SHAREHOLDER LETTER
Your Fund's Objective: Franklin Multi-Income Trust seeks to provide high,
current income consistent with preservation of capital.
Dear Shareholder:
This semiannual report for Franklin Multi-Income Trust covers the period ended
September 30, 1999. During the six-months under review, rising interest rates
created a challenging environment for high yield bonds and utility equities.
After significantly easing interest rates in the fourth quarter of 1998,
concerns about domestic inflationary tendencies sparked a tightening approach on
the part of the Federal Open Market Committee (FOMC). They twice raised the
federal funds target rate by 0.25%, and it ended the period at 5.25%. The yield
on the benchmark 10-year U.S. Treasury bond increased from 5.24% on March 1,
1999, to 5.90% on September 30, 1999. Also, following several quarters of
remarkably robust expansion and benign inflation in 1998, economic data releases
reflected a moderate slowdown in the pace of growth over the first half of 1999.
The annual inflation rate, as measured by the Consumer Price Index, rose from
1.7% at the beginning of the reporting period to 2.6% at the period's close.
CONTENTS
Shareholder Letter ........... 1
Performance Summary .......... 8
Year 2000 Update ............. 10
Dividend Reinvestment and
Cash Purchase Plan ........... 12
Financial Highlights &
Statement of Investments ..... 16
Financial Statements ......... 22
Notes to
Financial Statements ......... 26
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 17 of
this report.
WHAT IS RISK PREMIUM?
High yield bonds are by nature riskier than U.S. Treasury bonds, so investors
demand a risk premium to invest in them. This risk premium is measured in the
form of the additional interest rate investors require, above that on U.S.
Treasuries, or the interest-rate spread between the two assets. When spreads are
large (wide) it indicates risk aversion, and the fact that investors are
demanding to be paid more to invest capital in high yield companies.
The economy's direction and its effect on inflationary pressures will contribute
to the level of volatility that impacts the bond and utility markets in the near
future. During the period under review, many investors reacted very swiftly to
new releases of economic data and Federal Reserve Board announcements, and we
believe that in many instances the market overcorrected. Investors with
short-term investment horizons may view such instability as unfavorable.
However, we prefer to take a long-term approach toward investing and find that
recent market conditions afforded us opportunities not only to increase the
funds' income-earning potential, but also to enhance the portfolio's overall
structure.
PORTFOLIO NOTES
Despite generally supportive corporate fundamentals, the interest-rate increases
negatively impacted fixed income and utility equity assets across the board,
with a similar effect on the Trust. Interest-rate volatility, combined with
expectations for heavy new issuance later in the period, increased the risk
premium investors demanded for high yield bonds. This risk premium, measured by
the interest rate spread over U.S. Treasury bonds, remained large by historical
standards through the period's close. Utility stocks, on the other hand,
participated in the broad-based equity market strength at the beginning of the
reporting period, but two successive interest-rate increases dramatically
curtailed sector gains later in the period.
The interest-rate hikes caused most fixed-income investment products'
performance to suffer. Nonetheless, the Trust's returns were in line with its
benchmark indices. We believe that once interest-rate volatility decreases, our
focus on growth-oriented sectors and strong individual security selection will
leave the Trust well-positioned to take advantage of positive industry trends
over the medium to long term.
SECTOR DISCUSSIONS
WIRELESS
During the reporting period, the Trust's cellular holdings benefited from
industry consolidation and increased market penetration. One of our holdings,
Comcast Cellular Corp., was acquired by SBC Communications Inc., an
investment-grade company with a stronger credit profile. The Comcast bonds were
subsequently tendered, and we sold them at a significant premium. Two other
holdings, Dobson/Sygnet Communications Co. and Nextel Communications Inc., also
benefited from solid subscriber growth and strong business plans, which
positioned them advantageously to face increased competition. The paging sector
holdings, unfortunately, came under pressure due to intense industry competition
and concern over the growing consumer preference for cellular phones. Pricing
power declined, and we expect competition to remain fierce in this sector.
However, it should be noted that much of the paging sector competition comes
from the cellular providers, a trend which should benefit the Trust's cellular
names in general.
TELECOMMUNICATIONS
In this sector, we focused on companies with the ability to provide a complete
spectrum of services to their customers, called "bundling," and that have strong
management teams, their own networks and equipment, and ready access to capital.
We also positioned the Trust to take advantage of industry consolidation.
