- 2,052,250 ------------- Consumer Products 3.2% 1,000,000 Revlon Consumer Products Corp., senior sub. notes, 10.50%, 02/15/03 ............ 1,015,000 Consumer Products (cont.) $ 500,000 RJR Nabisco, Inc., senior notes, 9.25%, 08/15/13 ............................... $ 481,875 500,000 Sealy Corp., senior sub. notes, 9.50%, 05/01/03 ................................ 505,000 ------------- 2,001,875 ------------- Containers/Packaging 1.7% 1,000,000 Owens-Illinois, Inc., senior sub. notes, 9.75%, 08/15/04 ....................... 1,026,250 ------------- Energy .8% 500,000 Gulf Canada, senior sub. notes, 9.25%, 01/15/04 ................................ 511,875 ------------- Food & Beverage 1.3% 200,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05 ................. 197,000 100,000 Dr Pepper Bottling Co. of Texas, senior sub. notes, 10.25%, 02/15/00 ........... 105,500 500,000 PMI Acquisition Corp., senior sub. notes, 10.25%, 09/01/03 ..................... 512,500 ------------- 815,000 ------------- Food Retailing 7.4% 1,000,000 Bruno's, Inc., senior sub. notes, 10.50%, 08/01/05 ............................. 967,500 250,000 Dominick's Finer Foods, senior sub. notes, 10.875%, 05/01/05 ................... 266,875 1,000,000 Pathmark Stores, Inc., senior sub. notes, 9.625%, 05/01/03 ..................... 942,500 1,000,000 Penn Traffic Co., senior sub. notes, 10.25%, 02/15/02 .......................... 995,000 500,000 Pueblo Xtra International, senior notes, 9.50%, 08/01/03 ....................... 452,500 1,000,000 Ralphs Grocery Co., senior notes, 10.45%, 06/15/04 ............................. 965,000 ------------- 4,589,375 ------------- Forest/Paper Products 7.5% 500,000 Fort Howard Corp., senior sub. notes, 9.00%, 02/01/06 .......................... 492,500 1,000,000 Rapp International Finance, guaranteed secured notes, 13.25%, 12/15/05 ......... 985,000 1,000,000 REPAP New Brunswick, senior notes, 10.625%, 04/15/05 ........................... 975,000 500,000 REPAP Wisconsin, Inc., senior secured notes, 9.25%, 02/01/02 ................... 480,000 600,000 S.D. Warren Co., senior sub. notes, 12.00%, 12/15/04 ........................... 633,000 1,000,000 Tjiwi Kimia International, guaranteed senior notes, 13.25%, 08/01/01 ........... 1,075,000 ------------- 4,640,500 ------------- Gaming/Leisure 4.1% 1,000,000 Aztar Corp., senior sub. notes, 13.75%, 10/01/04 ............................... 1,120,000 250,000 Players International, Inc., senior notes, 10.875%, 04/15/05 ................... 253,750 1,000,000 Showboat, Inc., senior sub. notes, 13.00%, 08/01/09 ............................ 1,150,000 ------------- 2,523,750 ------------- Health Care 5.2% 1,000,000 Abbey Healthcare Group, Inc., senior sub. notes, 9.50%, 11/01/02 ............... 1,055,000 176,981 Amerisource Corp., senior deb., PIK, 11.25%, 07/15/05 .......................... 196,449 $1,000,000 OrNda Healthcorp., guaranteed senior sub. notes, 11.375%, 08/15/04 ............. $ 1,127,500 800,000 Tenet Healthcare Corp., senior sub. notes, 10.125%, 03/01/05 ................... 862,000 ------------- 3,240,949 ------------- Industrial 2.6% 1,000,000 AAF-McQuay, Inc., senior notes, 8.875%, 02/15/03 ............................... 990,000 259,000 Thermadyne Industries, Inc., senior notes, 10.25%, 05/01/02 .................... 261,590 359,000 Thermadyne Industries, Inc., sub. notes, 10.75%, 11/01/03 ...................... 360,794 ------------- 1,612,384 ------------- Lodging .8% 500,000 Red Roof Inns, senior notes, 9.625%, 12/15/03 .................................. 486,250 ------------- Media/Broadcasting 5.0% 500,000 American Media Operation, senior sub. notes, 11.625%, 11/15/04 ................. 505,000 1,000,000 New World Television, Inc., senior notes, 11.00%, 06/30/05 ..................... 1,055,000 1,000,000 Sullivan Broadcast Holdings, units, 13.25%, 12/15/06 ........................... 1,080,000 500,000 Turner Broadcasting Systems, Inc., senior deb., 8.40%, 02/01/24 ................ 497,500 ------------- 3,137,500 ------------- Metals & Mining 3.2% 1,000,000 eAcme Metals, Inc., senior secured disc. notes, zero coupon to 08/01/97, (original accretion rate 13.50%), 13.50% thereafter, 08/01/04 ................. 895,000 1,000,000 Gulf States Steel, units, 13.50%, 04/15/03 ..................................... 905,000 180,000 UCAR Global Enterprises, senior sub. notes, 12.00%, 01/15/05 ................... 208,350 ------------- 2,008,350 ------------- Restaurants 1.1% 700,000 Foodmaker, Inc., S.F., senior sub. notes, 9.25%, 03/01/99 ...................... 