UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-05813
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Franklin Multi-Income Trust
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(Exact name of registrant as specified in charter)
One Franklin Parkway, San Mateo, CA 94403-1906 (Address of
principal executive offices) (Zip code)
Murray L. Simpson, One Franklin Parkway, San Mateo, CA 94403-1906
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(Name and address of agent for service)
Registrant's telephone number, including area code: (650) 312-2000
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Date of fiscal year end: 3/31
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Date of reporting period: 3/31/04
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ITEM 1. REPORTS TO STOCKHOLDERS.
MARCH 31, 2004
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ANNUAL REPORT AND SHAREHOLDER INFORMATION
INCOME
Franklin
Multi-Income Trust
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[LOGO OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
FRANKLIN o Templeton o Mutual Series
Franklin Templeton Investments
GAIN FROM OUR PERSPECTIVE
Franklin Templeton's distinct multi-manager structure combines the specialized
expertise of three world-class investment management groups--Franklin, Templeton
and Mutual Series.
SPECIALIZED EXPERTISE
Each of our portfolio management groups operates autonomously, relying on its
own research and staying true to the unique investment disciplines that underlie
its success.
FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a
driving force in fixed income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity investing.
TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in
1954, launched what has become the industry's oldest global fund. Today, with
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.
MUTUAL SERIES. Founded in 1949, Mutual Series is dedicated to a unique style of
value investing, searching aggressively for opportunity among undervalued
stocks, arbitrage situations and distressed companies.
TRUE DIVERSIFICATION
Because our management groups work independently and adhere to distinctly
different investment approaches, Franklin, Templeton and Mutual Series funds
typically have a low overlap of securities. That's why our funds can be used to
build truly diversified portfolios covering every major asset class.
RELIABILITY YOU CAN TRUST
At Franklin Templeton Investments, we seek to consistently provide investors
with exceptional risk-adjusted returns over the long term, as well as the
reliable account services that have helped us become one of the most trusted
names in financial services.
MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
Not part of the annual report
Contents
ANNUAL REPORT
Franklin Multi-Income Trust ..................... 1
Performance Summary ............................. 5
Annual Shareholders' Meeting .................... 6
Dividend Reinvestment
and Cash Purchase Plan .......................... 7
Financial Highlights and
Statement of Investments ........................ 10
Financial Statements ............................ 16
Notes to Financial Statements ................... 20
Independent Auditors' Report .................... 26
Tax Designation ................................. 27
Board Members and Officers ...................... 28
Proxy Voting Policies and Procedures ............ 33
Annual Report
Franklin Multi-Income Trust
YOUR FUND'S GOAL: Franklin Multi-Income Trust seeks to provide high, current
income consistent with preservation of capital.
Dear Shareholder:
We are pleased to bring you Franklin Multi-Income Trust's (the Fund's) annual
report, which covers the fiscal year ended March 31, 2004.
PERFORMANCE OVERVIEW
During the fiscal year under review, the Fund's cumulative total returns were
+39.09% based on change in net asset value and +32.84% based on change in market
price on the New York Stock Exchange. For comparison, the Credit Suisse First
Boston (CSFB) High Yield Index returned 22.86%, while utilities stocks, as
measured by the Standard & Poor's (S&P) Utilities Index, returned 37.06%, for
the year ended March 31, 2004. 1 You can find the Fund's performance data in the
Performance Summary on page 5.
1. Source: Credit Suisse First Boston; Standard &Poor's Micropal. The CSFB High
Yield Index is a trader-priced portfolio constructed to mirror the high yield
debt market. The S&P Utilities Index is a market capitalization-weighted index
that includes utility stocks in the Standard & Poor's 500 Composite Index. The
indexes are unmanaged and include reinvested distributions. One cannot invest
directly in an index, nor is an index representative of the Fund's portfolio.
THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 11.