PORTFOLIO BREAKDOWN
Based on Total Market Value
9/30/99
Corporate Bonds -- 50.85%
Utilities Stocks -- 34.29%
Miscellaneous Equities & Preferred Stocks -- 11.96%
Convertible Bonds -- 0.83%
Foreign Currency Denominated Bonds -- 0.40%
Cash & Other Assets -- 1.67%
TOP 10 HOLDINGS
Based on Total Market Value
9/30/99
COMPANY
SECTOR (SECURITY TYPE)
New Century Energies Inc. ................ 2.59%
Utility (stock)
Enron Corp. .............................. 2.48%
Utility (stock)
FPL Group Inc. ........................... 2.37%
Utility (stock)
Unicom Corp. ............................. 2.15%
Utility (stock)
CMS Energy Corp. ......................... 2.04%
Utility (stock)
Millicom Int'l Cellular SA ............... 1.97%
Telecommunications (bond)
Edison International ..................... 1.97%
Utility (stock)
Southern Co. ............................. 1.83%
Utility (stock)
Duke Energy .............................. 1.73%
Utility (stock)
Dominion Resources Inc. .................. 1.63%
Utility (stock)
One such example was the merger between IXC Communications Inc. and Cincinnati
Bell Inc., which significantly improved IXC's financial position due to
Cincinnati Bell's substantially stronger credit profile. Although competitive
local exchange carrier (CLEC) consolidation took place more slowly than
expected, we believe the pace is likely to accelerate and that CLEC valuations
at the end of the reporting period were attractive. We maintained our favorable
outlook for telecommunications companies and added Williams Communication Group
Inc. and PSINet Inc. to the portfolio. Williams Communications is a wholesale
communications provider that boasts superior access to capital. It also has
successfully taken advantage of its strong engineering and construction
background, along with existing pipeline permits, to build its network. PSINet
is an Internet service provider (ISP) that focuses primarily on business
customers, but also sells wholesale services to other ISPs to fully utilize its
network. PSINet is a rapidly growing, globally focused company, which we believe
will make a valuable addition to the Trust going forward.
CABLE & BROADCASTING
Mergers and acquisitions continued during the review period, and the strong
demand and efficiencies of scale achieved through consolidation proved
beneficial for this sector. We maintained our emphasis on competitive companies
with lower cost structures, and in general, we looked for companies that were
leaders in their respective markets. We also found attractive the slightly more
defensive nature of the cable companies' utility-like revenue streams from their
core video product, given the industry's high potential for growth. In the cable
sector, the Trust's position in Charter Communications Holdings LLC performed
well. The company filed for an initial public offering, and investors' beliefs
that the company's capital structure would benefit from the prospective equity
offering strengthened its stock. In the broadcasting sector, the Federal
Communications Commission (FCC) relaxed ownership restrictions on television
stations, which should precipitate further consolidation activity in the sector
moving forward. The Trust's position in Fox/Liberty Networks LLC performed well,
as Fox/Liberty was acquired by Fox Entertainment Group, Inc. and was upgraded to
investment grade by Standard & Poors(R), an international credit rating agency.
UTILITIES
As with the telephone and gas industries, we anticipate that the electric
utilities industry deregulation now under way should lead to a higher industry
growth rate over the medium term, despite the pressure of near-term
interest-rate volatility. During the reporting period we maintained our focus on
utility companies located in states whose legislatures have crafted favorable
plans regarding the transition to competition, as well as those companies that
achieved above-average earnings growth through unregulated business activities.
So far, 1999 has been the most active year for the passage of retail competition
legislation, as Arkansas, Maryland, New Jersey, Ohio, Texas and Virginia passed
such laws. With a portion of the regulatory umbrella removed, individual
managements are more inclined to improve their equity returns, become more
efficient and pursue innovative investment ideas. Virginia-based Dominion
Resources Inc., one the fund's five largest positions, is an example of how
beneficial legislation can impact individual electric companies. In March, the
Virginia Governor signed into law legislation that provided a favorable
transition to competition. Since the signing, through September 30, 1999,
Dominion's stock price outperformed the S&P Electric Utilities Index by 24.75%.
DIVIDEND DISTRIBUTIONS
4/1/99-9/30/99
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 5.6 cents
- ---------------------------
TOTAL 37.6 cents
Diversification can be a key performance driver for any company, but may be
particularly relevant to electric utilities, which often have difficulty
achieving significant valuation premiums to their peers based solely on the core
electric business. In last year's annual report, we highlighted Montana Power
Co., which we first began acquiring in the beginning of 1998 for its outstanding
diversification strategy. Montana Power remains one of the fund's core holdings
and was one of the best-performing electric utility companies in the U.S. for
the year ended September 30, 1999. We are pleased with Montana Power's success
and are actively searching for other companies with hidden value among
unregulated investments.
WHAT'S AHEAD
Recent economic data suggests positive growth going forward, as underlying
fundamentals remain supportive, and inflation, although slightly higher, is
still relatively benign and low by historical standards. Furthermore, we believe
the FOMC's two interest-rate hikes during the reporting period helped reduce
uncertainty about interest rates, and that the likelihood of significant rate
increases in the near future is relatively low. Moderate growth, coupled with
historically low inflation, should provide a favorable environment for high
yield bonds and utility equities over the near to intermediate term, provided
interest rates remain stable. We believe that, on a historical basis, utility
equity and high yield bond valuations continue to be attractive and that
improving fundamentals lend encouragement for future sector performance.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of September 30, 1999, the end of the reporting period. However,
market and economic conditions are changing constantly, which can be expected to
affect our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy. As always, we appreciate
your continued participation in Franklin Multi-Income Trust and look forward to
serving your future investment needs.