686,000 ------------- Technology/Information Systems 1.1% 200,000 cAltera Corp., cvt. sub. notes, 5.75%, 06/15/02 ................................ 254,000 500,000 dAnacomp, Inc., S.F., senior sub. notes, 15.00%, 11/01/00 ...................... 462,500 ------------- 716,500 ------------- Textiles/Apparel 1.6% 1,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05 .................... 997,500 ------------- Transportation 1.9% 1,000,000 Delta Air Lines, Inc., S.F., pass-through equipment trust, 10.50%, 04/30/16 .... 1,194,678 ------------- Utilities 1.7% 500,000 El Paso Electric Co., first mortgage, Series E, 9.40%, 05/01/11 ................ 508,750 500,000 Midland Funding II, S.F., senior lease obligation, Series A, 11.75%, 07/23/05 .. 528,401 ------------- 1,037,151 ------------- Wireless Communication 3.2% $2,000,000 eComcast Cellular Corp., Series B, (original accretion rate 11.37%), 0.00%, 03/05/00$ 1,470,000 500,000 Rogers Cantel Mobile Communications, Inc., S.F., guaranteed senior secured notes, 10.75%, 11/01/01 ....................................................... 524,374 ------------- 1,994,374 ------------- Total Bonds (Cost $38,182,931) ........................................... 40,025,572 ------------- Foreign Government Agencies .7% 2,175,000 fESCOM, E168, utility deb. (South Africa), 11.00%, 06/01/08 (Cost $513,318) .... 423,814 ------------- Total Long Term Investments (Cost $68,090,210)............................ 75,797,956 ------------- gReceivables from Repurchase Agreements .4% 277,838 Joint Repurchase Agreement, 5.423%, 04/01/96, (Maturity Value $275,891) (Cost $275,766) BT Securities Corp., (Maturity Value $53,247) Collateral: U.S. Treasury Notes, 6.75% - 7.125%, 09/30/99 - 04/30/00 Daiwa Securities America, Inc., (Maturity Value $62,903) Collateral: U.S. Treasury Bills, 06/27/96 - 09/26/96 Fuji Securities, Inc., (Maturity Value $53,247) Collateral: U.S. Treasury Bills, 06/13/96 - 11/14/96 U.S. Treasury Notes, 6.125%, 09/30/00 Lehman Government Securities, Inc., (Maturity Value $53,247) Collateral: U.S. Treasury Bills, 06/20/96 U.S. Treasury Notes, 6.125%, 05/31/97 The Nikko Securities Co. International, Inc., (Maturity Value $53,247) Collateral: U.S. Treasury Notes, 5.625% - 8.50%, 04/30/97 - 11/15/00 .......... 275,766 ------------- Total Investments (Cost $68,365,976) 122.4% ......................... 76,073,722 Liabilities in Excess of Other Assets (22.4)% ....................... (13,920,849) ------------- Net Assets 100.0% ................................................... $62,152,873 ============= At March 31, 1996, the net unrealized appreciation based on the cost of investments for income tax purposes of $68,365,976 was as follows: Aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost .............................................. $8,271,865 Aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value .............................................. (564,119) ------------- Net unrealized appreciation .................................................. $7,707,746 ============= PORTFOLIO ABBREVIATIONS: L.L.C. - Limited Liability Corp. L.P. - Limited Partnership PIK - Payment-in-Kind S.F. - Sinking Fund aNon-income producing. bSee Note 8 regarding restricted securities. cSee Note 9 regarding Rule 144A securities. dSee Note 11 regarding credit risk and defaulted securities. eZero coupon/step-up bonds. The current effective yield may vary. The original accretion rate will remain constant. fFace amount is stated in foreign currency and value is stated in U.S. dollars. gFace amount for repurchase agreements is for the underlying collateral. See Note 2(f) regarding joint repurchase agreement. The accompanying notes are an integral part of these financial statements.
FRANKLIN MULTI-INCOME TRUST Financial Statements Statement of Assets and Liabilities March 31, 1996 Assets: Investments in securities, at value (identified cost $68,090,210) $75,797,956 Receivables from repurchase agreements, at value and cost 275,766 Receivables: Dividends and interest 1,099,257 Investment securities sold 1,888,383 Unamortized note issuance costs (Note 3) 101,156 -------------- Total assets 79,162,518 -------------- Liabilities: Payables: Investment securities purchased 496,780 Notes (Note 3) 16,000,000 Accrued interest (Note 3) 51,200 Distributions to shareholders 374,886 Management fees 55,425 Accrued expenses and other liabilities 31,354 Total liabilities 17,009,645 -------------- Net assets, at value $62,152,873 ============== Net assets consist of: Undistributed net investment income $ 20,786 Unrealized net appreciation on investments and translation of assets and liabilities