November 15, 1995
Dear Shareholder:
We're pleased to present the semi-annual report of the Franklin Multi-Income
Trust for the period ended September 30, 1995.
The effects of several interest rate increases made during 1994 and early 1995
were realized by March of this year. U.S. Gross Domestic Product (GDP) fell from
an annualized rate of 5.1% in the fourth quarter of 1994 to just 2.7% and 1.1%
in the first and second quarters of 1995, respectively.* This reduction led many
to believe the Federal Reserve Board had been overzealous in its bid to increase
short-term interest rates, and prompted fears that another recession was
approaching. In response to this slowed growth, the Fed lowered the federal
funds target rate on July 6, 1995, to 5.75% from 6.00%. Since then, the economy
appears to have stabilized.
Interest rate changes affect investments of all types, including the high yield
corporate bonds and utility stocks in which the Trust invests. The Trust
performed very favorably in the economic environment that prevailed during the
past six months. The Manager's Discussion on page 2 provides specific details
regarding how this performance was achieved.
As always, we appreciate your support of the Franklin Multi-Income Trust. Please
feel free to contact us if you have questions or concerns. We look forward to
serving your investment needs in the future.
Sincerely,
Charles B. Johnson
Chairman
Franklin Multi-Income Trust
*Source: U.S. Commerce Department
Table of Contents Page
Manager's Discussion 2
Performance Summary 5
Portfolio Operations 7
Dividend Reinvestment Plan 8
Results of Shareholder Meeting 10
Statement of Investments 11
Financial Statements 17
Notes to Financial Statements 19
MANAGER'S DISCUSSION
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 utilities
securities.
We are pleased to report that during the six-month period ended September 30,
1995, the Franklin Multi-Income Trust reported a cumulative total return of
+10.18%, based on the change in its market price on the New York Stock Exchange.
This performance exceeded returns in nearly every income sector, including the
short-term Treasury market (+3.48%)* and the high yield corporate bond market
(+9.11%).**
A number of factors contributed to the Trust's performance. First, general
economic trends, most notably declining interest rates, created an ideal
environment for high yield corporate bonds and utility stocks, two sectors in
which the Trust invests. High yield corporate bonds benefited from moderate
economic growth and low inflation levels, which enabled companies to improve
earnings and strengthen their balance sheets. In addition, falling interest
rates led to higher corporate profits in many cases, and fueled a long-awaited
price rally in utility stocks.
Second, the Trust's assets were strategically positioned in industries that
outperformed the overall bond market. For instance, the fund's holdings in the
cable television and media/ broadcasting industries (10.1% of the Trust's total
net assets), benefited from some high-profile mergers involving well-known
companies such as ABC, Disney, Viacom and Time-Warner. Many of the Trust's cable
and media holdings, including Continental Cablevision and Turner Broadcasting,
benefited from the speculation of potential buy-outs that surrounded such
companies in recent months.
*Source: Merrill Lynch Taxable Bond Indices, 9/95
**Source: Micropal
A recent trend toward consolidation also sparked strong performance in the
health care sector (5.3% of the Trust's total net assets). During the year, many
health care companies merged for greater economies of scale in hopes of
competing with larger HMOs. OrNda Health Care, an operator of acute care
hospitals and one of the Trust's largest positions in the health care industry,
recently acquired a number of other hospital facilities. Another consolidation
involved Abbey Health Care Group, a home health care provider, which merged with
Homedco. Such activity helped to boost the performance of the health care
industry during this reporting period.
Franklin Multi-Income Trust Top 10 Company Holdings As a percentage of total
net assets September 30, 1995
Company % of total
Industry net assets
Southern Company 3.65%
Utility (stocks)
Scana Corp. 3.52%
Utility (stocks)
Allegheny Power System, Inc. 3.11%
Utility (stocks)
CINergy Corp. 2.63%
Utility (stocks)
Public Service Co. of Colorado 2.60%
Utility (stocks)
Wisconsin Energy 2.59%
Utility (stocks)
FPL Group, Inc. 2.56%
Utility (stocks)
Dominion Resources 2.54%
Utility (stocks)
Comcast Cellular Corp. 2.52%
Wireless Communications (bonds)
Duke Power Co. 2.50%
Utility (stocks)
For a complete list of portfolio holdings, please see page 11 of this report.
Our utility holdings also played a large part in the Trust's strong performance.