Sincerely,
/s/ Christopher J. Molumphy
Christopher J. Molumphy
Portfolio Manager
Franklin Multi-Income Trust
PERFORMANCE SUMMARY AS OF 9/30/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions according to the terms specified in the Trust's dividend
reinvestment and cash purchase plan.
PRICE AND DISTRIBUTION INFORMATION
<TABLE>
<CAPTION>
CHANGE 9/30/99 3/31/99
------------------------------
<S> <C> <C> <C>
Net Asset Value -$0.41 $9.64 $10.05
Market Price (NYSE) -$1.06 $7.94 $ 9.00
</TABLE>
<TABLE>
<CAPTION>
DISTRIBUTIONS (4/1/99 - 9/30/99)
------------------------------
<S> <C>
Dividend Income $0.368
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION
6-MONTH 1-YEAR 5-YEAR (10/9/89)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1)
Based on change in
net asset value ............. -0.10% -2.37% +74.67% +216.08%
Based on change in
market price ................ -8.01% -10.77% +63.29% +142.42%
Average Annual Total Return(1)
Based on change in
net asset value ............. -0.10% -2.37% +11.80% +12.23%
Based on change in
market price ................ -8.01% -10.77% +10.30% +9.28%
Distribution Rate(2) .. 8.47%
</TABLE>
1. Total return calculations represent the cumulative and average annual change
in value of an investment over the periods indicated. Six-month return has not
been annualized.
2. Distribution rate is based on an annualization of the Trust's 5.6 cent per
share September monthly dividend and the NYSE closing price of $7.94 on
September 30, 1999.
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility, and the economic,
social and political climates of countries where the Trust invests. Emerging
markets involve heightened risks related to the same factors, in addition to
those associated with their relatively small size and lesser liquidity. You may
have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
PORTFOLIO OPERATIONS
CHRISTOPHER MOLUMPHY
Senior Portfolio Manager
Franklin Advisers, Inc.
- --------------------------------------------------------------------------------
Christopher Molumphy earned his Bachelor of Arts degree in economics from
Stanford University and his master's degree in finance from the University of
Chicago. He has been with Franklin Advisers, Inc. since 1988. Mr. Molumphy is a
Chartered Financial Analyst and a member of several securities industry
associations. He has managed Franklin Multi-Income Trust since 1991.
FRANKLIN TEMPLETON
IS READY FOR YEAR 2000
Year 2000 Readiness Disclosure as of 9/30/99
WE ARE READY!
WE'VE DONE A LOT TO PREPARE!
The enormous scope of this project encompassed practically every
computer-dependent record and process within the company. Naturally, our Y2K
plan focused first on readying "mission-critical" systems -- those that are
necessary for our core business functions. As of September 30, 1999, all our
mission-critical systems that could affect our funds were certified as Y2K
compliant.
Our business operations rely greatly on a complex, worldwide network of computer
systems owned and managed by third parties. We continue to work with these
outside companies and your fund's transfer agent to confirm their preparedness
for Year 2000.
WE HAVE CONTINGENCY PLANS.
Our company recognizes that even our extensive testing cannot guarantee the
absence of difficulties associated with the Y2K transition. Therefore, we are
developing and integrating worldwide contingency plans.
HOW DOES YEAR 2000 AFFECT OUR
PORTFOLIO MANAGERS' INVESTMENT STRATEGIES?
All our portfolio managers recognize the importance of Year 2000 and its
potential to impact the issuers and industries in which we invest, as well as
the U.S. and world economy as a whole. As long-term investors, we seek to make
and hold investments in companies we believe are well-managed, with good
prospects for the future. In our experience, such companies are more likely to
have sufficient Y2K programs in place.
Technological changes are ever-present in our industry, and we believe we have
the experience and skills necessary to realize and to react to any challenges
that may arise due to this transition. Once again, Franklin Templeton is ready
for Year 2000, and we look forward to moving into the new millennium with you.
For additional information on Franklin Templeton's Y2K efforts, check our Web
site at www.franklintempleton.com.
Franklin Templeton is confident it is well-positioned to meet the challenges of
Y2K.
These statements should be considered Year 2000 Readiness Disclosures, as such
term is understood under the "Year 2000 Information and Readiness Disclosure
Act." This information is not intended as a representation or warranty and does
not create a legal obligation on the part of the fund, or Franklin Resources,
Inc. and its affiliates to the recipient.
DIVIDEND REINVESTMENT
AND CASH PURCHASE PLAN
The Trust's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers you
a prompt and simple way to reinvest 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. A copy of that Brochure
may be obtained from the Trust at the address on the back 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 payment 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 two business days before an investment date. Payments received less than
two 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 Plan Agent receives the written notice not less than 48 hours before an
investment date.