denominated in foreign currencies 7,706,441 Net realized gain from investments and foreign currency transactions 634,866 Capital shares 58,576 Additional paid-in capital 53,732,204 -------------- Net assets, at value $62,152,873 ============== Net asset value per share ($62,152,873 / 5,857,600 shares of beneficial interest outstanding) $10.61 ============== Statement of Operations for the year ended March 31, 1996 Investment income: Dividends, net of foreign taxes withheld of $424 $1,737,224 Interest 4,777,375 -------------- Total income $ 6,514,599 Expenses: Management fees (Note 5) 652,223 Shareholder servicing costs 36,273 Professional fees 28,353 Trustees' fees and expenses 10,987 Custodian fees 5,696 Reports to shareholders 4,470 Amortization of note issuance costs (Note 3) 29,250 Other 26,587 -------------- Operating expenses 793,839 Interest expense (Note 3) 1,152,000 -------------- Total expenses 1,945,839 -------------- Net investment income 4,568,760 -------------- Realized and unrealized gain (loss) from investments and foreign currency: Net realized gain from: Investments 1,192,080 Foreign currency transactions 1,145 Net unrealized appreciation (depreciation) on: Investments 5,295,134 Translation of assets and liabilities denominated in foreign currencies (3,467) -------------- Net realized and unrealized gain on investments and foreign currency 6,484,892 -------------- Net increase in net assets resulting from operations $11,053,652 ============== FRANKLIN MULTI-INCOME TRUST Financial Statements (cont.) Statements of Changes in Net Assets for the year ended March 31, 1996 and 1995 1996 1995 ---------- --------- Increase (decrease) in net assets: Operations: Net investment income $ 4,568,760 $ 4,559,134 Net realized gain from investments and foreign currency transactions 1,193,225 658,632 Net unrealized appreci- ation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies 5,291,667 (1,110,555) ---------- ---------- Net increase in net assets resulting from operations 11,053,652 4,107,211 Distributions to shareholders from: Undistributed net investment income (4,498,637) (4,567,225) Distributions in excess of net invest- ment income -- (48,564)* Net realized capital gain (632,621) (1,651,843) ---------- ---------- Net increase (decrease) in net assets 5,922,394 (2,160,421) Net assets: Beginning of year 56,230,479 58,390,900 ---------- ---------- End of year (including undistributed net invest- ment income of $20,786 at 3/31/96 and accumu- lated distributions in excess of net investment income of $44,123 at 3/31/95) $62,152,873 $56,230,479 ========== ========== Statement of Cash Flows for the year ended March 31, 1996 Dividends and interest received $ 5,928,458 Operating expenses paid (764,657) Interest expense paid (1,152,012) -------------- Cash provided - operations 4,011,789 -------------- Investment purchases (326,758,234) Investment sales 327,822,703 -------------- Cash provided - investments 1,064,469 -------------- Distributions to shareholders (5,131,258) -------------- Cash used - financing activities (5,131,258) -------------- Net decrease in cash (55,000) Cash at beginning of year 55,000 -------------- Cash at end of year $ -- ============== *The excess distributions are due to timing differences between financial statement and tax basis. The accompanying notes are an integral part of these financial statements. FRANKLIN MULTI-INCOME TRUST Notes to Financial Statements NOTE 1 - ORGANIZATION Franklin Multi-Income Trust (the Fund) was organized as a Massachusetts business trust on August 22, 1989 and is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940. The Fund seeks to provide investors with high current income consistent with preservation of capital. The Fund has two classes of securities: senior fixed-rate notes (the Notes) and shares of beneficial interest (the Shares). NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES a. Security Valuation: Portfolio securities listed on a securities exchange or on the NASDAQ for which market quotations are readily available are valued at the last sale price or, if there is no sale price, within the range of the most recent quoted bid and asked prices. Other securities are valued based on a variety of factors, including yield, risk, maturity, trade activity and recent developments related to the securities. The Fund may utilize a pricing service, bank or broker/dealer experienced in such matters to perform any of the pricing functions, under procedures approved by the Board of Trustees (the Board). Securities for which market quotations are not available and securities