Annual
Report
March 31, 1998
Franklin Multi-Income Trust
Technology Update:
Franklin Templeton Combats
the Year 2000 Problem
By Charles B. Johnson,
President of Franklin Resources, Inc.
As we near the 21st century, Franklin Templeton is taking important steps to
tackle the computer glitch dubbed the Year 2000 Problem, Y2K, or the Millennium
Bug. The problem originated from the software designers' attempt to save memory
by recording years in a two-digit format -- "98" instead of "1998," for example
- -- but didn't take into account that the year 2000 or "00," could also be
interpreted as 1900. Uncorrected, this problem could prevent computers from
accurately processing date-sensitive data after 1999.
Franklin Templeton's Information Services & Technology division established a
Year 2000 Project Team that has already begun making the necessary software
changes to help our computer systems, which service the funds and their
shareholders, be Year 2000 compliant. As changes reach completion, we plan to
conduct comprehensive tests to verify their effectiveness. We will also seek
reasonable assurances from all of our major software or data-services suppliers
that they will be Year 2000 compliant.
In addition, with an estimated 80% of businesses facing the Year 2000 Problem,
mutual fund managers appreciate the impact it potentially could have on com-
panies. That's why Franklin Templeton managers are aware of this issue when
managing fund portfolios.
GRAPH PICTURE OMITTED
Charles B. Johnson
President
Franklin Multi-Income Trust
SHAREHOLDER LETTER
CONTENTS
Shareholder Letter 1
Manager's Discussion 3
Performance Summary 7
Portfolio Operations 9
Dividend
Reinvestment Plan 10
Annual Meeting
of Shareholders 14
Financial Highlights &
Statement of Investments 15
Notes to
Financial Statements 25
Independent
Auditors' Report 28
Dear Shareholder:
We are pleased to bring you the Franklin Multi-Income Trust (the Trust) annual
report for the period ended March 31, 1998.
The year under review began with moderate growth, rising employment, lower
interest rates and relatively little inflationary pressure for the U.S. economy.
In the fourth quarter of 1997, the Asian currency crises created economic havoc
in many countries throughout the region, with global effects. In the U.S., the
Dow Jones(R) Industrial Average (the Dow) dropped 7.18% on October 27, 1997. By
the end of the fund's fiscal year, the Dow had rebounded, and stood at 8799.81,
compared with 6583.48 a year earlier.*
Many concerns and uncertainties remain regarding the impact of the Asian
financial crises. Yet, we believe the situation should not derail the U.S.
economy's underlying strength. Export competitiveness should improve as Asian
foreign currencies recover and stabilize. The Asian situation resulted in a
"flight to quality," and U.S. financial markets have become attractive to
investors worldwide.
*The Dow Jones Industrial Average is a price-weighted average of 30 actively
traded blue chip stocks.
Recent U.S. economic conditions benefited utility stocks and high yield
corporate bonds -- major investment sectors for the Trust. The S&P(R)
Utilities Index's total return was 29.9% for the year ended March 31, 1998. CS
First Boston High Yield Index had a 14.33% total return for the same period.*
Franklin Multi-Income Trust also performed favorably in this environment, and
the Manager's Discussion beginning on page 3 provides specific details about
your trust's performance and investment strategies.
As always, we appreciate your continued investment in Franklin Multi-Income
Trust and look forward to serving your future investment needs.
Sincerely,
Charles B. Johnson
President
Franklin Multi-Income Trust
*Source: Standard & Poor's(R) Micropal. The S&P Utilities Index is a
capitalization-weighted index of all stocks, designed to measure the performance
of the utility sector of the Standard & Poor's 500 Index. The Credit Suisse
First Boston High Yield Index is an unmanaged, trader priced portfolio
constructed to mirror the high yield debt market. Indices do not pay management
fees or operating expenses. An index is a measure of performance and one cannot
invest in it directly.
MANAGER'S DISCUSSION
- --------------------------------------------------------------------------------
Your Fund's Objective: Franklin Multi-Income Trust seeks to provide high current
income consistent with preservation of capital.
- --------------------------------------------------------------------------------
Franklin Multi-Income Trust (NYSE: FMI) generated a cumulative total return of
+32.57% for the twelve-month period ended March 31, 1998, based on its change in
market price on the New York Stock Exchange.
The Trust benefited from the strong performance of individual securities we
selected for its portfolio in addition to solid market and economic
fundamentals. Benign inflation and falling interest rates provided a favorable
environment for the Trust's bond holdings, and the strong performance of the
utilities sector benefited the Trust's utilities stock exposure.
SECTOR DISCUSSIONS
INDUSTRIAL
The Trust benefited from its industrial sector exposure due to healthly
performance from such individual securities as Nortek Inc. and Allied Waste
Industries Inc. Strength in the building cycle and building products bolstered
Nortek, a diversified building product manufacturer, as did the company's
expansion of its distribution channels into do-it-yourself chains and the HVAC
(heating, ventilation, air conditioning) market. In addition, Nortek gained
advantage from successful integration of Ply Gen and NuTone, two acquisitions
during the period. Allied Waste's positive performance largely resulted from its
purchase of Laidlaw Environmental Services Inc.'s solid waste assets and its
success in integrating operations and spinning off non-core divisions.