Annual Report | 1
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
PORTFOLIO BREAKDOWN
Corporate Bonds 52.0%
Utilities Common Stocks 40.0%
Misc. Common & Preferred Stocks 3.6%
Convertible Bonds 0.7%
Foreign Currency Denominated Bonds 0.6%
Cash & Other Net Assets 3.1%
*The calculation of percentages is based on total net assets plus long-term debt
issued by the Fund.
ECONOMIC AND MARKET OVERVIEW
During the 12 months under review, many factors impacted the U.S. economy and
financial markets. Although the uneven economic recovery and continuing
geopolitical instability created an uncertain environment, signs that the
economic recovery was gaining traction helped to drive up most financial
markets. Third quarter 2003 gross domestic product (GDP) grew an annualized
8.2%, its strongest pace in nearly 20 years, while fourth quarter GDP grew 4.1%
annualized and first quarter 2004 GDP rose an estimated 4.2% annualized.
Although 10-year Treasury yields were volatile during the spring and summer,
they ended the Fund's fiscal year nearly unchanged at 3.86% on March 31, 2004,
compared with 3.83% at the beginning of the period. The U.S. trade deficit
continued to increase, which contributed to a decline in the U.S. dollar versus
the euro and other major currencies. Consumer spending remained healthy, as low
mortgage rates helped the housing market. Business spending rebounded during the
period, particularly for equipment and software, which also contributed to the
strong pace of economic growth.
High yield bonds performed well as the economic recovery contributed to
expectations of improving operating results, better credit fundamentals and a
declining default rate. As investors gained comfort with the outlook for high
yield bonds, the yield spread over comparable Treasury bonds narrowed from 8.3
percentage points to 5.0 percentage points. 2
Utility stocks' strong performance was partly driven by the rebound in prices
for some recently troubled companies, as non-dividend paying utilities
represented four of the index's top five best-performing utilities stocks during
the period. Largely as a result, many dividend-paying utility stocks, in which
the Fund invests, generated lower returns than the overall index.
INVESTMENT STRATEGY
We invest primarily in two asset classes: high yield bonds and utility stocks.
Within the high yield portion of the portfolio, we use fundamental research to
invest in a diversified portfolio of bonds. Within the utility portion of the
portfolio, we focus on companies with attractive dividend yields and a history
of increasing their dividends.
2. Treasuries, if held to maturity, offer a fixed rate of return and fixed
principal value; their interest payments and principal are guaranteed.
2 | Annual Report
MANAGER'S DISCUSSION
During the Fund's fiscal year, returns for the Fund's high yield bonds and
utility stocks were comparable, so the asset weightings did not play a
significant role in the portfolio's overall return.
HIGH YIELD CORPORATE BONDS
Within the portfolio's high yield corporate bonds, the Fund benefited from
relatively aggressive positioning. As signs of economic recovery grew more
pronounced, investors seemed more comfortable with risk, and lower-rated bonds
experienced greater returns than higher-rated bonds within the high yield
spectrum. The Fund began the fiscal year with a larger position in such
lower-rated bonds relative to the CSFB High Yield Index, as we believed they
were attractively priced and could benefit disproportionately from the expected
economic recovery.
In addition, using our bottom-up research, we benefited from industry and
company credit selection as we followed our investment strategy. Fund holdings
in cable and satellite television, as well as the retail sector underweighting,
boosted the Fund's returns relative to the index. 3 For example, the Fund began
the fiscal year with an overweighted position in the cable and satellite
television sector relative to the index, which ranked among the top-performing
high yield sectors. In particular, Charter Communications bond prices rose as
the company refinanced debt to extend maturities. Telewest Communications and
Adelphia Communications bonds also appreciated during the period as investors
seemed to gain confidence in these companies' ultimate value. The retail sector,
on the other hand, generated lower returns than the index, and the Fund
benefited from its relatively underweighted position.
Conversely, Fund positions in telecommunications and utilities constrained
performance versus the index. 4 The Fund had lower exposure to those sectors
than the index; however, these sectors outperformed the index for the period,
which hindered the Fund's relative return. We generally limit our high yield
utility bond exposure given the Fund's significant position in utility stocks.