As the utility market began to recover in 1995, we increased the Trust's
holdings significantly to 48.4% of the portfolio's net assets as of September
30, 1995, from 32.9% six months earlier. By the end of the reporting period,
utility stocks represented nine of the Trust's top 10 holdings, as the table on
page 3 illustrates. The largest holding in the Trust, representing 3.65% of its
total net assets, is the Southern Company. This position emphasizes not only the
Trust's increased awareness of utilities, but also the strong performance in
that sector. In addition, we concentrated on companies we expected would benefit
from the increased competition that the certainty of deregulation will bring.
The Trust's assets are invested in 99 positions spanning more than 20
industries. Corporate bonds represented 57.67% of the total portfolio at
period-end, slightly below the 61.32% this sector represented six months
earlier.
Our outlook for the economy and the Franklin Multi-Income Trust is positive. The
Federal Reserve appears to be adopting a monetary policy which should foster
moderate growth, maintain the current low level of inflation and reduce the
chances of recession. This combination of mild growth and inflation will likely
benefit the financial markets in general, and the high yield corporate bond and
utility equity sectors in particular. High yield bond issuers will most likely
continue to experience higher earnings and stronger balance sheets, which should
positively affect the high yield market. As for utility securities, this year's
rally appears to have been sustained. Overall, we believe this sector should
benefit from continued consolidation and increased competition that will follow
deregulation.
Performance Summary
The Franklin Multi-Income Trust continued to meet its objective of providing
high current income to its shareholders. The fund produced cumulative total
returns of +10.18% for the six-month and +24.43% for the one-year periods ended
September 30, 1995. Total return reflects the change in the New York Stock
Exchange (NYSE) market price of an investment. Based on the change in net asset
value (as opposed to market price), six-month and one-year total returns for the
same period were +11.95% and +22.74%, respectively. All total return
calculations assume reinvestment of dividends and capital gains according to the
terms specified in the Trust's Dividend Reinvestment Plan.
The Trust's closing price on the NYSE increased to $9.25 per share on September
30, 1995 from $8.75 on March 31, 1995, and its net asset value price per share
increased to $10.35 on September 30, 1995, from $9.60 on March 31, 1995.
During the reporting period, shareholders received income distributions totaling
38.4 cents ($0.384) per share. Dividends will vary based on the Trust's earnings
and any profits realized from the sale of securities in the portfolio. Past
distributions are not indicative of future trends.
Based on an annualization of the current monthly dividend of 6.4 cents ($0.064)
per share and the NYSE closing price of $9.25 on September 30, 1995, the Trust's
distribution rate was 8.30%.+
+High yields reflect the higher credit risks associated with certain lower rated
securities in the Trust's portfolio and, in some cases, the lower market prices
for these instruments.
The past six months exhibited substantial progress in the investment market;
however, investors should be aware that short-term price fluctuations in the
Franklin Multi-Income Trust may occur. It is our belief that the Trust's
performance will be especially rewarding for long-term investors. For example,
the Trust's average annual total returns at net asset value and market price
were +14.28% and +10.80% respectively, since inception. Average annual total
return represents the average annual increase in value of an investment over the
periods indicated, assuming reinvestment of dividends and capital gains
according to the terms specified in the Trust's Dividend Reinvestment Plan.
Past performance is not predictive of future results.
Franklin Multi-Income Trust
Cumulative Total Returns*
Period Ended September 30, 1995
Since
Inception
1-year 5-year (10/09/89)
Based on change 22.74% 145.36% 122.15%
in net asset value
Based on change 24.43% 179.93% 84.64%
in market price
Distribution Rate** 8.30%
*Total return calculations are based on the change in net asset value, assuming
reinvestment of dividends and capital gains according to the terms specified in
the Trust's Dividend Reinvestment Plan.
**Based on an annualization of the current 6.4 cents per share monthly dividend
and the New York Stock Exchange closing price of $9.25 on September 30, 1995.
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
Annual Meeting of Shareholders
July 21, 1995
At an Annual Meeting of Shareholders of the Fund held on July 21, 1995,
shareholders of the Fund voted as follows:
1. Regarding the election of trustees to be Class 3 Trustees of the Fund, to
hold office for a three-year term ending in 1998.
<TABLE>
<CAPTION>
%
For (%) Voted Withheld (%)
<S> <C> <C> <C> <C> <C>
Edward B. Jamieson...................................................3,372,674 57.58 97.87 73,333 2.13
Charles B. Johnson...................................................3,386,281 57.81 98.27 59,726 1.73
Rupert H. Johnson, Jr................................................3,367,642 57.49 97.73 78,365 2.27
2. Regarding the ratification of the selection of Coopers & Lybrand L.L.P.,
Certified Public Accountants, as the independent auditors for the Fund for
the fiscal year ending March 31, 1996.