You will find a complete listing of the Trust's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 16 of
this report.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Franklin Multi-Income Trust
Top 10 Holdings
3/31/98
COMPANY % OF TOTAL
INDUSTRY NET ASSETS
- ----------------------------------------------------------
New Century
Energies, Inc.
Utility (stock) 5.1%
FPL Group, Inc.
Utility (stock) 3.1%
CINergy Corp.
Utility (stock) 3.0%
Pacific Enterprises
Utility (stock) 2.9%
Southern Co.
Utility (stock) 2.5%
Dominion Resources, Inc.
Utility (stock) 2.5%
New Jersey Resources Corp.
Utility (stock) 2.5%
Allegheny Power Systems, Inc.
Utility (stock) 2.4%
Millicom International
Cellular, Inc.
Wireless Communication
(bond) 2.2%
American Electric
Power Co., Inc.
Utility (stock) 2.1%
Broadcasting/Media
Rapid consolidation within the broadcasting and media industries, initiated by
government deregulation and sustained by a healthy advertising environment,
created larger, more diversified corporations. Sullivan Broadcasting Holdings, a
Trust holding, was a significant beneficiary of this trend as the company is in
the process of being acquired by Sinclair Capital, a more diversified
broadcasting company with a stronger credit profile.
Utilities
Deregulation of domestic utilities continued during the year under review, and
the Trust closely monitored events and maintained its focus on companies that we
believe were poised to perform well in an increasingly competitive environment.
Although the transition to a deregulated electric utilities industry is not yet
complete, much of the uncertainty surrounding the process was resolved as
several states passed legislation outlining the industry's restructuring over
the next 5 to 10 years. California, Massachusetts and Illinois passed
deregulation laws in 1997, and as many as 20 more states may follow in 1998 and
1999. We believe that as more individual states establish definitive regulatory
plans, more uncertainties will be resolved and stocks should do well.
With regard to selecting specific utility securities, we try to identify those
companies with strong management teams, attractive service territories and
efficient, low-cost operations. Several domestic electric utilities fit this
profile and have contributed strong gains in the dynamic environment brought
about by deregulation. One such company is FPL Group, Inc., a Florida-based
electric utility, which generated a 51.19% total return over the twelve-month
period ended March 31, 1998. FPL's performance was largely a result of a mild
regulatory environment and an exceptionally strong balance sheet. The Trust also
benefited from BellSouth Corp., a large telecommunications company, which posted
excellent earnings growth, driven by rapid expansion of its cellular and local
telephone services. BellSouth's twelve-month total return was 64.97% for the
period ended March 31, 1998.
Wireless Communication
The wireless industry experienced rapid subscriber growth driven by declining
service costs, increasing mobility of the general population and a continued
movement toward a service-based economy. In addition, in markets historically
dominated by oligopolies, the number of providers per market rose, as we
witnessed the entrance of several additional cellular providers with the
introduction of broadband personal communications services (PCS). Such increased
competition led to price compression, making cellular service more affordable.
As a consequence, usage and market penetration increased, so although companies
may experience some loss of market share due to increased competition, this is
largely offset by the overall growth of the revenue pie. In particular, Nextel
Communications and Sygnet Wireless, Inc., two of the Trust's holdings, profited
from these trends.
What's Ahead
Recent economic data suggests moderate to slow economic growth accompanied by
benign inflation and stable to declining interest rates. If this environment
persists, high-yield corporate bonds and utility equities should remain
attractive investments over the short to intermediate term, which would bode
favorably for Franklin Multi-Income Trust.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of March 31, 1998, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the Trust's portfolio composition. Although historic
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.
PERFORMANCE SUMMARY
Franklin Multi-Income Trust's closing price on the New York Stock Exchange
(NYSE) increased $1.625, from $9.375 on March 31, 1997, to $11.00 on March 31,
1998. The Trust's share price, as measured by net asset value, increased $1.64,
from $10.34 to $11.98 for the same period.
During the reporting period, the Trust's distributions totaled $1.26 per share.
This included a December 1997 distribution consisting of the monthly dividend of
6.4 cents ($0.064), a long-term capital gain of 46.8 cents ($0.468) and a
short-term capital gain of 2.4 cents ($0.024). Distributions will vary based on
income earned by the fund and any profits realized from the sale of securities
in the portfolio as well as the level of the fund's operating expenses. Past
distributions are not predictive of future trends.
Based on an annualization of March's monthly per-share dividend of 6.4 cents
($0.064) and the NYSE closing price of $11.00 on March 31, 1998, the Trust's
distribution rate was 6.98%.
Franklin Multi-Income Trust
Dividend Distributions
4/1/97 - 3/31/98
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 reported a +32.57% cumulative total return for the
12-month period ended March 31, 1998. Total return reflects the change in the
Trust's market price on the NYSE. Based on the change in net asset value (as
opposed to market price), total return for the same period was +30.91%. All
total returns assume reinvestment of dividends and capital gains according to
the terms specified in the Trust's dividend reinvestment plan.
We urge you to view your investment in Franklin Multi-Income Trust with a
long-term perspective. As the chart shows, the Trust reported a +227.91%
cumulative total return, based on net asset value, since its inception on
October 9, 1989.