There is no direct charge to participants for reinvesting dividends and capital
gain 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 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 would 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 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 capital gain 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 all full shares; or (b) that you prefer the
Plan Agent to sell your shares and send you the 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 your 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.
The Trust or the Plan Agent may amend or terminate the Plan. You will receive
written notice at least 90 days before the effective date of termination or of
any amendment. In the case of termination, you will receive written notice at
least 90 days before the record date of any dividend or capital gain
distribution by the Trust.
FRANKLIN MULTI-INCOME TRUST
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED MARCH 31,
SEPTEMBER 30, 1999 --------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ..................... $10.04 $11.98 $10.34 $10.61 $9.60 $9.97
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income ................................... .35 .76 .72 .79 .78 .78
Net realized and unrealized gains (losses) .............. (.38) (1.70) 2.18 -- 1.11 (.08)
------ ------ ------ ------ ------ ------
Total from investment operations ......................... (.03) (.94) 2.90 .79 1.89 .70
------ ------ ------ ------ ------ ------
Less distributions from:
Net investment income ................................... (.35) (.76) (.74) (.77) (.77) (.78)
In excess of net investment income ...................... (.02) (.01) (.03) -- -- (.01)
Net realized gains ...................................... -- (.23) (.49) (.29) (.11) (.28)
------ ------ ------ ------ ------ ------
Total distributions ...................................... (.37) (1.00) (1.26) (1.06) (.88) (1.07)
------ ------ ------ ------ ------ ------
Net asset value, end of period ........................... $9.64 $10.04 $11.98 $10.34 $10.61 $9.60
====== ====== ====== ====== ====== ======
Market value, end of period(1) ........................... $7.938 $9.000 $11.000 $9.375 $9.000 $8.750
====== ====== ====== ====== ====== ======
Total return (based on market value per share)* .......... (8.01)% (9.58)% 32.57% 16.24% 12.87% 1.46%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ........................ $56,463 $58,827 $70,190 $60,594 $62,153 $56,230
Ratios to average net assets:
Expenses ............................................... 3.22%** 3.07% 3.00% 3.14% 3.21% 3.00%
Net investment income .................................. 6.82%** 6.87% 6.47% 7.48% 7.53% 6.37%
Portfolio turnover rate .................................. 13.44% 24.31% 45.31% 44.40% 35.06% 29.77%
Total debt outstanding at end of period (000's omitted)... $16,000 $16,000 $16,000 $16,000 $16,000 $16,000
Asset coverage per $1,000 of debt ........................ $3,529 $3,677 $4,387 $3,787 $3,885 $3,514
Average amount of notes per share during the period ...... $2.73 $2.73 $2.73 $2.73 $2.73 $2.73
</TABLE>
* Total return is not annualized for periods less than one year.
** Annualized
(1) Based on the last sale on the New York Stock Exchange.
See notes to financial statements.
FRANKLIN MULTI-INCOME TRUST
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES/
WARRANTS VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS 52.6%
COMMERCIAL SERVICES
(a)Sodexho Marriott Services Inc. ................ 131 $ 2,227
----------
CONSUMER SERVICES .1%
Marriott International Inc., A .................. 1,052 34,387
----------
ENERGY MINERALS 1.5%
Ultramar Diamond Shamrock Corp. ................. 33,300 849,150
----------
INDUSTRIAL SERVICES .3%
(a)Weatherford International Inc. ................ 5,686 181,952
----------
NON-ENERGY MINERALS
(a)Gulf States Steel Inc., wts., 4/15/03 ......... 1,000 10
----------
PRODUCER MANUFACTURING 1.1%
(a)Anacomp Inc. .................................. 20,565 338,680
(a)Harvard Industries Inc. ....................... 27,466 255,777
----------
594,457
----------
TELECOMMUNICATIONS 5.9%
BellSouth Corp. ................................. 24,000 1,080,000
GTE Corp. ....................................... 10,000 768,750
(a)Loral Orion Network System, wts., 1/15/07 ..... 1,000 8,151
SBC Communications Inc. ......................... 7,000 357,438
U.S. West Inc. .................................. 20,000 1,141,250
----------
3,355,589
----------
UTILITIES 43.7%
Allegheny Energy Inc. ........................... 20,000 636,250
American Electric Power Co. Inc. ................ 17,500 597,188
Central & South West Corp. ...................... 29,900 631,638
Cinergy Corp. ................................... 28,200 798,413
CMS Energy Corp. ................................ 13,400 454,763
Conectiv Inc. ................................... 20,000 392,500
Dominion Resources Inc. ......................... 26,000 1,173,250
DPL Inc. ........................................ 50,900 897,113
DTE Energy Co. .................................. 20,000 722,500
Duke Energy Corp. ............................... 22,600 1,245,825
Edison International ............................ 58,400 1,419,850
Enron Corp. ..................................... 43,252 1,784,140
Entergy Corp. ................................... 20,000 578,750
FirstEnergy Corp. ............................... 20,000 510,000
Florida Progress Corp. .......................... 10,000 462,500
FPL Group Inc. .................................. 33,900 1,707,713
Montana Power Co. ............................... 28,200 858,338
New Century Energies Inc. ....................... 55,700 1,862,467
New England Electric System ..................... 6,800 352,750
Northwestern Corp. .............................. 11,700 266,175
PECO Energy Co. ................................. 20,900 783,750
Puget Sound Energy Inc. ......................... 25,000 560,938
Reliant Energy Inc. ............................. 11,400 308,513
</TABLE>
FRANKLIN MULTI-INCOME TRUST
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (CONT.)