For (%) % of Voted Against (%) Abstain (%)
<S> <C> <C> <C> <C> <C> <C>
3,369,113 57.52 97.77 62,808 1.82 14,086 4.09
</TABLE>
FRANKLIN MULTI-INCOME TRUST
Statement of Investments in Securities and Net Assets, September 30, 1995
(unaudited)
<TABLE>
<CAPTION>
Shares/ Value
Warrants (Note 3)
Common Stocks/Warrants 49.8%
<S> <C> <C>
Energy 1.3%
33,300 Ultramar Corp............................................................................... $ 790,875
---------------
Gaming/Leisure .1%
526 a Host Marriott Corp.......................................................................... 6,509
526 Marriott International, Inc................................................................. 19,659
---------------
26,168
---------------
Industrial
1,000 a Gulf States Steel, warrants................................................................. 12,500
518 a Thermadyne Industries, Inc.................................................................. 9,324
---------------
21,824
---------------
Utilities 48.4%
74,000 Allegheny Power System, Inc................................................................. 1,887,000
40,000 American Electric Power Co., Inc............................................................ 1,455,000
12,100 Ameritech Corp.............................................................................. 630,713
11,000 Bellsouth Corp.............................................................................. 804,375
59,000 Central & South West Corp................................................................... 1,504,500
57,200 CINergy Corp................................................................................ 1,594,450
41,000 Dominion Resources, Inc..................................................................... 1,542,625
60,600 DPL, Inc.................................................................................... 1,401,375
35,000 Duke Power Co............................................................................... 1,518,125
38,000 FPL Group, Inc.............................................................................. 1,553,250
6,800 New England Electric System................................................................. 251,600
39,600 Pacific Enterprises......................................................................... 994,950
46,200 Pacific Gas & Electric Co................................................................... 1,380,225
50,000 PacifiCorp.................................................................................. 950,000
46,000 Public Service Co. of Colorado.............................................................. 1,575,500
25,000 Puget Sound Power & Light Co................................................................ 581,250
34,000 San Diego Gas & Electric Co. ............................................................... 786,250
11,000 SBC Communications, Inc. ................................................................... 605,000
89,000 Scana Corp.................................................................................. 2,136,000
14,500 SCEcorp..................................................................................... 257,375
93,600 Southern Co................................................................................. 2,211,300
36,000 Texas Utilities Co.......................................................................... 1,255,500
30,000 Wicor Inc................................................................................... 907,500
55,600 Wisconsin Energy Corp....................................................................... 1,570,700
29,354,563
---------------
Total Common Stocks (Cost $25,818,241) ............................................... 30,193,430
---------------
Statement of Investments in Securities and Net Assets, September 30, 1995
(unaudited) (cont.)
Shares/ Value
Warrants (Note 3)
<S> <C> <C>
Partnership Units .1%
Financials
1 a,b,e PG Partners I, L.P. (Cost $47,572).......................................................... $ 90,480
---------------
Preferred Stocks 1.5%
Consumer Goods .8%
70,000 RJR Nabisco Holdings Corp., $0.83 cvt. pfd., Series A ...................................... 472,500
---------------
Energy .7%
7,000 c Occidental Petroleum Corp., $3.875 cvt. pfd. ............................................... 404,250
---------------
Total Preferred Stocks (Cost $845,600) ............................................... 876,750
---------------
Face
Amount
Bonds 72.1%
Automotive 1.4%
$ 850,000 SPX Corp., senior sub. notes, 11.75%, 06/01/02 ............................................. 903,125
---------------
Cable Television 7.5%
1,500,000 f Bell Cablemedia, Plc., senior disc. notes, zero coupon to 07/15/99, (original
accretion rate 11.95%), 11.95% thereafter, 07/15/04 ....................................... 1,012,500
500,000 Century Communications Corp., senior notes, 9.50%, 03/01/05 ................................ 503,750