Franklin Multi-Income Trust
Periods ended 3/31/98
Since
Inception
1-Year 5-Year (10/9/89)
- --------------------------------------------------------------------------------
Cumulative Total Return1
Based on change in net asset value 30.91% 85.70% 227.91%
Based on change in market price 32.57% 72.90% 165.75%
Average Annual Total Return1
Based on change in net asset value 30.91% 13.18% 15.21%
- --------------------------------------------------------------------------------
Based on change in market price 32.57% 11.57% 12.36%
Distribution Rate2 6.98%
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 an annualization of March's 6.4 cent per share
monthly dividend and the New York Stock Exchange closing price of $11.00 on
March 31, 1998.
Franklin Multi-Income Trust paid distributions derived from long-term captial
gains of 46.80 cents ($0.4680) per share in December 1997. The fund hereby
designates such distributions as capital gain dividends per Section 852(b)(3) of
the Internal Revenue Code.
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 the 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.
DIVIDEND REINVESTMENT
AND CASH PURCHASE PLAN
The Trust's Dividend Reinvestment Plan and Cash Purchase Plan (the "Plan")
offers you a prompt and simple way to reinvest income dividends and capital gain
distributions in shares of the Trust. The Plan also allows you to purchase
additional shares of the Trust by making voluntary cash payments. First Data
Investor Services Group (the "Plan Agent"), P.O. Box 8030, Boston,
Massachusetts, 02266-8030, acts as your Plan Agent in administering the Plan.
The complete Terms and Conditions of the Dividend Reinvestment and Cash Purchase
Plan are contained in the Trust's Dividend Reinvestment and Cash Purchase Plan
Brochure dated December 1997. A copy of that Brochure may be obtained from the
Trust 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 Trust declares a dividend or capital gain distribution, you, as a
participant in the Plan, will automatically receive an equivalent amount of
shares of the Trust purchased on your behalf by the Plan Agent.
The Plan permits you on a voluntary basis to submit in cash payments of not less
than $100 each up to a total of $5,000 per month to purchase additional shares
of the Trust. It is entirely up to you whether you wish to buy additional shares
with voluntary cash payments, and you do not have to send in the same amount
each time if you do. These payments should be made by check or money order
payable to Franklin Multi-Income Trust and sent to First Data Investor Services
Group, P.O. Box 8030, Boston, Massachusetts, 02266-8030.
Your cash payment will be aggregated with the payments of other participants and
invested on your behalf by the Plan Agent in shares of the Trust which are
purchased in the open market.
The Plan Agent will invest cash payments on approximately the 15th of each month
in which no dividend or distribution is payable and, during each month in which
a dividend or distribution is payable, will invest cash payments beginning on
the dividend payments date. Under no circumstances will interest be paid on your
funds held by the Plan Agent. Accordingly, you should send any voluntary cash
payments which you wish to make shortly before an investment date but in
sufficient time to ensure that your payment will reach the Plan Agent not less
than 2 business days before an investment date. Payments received less than 2
business days before an investment date will be invested during the next month
or, if there are more than 30 days until the next investment date, will be
returned to you. You may obtain a refund of any cash payment by written notice,
if the written notice is received by the Plan Agent not less than 48 hours
before an investment date.
There is no direct charge to participants for reinvesting dividends and
distributions, since the Plan Agent's fees are paid by the Trust. However, when
shares are purchased in the open market, each participant will pay a pro rata
portion of any brokerage commissions incurred. The Plan Agent will deduct a
$5.00 service fee from each of your voluntary cash payments.
The automatic reinvestment of dividends and capital gain distributions does not
relieve you of any taxes which may be payable on such dividends or
distributions. In connection with the reinvestment of dividends and capital gain
distributions, shareholders generally will be treated as having received a
distribution equal to the cash distribution that you have been paid.
The Trust does not issue new shares in connection with the Plan. All investments
are in full and fractional shares, carried to three decimal places. If the
market price exceeds the net asset value you will receive shares that were
purchased at a price greater than net asset value per share in connection with
purchases through the Plan.
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 its name or in the name of its nominee.
This convenience provides added protection against loss, theft or inadvertent
destruction of certificates. However, you may request that a certificate
representing your Plan shares be issued to you.
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
may specify either: (a) that you wish to receive, without charge, stock
certificates issued in your name for full shares; or (b) that you prefer the
Plan Agent to sell your shares and send your proceeds less brokerage commissions
and a $5.00 fee. The Plan Agent will convert any fractional shares you hold at
the time of your withdrawal to cash at current market price and send you a check
for 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 and to
determine if your nominee will participate in the Plan on your behalf.
ANNUAL MEETING OF SHAREHOLDERS
July 16, 1997
At an Annual Meeting of Shareholders of Franklin Multi-Income Trust on July 16,
1997, shareholders of the Trust voted as follows:
1. Regarding the election of trustees to be Class Two Trustees of the Trust, to
hold office for a three-year term ending in 2000.