Within telecommunications, we had difficulty finding attractive investments
during the reporting period largely due to the many defaults over the past
several years.
TOP 10 HOLDINGS
3/31/04
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COMPANY
SECTOR/INDUSTRY % OF TOTAL
(SECURITY TYPE) MARKET VALUE
- ---------------------------------------------------
Exelon Corp. 2.7%
UTILITIES (STOCK)
- ---------------------------------------------------
Dominion Resources Inc. 2.4%
UTILITIES (STOCK)
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Entergy Corp. 2.3%
UTILITIES (STOCK)
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Southern Co. 2.1%
UTILITIES (STOCK)
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FPL Group Inc. 2.0%
UTILITIES (STOCK)
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NiSource Inc. 1.9%
UTILITIES (STOCK)
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American Electric Power Co. Inc. 1.8%
UTILITIES (STOCK)
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FirstEnergy Corp. 1.7%
UTILITIES (STOCK)
- ---------------------------------------------------
Nicor Inc. 1.6%
UTILITIES (STOCK)
- ---------------------------------------------------
Cinergy Corp. 1.6%
UTILITIES (STOCK)
- ---------------------------------------------------
3. Cable and satellite television companies are part of consumer services in the
SOI. 4. Telecommunication companies are part of communications in the SOI.
Annual Report | 3
DIVIDEND DISTRIBUTIONS
4/1/03-3/31/04
- ---------------------------------------------
MONTH DIVIDEND PER SHARE
- ---------------------------------------------
April 3.50 cents
May 3.50 cents
June 3.50 cents
July 3.50 cents
August 3.50 cents
September 3.50 cents
October 3.50 cents
November 3.50 cents
December 3.50 cents
January 3.50 cents
February 3.50 cents
March 3.50 cents
- ---------------------------------------------
TOTAL 42.00 CENTS
UTILITY STOCKS
During the 12 months under review, the Fund's utility exposure was in the lower
half of its normal investment range. Utilities have experienced a remarkable
recovery from the difficulties encountered during 2001 and 2002, which included
the California energy crisis and the Enron bankruptcy. Electric utilities
generally reduced capital spending in non-regulated ventures and focused on
their core, regulated franchises. Largely as a result, many investors' previous
credit concerns related to utilities appeared to dissipate during the reporting
period. Given the industry's recent financial recovery, we believed valuations
of dividend-paying utilities had become expensive, and we found it difficult to
uncover many attractive investments. Within the utility stock portion of the
Fund's portfolio, we focused on those companies with consistent dividends,
quality management and regulated assets.
Thank you for your participation in Franklin Multi-Income Trust. We look forward
to serving you in the future.
Sincerely,
[PHOTO OMITTED]
/S/Christopher J. Molumphy, CFA
Senior Portfolio Manager
[PHOTO OMITTED]
/S/Glenn I. Voyles, CFA
Portfolio Manager
Franklin Multi-Income Trust
THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
MARCH 31, 2004, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR MAIN
INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE DEPENDING
ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY NOT BE
RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE ADVISOR MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR
COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
PHILOSOPHY.
4 | Annual Report
Performance Summary as of 3/31/04
Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses. Capital
gain distributions are net profits realized from the sale of portfolio
securities. Total return reflects the Fund's dividend income, capital gain
distributions, if any, and any unrealized gains or losses. All total returns
include reinvested distributions according to the terms specified in the Fund's
dividend reinvestment and cash purchase plan and do not reflect any sales
charges paid at inception or brokerage commissions paid on secondary market
purchases.
