MESSAGE FROM THE PRESIDENT
May 15, 1997
Dear Shareholder:
We are pleased to bring you the Franklin Multi-Income Trust annual report for
the period ended March 31, 1997.
During this reporting period, the U.S. economy continued to grow at a moderate
pace. Inflation, as measured by the Consumer Price Index, grew at 2.76% during
the one-year period, while interest rates remained relatively low.* Combined,
these two factors created a favorable environment for both of the major
investment sectors in which the Trust invests -- high yield corporate bonds and
utility stocks.
The high yield corporate bond market experienced a 56% increase in new issues in
1996 as issuers took advantage of the low-interest rate environment. At the same
time, many high-yield securities benefited from stronger corporate earnings and
improved financial conditions. The default rate in the high yield market
decreased from 3.1% in 1995 to 1.4% in 1996.**
Uncertainty regarding deregulation prevented electric utility and
telecommunications industry stocks from fully participating in the general
market rally that lasted for most of the reporting period. Nevertheless, a
positive economic climate -- in particular, low interest rates -- contributed to
a solid performance in the utility sector. In fact, as measured by the S&P(R)
Utilities Index, the sector reported a total return of 4.63% for the one-year
period ended March 31, 1997.+
*Source: Bloomberg.
**Source: Moody's Investors Services.
The Franklin Multi-Income Trust posted a favorable performance in this
environment. The Manager's Discussion on page 3 provides specific details about
the Trust's performance and investment strategies.
As always, we appreciate your continued investment in the Franklin Multi-Income
Trust and look forward to serving your future investment needs.
Sincerely,
Charles B. Johnson
President
Franklin Multi-Income Trust
+Source: Bloomberg.
-- Celebrating 50 Years --
This year marks 50 years of business for Franklin Templeton. Over these years,
the mutual fund industry has experienced profound changes in technology,
regulations and customer expectations. As one of the largest mutual fund
families, we are proud to be an innovative industry leader, providing people
like you with an opportunity to invest around the globe. We thank you for your
past support and look forward to serving your investment needs in the years
ahead.
MANAGER'S DISCUSSION
Your Fund's Objective:
The Franklin Multi-Income Trust seeks to provide high current income consistent
with preservation of capital.
The Franklin Multi-Income Trust generated a cumulative total return of 16.24%
for the 12-month period ended March 31, 1997, based on its change in market
price on the New York Stock Exchange. This compares favorably with the total
returns of the First Boston High Yield Corporate Index 11.66% and the S&P
Utilities Index(R) 4.63%.*
In general, strong corporate earnings and improving financial conditions
benefited the Trust's high-yield corporate securities, while the stronger stock
market helped its utility stocks. Contributing to the Trust's performance were
solid economic and sector fundamentals, attractively priced new issues,
investment opportunities in the secondary market and individual security
success.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
*Total returns include reinvested interest or dividends. Indices are unmanaged,
and one cannot invest directly in an index.
Sector Discussions
Wireless
The Trust maintained its strong weighting in telecommunications throughout the
period. Our holdings in Milicom International Cellular, a globally diversified
cellular telephone operator, performed especially well. High demand in the
fourth quarter, particularly from Asia and Latin America, helped the firm
increase its subscription base by 101% in 1996.** Additionally, Nextel
Communication's successful roll-out of its new digital wireless PowerFone(R)
resulted in significant capital appreciation for the portfolio.
Food Retailing
This sector benefited from ongoing industry consolidation and cost-cutting
efforts during the reporting period. Most notably, the Trust's positions in
Ralphs Grocery Co. and Smith's Food & Drug performed well in this climate.
Dominick's Finer Foods, part of Chicago's second-largest supermarket operator,
merits mention as Moody's Investors Services, a national rating agency, in
November 1996 upgraded certain subordinated notes from B3 to B2. This upgrade
was further supported when Dominick's parent company reported record sales in
1996 for the 15th consecutive year.
Automotive
Our positions in Collins & Aikman and Aetna have performed well in an
environment of continued outsourcing and company consolidation in the automotive
sector. For example, Collins & Aikman recently sold its floor-covering business,
allowing it to concentrate on the automotive interior trim market and to reduce
its debt.
Chemicals
The Trust realized large profits on the sale of its holdings in IMC Global Inc.
The firm's debt had been upgraded in October 1996 from Ba3 to Baa2 by Moody's
following a merger with Vigoro and a joint venture with Freeport McMoRan LP.
Together, these factors helped improve IMC's capital structure and bolstered its
global aspirations.