<TABLE>
<CAPTION>
SHARES/
WARRANTS VALUE
<S> <C> <C>
COMMON STOCKS AND WARRANTS (CONT.)
UTILITIES (CONT.)
SCANA Corp. ......................................................... 30,000 $ 725,625
Sempra Energy ....................................................... 50,000 1,040,625
Southern Co. ........................................................ 51,300 1,320,975
Texas Utilities Co. ................................................. 28,100 1,048,481
Unicom Corp. ........................................................ 42,000 1,551,375
----------
24,692,405
----------
TOTAL COMMON STOCKS AND WARRANTS (COST $24,647,632) .................. 29,710,177
----------
PREFERRED STOCKS 1.8%
Sinclair Capital, 11.625%, pfd. (COST $1,000,000) ................... 10,000 1,002,500
----------
CONVERTIBLE PREFERRED STOCKS 4.6%
CONSUMER NON-DURABLES .8%
Ralston-Ralston Purina Group/Interstate Bakeries, 7.00%, cvt. pfd ... 9,300 437,100
----------
CONSUMER SERVICES .3%
Host Marriott Corp., 6.75%, cvt. pfd ................................ 4,400 150,700
----------
TRANSPORTATION .5%
Canadian National Railway Co., 5.25%, cvt. pfd. (Canada) ............ 5,700 294,619
----------
UTILITIES 3.0%
CMS Energy Trust I, 7.75%, cvt. pfd ................................. 22,000 1,017,500
Utilicorp United Inc., 9.75%, cvt. pfd .............................. 27,300 689,325
----------
1,706,825
----------
Total Convertible Preferred Stocks (Cost $2,837,060) ................ 2,589,244
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT*
<S> <C> <C>
NON-CONVERTIBLE BONDS 65.3%
COMMERCIAL SERVICES 6.0%
American Commercial Lines LLC, senior note, 10.25%, 6/30/08 ..................... $ 600,000 588,000
AmeriServe Food Distribution Inc., senior note, 8.875%, 10/15/06 ................ 250,000 198,750
AmeriServe Food Distribution Inc., senior sub. note, 10.125%, 7/15/07 ........... 750,000 506,250
Big Flower Press Holdings Inc., senior sub. note, 8.875%, 7/01/07 ............... 500,000 492,500
Fleming Cos. Inc., senior sub. note, B, 10.50%, 12/01/04 ........................ 1,000,000 950,000
Intertek Finance PLC, senior sub. note, B, 10.25%, 11/01/06 (United Kingdom) .... 700,000 658,000
---------
3,393,500
---------
CONSUMER NON-DURABLES 1.5%
Revlon Consumer Products Corp., senior sub. note, 8.625%, 2/01/08 ............... 1,000,000 822,500
---------
CONSUMER SERVICES 10.3%
Chancellor Media Corp., senior note, 8.00%, 11/01/08 ............................ 500,000 490,000
Chancellor Media Corp., senior sub. note, B, 8.75%, 6/15/07 ..................... 500,000 492,500
Charter Communications Holdings LLC, senior disc. note, 144A,
zero cpn. to 4/01/04, 9.92% thereafter, 4/01/11 ................................. 1,000,000 597,500
Diamond Holdings PLC, senior note, 9.125%, 2/01/08 (United Kingdom) ............. 500,000 500,000
</TABLE>
FRANKLIN MULTI-INCOME TRUST
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NON-CONVERTIBLE BONDS (CONT.)
CONSUMER SERVICES (CONT.)