<TABLE>
<CAPTION>
% of % of
Outstanding % of Outstanding % of
FOR SHARES VOTED AGAINST SHARES VOTED
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S. Joseph Fortunato 3,588,386.703 61.260% 98.169% 66,913.443 1.142% 1.831%
David W. Garbellano* 3,581,418.992 61.141% 97.979% 73,881.144 1.261% 2.021%
Frank W. T. LaHaye 3,599,098.992 61.443% 98.462% 56,201.144 0.959% 1.538%
</TABLE>
2. Regarding the ratification of the selection of Coopers & Lybrand L.L.P.,
Certified Public Accountants, as the independent auditors for the Trust for the
fiscal year ending March 31, 1998.
<TABLE>
<CAPTION>
% of % of
Outstanding % of Outstanding % of
FOR SHARES VOTED AGAINST SHARES VOTED
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3,590,001.843 61.288% 98.214% 11,971.638 0.204% 0.328%
</TABLE>
*The Board notes with deep regret the passing of director David W. Garbellano,
on September 27, 1997. A search for a qualified candidate to fill this vacancy
is underway.
<TABLE>
<CAPTION>
FRANKLIN MULTI-INCOME TRUST
Financial Highlights
YEAR ENDED MARCH 31,
------------------------------------------------
1998 1997 1996 1995 1994
------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $10.34 $10.61 $9.60 $9.97 $11.38
------------------------------------------------
Income from investment operations:
Net investment income .72 .79 .78 .78 .84
Net realized and unrealized gains (losses) 2.18 -- 1.11 (.08) (.78)
------------------------------------------------
Total from investment operations 2.90 .79 1.89 .70 .06
------------------------------------------------
Less distributions:
Net investment income (.74) (.77) (.77) (.78) (.85)
In excess of net investment income (.03) -- -- (.01) --
Net realized gains (.49) (.29) (.11) (.28) (.62)
------------------------------------------------
Total distributions (1.26) (1.06) (.88) (1.07) (1.47)
------------------------------------------------
Net asset value, end of year $11.98 $10.34 $10.61 $9.60 $9.97
================================================
Market value, per share end of year1 $11.000 $9.375 $9.000 $8.750 $9.750
================================================
Total return (based on market value per share)2 32.57% 16.24% 12.87% 1.46% 5.47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) $70,190 $60,594 $62,153 $56,230 $58,391
Ratios to average net assets:
Expenses 3.00% 3.14% 3.21% 3.00% 2.90%
Net investment income 6.47% 7.48% 7.53% 6.37% 6.00%
Portfolio turnover rate 45.31% 44.40% 35.06% 29.77% 28.90%
Average commission rate paid3 $.0524 $.0522 $.0536 -- --
Total debt outstanding at end of year (000's omitted) $16,000 $16,000 $16,000 $16,000 $15,974
Asset coverage per $1,000 of debt $ 4,387 $ 3,787 $ 3,885 $ 3,514 $ 3,655
Average amount of notes per share during the year $2.73 $2.73 $2.73 $2.73 $2.73
</TABLE>
1Based on the last sale on the New York Stock Exchange.
2Total return is not annualized.
3Relates to purchases and sales of equity securities. Prior to fiscal year end
1996 disclosure of average commission rate was not required.
See notes to financial statements.
<TABLE>
<CAPTION>
FRANKLIN MULTI-INCOME TRUST
Statement of Investments, March 31, 1998
SHARES/
WARRANTS VALUE
- ----------------------------------------------------------------------------------------------------------
a,cCommon Stocks and Warrants 51.7%
Broadcasting .7%
<S> <C> <C>
aSullivan Broadcast Holdings 16,000 $ 496,000
-----------
Consumer Products .6%
RJR Nabisco Holdings Corp. 14,000 438,375
-----------
Energy 2.4%
Contectiv, Inc. 20,000 438,750
Ultramar Diamond Shamrock Corp. 33,300 1,173,825
-----------
1,612,575
-----------
Industrial .5%
aAnacomp, Inc. 20,565 313,616
-----------
aThermadyne Holdings Corp. 518 17,547
-----------
331,163
-----------
Lodging
aHost Marriott Corp. 526 9,961
Marriott International, Inc. 526 19,561
Marriott International, Class A 526 18,837
Sodexho Marriott Services, Inc. 131 3,493
-----------
51,852
-----------
Metals and Mining
aGulf States Steel, Inc., warrants 1,000 5,000
-----------
Telecommunications 3.0%
Ameritech Corp. 20,000 988,750
BellSouth Corp. 12,000 810,750
aOrion Network Systems, Inc., warrants 1,000 13,125
SBC Communications, Inc. 7,000 305,375
-----------
2,118,000
-----------
Utilities 44.5%
Allegheny Energy, Inc. 50,000 1,678,125
American Electric Power Co., Inc. 30,000 1,507,500
Central & South West Corp. 29,900 799,825
Cinergy Corp. 57,200 2,116,400
Dominion Resources, Inc. 41,000 1,722,000
DPL, Inc. 75,900 1,480,050
Duke Energy Corp. 17,000 1,012,563
Edison International 14,500 425,938
Enova Corp. 34,000 949,875
Enron Corp. 21,626 1,002,906
Entergy Corp. 25,400 755,650
Florida Progress Corp. 25,000 1,042,188
FPL Group, Inc. 33,900 2,178,075
New Century Energies, Inc. 71,000 3,576,625
New England Electric System 6,800 310,675
New Jersey Resources Corp. 43,900 1,720,331
OGE Energy Corp. 15,600 902,850
Utilities (cont.)