**Source: Bloomberg.
Energy
High commodity prices (especially oil and gas) and strong industry fundamentals
led to capital appreciation in our Gulf Canada and Forcenergy investments. The
latter develops, explores, acquires and produces oil and natural gas. Forcenergy
had a strong performance in the fourth quarter of 1996, earning $0.23 a share,
as opposed to $0.01 a share in the same period a year earlier.+ Our outlook for
this sector remains positive.
Utilities Stock Update
While our holdings in the utilities sector (38.2% of total market value) as a
group contributed to a solid performance during the reporting period, the
ongoing issue of deregulation continues to present investors with new hazards
and opportunities each day.
Progress was made in the following key regulatory areas last year, and we expect
the progress to continue throughout 1997. First, state and federal authorities
continued to deregulate both electric and telephone utility industries over the
year, thus helping to eliminate regulatory uncertainty. Second, in the
telecommunications industry, the Federal Communications Commission adopted rules
to administer the deregulation of the regional Bell telephone companies. These
rules should ensure an orderly transition to a competitive business environment
over the next five years and may increase opportunities for certain
telecommunications companies.
+Source: Moody's Investor's Service telecommunications companies.
Even in a difficult environment, the Trust benefited from its holdings in
companies with superior growth rates and strong competitive positions. Utility
stocks that performed well during the one-year reporting period included
BellSouth Corp., CINergy, US West, and SCANA Corp. We believe that utility
stocks are very attractively valued at current levels and should offer
significant upside potential as more regulatory issues are resolved. Going
forward, we will focus on investments in those companies that we believe are
well-positioned to take advantage of decreasing regulation and new investment
opportunities.
What's Ahead?
Recent economic data continue to suggest moderate economic growth accompanied by
relatively stable interest rates. Inflation appears to be mild, although it has
increased slightly. If this environment continues, high yield corporate bonds
and utility stocks should remain attractive investments over the short- to
intermediate-term and bode favorably for the Franklin Multi-Income Trust.
Just as economic and market conditions constantly change, our strategies,
evaluations, conclusions and decisions regarding portfolio holdings discussed
above will also 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 our selection process for the Trust's
purchases.
PERFORMANCE SUMMARY
The Franklin Multi-Income Trust's closing price on the New York Stock Exchange
(NYSE) increased 37.5 cents from $9.00 on March 31, 1996, to $9.375 on March 31,
1997. The Trust's net asset value price per share decreased 28 cents from $10.62
on March 31, 1996, to $10.34 on March 31, 1997.
During the reporting period, the Trust distributed income totaling $1.061 per
share. This included dividend distributions in the amount of 76.8 cents ($0.768)
per share, a long-term capital gain distribution of 21.5 cents ($0.215) per
share, a short-term capital gain distribution of 7.3 cents ($0.073) per share,
and a 0.5 cent ($0.005) per share income distribution in December 1996 to meet
excise tax requirements. Based on an annualization of March's monthly dividend
of 6.4 cents ($0.064) per share and the NYSE closing price of $9.375 on March
31, 1997, the Trust's distribution rate was 8.19%. Dividends will vary based on
the earnings of the fund's portfolio, and past distributions are not predictive
of future trends.
Franklin Multi-Income Trust
Dividend Distributions 4/1/96 - 3/31/97
Dividend
Month per Share
April 6.4 cents
May 6.4 cents
June 6.4 cents
July 6.4 cents
August 6.4 cents
September 6.4 cents
October 6.4 cents
November 6.4 cents
December 6.4 cents
January 6.4 cents
February 6.4 cents
March 6.4 cents
Total 76.8 cents
Franklin Multi-Income Trust
Periods ended March 31, 1997
Since
Inception
1-Year 5-Year (10/09/89)
Cumulative Total Return1
Based on change in net asset value 8.45% 86.38% 170.93%
Based on change in market price 16.24% 68.54% 121.47%
Average Annual Total Return1
Based on change in net asset value 8.45% 13.26% 14.44%
Based on change in market price 16.24% 11.00% 11.36%
Distribution Rate2 8.19%
1. Total return calculations represent the change in value of an investment over
the periods indicated and assume reinvestment of all distributions according to
the terms specified in the Trust's dividend reinvestment plan.
2. Distribution rate is based on the annualization of the Trust's current 6.4
cent per share monthly dividend and the NYSE closing price of $9.375 on March
31, 1997. Past performance is not predictive of future results.
PORTFOLIO OPERATIONS
Christopher Molumphy
Senior Portfolio Manager
Franklin Advisers, Inc.