Fox/Liberty Networks LLC, senior disc. note, zero cpn. to 8/15/02,
9.75% thereafter, 8/15/07 ................................................................ $1,000,000 $ 790,000
Horseshoe Gaming Holding Corp., senior sub. note, 8.625%, 5/15/09 .......................... 1,000,000 945,000
LIN Holdings Corp., senior disc. note, zero cpn. to 3/01/03,
10.00% thereafter, 3/01/08 ............................................................... 850,000 561,000
Six Flags Entertainment Corp., senior note, 8.875%, 4/01/06 ................................ 600,000 564,000
Telewest Communications PLC, senior disc. note, 144A,
zero cpn. to 4/15/04, 9.25% thereafter, 4/15/09 (United Kingdom) ......................... 500,000 301,250
United Pan-Europe Communications NV, senior disc. note, 144A,
zero cpn. to 8/01/04, 12.50% thereafter, 8/01/09 (Netherlands) ........................... 1,000,000 565,000
---------
5,806,250
---------
ELECTRONIC TECHNOLOGY .6%
Celestica International Inc., senior sub. note, 10.50%, 12/31/06 (Canada) .................. 325,000 342,875
---------
ENERGY MINERALS 5.4%
Chesapeake Energy Corp., senior note, B, 9.625%, 5/01/05 ................................... 200,000 192,000
Clark R&M Inc., senior sub. note, 8.875%, 11/15/07 ......................................... 1,000,000 825,000
Conproca SA, S.F., senior secured note, 144A, 12.00%, 6/16/10 (Mexico) ..................... 900,000 850,500
Pride Petroleum Services Inc., senior note, 9.375%, 5/01/07 ................................ 500,000 505,000
RBF Finance Co., senior note, 11.375%, 3/15/09 ............................................. 650,000 682,500
---------
3,055,000
---------
HEALTH SERVICES 2.6%
Abbey Healthcare Group Inc., senior sub. note, 9.50%, 11/01/02 ............................. 1,000,000 975,000
Magellan Health Services Inc., senior sub. note, 9.00%, 2/15/08 ............................ 600,000 513,000
---------
1,488,000
---------
INDUSTRIAL SERVICES 1.9%
Allied Waste North America Inc., senior note, B, 7.875%, 1/01/09 ........................... 900,000 787,500
Universal Compression Inc., senior disc. note, zero cpn. to 2/15/03,
9.875% thereafter, 2/15/08 ............................................................... 500,000 305,000
---------
1,092,500
---------
NON-ENERGY MINERALS 1.4%
LTV Corp., senior note, 8.20%, 9/15/07 ..................................................... 900,000 801,000
---------
PROCESS INDUSTRIES 7.3%
Anchor Glass, first mortgage, 11.25%, 4/01/05 .............................................. 1,000,000 1,005,000
Ball Corp., senior note, 7.75%, 8/01/06 .................................................... 250,000 244,375
Ball Corp., senior sub. note, 8.25%, 8/01/08 ............................................... 150,000 146,438
Consolidated Container Company LLC, senior sub. note, 144A, 10.125%, 07/15/09 .............. 1,000,000 1,000,000
Graham Packaging Co., senior disc. note, B, zero cpn. to 1/15/03,
10.75% thereafter, 1/15/09 ............................................................... 200,000 129,000
Graham Packaging Co., senior sub. note, B, 8.75%, 1/15/08 .................................. 200,000 187,500
Huntsman ICI Chemicals LLC, zero cpn., senior disc. note, 144A, 12/31/09 ................... 2,000,000 500,000
Lyondell Chemical Co., 9.875%, 5/01/07 ..................................................... 300,000 297,000
Pindo Deli Finance Mauritius Ltd., senior note, 10.25%, 10/01/02 (Indonesia) ............... 1,000,000 630,000
---------
4,139,313
---------
PRODUCER MANUFACTURING 7.0%
Advanced Accessory Systems, senior sub. note, B, 9.75%, 10/01/07 ........................... 500,000 453,750
Aetna Industries Inc., senior note, 11.875%, 10/01/06 ...................................... 1,000,000 1,157,500
Collins & Aikman Corp., senior sub. note, B, 10.00%, 1/15/07 ............................... 1,000,000 955,000
</TABLE>
FRANKLIN MULTI-INCOME TRUST
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NON-CONVERTIBLE BONDS (CONT.)
PRODUCER MANUFACTURING (CONT.)
Derlan Industries Ltd., senior note, 10.00%, 1/15/07 (Canada) ............................. $ 291,000 $ 292,455
Nortek Inc., 8.875%, 8/01/08 .............................................................. 250,000 236,250
Nortek Inc., senior note, B, 9.125%, 9/01/07 .............................................. 500,000 486,250
Oshkosh Truck Corp., senior sub. note, 8.75%, 3/01/08 ..................................... 400,000 389,000
---------
3,970,205
---------
RETAIL TRADE 1.1%
Shoppers Food Warehouse Corp., senior note, 9.75%, 6/15/04 ................................ 250,000 260,313
Specialty Retailers Inc., senior note, B, 8.50%, 7/15/05 .................................. 500,000 352,500
---------
612,813
---------
TELECOMMUNICATIONS 17.3%
Arch Communications Group Inc., senior disc. note, zero cpn. to 3/15/01,
10.875% thereafter, 3/15/08 ............................................................. 1,000,000 345,000
Crown Castle International Corp., senior disc. note, 144A, zero cpn .......................