500,000 Continental Cablevision, Inc., senior sub. deb., 11.00%, 06/01/07 .......................... 555,000
500,000 Continental Cablevision, Inc., senior sub. deb., 9.00%, 09/01/08 ........................... 512,500
600,000 g Rogers Cable System, Ltd., senior secured deb. (Canada), 9.65%, 01/15/14 ................... 383,957
1,000,000 Tele-Communications, Inc., senior sub. deb., 9.80%, 02/01/12 ............................... 1,138,389
500,000 Turner Broadcasting Systems, Inc., senior deb., 8.40%, 02/01/24 ............................ 467,500
---------------
4,573,596
---------------
Chemicals 3.2%
1,000,000 f Harris Chemical North America, Inc., senior secured disc. notes, zero coupon
to 01/15/96, (original accretion rate 10.25%), 10.25% thereafter, 07/15/01 ................ 892,500
100,000 IMC Global, Inc., senior deb., 9.45%, 12/15/11 ............................................. 103,000
400,000 IMC Global, Inc., senior notes, 9.25%, 10/01/00 ............................................ 412,500
300,000 IMC Global, Inc., senior notes, Series B, 10.125%, 06/15/01 ................................ 320,250
200,000 IMC Global, Inc., senior notes, Series B, 10.75%, 06/15/03 ................................. 217,000
---------------
1,945,250
---------------
Consumer Products 3.3%
1,000,000 Revlon Consumer Products Corp., senior sub. notes, 10.50%, 02/15/03 ........................ 1,020,000
500,000 RJR Nabisco, Inc., senior notes, 9.25%, 08/15/13 ........................................... 505,000
500,000 Sealy Corp., senior sub. notes, 9.50%, 05/01/03 ............................................ 500,000
---------------
2,025,000
---------------
Containers/Packaging 2.0%
$ 1,000,000 Owens-Illinois, Inc., senior sub. notes, 9.75%, 08/15/04.................................... $ 1,030,000
200,000 Stone Container Corp., senior notes, 11.50%, 10/01/04 ...................................... 210,500
---------------
1,240,500
---------------
Energy 1.7%
1,000,000 Gulf Canada, senior sub. notes, 9.25%, 01/15/04 ............................................ 1,020,080
---------------
Food & Beverages 3.4%
200,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05 ............................. 212,500
1,346,000 c Del Monte Corp., sub. notes, PIK, 12.25%, 09/01/02 ......................................... 962,390
250,000 c Dominick's Finer Foods, senior sub. notes, 10.875%, 05/01/05 ............................... 258,438
100,000 Dr Pepper Bottling Co. of Texas, senior sub. notes, 10.25%, 02/15/00 ....................... 104,750
500,000 PMI Acquisition Corp., senior sub. notes, 10.25%, 09/01/03 ................................. 510,000
---------------
2,048,078
---------------
Food Retailing 8.0%
1,000,000 Brunos, Inc., senior sub. notes, 10.50%, 08/01/05 .......................................... 980,000
1,000,000 Pathmark Stores, Inc., senior sub. notes, 9.625%, 05/01/03 ................................. 992,500
1,000,000 Penn Traffic Co., senior sub. notes, 10.375%, 10/01/04 ..................................... 945,000
500,000 Pueblo Xtra International, senior notes, 9.50%, 08/01/03 ................................... 472,500
500,000 Ralphs Grocery Co., senior notes, 10.45%, 06/15/04.......................................... 491,250
1,000,000 Ralphs Grocery Co., senior sub. notes, 11.00%, 06/15/05..................................... 940,000
---------------
4,821,250
---------------
Forest/Paper Products 6.9%
1,000,000 Fort Howard Corp., senior sub. notes, 9.00%, 02/01/06....................................... 935,000
1,000,000 REPAP New Brunswick, senior notes, 10.625%, 04/15/05 ....................................... 1,012,500
500,000 REPAP Wisconsin, Inc., senior secured notes, 9.25%, 02/01/02 ............................... 483,750
600,000 S.D. Warren Co., senior sub. notes, 12.00%, 12/15/04 ....................................... 666,000
1,000,000 Tjiwi Kimia International, guaranteed senior notes, 13.25%, 08/01/01 ....................... 1,090,000
---------------
4,187,250
---------------
Gaming/Leisure 4.8%
1,000,000 Aztar Corp., senior sub. notes, 13.75%, 10/01/04 ........................................... 1,080,000
250,000 c Players International Inc., senior notes, 10.875%, 04/15/05 ................................ 236,250
500,000 Red Roof Inns, senior notes, 9.625%, 12/15/03 .............................................. 487,500
1,000,000 Showboat, Inc., senior sub. notes, 13.00%, 08/01/09 ........................................ 1,087,500
---------------
2,891,250
---------------
Health Care 5.3%
1,000,000 Abbey Healthcare Group, Inc., senior sub. notes, 9.50%, 11/01/02 ........................... 1,050,000
176,981 Amerisource Corp., senior deb., PIK, 11.25%, 07/15/05 ...................................... 192,024
$ 1,000,000 OrNda Healthcorp., guaranteed senior sub. notes, 11.375%, 08/15/04 ......................... $ 1,117,500
800,000 Tenet Healthcare Corp., senior sub. notes, 10.125%, 03/01/05 ............................... 848,000
---------------
3,207,524