Christopher Molumphy holds a bachelor of arts degree in economics from Stanford
University and a master's degree in finance from University of Chicago. He has
been with Franklin Advisers since 1988. Molumphy is a Chartered Financial
Analyst (CFA) and a member of several securities industry associations. He has
managed the Franklin Multi-Income Trust since 1991.
As of March 31, 1997, Morningstar awarded the Franklin Multi-Income Trust a
five-star overall rating, measuring its performance against a universe of 63
closed-end fixed-income funds for the five-year period.*
*Morningstar proprietary ratings reflect historical risk-adjusted performance
and are subject to change every month. Past performance is no guarantee of
future results. Morningstar ratings are calculated from the fund's three- and
five-year average annual returns in excess of 90-day Treasury bill returns and a
risk factor that reflects fund performance below 90-day T-bill returns. Ten
percent of the funds in an investment category receive five stars, 22.5% receive
four stars. Ratings for other periods ended March 31, 1997: four stars for the
three-year period out of a universe of 96 closed-end fixed-income funds.
Specific period ratings are combined to produce an overall star rating.
FRANKLIN MULTI-INCOME TRUST
Statement of Investments in Securities and Net Assets, March 31, 1997
<TABLE>
<CAPTION>
Shares/ Value
Warrants (Note 1)
Common Stocks and Warrants 53.2%
<S> <C> <C>
Energy 3.5%
50,000 PacifiCorp....................................................................... $ 1,068,750
33,300 Ultramar Diamond Shamrock Corp. ................................................. 1,057,275
-------------
2,126,025
-------------
Industria l0.4%
20,565 aAnacomp, Inc.................................................................... 226,215
1,000 aGulf States Steel, warrants .................................................... 5,000
518 aThermadyne Industries, Inc. .................................................... 14,375
-------------
245,590
-------------
Lodging
526 aHost Marriott Corp. ............................................................ 8,940
526 Marriott International, Inc. .................................................... 26,169
-------------
35,109
-------------
Media and Broadcasting0.3%
16,000 aSullivan Broadcast Holdings..................................................... 160,000
-------------
Telecommunications1.4%
120 dNippon Telegraph & Telephone Corp. (Japan)...................................... 845,152
-------------
Utilities 47.6%
74,000 Allegheny Power System, Inc. .................................................... 2,192,250
40,000 American Electric Power Co., Inc. ............................................... 1,650,000
10,000 Ameritech Corp. ................................................................. 615,000
12,000 BellSouth Corp. ................................................................. 507,000
48,800 Central and South West Corp. .................................................... 1,043,100
57,200 CINergy Corp. ................................................................... 1,951,950
20,000 Delmarva Power and Light Co...................................................... 367,500
41,000 Dominion Resources, Inc. ........................................................ 1,491,375
60,600 DPL, Inc. ....................................................................... 1,461,975
20,000 Duke Power Co. .................................................................. 882,500
14,500 Edison International............................................................. 326,250
34,000 Enova Corp....................................................................... 748,000
14,000 Enron Corp....................................................................... 532,000
16,500 Enron Global Power and Pipelines L.L.C........................................... 455,813
28,400 Entergy Corp. ................................................................... 695,800
38,000 FPL Group, Inc. ................................................................. 1,676,750
6,800 New England Electric System ..................................................... 233,750
43,900 New Jersey Resources Corp........................................................ 1,251,150
11,700 OGE Energy Corp.................................................................. 489,938
49,600 Pacific Enterprises ............................................................. 1,500,400
Utilities (cont.)