Pacific Enterprises 49,600 $ 2,024,300
PacifiCorp 50,000 1,231,250
Puget Sound Energy, Inc. 25,000 704,688
SCANA Corp. 40,000 1,237,500
Southern Co. 63,100 1,747,081
Texas Utilities Co. 28,100 1,104,681
-----------
31,231,076
-----------
Total Common Stocks and Warrants (Cost $24,082,525) 36,284,041
-----------
Partnership Units
Financial Services
a,cPG Partners I, L.P. Preference Units (Cost $0) 1 27,333
-----------
Preferred Stocks 7.8%
Broadcasting 1.6%
Sinclair Capital, 11.625% pfd. 10,000 1,097,500
-----------
Food & Beverage .8%
Ralston Purina Co., 7.00% cvt. pfd. 9,300 587,063
-----------
Energy 1.9%
CMS Energy Corp., 7.75% quarterly cvt. pfd. 22,000 1,390,125
-----------
Lodging .6%
Hilton Hotels, 8.00% cvt. pfd. 14,000 416,500
-----------
Telecommunications 1.4%
Nortel Inversora SA, 10.00% cvt. pfd. (Argentina) 15,000 952,500
-----------
Transportation 1.5%
CNF Trust I, 5.00% cvt. pfd., Series A 5,700 330,600
Union Pacific Corp., 144A, 6.25% quarterly cvt. pfd. 13,300 708,225
-----------
1,038,825
-----------
Total Preferred Stocks (Cost $4,589,319) 5,482,513
-----------
PRINCIPAL
AMOUNT*
---------
Non-Convertible Bonds 58.4%
Automotive 2.6%
Advanced Accessory Systems, senior sub. notes, 144A, 9.75%, 10/01/07 $ 500,000 516,250
Aetna Industries, Inc., senior notes, 11.875%, 10/01/06 1,000,000 965,000
bHarvard Industries, Inc., senior notes, 11.125%, 8/01/05 1,000,000 375,000
-----------
1,856,250
-----------
Broadcasting 4.1%
Chancellor Media Corp., senior sub. notes, 8.75%, 6/15/07 1,000,000 1,050,000
LIN Television Corp., senior disc. notes, 144A, zero coupon to 3/01/03,
10.00% thereafter, 3/01/08 1,000,000 632,500
Sullivan Broadcast Holdings, senior deb., 13.25%, 12/15/06 1,000,000 1,200,000
-----------
2,882,500
-----------
Cable .7%
Diamond Holdings, Plc., senior notes, 144A, 9.125%, 2/01/08 (United Kingdom)$ 500,000 $ 513,750
-----------
Chemical Products 1.5%
Huntsman Corp., senior sub. notes, 144A, 9.50%, 7/01/07 1,000,000 1,025,000
-----------
Consumer Products 2.8%
E & S Holdings Corp., senior sub. notes, Series B, 10.375%, 10/01/06 500,000 418,125
Revlon Consumer Products Corp., senior sub notes, 144A, 8.625%, 2/01/08 1,000,000 1,015,000
RJR Nabisco, Inc., senior notes, 9.25%, 8/15/13 500,000 557,144
-----------
1,990,269
-----------
Containers and Packaging 2.8%
Anchor Glass, first mortgage, 144A, 11.25%, 4/01/05 1,000,000 1,110,000
Graham Packaging Co., senior sub. notes, 144A, 8.75%, 1/15/08 200,000 200,500
Graham Packaging Holdings, senior disc. notes, 144A, zero coupon to 1/15/03,
10.75% thereafter, 1/15/09 200,000 125,000
U.S. Can Corp., senior sub. notes, Series B, 10.125%, 10/15/06 500,000 537,500
-----------
1,973,000
-----------
Energy 3.1%
Abraxas Petroleum Corp., senior notes, Series B, 11.50%, 11/01/04 200,000 206,500
Abraxas Petroleum Corp., senior notes, 144A, 11.50%, 11/01/04 600,000 618,000
Dailey International, Inc., senior notes, 144A, 9.50%, 2/15/08 300,000 302,250
Forcenergy, Inc., senior sub. notes, 9.50%, 11/01/06 500,000 521,250
Pride Petroleum Services, Inc., senior notes, 9.375%, 5/01/07 500,000 530,000
-----------
2,178,000
-----------
Food Retailing 3.1%
Fleming Cos., Inc., senior sub. notes, 10.50%, 12/01/04 1,000,000 1,065,000
Penn Traffic Co., senior notes, 8.625%, 12/15/03 1,000,000 820,000
Shoppers Food Warehouse Corp., senior notes, 9.75%, 6/15/04 250,000 266,875
-----------
2,151,875
-----------
Foreign Government Agencies .6%
ESCOM, E168, utility deb., 11.00%, 6/01/08 (South Africa) 2,175,000 ZAR 377,463
-----------
Health Care 2.3%
Abbey Healthcare Group, Inc., senior sub. notes, 9.50%, 11/01/02 1,000,000 1,010,000
Magellan Health Services, Inc., senior sub notes, 144A, 9.00%, 2/15/08 600,000 606,000
-----------
1,616,000
-----------
Industrial 6.8%
Allied Waste Industries, Inc., senior disc. notes, zero coupon to 6/01/02,
11.30% thereafter, 6/01/07 1,500,000 1,110,000
Clark R&M Inc., senior sub. notes, 8.875%,11/15/07 1,000,000 1,017,500
Derlan Industries, Ltd., senior notes, 10.00%, 1/15/07 (Canada) 500,000 527,500
Falcon Building Products, senior disc. notes, Series B, zero coupon to 6/15/02,
10.50% thereafter, 6/15/07 500,000 342,500
Intertek Finance, Plc., senior sub. notes, Series B, 10.25%,11/01/06
(United Kingdom) 500,000 537,500
Nortek, Inc., senior notes, Series B, 9.125%, 9/01/07 500,000 518,750
Industrial (cont.)