---------------
Industrial 3.4%
350,000 American Standard, Inc., senior deb., 11.375%, 05/15/04 .................................... 386,750
500,000 American Standard, Inc., senior sub. notes, 9.875%, 06/01//01 .............................. 533,750
600,000 Inter-City Products Corp., senior secured notes, 9.75%, 03/01/00 ........................... 507,000
259,000 Thermadyne Industries, Inc., senior notes, 10.25%, 05/01/02................................. 260,295
359,000 Thermadyne Industries, Inc., sub. notes, 10.75%, 11/01/03................................... 357,205
---------------
2,045,000
---------------
Media/Broadcasting 2.6%
500,000 American Media Operation, senior sub. notes, 11.625%, 11/15/04 ............................. 517,500
1,000,000 New World Television, Inc., senior notes, 11.00%, 06/30/05 ................................. 1,065,000
---------------
1,582,500
---------------
Metals & Mining 3.2%
1,000,000 f Acme Metals, Inc., senior secured disc. notes, zero coupon to 08/01/97,
(original accretion rate 13.50%), 13.50% thereafter, 08/01/04 ............................. 780,000
1,000,000 c Gulf States Steel, 13.50%, 04/15/03 ........................................................ 935,000
180,000 UCAR Global Enterprises, senior sub. notes, 12.00%, 01/15/05 ............................... 205,200
---------------
1,920,200
---------------
Restaurants 2.4%
1,000,000 Flagstar Corp., senior sub. deb., 11.375%, 09/15/03 ........................................ 785,000
700,000 Foodmaker, Inc., S.F., senior sub. notes, 9.25%, 03/01/99 .................................. 649,250
---------------
1,434,250
---------------
Retail .5%
240,000 c Danka Business Systems, Plc., cvt. sub. notes, 6.75%, 04/01/02 ............................. 332,400
---------------
Technology/Information Systems 3.3%
1,000,000 ADT Operations, guaranteed senior sub. notes, 9.25%, 08/01/03 .............................. 1,050,000
400,000 c Altera Corp., cvt. sub. notes, 5.75%, 06/15/02 ............................................. 549,500
500,000 d Anacomp, Inc., S.F., senior sub. notes, 15.00%, 11/01/00 ................................... 372,500
---------------
1,972,000
---------------
Textiles/Apparel 3.0%
957,000 JPS Textiles Group, Inc., S.F., sub. disc. notes, 10.85%, 06/01/99 ......................... 818,235
1,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05 ................................ 977,500
---------------
1,795,735
---------------
Transportation 1.9%
$ 1,000,000 Delta Air Lines, Inc., S.F., pass through equipment trust, 10.50%, 04/30/16 ................ $ 1,171,494
---------------
Utilities .9%
500,000 Midland Funding II, S.F., senior lease obligation, Series A, 11.75%, 07/23/05 .............. 524,415
---------------
Wireless Communication 3.4%
2,000,000 f Comcast Cellular Corp., Series B, (original accretion rate 11.37%), 0.00%, 03/05/00......... 1,530,000
500,000 Rogers Cantel Mobile Communications, Inc., S.F., guaranteed senior secured
notes, 10.75%, 11/01/01 ................................................................... 526,875
---------------
2,056,875
---------------
Total Bonds (Cost $42,590,889) ....................................................... 43,697,772
---------------
Foreign Government Agencies .8%
2,175,000 g ESCOM, E168, utility deb. (South Africa), 11.00%, 06/01/08 (Cost $511,287) ................. 457,573
---------------
Total Common Stocks, Partnership Units, Preferred Stocks, Bonds
and Foreign Government Agencies (Cost $69,813,589) .................................. 75,316,005
---------------
h,i Receivables from Repurchase Agreements .7%
471,291 Joint Repurchase Agreement, 6.429%, 10/02/95 (Cost $462,101)
Daiwa Securities America, Inc., (Maturity Value $226,948)
Collateral: U.S. Treasury Bills, 03/28/96
Swiss Bank Corp., (Maturity Value $235,400)
Collateral: U.S. Treasury Notes, 6.125% - 6.75%, 05/15/97 - 08/31/00...................... 462,101
---------------
Total Investments (Cost $70,275,690) 125.0% ..................................... 75,778,106
Liabilities in Excess of Other Assets, Net (25.0)% .............................. (15,142,843)
---------------
Net Assets 100.0% ............................................................... $60,635,263
===============
At September 30, 1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $70,228,118 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ........................................................... $ 6,769,592
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value............................................................ (1,267,176)
---------------
Net unrealized appreciation............................................................... $ 5,502,416
===============
</TABLE>
PORTFOLIO ABBREVIATIONS:
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 10 regarding credit risk and defaulted securities.
eSee Note 3(a) regarding securities valued by the Board of Trustees.
fZero coupon/step-up bonds. The current effective yield may vary.