16,800 Peco Energy Co................................................................... $ 342,300
71,000 Public Service Co. of Colorado .................................................. 2,751,250
25,000 Puget Sound Power and Light Co................................................... 631,250
3,500 SBC Communications, Inc.......................................................... 184,188
40,000 SCANA Corp. ..................................................................... 1,015,000
63,100 Southern Co. .................................................................... 1,332,988
30,400 Texas Utilities Co. ............................................................. 1,030,925
50,000 Unicom Corp...................................................................... 975,000
15,000 U.S. West Communications Group................................................... 510,000
-------------
28,845,402
-------------
Total Common Stocks and Warrants (Cost $27,669,364) ....................... 32,257,278
-------------
Partnership Units0.1%
Financial
1 a,gPG Partners I, L.P. (Cost $29,296)............................................ 62,205
-------------
Preferred Stocks6.5%
Cable Television1.6%
10,595 Cablevision Systems Corp., Series L, 11.125% pfd., PIK........................... 982,719
-------------
Consumer Products0.8%
70,000 RJR Nabisco Holdings Corp., $0.6012 cvt. pfd., Series C.......................... 455,000
-------------
Media and Broadcasting 1.6%
10,000 a,bSinclair Capital 11.625% pfd.................................................. 980,000
-------------
Wireless Communication2.5%
30,000 Nortel Inversora S.A., 10.00% cvt. pfd........................................... 1,350,000
3,000 a,bQUALCOMM, Inc. 5.75% cvt. pfd................................................. 149,250
-------------
1,499,250
-------------
Total Preferred Stocks (Cost $3,820,460) .................................. 3,916,969
-------------
Face
Amount
Bonds64.1%
Automotive4.3%
$1,000,000 Aetna Industries, Inc., senior notes, 11.875%, 10/01/06 ......................... 1,050,000
500,000 Collins & Aikman Corp., senior sub. notes, 11.50%, 04/15/06 ..................... 547,500
1,000,000 Harvard Industries, Inc., senior notes, 12.00%, 07/15/04 ........................ 505,000
500,000 bLDM Technologies, Inc., senior sub. notes, 10.75%, 01/15/07 .................... 510,000
-------------
2,612,500
-------------
Cable Television1.8%
$1,000,000 Tele-Communications, Inc., senior sub. deb., 9.80%, 02/01/12 .................... $ 1,078,728
-------------
Consumer Products 2.9%
500,000 E & S Holdings Corp., senior sub. notes, 10.375%, 10/01/06 ...................... 510,000
300,000 bRent-Way, Inc., cvt. sub. debentures, 7.00%, 02/01/07 .......................... 267,000
500,000 RJR Nabisco, Inc., senior notes, 9.25%, 08/15/13 ................................ 493,750
500,000 Sealy Corp., senior sub. notes, 10.25%, 05/01/03 ................................ 515,000
-------------
1,785,750
-------------
Containers and Packaging2.6%
1,000,000 Owens-Illinois, Inc., senior sub. notes, 9.75%, 08/15/04 ........................ 1,040,000
500,000 bU.S. Can Corp., senior sub. notes, 10.125%, 10/15/06 ........................... 522,500
-------------
1,562,500
-------------
Energy1.7%
500,000 Forcenergy, Inc., senior sub. notes, 9.50%, 11/01/06 ............................ 491,875
500,000 eGulf Canada Resources, Ltd., senior sub. notes, (Canada), 9.25%, 01/15/04 ...... 520,000
-------------
1,011,875
-------------
Financial Services 1.8%
1,000,000 bFirst Nationwide Escrow, senior sub. notes, 10.625%, 10/01/03 .................. 1,062,500
-------------
Food and Beverage1.9%
200,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05 .................. 215,500
100,000 Dr Pepper Bottling Co. of Texas, senior notes, 10.25%, 02/15/00 ................. 104,500
800,000 PMI Acquisition Corp., guaranteed senior sub. notes, 10.25%, 09/01/03 ........... 828,000
-------------
1,148,000
-------------
Food Retailing 3.2%
250,000 Dominick's Finer Foods, Inc., senior sub. notes, 10.875%, 05/01/05 .............. 272,500
1,000,000 Penn Traffic Co., senior sub. notes, 8.625%, 12/15/03 ........................... 825,000
750,000 Smith's Food and Drug Centers, Inc., senior sub. notes, 11.25%, 05/15/07 ........ 819,375
-------------
1,916,875
-------------
Foreign Government Agencies 0.6%
2,175,000 eESCOM, E168, utility deb. (South Africa), 11.00%, 06/01/08 ..................... 379,128
-------------
Forest and Paper Products 6.8%
1,000,000 bAsia Pulp and Paper, bonds, 12.00%, 12/29/49 ................................... 960,000
1,000,000 Rapp International Finance, company guaranteed secured notes, 13.25%, 12/15/05 .. 1,010,000
1,000,000 REPAP New Brunswick, senior notes, 10.625%, 04/15/05 ............................ 982,500
500,000 REPAP Wisconsin, Inc., senior secured notes, 9.25%, 02/01/02 .................... 495,000