Oshkosh Truck Corp., senior sub notes, 144A, 8.75%, 3/01/08 $ 400,000 $ 406,000
Universal Compression, Inc., senior disc. notes, 144A, zero coupon to 2/15/03,
9.875% thereafter, 2/15/08 500,000 316,875
-----------
4,776,625
-----------
Information and Technology Systems .8%
Celestica International, Inc., senior sub. notes, 10.50%, 12/31/06 (Canada) 500,000 545,000
-----------
Media 4.9%
Big Flower Press Holdings, Inc., senior sub. notes, 144A, 8.875%, 7/01/07 500,000 516,250
Century Communication Corp., senior disc. notes, 144A, zero coupon, 1/15/08 1,000,000 440,000
Fox Kids Worldwide, Inc., senior notes, 144A, 9.25%, 11/01/07 300,000 303,000
Fox/Liberty Network L.L.C., senior disc. notes, zero coupon to 8/15/02,
9.75% thereafter, 8/15/07 1,000,000 687,500
Outdoor Systems, Inc., senior sub. notes, 8.875%, 6/15/07 1,000,000 1,055,000
Six Flags Entertainment Corp., senior notes, 8.875%, 4/01/06 400,000 409,250
-----------
3,411,000
-----------
Metals and Mining 1.5%
LTV Corp., senior notes, Series AI, 8.20%, 9/15/07 1,000,000 1,017,500
-----------
Paper and Forest Products 1.2%
Pindo Deli Finance Mauritius Ltd., senior notes, 144A, 10.75%,
10/01/07 (Indonesia) 1,000,000 822,500
-----------
Restaurant 1.6%
AmeriServe Food Co., senior sub. notes, 10.125%, 7/15/07 750,000 810,000
AmeriServe Food Dist., Inc., senior sub. notes, 8.875%, 10/15/06 250,000 258,750
-----------
1,068,750
-----------
Retail .7%
Specialty Retailers, Inc., senior notes, Series B, 8.50%, 7/15/05 500,000 516,250
-----------
Telecommunications 3.1%
Flag Limited, senior notes, 144A, 8.25%, 1/30/08 (Bermuda) 200,000 205,000
Intermedia Communications Inc., senior disc. notes, Series B, zero coupon to 7/15/02,
11.25% thereafter, 7/15/07 1,250,000 934,375
NEXTLINK Communications, Inc., senior notes, 9.625%, 10/01/07 500,000 532,500
NEXTLINK Communications, Inc., senior notes, 144A, 9.00%, 3/15/08 500,000 515,625
-----------
2,187,500
-----------
Textiles and Apparel 1.5%
Collins & Aikman Floor Coverings Inc., senior sub. notes, Series B,
10.00%, 1/15/07 1,000,000 1,047,500
-----------
Utilities - Electric 1.1%
AES Corp., senior sub. notes, 144A, 8.50%, 11/01/07 750,000 774,373
-----------
Wireless Communication 11.6%
Arch Communications Group, Inc., senior disc. notes, zero coupon to 3/15/01,
10.875% thereafter, 3/15/08 1,000,000 580,000
Comcast Cellular Corp., senior notes, Series B, 9.50%, 5/01/07 1,000,000 1,055,000
Metrocall, Inc., senior sub. notes, 9.75%, 11/01/07 1,000,000 1,035,000
Wireless Communication (cont.)
Millicom International Cellular SA, senior disc. notes, zero coupon to 6/01/01,
13.50% thereafter, 6/01/06 (Luxembourg) $2,000,000 $ 1,575,000
Nextel Communications, senior disc. notes, zero coupon to 2/15/99,
9.75% thereafter, 8/15/04 1,000,000 965,000
Orion Network Systems, Inc., units, senior disc. notes, zero coupon to 1/15/02,
12.50% thereafter, 1/15/07 1,000,000 785,000
Paging Network, Inc., senior sub. notes, 10.00%, 10/15/08 1,000,000 1,055,000
Sygnet Wireless, Inc., senior notes, 11.50%, 10/01/06 1,000,000 1,125,000
-----------
8,175,000
-----------
Total Non-Convertible Bonds (Cost $38,859,498) 40,906,105
-----------
Convertible Bonds 2.1%
Consumer Products .3%
Rent-Way, Inc., cvt. sub. deb., 7.00%, 2/01/07 100,000 185,625
-----------
Information and Technology Systems 1.1%
Dovatron International, Inc., cvt. sub. notes, 144A, 6.00%, 10/15/02 500,000 627,500
Reptron Electronics, Inc., cvt. sub. notes, 6.75%, 8/01/04 200,000 152,000
-----------
779,500
-----------
Real Estate Investment Trust .7%
Macerich Co., cvt. sub. notes, 144A, 7.25%, 12/15/02 500,000 512,500
-----------
Total Convertible Bonds (Cost $1,401,572) 1,477,625
-----------
Total Investments (Cost $68,932,914) 120.0% 84,177,617
Other Assets, less Liabilities (20.0)% (13,987,787)
-----------
Net Assets 100.0% $70,189,830
===========
CURRENCY ABBREVIATIONS
ZAR - South African Rand
* Securities traded in U.S. dollars unless otherwise indicated.