to 8/01/04, 11.25% thereafter, 8/01/11 .................................................. 1,000,000 575,000
Dobson/Sygnet Communications Co., senior note, 12.25%, 12/15/08 ........................... 1,000,000 1,052,500
Intermedia Communications Inc., senior disc. note, B, zero cpn. to 7/15/02,
11.25% thereafter, 7/15/07 .............................................................. 1,250,000 831,250
IXC Communications Inc., senior sub. note, 9.00%, 4/15/08 ................................. 450,000 446,063
Loral Space and Communications Ltd., senior disc. note, zero cpn. to 1/15/02,
12.50% thereafter, 1/15/07 .............................................................. 1,000,000 485,000
Metrocall Inc., senior sub. note, 11.00%, 9/15/08 ......................................... 1,000,000 625,000
Millicom International Cellular SA, senior disc. note, zero cpn. to
6/01/01, 13.50% thereafter, 6/01/06 (Luxembourg) ........................................ 2,000,000 1,420,000
Nextel Communications Inc., senior disc. note, 9.75%, 8/15/04 ............................. 1,000,000 1,011,250
NEXTLINK Communications Inc., senior note, 9.625%, 10/01/07 ............................... 500,000 482,500
NEXTLINK Communications Inc., senior note, 9.00%, 3/15/08 ................................. 500,000 466,250
Paging Network Inc., senior sub. note, 8.875%, 2/01/06 .................................... 1,000,000 270,000
PSINet Inc., senior note, 144A, 11.00%, 8/01/09 ........................................... 750,000 735,000
(b)Williams Communication Group Inc., senior note, 10.875%, 10/01/09 ....................... 1,000,000 992,490
---------
9,737,303
---------
UTILITIES 2.9%
AES Corp., senior note, 9.50%, 6/01/09 .................................................... 750,000 750,000
ESCOM, E168, 11.00%, 6/01/08 (South Africa) ............................................... 2,175,000ZAR 286,738
Niagara Mohawk Power Corp., senior note, G, 7.75%, 10/01/08 ............................... 600,000 610,650
---------
1,647,388
---------
TOTAL NON-CONVERTIBLE BONDS (COST $40,370,587) ............................................ 36,908,647
---------
CONVERTIBLE BONDS 1.1%
HEALTH SERVICES .6%
Omnicare Inc., cvt. sub. deb., 5.00%, 12/01/07 ............................................ 500,000 331,145
---------
TELECOMMUNICATIONS .5%
Global Telesystems Group Inc., cvt., 5.75%, 7/01/10 ....................................... 300,000 269,625
---------
TOTAL CONVERTIBLE BONDS (COST $769,438) ................................................... 600,770
---------
</TABLE>
FRANKLIN MULTI-INCOME TRUST
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(c)Repurchase Agreement 2.1%
Joint Repurchase Agreement, 5.217%, 10/01/99 (Maturity Value $1,201,426)
(COST $1,201,252) ........................................................... $1,201,252 $ 1,201,252
Banc of America Securities LLC
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Chase Securities Inc.
CIBC World Markets Corp.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Paine Webber Inc.
Paribas Corp.
Warburg Dillon Read LLC
Collateralized by U.S. Treasury Bills & Notes
-----------
TOTAL INVESTMENTS (COST $70,825,969) 127.5% .................................. 72,012,590
-----------
OTHER ASSETS, LESS LIABILITIES (27.5)% ....................................... (15,549,945)
-----------
NET ASSETS 100.0% ............................................................ $56,462,645
===========
CURRENCY ABBREVIATION:
ZAR - South African Rand
</TABLE>
*The principal amount is stated in U.S. dollars unless otherwise indicated.
(a) Non-income producing
(b) Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
(c) Investment is through participation in a joint account with other funds
managed by the investment advisor. At September 30, 1999, all repurchase
agreements had been entered into on that date.
See notes to financial statements.
FRANKLIN MULTI-INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments in securities:
Cost .............................................................. $ 70,825,969
============
Value ............................................................. 72,012,590
Receivables:
Investment securities sold ........................................ 873,986
Dividends and interest ............................................ 973,676
Note issuance costs (Note 3) ........................................ 95,439
------------
Total assets .................................................... 73,955,691
------------
Liabilities:
Payables:
Investment securities purchased ................................... 992,490
Affiliates ........................................................ 52,573
Notes (Note 3) .................................................... 16,000,000
Accrued interest (Note 3) ......................................... 48,000
Distributions to shareholders ....................................... 328,026
Other liabilities ................................................... 71,957
------------
Total liabilities ............................................... 17,493,046
------------
Net assets, at value .......................................... $ 56,462,645
============
Net assets consist of:
Accumulated distributions in excess of net investment income ........ $ (313,799)
Net unrealized appreciation ......................................... 1,186,831
Accumulated net realized gain ....................................... 1,799,499
Capital shares ...................................................... 53,790,114
------------
Net assets, at value .......................................... $ 56,462,645
============
Net asset value per share (56,462,645 / 5,857,600 shares outstanding) $ 9.64
============
</TABLE>
See notes to financial statements.