600,000 S.D. Warren Co., senior sub. notes, 12.00%, 12/15/04 ............................ 657,000
-------------
4,104,500
-------------
Gaming and Leisure 3.2%
$ 500,000 Aztar Corp., senior sub. notes, 13.75%, 10/01/04 ................................ $ 558,750
250,000 Players International, Inc., senior notes, 10.875%, 04/15/05 .................... 258,750
1,000,000 Showboat, Inc., senior sub. notes, 13.00%, 08/01/09 ............................. 1,127,500
-------------
1,945,000
-------------
Health Care 3.7%
1,000,000 Abbey Healthcare Group, Inc., senior sub. notes, 9.50%, 11/01/02 ................ 1,040,000
800,000 Tenet Healthcare Corp., senior sub. notes, 10.125%, 03/01/05 .................... 848,000
300,000 bU.S. Diagnostic Inc., cvt. sub debentures, 9.00%, 03/31/03 ..................... 333,000
-------------
2,221,000
-------------
Industrial3.3%
382,611 Anacomp, Inc., senior sub. notes, PIK to 06/30/97, (original accretion rate 13.00%),
13.00% thereafter, 06/04/02 .................................................... 399,828
500,000 bDerlan Industries, Ltd., senior notes, 10.00%, 01/15/07 ........................ 492,500
500,000 bIntertek Finance Plc., senior sub. notes, 10.25%, 11/01/06 ..................... 506,250
259,000 Thermadyne Industries, Inc., senior notes, 10.25%, 05/01/02 ..................... 262,238
359,000 Thermadyne Industries, Inc., sub. notes, 10.75%, 11/01/03 ....................... 362,590
-------------
2,023,406
-------------
Lodging 2.5%
1,000,000 Prime Hospitality Corp., senior sub. notes, 9.75%, 04/01/07 ..................... 988,750
500,000 Red Roof Inns, senior notes, 9.625%, 12/15/03 ................................... 507,500
-------------
1,496,250
-------------
Media and Broadcasting 3.6%
500,000 American Media Operation, senior sub. notes, 11.625%, 11/15/04 .................. 538,750
500,000 Jacor Communications Co., guaranteed, senior sub. notes, 9.75%, 12/15/06 ........ 510,000
1,000,000 Sullivan Broadcast Holdings, units, 13.25%, 12/15/06 ............................ 1,165,000
-------------
2,213,750
-------------
Metals and Mining4.1%
1,000,000 cAcme Metals, Inc., guaranteed senior secured disc. notes, zero coupon to 08/01/97,
(original accretion rate 13.50%), 13.50% thereafter, 08/01/04 .................. 1,062,500
500,000 bDayton Mining Corp., sub. debentures, 7.00%, 04/01/02 .......................... 490,000
1,000,000 Gulf States Steel, units, 13.50%, 04/15/03 ...................................... 957,500
-------------
2,510,000
-------------
Technology and Information Systems 1.8%
90,000 bAdaptec, Inc., cvt. sub. notes, 4.75%, 02/01/04 ................................ 87,750
500,000 bCelestica International, Inc., senior sub. notes, 10.50%, 12/31/06 ............. 522,500
Technology and Information Systems (cont.)
$ 250,000 Dovatron International, Inc., cvt. sub. notes, 6.00%, 10/15/02 .................. $ 240,000
300,000 bHMT Technology Corp., cvt. sub. notes, 5.75%, 01/15/04 ......................... 255,000
-------------
1,105,250
-------------
Textiles and Apparel0.8%
500,000 bCollins & Aikman Floorcoverings, senior sub. notes, 10.00%, 01/15/07 ........... 495,625
-------------
Utilities 1.8%
500,000 El Paso Electric Co., first mortgage, Series E, 9.40%, 05/01/11 ................. 543,750
500,000 Midland Funding II, S.F., debenture, Series A, 11.75%, 07/23/05 ................. 568,750
-------------
1,112,500
-------------
Wireless Communication11.7%
2,000,000 cArch Communications Group, Inc., senior disc. notes, zero coupon to 03/15/01,
(original accretion rate 10.875%), 10.875% thereafter, 03/15/08 ................ 870,000
2,000,000 cComcast Cellular Corp., Series B, zero coupon, (original accretion rate 11.37%),
03/05/00........................................................................ 1,470,000
2,000,000 cMillicom International Cellular, Inc., senior disc. notes, zero coupon to 06/01/00,
(original accretion rate 13.50%), 13.50% thereafter, 06/01/06 .................. 1,327,500
1,000,000 cOrion Network Systems, Inc., units, zero coupon to 01/15/02, (original accretion rate
12.50%), 12.50% thereafter, 01/15/07 ........................................... 500,000
1,000,000 Paging Network, Inc., senior sub. notes, 10.00%, 10/15/08 ....................... 893,750
1,000,000 Rogers Cantel Mobile Communications, Inc., senior secured deb., 9.75%, 06/01/16 . 1,020,000
1,000,000 Sygnet Wireless, Inc., senior notes, 11.50%, 10/01/06 ........................... 1,005,000
-------------
7,086,250
-------------
Total Bonds (Cost $37,938,040) ............................................ 38,871,387
-------------
Total Long Term Investments (Cost $69,457,160) ............................ 75,107,839
-------------
489,862 fReceivables from Repurchase Agreements 0.8%
Joint Repurchase Agreements, 6.417%, 04/01/97, (Maturity Value $481,938)
(Cost $481,853)