The original accretion rate will remain constant.
gFace amount stated in foreign currencies, value in U.S. dollars.
hFace amount for repurchase agreements is for the underlying collateral.
iSee Note 3(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
September 30, 1995 (unaudited)
Assets:
Investments in securities, at value
(identified cost $69,813,589) $75,316,005
Receivables from repurchase agreements,
at value and cost 462,101
Dividend and interest receivables 1,266,665
Unamortized note issuance costs (Note 2) 123,092
------------
Total assets 77,167,863
------------
Liabilities:
Payables:
Notes (Note 2) 16,000,000
Accrued interest (Note 2) 51,200
Distributions to shareholders 374,886
Management fees 53,699
Accrued expenses and other liabilities 52,815
------------
Total liabilities 16,532,600
------------
Net assets, at value $60,635,263
============
Net assets consist of:
Undistributed net investment income $ 42,213
Unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies 5,502,484
Net realized gain from investments
and foreign currency transactions 1,299,786
Capital shares 58,576
Additional paid-in capital 53,732,204
------------
Net assets, at value $60,635,263
============
Net asset value per share
($60,635,263 O 5,857,600 shares of
beneficial interest outstanding) $10.35
============
Statement of Operations
for the six months ended September 30, 1995 (unaudited)
Investment income:
Dividends $ 831,715
Interest 2,479,795
------------
Total income $3,311,510
Expenses:
Management fees (Note 5) 317,663
Shareholder servicing costs 14,949
Professional fees 16,289
Reports to shareholders 11,636
Trustees' fees and expenses 6,766
Custodian fees 3,983
Amortization of note
issuance costs (Note 2) 14,625
Other 15,854
------------
Operating expenses 401,765
Interest expense (Note 2) 576,000
------------
Total expenses 977,765
------------
Net investment income 2,333,745
------------
Realized and unrealized
gain (loss) from investments
and foreign currency:
Net realized gain from:
Investments 1,230,738
Foreign currency
transactions 1,909
Net unrealized appreciation
(depreciation) on:
Investments 3,089,806
Translation of assets
and liabilities denominated
in foreign currencies (2,096)
------------
Net realized and
unrealized gain on
investments and
foreign currency 4,320,357
------------
Net increase in net assets
resulting from operations $6,654,102
============
FRANKLIN MULTI-INCOME TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets for the six months ended September 30, 1995
(unaudited) and the year ended March 31, 1995
Six months Year ended
Ended 9/30/95 3/31/95
---------- ---------
Increase (decrease) in net assets:
Operations:
Net investment income $ 2,333,745 $ 4,559,134
Net realized gain from
investments and
foreign currency
transactions 1,232,647 658,632
Net unrealized appreci-
ation (depreciation) on
investments and
translation of assets and
liabilities denominated in
foreign currencies 3,087,710 (1,110,555)
---------- ----------
Net increase in net
assets resulting
from operations 6,654,102 4,107,211
Distributions to
shareholders from:
Undistributed net
investment income (2,249,318) (4,567,225)
Distributions in
excess of net invest-
ment income -- (48,564)*
Net realized
capital gain -- (1,651,843)
---------- ----------
Net increase
(decrease) in
net assets 4,404,784 (2,160,421)
Net assets:
Beginning of period 56,230,479 58,390,900
---------- ----------
End of period (including
undistributed net invest-
ment income of $42,213 at
9/30/95, and accumu-
lated distribution in excess
of net investment income
of $44,123 at 3/31/95) $60,635,263 $56,230,479
========== ==========
Statement of Cash Flows
for the six months ended September 30, 1995 (unaudited)
Dividends and interest received $ 2,902,525
Operating expenses paid (374,784)
Interest expense paid (576,001)
------------
Cash provided - operations 1,951,740
------------
Investment purchases (165,293,366)
Investment sales 165,535,944
------------
Cash provided - investments 242,578
------------
Distributions to shareholders (2,249,318)
------------
Cash used - financing activities (2,249,318)
------------
Net decrease in cash (55,000)
Cash at beginning of period 55,000
------------
Cash at end of period $ --
============
*The excess distributions are due to timing differences between book and tax
basis (Note 4).