PRICE AND DISTRIBUTION INFORMATION
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CHANGE 3/31/04 3/31/03
- --------------------------------------------------------------------------------
Net Asset Value (NAV) +$2.02 $8.42 $6.40
Market Price (NYSE) +$1.55 $7.65 $6.10
DISTRIBUTIONS (4/1/03-3/31/04)
Dividend Income $0.4200
PERFORMANCE
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1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------------------------------------------
Cumulative Total Return 1
Based on change in NAV +39.09% +27.74% +122.58%
Based on change in market price +32.84% +29.65% +109.45%
Average Annual Total Return 1
Based on change in NAV +39.09% +5.02% +8.33%
Based on change in market price +32.84% +5.33% +7.67%
- ------------------------------------------------------------------------------
Distribution Rate 2 5.49%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. ONGOING MARKET VOLATILITY
CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE RECENT RETURNS MAY DIFFER
FROM THOSE SHOWN. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH
MARKET CONDITIONS, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.
FOR MOST RECENT MONTH-END PERFORMANCE, CALL FRANKLIN TEMPLETON INVESTMENTS AT
1-800/342-5236.
ENDNOTES
SPECIAL RISKS ARE ASSOCIATED WITH FOREIGN INVESTING, INCLUDING CURRENCY
VOLATILITY, ECONOMIC INSTABILITY AND POLITICAL DEVELOPMENTS OF COUNTRIES WHERE
THE FUND INVESTS. EMERGING MARKETS INVOLVE HEIGHTENED RISKS RELATED TO THE SAME
FACTORS, IN ADDITION TO THOSE ASSOCIATED WITH THEIR RELATIVELY SMALL SIZE AND
LESSER LIQUIDITY.
1. Total return calculations represent the cumulative and average annual changes
in value of an investment over the periods indicated.
2. Distribution rate is based on an annualization of the Fund's 3.50 cent per
share March dividend and the NYSE closing price of $7.65 on 3/31/04.
Annual Report | Past performance does not guarantee future results. | 5
Annual Shareholders' Meeting
SEPTEMBER 9, 2003
At an annual Meeting of Shareholders of Franklin Multi-Income Trust (the "Fund")
held on September 9, 2003, shareholders approved the following:
1. Regarding the proposal to elect nominees for Trustees:
- ---------------------------------------------------------------------------------------------------------
% OF % OF
SHARES % OF OUTSTANDING WITHHELD OR % OF OUTSTANDING
TRUSTEES FOR VOTED SHARES ABSTAIN VOTED SHARES
- ---------------------------------------------------------------------------------------------------------
Robert F. Carlson 4,812,813.6750 96.08% 82.16% 196,466.6360 3.92% 3.35%
Joseph Fortunato 4,817,240.5950 96.17% 82.24% 192,039.7160 3.83% 3.28%
Frank W. T. Lahaye 4,824,640.5950 96.31% 82.37% 184,636.7160 3.69% 3.15%
6 | Annual Report
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. PFPC Inc. (the "Plan Agent"), P.O.
Box 9223, Chelsea, MA 02150-9223, 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 PFPC Inc. and sent to PFPC Inc., Attn: Franklin Multi-Income Trust,
P.O. Box 9223, Chelsea, MA 02150-9223.
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
TRUSTS 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 Plan Agent receives the written notice not less than 48 hours before an
investment date.
Annual Report | 7
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.
8 | Annual Report
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.
Annual Report | 9
Franklin Multi-Income Trust
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
- --------------------------------------------------------------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ................................. $6.40 $8.71 $9.80 $8.97 $10.04
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Income from investment operations:
Net investment income ............................................. .44 .51 .63 .66 .71
Net realized and unrealized gains (losses) ........................ 2.00 (2.25) (1.05) .84 (.84)
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Total from investment operations ................................... 2.44 (1.74) (.42) 1.50 (.13)
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Less distributions from:
Net investment income ............................................. (.42) (.57) (.67) (.67) (.70)
Net realized gains ................................................ -- -- -- -- (.24)
========================================================
Total distributions ................................................ (.42) (.57) (.67) (.67) (.94)
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Net asset value, end of year ....................................... $8.42 $6.40 $8.71 $9.80 $ 8.97
========================================================
Market value, end of year a ........................................ $7.65 $6.10 $8.70 $8.62 $ 7.00
========================================================
Total return (based on market value per share) ..................... 32.84% (23.67)% 9.23% 33.54% (12.29)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .................................... $49,322 $37,511 $51,047 $57,412 $52,559
Ratios to average net assets:
Expenses .......................................................... 3.49% 4.47% 3.45% 3.23% 3.30%
Net investment income ............................................. 5.71% 7.52% 6.97% 6.88% 7.33%
Portfolio turnover rate ............................................ 45.82% 48.45% 18.27% 26.72% 30.42%
Total debt outstanding at end of year (000's) ...................... $14,000 $14,000 $16,000 $16,000 $16,000
Asset coverage per $1,000 of debt .................................. $ 3,523 $ 2,679 $ 3,190 $ 3,588 $ 3,285
Average amount of notes per share during the year .................. $2.39 $2.54 $2.73 $2.73 $2.73
a Based on the last sale on the New York Stock Exchange.