Aubrey G. Lanston & Co., Inc., (Maturity Value $57,925)
Collateral: U.S. Treasury Bills, 09/04/97
U.S. Treasury Notes, 6.75% - 7.00%, 04/15/99 - 05/31/99
Barclays de Zoete Wedd Securities, Inc., (Maturity Value $28,962)
Collateral: U.S. Treasury Notes, 6.00% - 7.125%, 09/30/98 - 09/30/99
CIBC Wood Gundy Securities Corp., (Maturity Value $57,925)
Collateral: U.S. Treasury Notes, 6.25%, 06/30/98
Daiwa Securities America, Inc., (Maturity Value $57,925)
Collateral: U.S. Treasury Notes, 5.00% - 7.50%, 06/30/98 - 12/31/01
Fuji Securities, Inc., (Maturity Value $57,925)
Collateral: U.S. Treasury Bills, 07/31/97
U.S. Treasury Notes, 5.875%, 04/30/98
Sanwa Securities (USA) Co., L.P., (Maturity Value $57,925)
Collateral: U.S. Treasury Notes, 5.625% - 6.75%, 05/15/98 - 11/30/00
SBC Warburg, Inc., (Maturity Value $57,925)
Collateral: U.S. Treasury Notes, 6.875%, 03/31/00
The Nikko Securities Co. International, Inc., (Maturity Value $47,501)
Collateral: U.S. Treasury Notes, 4.75% - 6.50%, 05/31/98 - 09/30/01
UBS Securities L.L.C., (Maturity Value $57,925)
Collateral: U.S. Treasury Notes, 5.00% - 6.875%, 04/30/97 - 04/30/00 ......... $ 481,853
-------------
Total Investments (Cost $69,939,013)124.7% ............................ 75,589,692
Liabilities in Excess of Other Assets (24.7%)......................... (14,995,881)
-------------
Net Assets 100.0% .................................................... $ 60,593,811
=============
At March 31, 1997, the net unrealized appreciation based on the
cost of investments for income tax purposes of $69,939,013 was
as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................ $ 7,241,121
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................ (1,590,442)
-------------
Net unrealized appreciation ................................................... $ 5,650,679
=============
</TABLE>
PORTFOLIO ABBREVIATIONS:
L.L.C. - Limited Liability Corp.
L.P. - Limited Partnership
PIK - Payment-in-Kind
S.F. - Sinking Fund
aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
cZero coupon/step-up bonds. The current effective yield may vary. The original
accretion rate will remain constant.
dSecurities traded in foreign currency and valued in U.S. dollars.
eFace amount is stated in foreign currency and value is stated in U.S. dollars.
fFace amount for repurchase agreements is for the underlying collateral.
See Note 1(g) regarding the joint repurchase agreement.
gSee Note 8 regarding restricted securities.
The accompanying notes are an integral part of these financial statements.
FRANKLIN MULTI-INCOME TRUST
Financial Statements
Statement of Assets and Liabilities
March 31, 1997
Assets:
Investments in securities, at value
(identified cost $69,457,160) $75,107,839
Receivables from repurchase
agreements, at value and cost 481,853
Receivables:
Dividends and interest 1,385,672
Investment securities sold 579,403
Unamortized note issuance costs
(Note 2) 71,906
--------------
Total assets 77,626,673
--------------
Liabilities:
Payables:
Investment securities purchased 524,160
Notes (Note 2) 16,000,000
Accrued interest (Note 2) 48,000
Distributions to shareholders 374,886
Management fees 55,319
Accrued expenses and other liabilities 30,497
--------------
Total liabilities 17,032,862
--------------
Net assets, at value $60,593,811
==============
Net assets consist of:
Undistributed net investment income $ 82,390
Net unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies 5,651,223
Accumulated net realized
gain from investments 1,069,418
Capital shares 53,790,780
--------------
Net assets, at value $60,593,811
==============
Net asset value per share:
($60,593,811 / 5,857,600 shares of
beneficial interest outstanding) $10.34
==============
Statement of Operations
for the year ended March 31, 1997
Investment income:
Interest $4,598,063
Dividends, net of foreign
taxes withheld of $771 2,010,914
-------------
Total income $ 6,608,977
Expenses:
Management fees (Note 6) 665,109
Shareholder servicing costs 33,199
Professional fees 29,295
Amortization of note
issuance costs (Note 2) 29,250
Trustees' fees and expenses 10,295
Reports to shareholders 9,015
Custodian fees 1,866
Registration 75
Other 23,423
-------------
Operating expenses 801,527
Interest expense (Note 2) 1,152,000
-------------
Total expenses 1,953,527
--------------
Net investment income 4,655,450
--------------
Realized and unrealized gain (loss)
from investments and foreign currency:
Net realized gain (loss) from:
Investments 2,059,772
Foreign currency
transactions (4,152)
Net unrealized appreciation
(depreciation) on:
Investments (2,057,065)
Translation of assets and
liabilities denominated in
foreign currency 1,847
--------------
Net realized and unrealized
gain from investments
and foreign currency 402
--------------
Net increase in net assets
resulting from operations $ 4,655,852
==============
The accompanying notes are an integral part of these financial statements.