restricted as to resale, are valued in accordance with procedures established by the Board. The value of a foreign security is determined as of the earlier of the close of trading on the foreign exchange on which it is traded or the close of trading on the New York Stock Exchange (the Exchange). That value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at noon, New York time, on the day the value of the foreign security is determined. If no sale is reported at that time, the mean between the current bid and asked prices is used. Occasionally, events which affect the values of foreign securities and foreign exchange rates may occur between the times at which they are determined and the close of the Exchange and will, therefore not be reflected in the computation of the Fund's net asset value, unless material. If events which materially affect the value of these foreign securities occur during such period, these securities will be valued in accordance with procedures established by the Board. b. Security Transactions: Security transactions are accounted for on the date the securities are purchased or sold (trade date). Realized gains and losses on security transactions are determined on the basis of specific identification. c. Investment Income, Expenses and Distributions: Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income and estimated expenses are accrued daily. Bond discount and premium are amortized as required by the Internal Revenue Code. Net investment income differs for financial statement and tax purposes primarily due to differing treatments of defaulted securities (Note 10) and foreign currency transactions. Net realized capital gains and losses differ for financial statement and tax purposes primarily due to differing treatment of wash sales and foreign currency transactions. d. Income Taxes: The Fund intends to continue to qualify for the tax treatment applicable to regulated investment companies under the Internal Revenue Code and to make the requisite distributions to its shareholders which will be sufficient to relieve it from income and excise taxes. e. Foreign Currency Translation: The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the rate of exchange of the currencies against U.S. dollars on the valuation date. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the day that the transactions are recorded. Differences between income and expense amounts recorded and collected or paid are recognized when reported by the custodian. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends and interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized appreciation or depreciation on translation of assets and liabilities denominated in foreign currencies arises from changes in the value of assets and liabilities other than investments in securities at the end of the reporting period, resulting from changes in exchange rates. f. Repurchase Agreements: The Fund may enter into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account to be used to invest in one or more repurchase agreements with government securities dealers recognized by the Federal Reserve Board and/or member banks of the Federal Reserve System. The value and face amount of the joint repurchase agreement are allocated to the Fund based on its pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by underlying U.S. government securities, which are delivered to the Fund's custodian. The market value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the Fund, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. At March 31, 1996, all outstanding repurchase agreements held by the Fund, had been entered into on March 29, 1996. g. 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. NOTE 3 - SENIOR FIXED-RATE NOTES On August 16, 1994, the fund issued $16 million aggregate principal amount of a new class of five-year senior fixed-rate notes. The Notes are general unsecured obligations of the Fund and rank senior to all existing or future unsecured indebtedness of the Fund. The Notes are senior to the Shares and, in any liquidation of the Fund, the Notes must be paid in full before any payments would be made with respect to the Shares. The Notes bear interest, payable semi-annually, at the rate of 7.20% per annum, to their maturity on September 15, 1999. The Notes were issued in a private placement, and are not available for resale. Therefore, no market value can be obtained for the Notes. Under the Investment Company Act of 1940, the Fund is required to maintain asset coverage for the Notes of at least 300%. In addition, pursuant to the agreement