10 | See notes to financial statements. | Annual Report
Franklin Multi-Income Trust
STATEMENT OF INVESTMENTS, MARCH 31, 2004
- ------------------------------------------------------------------------------------------------------------------------------
SHARES/WARRANTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS 52.4%
Communications .9%
a Metrocall Holdings Inc. .................................................... 4,620 $ 321,875
Millicom International Cellular SA (Luxembourg) ............................ 3,721 81,861
a XO Communications Inc. ..................................................... 975 4,856
a XO Communications Inc., wts., A, 1/16/10 ................................... 1,949 4,093
a XO Communications Inc., wts., B, 1/16/10 ................................... 1,462 2,412
a XO Communications Inc., wts., C, 1/16/10 ................................... 1,462 1,681
--------------
416,778
--------------
Consumer Services .1%
Marriott International Inc., A ............................................. 1,052 44,763
--------------
Electronic Technology
a Loral Space & Communications Ltd., wts., 12/27/06 .......................... 4,188 --
a Loral Space & Communications Ltd., wts., 1/15/07 ........................... 1,000 10
--------------
10
--------------
Transportation
a Continental Airlines Inc., B ............................................... 357 4,473
--------------
Utilities 51.4%
Alliant Energy Corp. ....................................................... 15,000 390,900
Ameren Corp. ............................................................... 20,000 921,800
American Electric Power Co. Inc. ........................................... 33,800 1,112,696
Atmos Energy Corp. ......................................................... 35,000 894,950
Cinergy Corp. .............................................................. 24,500 1,001,805
Dominion Resources Inc. .................................................... 23,400 1,504,620
DTE Energy Co. ............................................................. 20,000 823,000
Edison International ....................................................... 40,000 971,600
Energy East Corp. .......................................................... 30,000 760,800
Entergy Corp. .............................................................. 24,000 1,428,000
Exelon Corp. ............................................................... 24,500 1,687,315
FirstEnergy Corp. .......................................................... 27,500 1,074,700
FPL Group Inc. ............................................................. 19,000 1,270,150
Nicor Inc. ................................................................. 29,000 1,021,670
NiSource Inc. .............................................................. 57,000 1,211,250
NSTAR ...................................................................... 15,500 786,160
ONEOK Inc. ................................................................. 40,200 906,510
Pepco Holdings Inc. ........................................................ 20,500 419,020
Pinnacle West Capital Corp. ................................................ 24,000 944,400
PPL Corp. .................................................................. 11,700 533,520
Progress Energy Inc. ....................................................... 21,000 988,680
Public Service Enterprise Group Inc. ....................................... 15,000 704,700
Puget Energy Inc. .......................................................... 37,000 827,690
SCANA Corp. ................................................................ 12,621 446,152
Sempra Energy .............................................................. 26,000 826,800
Southern Co. ............................................................... 43,000 1,311,500
TXU Corp. .................................................................. 20,400 584,664
--------------