FRANKLIN MULTI-INCOME TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets
for the years ended March 31, 1997 and 1996
1997 1996
--------- ----------
Increase (decrease) in net assets:
Operations:
Net investment income $ 4,655,450 $ 4,568,760
Net realized gain from
investments and foreign
currency transactions 2,055,620 1,193,225
Net unrealized appreci-
ation (depreciation)
on investments and
translation of assets and
liabilities denominated
in foreign currency (2,055,218) 5,291,667
-------- -----------
Net increase in net
assets resulting
from operations 4,655,852 11,053,652
Distributions to
shareholders from:
Undistributed net
investment income (4,527,925) (4,498,637)
Undistributed net
realized capital gain (1,686,989) (632,621)
-------- -----------
Net increase
(decrease)
in net assets (1,559,062) 5,922,394
Net assets:
Beginning of year 62,152,873 56,230,479
-------- -----------
End of year (including
undistributed net invest-
ment income of $82,390
at 3/31/97 and $20,786
at 3/31/96) $60,593,811 $62,152,873
======== ===========
Statement of Cash Flows
for the year ended March 31, 1997
Interest and dividends received $ 5,397,583
Operating expenses paid (530,329)
Interest expense paid (1,152,000)
--------------
Cash provided - operations 3,715,254
--------------
Investment purchases (184,191,075)
Investment sales 186,690,735
--------------
Cash provided - investments 2,499,660
--------------
Distributions to shareholders (6,214,914)
--------------
Cash used - financing activities (6,214,914)
--------------
Net change in cash --
Cash at beginning of year --
--------------
Cash at end of year --
==============
The accompanying notes are an integral part of these financial statements.
FRANKLIN MULTI-INCOME TRUST
Notes to Financial Statements
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Franklin Multi-Income Trust (the Fund) is a non-diversified, closed-end
management investment company (mutual fund), registered under the Investment
Company Act of 1940, as amended. The Fund seeks to provide investors with high
current income consistent with preservation of shareholders' capital. The Fund
has two classes of securities: senior fixed-rate notes (the Notes) and shares of
beneficial interest (the Shares).
The following is a summary of significant accounting policies consistently
followed by the fund in preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles for investment
companies.
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. 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. 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. 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.
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.
d. 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.
Original issue discount is amortized as required by the Internal Revenue Code.
Net investment income and net realized capital gains and losses differ for
financial statement and tax purposes primarily due to differing treatments of
foreign currency transactions.
e. 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 expenses during the reporting
period. Actual results could differ from those estimates.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
f. 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, 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.
g. 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, 1997, all outstanding repurchase agreements held by the Fund
had been entered into on that date.
NOTE 2 - 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, 1997.
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 - TRUST SHARES
At March 31, 1997, there was an unlimited number of $.01 par value shares of
beneficial interest authorized. At March 31, 1997, 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 4 - DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At March 31, 1997, for tax purposes, the Fund had accumulated net realized
capital gains of $1,069,418. For income tax purposes, the aggregate cost of
securities and unrealized appreciation of the Fund are the same as for financial
statement purposes at March 31, 1997.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the year ended March 31, 1997 were $34,971,891 and
$35,694,234, respectively.
NOTE 6 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
a. Management Agreement
Under the terms of a management 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). Under an
agreement with Advisers, Franklin Templeton Services, Inc. (FT Services)
provides administrative services and facilities for the Fund. The fee is paid by
Adivsers and computed monthly based on average daily net assets. It is not a
separate expense of the Fund. b. Other Affiliated Parties and Transactions
Certain officers and trustees of the Fund are also officers and/or directors of
Advisers and FT Services, both wholly-owned subsidiaries of Franklin Resources,
Inc.
NOTE 7 - STATEMENT OF CASH FLOWS
The Fund's financial statements for the year ended March 31, 1997 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, commissions, bonds paid-in-kind,
stock dividends and year-end income and expense accrual changes aggregating to
$940,196.