a Non-income producing.
b See Note 7 regarding defaulted securities.
c See Note 8 regarding restricted securities.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN MULTI-INCOME TRUST
Financial Statements
Statement of Assets and Liabilities
March 31, 1998
Assets:
<S> <C>
Investments in securities, at value (cost $68,932,914) $84,177,617
Receivables:
Investment securities sold 3,080,684
Dividends and interest 1,391,359
Note issuance costs (Note 3) 42,656
-----------
Total assets 88,692,316
-----------
Liabilities:
Payables:
Investment securities purchased 1,880,597
Affiliates 60,284
Notes (Note 3) 16,000,000
Accrued interest (Note 3) 48,000
Distributions to shareholders 374,886
Funds advanced by custodian 91,867
Other liabilities 46,852
-----------
Total liabilities 18,502,486
-----------
Net assets, at value $70,189,830
===========
Net assets consist of:
Accumulated distributions in excess of net investment income $ (171,723)
Net unrealized appreciation 15,244,340
Accumulated net realized gain 1,327,099
Capital shares 53,790,114
-----------
Net assets, at value $70,189,830
===========
Net asset value per share ($70,189,830 / 5,857,600 shares of beneficial interest outstanding) $11.98
===========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
FRANKLIN MULTI-INCOME TRUST
Financial Statements (continued)
Statement of Operations
for the year ended March 31, 1998
Investment income:
(net of foreign taxes of $1,543)
<S> <C>
Dividends $2,025,223
Interest 4,189,259
----------
Total investment income $ 6,214,482
Expenses:
Management fees (Note 4) 694,082
Transfer agent fees 27,999
Custodian fees 1,901
Reports to shareholders 11,888
Registration and filing fees 75
Professional fees 24,318
Trustees' fees and expenses (Note 4) 9,494
Amortization of note issuance costs 29,250
Other 18,581
----------
Total expenses 817,588
Interest expense (Note 3) 1,152,000
---------
Net expenses 1,969,588
---------
Net investment income 4,244,894
---------
Realized and unrealized gains (losses):
Net realized gain from:
Investments 3,136,740
Foreign currency transactions 1,844
----------
Net realized gain 3,138,584
Net unrealized appreciation (depreciation) on:
Investments 9,594,022
Translation of assets and liabilities
denominated in foreign currencies (905)
----------
Net unrealized appreciation 9,593,117
---------
Net realized and unrealized gain 12,731,701
---------
Net increase in net assets resulting from operations $16,976,595
=========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN MULTI-INCOME TRUST
Financial Statements (continued)
Statements of Changes in Net Assets
for the years ended March 31, 1998 and 1997
1998 1997
------------------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C>
Net investment income $ 4,244,894 $ 4,655,450
Net realized gain from investments and foreign currency transactions 3,138,584 2,055,620
Net unrealized appreciation (depreciation) on investments and translation of assets and
liabilities denominated in foreign currencies 9,593,117 (2,055,218)
----------------------------
Net increase in net assets resulting from operations 16,976,595 4,655,852
Distributions to shareholders from:
Net investment income (4,326,914) (4,527,925)
In excess of net investment income (171,723) --
Net realized gains (2,881,939) (1,686,989)
----------------------------
Total distributions to shareholders (7,380,576) (6,214,914)
----------------------------
Net increase (decrease) in net assets 9,596,019 (1,559,062)
Net assets:
Beginning of year 60,593,811 62,152,873
---------------------------
End of year $70,189,830 $60,593,811
===========================
Undistributed net investment income (accumulated distributions in excess of net
investment income) included in net assets End of year $ (171,723) $ 82,390
===========================
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FRANKLIN MULTI-INCOME TRUST
Financial Statements (continued)
<S> <C>
Statement of Cash Flows
for the year ended March 31, 1998
Dividends and interest received $ 4,734,956
Operating expenses paid (770,321)
Interest expense paid (1,152,000)
-----------
Cash provided- operations 2,812,635
===========
Investment purchases (227,045,424)
Investment sales 231,521,498
-----------
Cash provided- investments 4,476,074
===========
Distributions to shareholders (7,380,576)
-----------
Cash used- financing activities (7,380,576)
===========
Net change in cash (91,867)
Cash at beginning of year --
-----------
Funds advanced by custodian at end of year $ (91,867)
===========
Reconciliation of Net Investment Income to Net CashProvided by Operating
Activities for the year ended March 31, 1998
Net investment income $4,244,894
Adjustments to reconcile net investment income to net cash provided by operating activities:
Dividends and interest (1,479,526)
Operating expenses 47,267
-----------
Net cash provided by operating activities $2,812,635
===========
</TABLE>
See notes to financial statements.