The accompanying notes are an integral part of these financial statements.
FRANKLIN MULTI-INCOME TRUST
Notes to Financial Statements (unaudited)
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 has two classes of securities:
senior fixed-rate notes (the "Notes") and shares of beneficial interest (the
"Shares").
NOTE 2 - SENIOR FIXED-RATE NOTES
At the Annual Meeting of Shareholders of the Fund held on August 16, 1994, the
shareholders authorized the issuance of a new class of five-year senior notes
(the "Notes") to be used to defease and retire certain existing notes. On
September 15, 1994, the Fund received proceeds of $16,000,000 from the issuance
of the Notes. The proceeds were used to defease and retire the Fund's 91/8%,
$16,000,000 Senior Fixed-Rate Notes which matured on October 15, 1994.
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 the
Note Basic Maintenance Amount under guidelines established by Standard & Poor's
Corporation. The Fund has met these requirements for the six months ended
September 30, 1995.
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 3 - SIGNIFICANT ACCOUNTING POLICIES
a. Security Valuation: Portfolio securities listed on a securities exchange or
on the NASDAQ National Market System for which market quotations are readily
available are valued at the last quoted sale price of the day or, if there is no
such reported sale, within the range of the most recent quoted bid and ask
prices. Other securities, for which market quotations are readily available, are
valued at current market values, obtained from pricing services, which are based
on a variety of factors, including recent trades, institutional size trading in
similar types of securities (considering yield, risk and maturity) and/or
developments related to specific securities. Portfolio securities which are
traded both in the over-the-counter market and on a securities exchange are
valued according to the broadest and most representative market as determined by
the Manager. Other securities for which market quotations are not available, if
any, are valued in accordance with procedures established by the Board of
Trustees.
The value of a foreign security is determined as of the close of trading on the
foreign exchange on which it is traded or as of the close of trading on the New
York Stock Exchange, if that is earlier, and 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 ask price 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, then these securities will be valued in accordance with procedures
established by the Board of Trustees.
The fair values of securities restricted as to resale, if any, are determined
following procedures established by the Board of Trustees.
b. 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 is amortized as
required by the Internal Revenue Code.
c. 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 for
both financial statement and income tax purposes.
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. Therefore, no income tax
provision is required.
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 such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expenses are translated at the rate of exchange quoted on
the respective date that such transactions are recorded. Differences between
income and expense amounts recorded and collected or paid are recognized when
reported by the custodian bank.
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.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade date and settlement dates on securities
transactions and 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/depreciation on investments and translation of assets and
liabilities denominated in foreign currencies arise from changes in the value of
assets and liabilities other than investments in securities at fiscal year end,
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.
In a repurchase agreement, the Fund purchases a U.S. government security from a
dealer or bank subject to an agreement to resell it at a mutually agreed upon
price and date. Such a transaction is accounted for as a loan by the Fund to the
seller, collateralized by the underlying security. The transaction requires the
initial collateralization of the seller's obligation by U.S. government
securities with market value, including accrued interest, of at least 102% of
the dollar amount invested by the Fund, with the value of the underlying
security marked to market daily to maintain coverage of at least 100%. The
collateral is delivered to the Fund's custodian and held until resold to the
dealer or bank. At September 29, 1995, the outstanding joint repurchase
agreement held by the Fund had been entered into on that date.
NOTE 4 - DISTRIBUTIONS AND CAPITAL LOSS CARRY FORWARDS
At March 31, 1995, for tax purposes, the Fund had accumulated net realized
capital gains of $69,048. For tax purposes, the aggregate cost of securities and
unrealized appreciation of the Fund are the same as for financial statement
purposes at September 30, 1995.
NOTE 5 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc., under the terms of an agreement, 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 .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 $317,663 the six months ended September 30, 1995.
Certain officers and Trustees of the Fund are also officers and/or directors of
Franklin Advisers, Inc., a wholly owned subsidiary of Franklin Resources, Inc.
NOTE 6 - TRUST SHARES
At September 30, 1995, there was an unlimited number of shares of $.01 par value
authorized. At September 30, 1995, 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 six months ended September 30, 1995
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 $382,005.