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 the restricted
security as disclosed in Note 1. At March 31, 1997, the Fund held the following
restricted security representing 0.1% of the Fund's net assets:
Acquisition
Units Security Date Cost Value
- ---- ------------------------ -------- ------------
1 PG Partners 1, L.P. ...... 3/31/93 $29,296 $62,205
NOTE 9 - CREDIT RISK
The Fund has 67.39% of its portfolio invested in lower rated and comparable
quality unrated high yield securities. Investments in high yield securities are
accompanied by a greater degree of credit risk and such lower rated 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
the holders of high yielding securities, because such securities are generally
unsecured and are often subordinated to other creditors of the issuer. For more
information as to specific securities, see the accompanying Statement of
Investments in Securities and Net Assets.
There are certain credit risks due to the manner in which the Fund is invested.
The Fund has investments in excess of 10% of its total net assets in the
Wireless Communication industry.
NOTE 10 - FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
period are as follows:
<TABLE>
<CAPTION>
Year ended March 31,
1997 1996 1995 1994 1993
------- ------- ------- ------- ------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period .................. $10.61 $ 9.60 $ 9.97 $11.38 $10.15
------- ------- ------- ------- ------
Net investment income .................................. 0.790 0.780 0.780 0.840 1.000
Net realized and unrealized gain (loss) on securities .. 0.001 1.110 (0.080) (0.780) 1.196
------- ------- ------- ------- ------
Total from investment operations ........................ 0.791 1.890 0.700 0.060 2.196
------- ------ ------ ------ ------
Less distributions from:
Net investment income .................................. (0.773) (0.770) (0.780) (0.853) (0.966)
Capital gains .......................................... (0.288) (0.110) (0.282) (0.617) --
In excess of net investment income ..................... -- -- (0.008) -- --
------- ------- ------- ------- ------
Total distributions ..................................... (1.061) (0.880) (1.070) (1.470) (0.966)
------- ------- ------- ------- ------
Net asset value at end of period......................... 10.34 10.61 9.60 9.97 11.38
======= ======= ======= ======= ======
Market value per share at end of period1................. $ 9.38 $ 9.00 $ 8.75 $ 9.75 $10.63
======= ======= ======= ======= ======
Total Investment Return:
Based on market value per share2 ....................... 16.24% 12.87% 1.46% 5.47% 19.72%
Ratios/Supplemental Data:
Net assets at end of period (000's omitted)............. $60,594 $62,153 $56,230 $58,391 $66,657
Ratio of expenses to average net assets ................ 3.14% 3.21% 3.00% 2.90% 2.99%
Ratio of net investment income to average net assets ... 7.48% 7.53% 6.37% 6.00% 7.51%
Portfolio turnover rate ................................ 44.40% 35.06% 29.77% 28.90% 41.22%
Average commission rate3................................ $ .0522 $ .0536 -- -- --
Total debt outstanding at end of period (000's omitted). $16,000 $16,000 $16,000 $15,974 $15,926
Asset coverage per $1,000 of debt ...................... $ 3,787 $ 3,885 $ 3,514 $ 3,655 $ 4,185
</TABLE>
NOTE 10 - FINANCIAL HIGHLIGHTS (cont.)
(For Notes outstanding throughout the year)
Face Amount of Average Monthly Average Monthly Average Amount of
Year Notes Outstanding Face Amount of Number of Shares Notes Per Share
Ended End of Period Notes Outstanding Outstanding During the Period
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
1997 16,000,000 16,000,000 5,857,600 2.73
1Based on the 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.
3Represents the average broker commission rate per share paid by the Fund in
connection with the execution of the Fund's portfolio transactions in equity
securities.
FRANKLIN MULTI-INCOME TRUST
Report of Independent Accountants
To the shareholders and Board of Trustees
of 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, 1997, and the related statement 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 period then ended, and the financial
highlights for each of the periods presented. 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 the
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, 1997, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement preparation. 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
Franklin Multi-Income Trust as of March 31, 1997, and 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 its financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
May 6, 1997
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
Franklin Multi-Income Trust Annual Report March 31, 1997.
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING (PURSUANT TO ITEM 304
(a)OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows in pie format the portfolio composition on 3/31/97, as a
percentage of total market value.
Portfolio Composition on March 31, 1997
Corporate Bonds 48.7%
Utilities Stocks 38.2%
Miscellaneous Equities & 9.8%
Preferred Stocks
Foreign Currency Denominated Bonds 1.1%
Cash & Equivalents 0.6%