FRANKLIN MULTI-INCOME TRUST
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Multi-Income Trust (the Fund) is registered under the Investment
Company Act of 1940 as a closed-end, non-diversified investment company. The
Fund has two classes of securities: senior fixed-rate notes (the Notes) and
shares of beneficial interest (the Shares). The Fund seeks to provide high
current income.
The following summarizes the Fund's significant accounting policies.
a. Security Valuation
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Restricted securities and securities for
which market quotations are not readily available are valued at fair value as
determined by management in accordance with procedures established by the Board
of Trustees. b. Foreign Currency Translation
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollars
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
c. Income Taxes
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and
distribute all of its taxable income.
d. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Bond discount is
amortized on an income tax basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
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 expense during the reporting
period. Actual results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
At March 31, 1998, there were an unlimited number of shares authorized ($0.01
par value). During the year ended March 31, 1998, there were no share
transactions; all reinvested distributions were satisfied with previously issued
shares purchased in the open market.
3. SENIOR FIXED-RATE NOTES
On August 16, 1994, the Fund issued $16 million principal amount of a new class
of five-year senior notes (the Notes). The Notes are general unsecured
obligations of the Fund and rank senior to Trust shares and all existing or
future unsecured indebtedness of the Fund.
The Notes bear interest, payable semi-annually, at the rate of 7.20% per year,
to 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. The Fund is required to maintain on a monthly basis a specified
discounted asset value for its portfolio in compliance with guidelines
established by Standard & Poor's Corporation, and is required to maintain asset
coverage for the Notes of at least 300%. The Fund has met these requirements
during the year ended March 31, 1998.
The issuance costs of $146,250 incurred by the Fund are deferred and amortized
on a straight line basis over the term of the Notes.
4. TRANSACTION WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or trustees of
Franklin Advisers, Inc. (Advisers) and Franklin Templeton Services, Inc. (FT
Services), the Fund's investment manager and administrative manager,
respectively.
The Fund pays an investment management fee to Advisers of 0.85% per year of the
average weekly net assets of the Fund, excluding the principal amount of the
Notes.
Under an agreement with Advisers, FT Services provides administrative services
to the Fund. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Fund.
5. INCOME TAXES
At March 31, 1998, the net unrealized appreciation based on the cost of
investments for income tax purposes of $68,932,914 was as follows:
Unrealized appreciation $15,839,667
Unrealized depreciation (594,964)
-------------
Net unrealized appreciation $15,244,703
=============
5. INCOME TAXES (cont.)
Net investment income and net realized capital gains differ for financial
statement and tax purposes primarily due to differing treatments of foreign
currency transactions.
6. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended March 31, 1998 aggregated $36,526,004 and $40,965,601, respectively.
7. CREDIT RISK
The Fund has 54.3% of its portfolio invested in lower rated and comparable
quality unrated high yield securities, which 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. At March 31, 1998, the Fund
held one defaulted security with a value aggregating $375,000 representing .5%
of the Fund's net assets. For information as to specific securities, see the
accompanying Statement of Investments.
For financial reporting purposes, the Fund discontinues accruing income on
defaulted bonds and provides an estimate for losses on interest receivable.
The Fund has investments in excess of 10% of its total net assets in the
Wireless Communication industry. Such concentration may subject the Fund more
significantly to economic changes occurring within that industry.
8. RESTRICTED SECURITIES
The Fund may purchase securities through a private offering that generally
cannot be resold to the public without prior registration under the Securities
Act of 1933. The costs of registering such securities are paid by the issuer.
Restricted securities held at March 31, 1998 are as follows:
Acquisition
Units Security Date Cost Value
- --------------------------------------------------------------------------------
1 PG Partners I, L.P.................. 3/13/93 $-- $27,333
9. OTHER CONSIDERATIONS
Advisers, as the Fund's manager, may serve as a member of various credit
committees, representing credit interests in certain corporate restructuring
negotiations. Currently, the manager serves on the credit committee for Harvard
Industries. As a result of this involvement, Advisers may be in possession of
certain material non-public information. Advisers has not nor does it intend to
sell any of its holdings in these securities while in possession of this
information.
FRANKLIN MULTI-INCOME TRUST
Independent Auditors' Report
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, as
of March 31, 1998, and the related statements of operations and cash flows for
the year ended, and 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 five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodians and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of March 31, 1998, the results of its operations and its cash flows for
the year then ended, and 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 five years
in the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
May 5, 1998
FRANKLIN MULTI-INCOME TRUST
Tax Information
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby
designates the following amounts as capital gain dividends for the fiscal year
ended March 31, 1998:
28% Gain $ 103,225
20% Gain $2,727,748
-------------
Total $2,830,973
=============
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
33.55% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended March 31, 1998.
Franklin Multi-Income Trust
Annual Report
March 31, 1998.
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 of the Franklin
Multi-Income Trust based on a percentage of total market value as of 3/31/98.
Corporate Bonds 48.1%
Utility Stocks 37.1%
Misc. Equities & Preferred Stock 12.6%
Convertible Bonds 1.8%
Foreign Currency Denominated Bonds 0.4%