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. The
Fund may purchase restricted securities through a private offering, and they
cannot be sold without prior registration under the Securities Act of 1933
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 3. At September 30, 1995, the Fund held the
following restricted security representing .15% of the Fund's net assets:
<TABLE>
<CAPTION>
Acquisition
Unit Security Date Cost Value
<S> <C> <C> <C>
1 PG Partners I, L.P. ............................................................ 3/31/93 $47,572 $90,480
</TABLE>
NOTE 9 - RULE 144A SECURITIES
Rule 144A provides a non-exclusive safe harbor exemption from the registration
requirements of the Securities Act of 1933 for specified resales of restricted
securities to qualified institutional investors. The Fund values these
securities as disclosed in Note 3. At September 30, 1995, the Fund held 144A
securities with a value aggregating $3,678,228, representing 6.07% of the Fund's
net assets. See the accompanying Statement of Investments in Securities and Net
Assets for specific information as to such securities.
NOTE 10 - CREDIT RISK AND DEFAULTED SECURITIES
Although the Fund has a diversified portfolio, 58.63% 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 September 30, 1995, the Fund
held one defaulted security issued by one company with a value aggregating
$372,500 representing 0.6% of the Fund's net assets. For information as to
specific securities, see the accompanying statement of investments in securities
and net assets.
For financial reporting purposes, it is the Fund's accounting practice to
discontinue accrual of income and provide an estimate for probable losses due to
unpaid interest income on defaulted bonds for the current reporting period.
NOTE 11 - FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for each share of
beneficial interest outstanding, total investment return, ratios to average net
assets and other supplemental data. This information has been derived from the
information provided in the financial statements and market price data for the
Fund's shares.
<TABLE>
<CAPTION>
Six months ended Year ended March 31,
September 30, 1995 1995 1994 1993 1992 1991
------------ ------ ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year........... $ 9.60 $ 9.97 $11.38 $10.15 $ 8.60 $ 8.61
------------ ------ ------- ------- ------- ------
Net investment income....................... 0.40 0.78 0.84 1.00 0.97 1.08
Net realized and unrealized gain (loss)
on securities .............................. 0.734 (0.08) (0.78) 1.196 1.586 (0.016)
------------ ------ ------- ------- ------- ------
Total from investment operations............. 1.134 0.70 0.06 2.196 2.556 1.064
------------ ------ ------ ------ ------ ------
Less distributions:
From net investment income.................. (0.384) (0.78) (0.853) (0.966) (0.985) (1.061)
From net realized capital gains............. -- (0.282) (0.617) -- -- (0.013)
In excess of net investment income.......... -- (0.008) -- -- (0.021) --
------------ ------ ------- ------- ------- ------
Total distributions.......................... (0.384) (1.07) (1.47) (0.966) (1.006) (1.074)
------------ ------ ------- ------- ------- ------
Net asset value, end of year................. $10.35 $ 9.60 $ 9.97 $11.38 $10.15 $ 8.60
============ ====== ======= ======= ======= ======
Market value per share, end of year1......... $ 9.25 $ 8.75 $ 9.75 $10.625 $ 9.75 $ 8.00
============ ====== ======= ======= ======= ======
Total Investment Return:
Based on market value per share2............ 10.18% 1.46% 5.47% 19.72% 35.93% 11.25%
Ratios to Average Net Assets:
Expenses.................................... 2.62%+ 3.00% 2.90% 2.99% 3.21% 3.43%
Net investment income....................... 6.25%+ 6.37% 6.00% 7.51% 7.64% 9.79%
Supplemental Data
Net assets at end of year
(000's omitted)............................ $60,635 $56,230 $58,391 $66,657 $59,470 $50,356
Portfolio turnover rate..................... 20.16% 29.77% 28.90% 41.22% 22.19% 26.07%
Total debt outstanding at end of year
(000's omitted)............................ $16,000 $16,000 $15,974 $15,926 $15,878 $15,829
Net asset coverage per $1,000 of debt....... $ 3,790 $ 3,514 $ 3,655 $ 4,185 $ 3,745 $ 3,181
NOTE 11 - FINANCIAL HIGHLIGHTS (cont.)
(For Notes outstanding throughout each year)
Face of Average Monthly Average Monthly Average Monthly
Year Notes Outstanding Face of Notes Number of Shares Notes Per Share
Ended End of Year Outstanding Outstanding During the Year
<S> <C> <C> <C> <C>
1991 16,000,000 16,000,000 5,857,600 2.73
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
19953 16,000,000 16,000,000 5,857,600 2.73
</TABLE>
+Annualized.
1Based on last sale on the New York Stock Exchange.
2Total return measures the change in value of an investment. 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.
3For the six months ended September 30, 1995.
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