with respect to the Notes, the Fund is required to maintain on a monthly basis a specified discounted asset value for its portfolio that equals or exceeds an amount determined under guidelines established by Standard & Poor's Corporation. The Fund met these requirements during the year ended March 31, 1996. The costs of $146,250 incurred by the Fund in connection with the issuance of the Notes are deferred and amortized on a straight-line basis over the term of the Notes. NOTE 4 - DISTRIBUTIONS ANDCAPITALLOSSCARRYOVERS At March 31, 1996, for tax purposes, the Fund had accumulated net realized capital gains of $634,866. For tax purposes, the aggregate cost of securities and unrealized appreciation of the Fund are the same as for financial statement purposes at March 31, 1996. NOTE 5 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Under the terms of an agreement, Franklin Advisers, Inc. (Advisers) provides investment advice, administrative services, office space and facilities to the Fund, and receives fees computed weekly and payable monthly at an annualized rate of 0.85% of the Fund's average weekly net assets (total assets less liabilities other than the principal amount of the Notes). Fees incurred by the Fund pursuant to this agreement aggregated $652,223 for the year ended March 31, 1996. Certain officers and Trustees of the Fund are also officers and/or directors of Advisers, a wholly owned subsidiary of Franklin Resources, Inc. NOTE 6 - TRUST SHARES At March 31, 1996, there was an unlimited number of shares of $.01 par value authorized. At March 31, 1996, no shares were issued pursuant to the Fund's Dividend Reinvestment Plan; all reinvested dividends were satisfied with previously issued shares purchased in the open market pursuant to such Plan. NOTE 7 - STATEMENT OF CASH FLOWS The Fund's financial statements for the year ended March 31, 1996 include a Statement of Cash Flows in compliance with SFAS 102. Cash provided from operations differs from net investment income because of amortization of bond discount, amortization of note issuance costs, bonds paid-in-kind, stock dividends and year-end income and expense accrual changes amounting to $556,971. NOTE 8 - RESTRICTED SECURITIES A restricted security is a security which has not been registered with the Securities and Exchange Commission pursuant to the Securities Act of 1933 (1933 Act). The Fund may purchase restricted securities through a private offering which cannot be sold without prior registration under the 1933 Act unless such sale is pursuant to an exemption therefrom. Subsequent costs of registration of such securities are borne by the issuer. A secondary market exists for certain privately placed securities. The Fund values these restricted securities as disclosed in Note 2. At March 31, 1996, the Fund held the following restricted security representing .15% of the Fund's net assets: Acquisition Unit Security Date Cost Value 1 PG Partners I, L.P. ......... 3/31/93 $48,212 $90,480 NOTE 9 - RULE 144A SECURITIES Rule 144A of the 1933 Act provides a non-exclusive safe harbor exemption from the registration requirements for specified resale of restricted securities to qualified institutional investors. The Fund values these securities as disclosed in Note 2. At March 31, 1996, the Fund held 144A securities with a value aggregating $1,263,144, representing 2.03% of the Fund's net assets. See the accompanying Statement of Investments in Securities and Net Assets for specific information on such securities. NOTE 10 - PURCHASES AND SALES OF SECURITIES Purchases and sales of securities (excluding purchases and sales of short-term securities) for the year ended March 31, 1996 aggregated $26,171,949 and $28,478,028, respectively. NOTE 11 - CREDIT RISK AND DEFAULTED SECURITIES Although the Fund has a diversified portfolio, 54.69% of its portfolio is invested in lower rated and comparable quality unrated high yield securities. Investments in higher yield securities are accompanied by a greater degree of credit risk, and such lower quality securities tend to be more sensitive to economic conditions than higher rated securities. The risk of loss due to default by the issuer may be significantly greater for holders of high yielding securities, because such securities are generally unsecured and are often subordinated to other creditors of the issuer. At March 31, 1996, the Fund held one defaulted security with a value of $462,500 representing 0.74% of the Fund's net assets. This security is identified on the accompanying Statement of Investments in Securities and Net Assets. NOTE 12 - FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout each period are as follows: Year ended March 31, 1996 1995 1994 1993 1992 ------- ------- ------- ------- ------ Per Share Operating Performance: Net asset value, beginning of period .................... $ 9.60 $ 9.97 $11.38 $10.15 $ 8.60 ------- ------- ------- ------- ------ Net investment income .................................. 