FRANKLIN MULTI-INCOME TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Dividends ................................................................................... $ 846,666
Interest .................................................................................... 2,186,983
---------
Total investment income ................................................................... 3,033,649
---------
Expenses:
Management fees (Note 4) .................................................................... 324,859
Transfer agent fees ......................................................................... 13,014
Custodian fees .............................................................................. 464
Reports to shareholders ..................................................................... 15,089
Professional fees ........................................................................... 12,355
Trustees' fees and expenses ................................................................. 2,323
Amortization of note issuance costs ......................................................... 13,968
Other ....................................................................................... 18,051
---------
Expenses before interest expense .......................................................... 400,123
Interest expense (Note 3) ................................................................. 572,800
---------
Total expenses ........................................................................... 972,923
---------
Net investment income .................................................................. 2,060,726
---------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments .................................................................................. 379,721
Foreign currency transactions ................................................................ (551)
---------
Net realized gain ............................................................................ 379,170
Net unrealized appreciation (depreciation) on:
Investments .................................................................................. (2,649,100)
Translation of assets and liabilities denominated in foreign currencies ...................... 506
---------
Net unrealized depreciation .................................................................. (2,648,594)
---------
Net realized and unrealized loss ............................................................. (2,269,424)
---------
Net decrease in net assets resulting from operations ......................................... $ (208,698)
=========
</TABLE>
See notes to financial statements.
FRANKLIN MULTI-INCOME TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
AND THE YEAR ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
September 30, 1999 March 31, 1999
----------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net Investment Income .............................................................. $ 2,060,726 $ 4,451,696
Net realized gain from investments and foreign currency transactions ............... 379,170 1,446,657
Net unrealized depreciation on investments and translation of assets
and liabilities denominated in foreign currencies ................................. (2,648,594) (11,408,915)
------------ ------------
Net decrease in net assets resulting from operations ............................... (208,698) (5,510,562)
Distributions to shareholders from:
Net investment income .............................................................. (2,060,726) (4,451,432)
In excess of net investment income ................................................. (94,871) (47,205)
Net realized gains ................................................................. -- (1,353,691)
------------ ------------
Total distributions to shareholders ............................................... (2,155,597) (5,852,328)
------------ ------------
Net decrease in net assets ......................................................... (2,364,295) (11,362,890)
Net assets:
Beginning of period ............................................................... 58,826,940 70,189,830
------------ ------------
End of period ..................................................................... $ 56,462,645 $ 58,826,940
============ ============
Accumulated distributions in excess of net investment income included in net
assets:
End of period ..................................................................... $ (313,799) $ (218,928)
============ ============
</TABLE>
See notes to financial statements.
FRANKLIN MULTI-INCOME TRUST
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Cash flow from operating activities:
Dividends and interest received ............................................. $ 2,629,294
Operating expenses paid ..................................................... (479,280)
Interest expense paid ....................................................... (572,800)
------------
Cash provided - operations 1,577,214
============
Cash flow from investing activities:
Investment purchases ........................................................ (200,664,850)
Investment sales and maturities ............................................. 201,290,093
------------
Cash provided - investments 625,243
============
Cash flow from financing activities:
Issuance of notes ........................................................... 16,000,000
Defeasance of notes (Note 3) ................................................ (16,000,000)
Distributions to shareholders ............................................... (2,202,457)
------------
Cash used - financing ........................................................ (2,202,457)
============
Net change in cash ........................................................... --
Cash at beginning of period .................................................. --
------------
Cash at end of period ........................................................ $ --
============
RECONCILIATION OF NET INVESTMENT INCOME TO NET CASH PROVIDED BY OPERATIONS FOR
THE PERIOD ENDED SEPTEMBER 30, 1999
Net investment income ........................................................ $ 2,060,726
Amortization income ......................................................... (500,035)
Note issuance costs paid .................................................... (75,000)
Amortization of note issuance costs ......................................... 13,968
Decrease in dividends and interest receivable ............................... 95,680
Decrease in other liabilities ............................................... (18,125)
------------
Cash provided - operations ................................................... $ 1,577,214
============
</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 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. 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 to
distribute substantially 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.
FRANKLIN MULTI-INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
At September 30, 1999, there were an unlimited number of shares authorized
($0.01 par value). During the period ended September 30, 1999, 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, 1999, 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 proceeds of the Notes were used
to defease previously issued notes that matured on September 15, 1999.
The Notes bear interest, payable semi-annually, at the rate of 6.75% per year,
to maturity on September 15, 2004. 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 period ended September 30, 1999.
The issuance costs of $96,069 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 Fund are also officers or directors 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 .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 September 30, 1999, the net unrealized appreciation based on the cost of
investments for income tax purposes of $70,825,969 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation ................. $ 6,608,238
Unrealized depreciation ................. (5,421,617)
-----------
Net unrealized appreciation ............. $ 1,186,621
===========
</TABLE>
Net investment income and net realized capital gains differ for financial
statement and tax purposes primarily due to differing treatment of foreign
currency transactions.
FRANKLIN MULTI-INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended September 30, 1999 aggregated $10,044,543 and $9,956,124,
respectively.
7. CREDIT RISK
The Fund has 62.30% 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. 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
Consumer Services and Telecommunications industries. Such concentration may
subject the Fund more significantly to economic changes occurring within these
industries.