0.78 0.78 0.84 1.00 0.97 Net realized and unrealized gain (loss) on securities .. 1.11 (0.08) (0.78) 1.196 1.586 ------- ------- ------- ------- ------ Total from investment operations ........................ 1.89 0.70 0.06 2.196 2.556 ------- ------ ------ ------ ------ Less distributions: From net investment income ............................. (0.77) (0.78) (0.853) (0.966) (0.985) From net realized capital gains ........................ (0.11) (0.282) (0.617) -- -- In excess of net investment income ..................... -- (0.008) -- -- (0.021) ------- ------- ------- ------- ------ Total distributions ..................................... (0.88) (1.07) (1.47) (0.966) (1.006) ------- ------- ------- ------- ------ Net asset value, end of period........................... $10.61* $ 9.60 $ 9.97 $11.38 $10.15 ======= ======= ======= ======= ====== Market value per share, end of period1................... $ 9.00 $ 8.75 $ 9.75 $10.625 $ 9.75 ======= ======= ======= ======= ====== Total Investment Return: Based on market value per share2 ....................... 12.87% 1.46% 5.47% 19.72% 35.93% Ratios to Average Net Assets: Expenses................................................ 3.21% 3.00% 2.90% 2.99% 3.21% Net investment income .................................. 7.53% 6.37% 6.00% 7.51% 7.64% Supplemental Data Net assets at end of period (000's omitted)............. $62,153 $56,230 $58,391 $66,657 $59,470 Portfolio turnover rate ................................ 36.82% 29.77% 28.90% 41.22% 22.19% Average commission rate3................................ $ .0536 -- -- -- -- Total debt outstanding at end of period (000's omitted). $16,000 $16,000 $15,974 $15,926 $15,878 Net asset coverage per $1,000 of debt .................. $ 3,885 $ 3,514 $ 3,655 $ 4,185 $ 3,745 (For Notes outstanding throughout the year) Year Face Amount of Average Monthly Average Monthly Average Amount of Ended Notes Outstanding Face Amount of Number of Shares Notes Per Share March 31, End of Period Notes Outstanding Outstanding During the Period 1992 $16,000,000 $16,000,000 5,857,600 $2.73 1993 16,000,000 16,000,000 5,857,600 2.73 1994 16,000,000 16,000,000 5,857,600 2.73 1995 16,000,000 16,000,000 5,857,600 2.73 1996 16,000,000 16,000,000 5,857,600 2.73
1Based on last sale on the New York Stock Exchange. 2Total return measures the change in value of an investment over the periods indicated. It is not annualized. It reflects the change in market value of the capital shares and assumes reinvestment of dividends and capital gains in accordance with the dividend reinvestment plan as stated in the Prospectus. 3Represents the average broker commission rate per share paid by the Fund in connection with the execution of the Fund's portfolio transaction in equity securities. *The Net Asset Value differs from the Net Asset Value reported in the Managers' Discussion as of the reporting date, which does not include market adjustment for portfolio trades made on that date. These adjustments are generally accounted for on the day following the trade date. Of the income dividends paid by the Fund for the fiscal year ended March 31, 1996, 19.36% qualified for the 70% dividends received deductions for corporations. FRANKLIN MULTI-INCOME TRUST Report of Independent Auditors To the Shareholders and Board of Trustees of the Franklin Multi-Income Trust We have audited the accompanying statement of assets and liabilities of the Franklin Multi-Income Trust, including the Fund's statement of investments in securities and net assets, as of March 31, 1996, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the year then ended, and the financial highlights for each of the periods indicated thereon. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits 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 March 31, 1996, by correspondence with the custodian and brokers. 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 audits provide 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 Fund as of March 31, 1996, 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 indicated thereon, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. San Francisco, California May 2, 1996 -----END PRIVACY-ENHANCED MESSAGE-----