25,355,052
--------------
TOTAL COMMON STOCKS AND WARRANTS (COST $19,641,048) ........................ 25,821,076
--------------
Annual Report | 11
Franklin Multi-Income Trust
STATEMENT OF INVESTMENTS, MARCH 31, 2004 (CONTINUED)
- ------------------------------------------------------------------------------------------------------------------------------
SHARES/WARRANTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS 1.3%
Communications
Metrocall Holdings Inc., 15.00%, pfd., A ................................... 195 $ 2,732
--------------
Utilities 1.3%
a Heco Capital Trust III, 6.50%, pfd. ........................................ 25,000 640,750
--------------
TOTAL PREFERRED STOCKS (COST $625,420) ..................................... 643,482
--------------
CONVERTIBLE PREFERRED STOCKS 2.4%
Consumer Durables 1.7%
Ford Motor Co. Capital Trust II, 6.50%, cvt. pfd. .......................... 15,300 811,665
--------------
Utilities .7%
CMS Energy Trust I, 7.75%, cvt. pfd. ....................................... 8,000 345,808
--------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $1,023,846) ....................... 1,157,473
--------------
-----------------
PRINCIPAL AMOUNT C
-----------------
BONDS 67.5%
Commercial Services .5%
Johnsondiversey Inc., senior sub. note, B, 9.625%, 5/15/12 ................. $ 200,000 219,000
b Key3Media Group Inc., senior sub. note, 11.25%, 6/15/11 .................... 1,000,000 12,500
--------------
231,500
--------------
COMMUNICATIONS 6.1%
Centennial Communications Corp., senior note, 144A, 8.125%, 2/01/14 ........ 300,000 278,250
Dobson Communications Corp., senior note, 8.875%, 10/01/13 ................. 400,000 316,000
Millicom International Cellular SA, senior note, 144A, 10.00%,
12/01/13 (Luxembourg) ...................................................... 500,000 522,500
Nextel Communications Inc., senior note, 7.375%, 8/01/15 ................... 600,000 652,500
Time Warner Telecom Inc., senior note, 144A, 9.25%, 2/15/14 ................ 300,000 304,500
Time Warner Telecom Inc., senior note, 10.125%, 2/01/11 .................... 300,000 278,250
Triton PCS Inc., senior note, 8.50%, 6/01/13 ............................... 200,000 214,000
US West Communications Inc., 6.875%, 9/15/33 ............................... 500,000 445,000
--------------
3,011,000
--------------
Consumer Durables 3.3%
D.R. Horton Inc., senior note, 8.50%, 4/15/12 .............................. 500,000 583,750
General Motors, 8.25%, 7/15/23 ............................................. 400,000 447,611
Simmons Co., senior sub. note, 144A, 7.875%, 1/15/14 ....................... 400,000 403,000
True Temper Sports Inc., senior sub. note, 144A, 8.375%, 9/15/11 ........... 200,000 205,000
--------------
1,639,361
--------------
Consumer Non-Durables 1.0%
Smithfield Foods Inc., senior note, 7.75%, 5/15/13 ......................... 200,000 221,000
William Carter, senior sub. note, 10.875%, 8/15/11 ......................... 242,000 282,535
--------------
503,535
--------------
Consumer Services 15.6%
b Adelphia Communications Corp., senior note, 10.875%, 10/01/10 .............. 1,000,000 975,000
Cablevision Systems Corp., senior note, 144A, 8.00%, 4/15/12 ............... 600,000 601,500
CanWest Media Inc., senior sub. note, 10.625%, 5/15/11 (Canada) ............ 500,000 570,000
Charter Communications Holdings II, senior note, 144A, 10.25%, 9/15/10 ..... 600,000 621,000
Dex Media West LLC, senior sub. note, 144A, 9.875%, 8/15/13 ................ 500,000 557,500
12 | Annual Report
Franklin Multi-Income Trust
STATEMENT OF INVESTMENTS, MARCH 31, 2004 (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT C VALUE
- -----------------------------------------------------------------------------------------------------------------------------
BONDS (CONT.)
Consumer Services (cont.)
DIRECTV Holdings/Finance, senior note, 8.375%, 3/15/13 ..................... $ 500,000 $ 572,500
Hollywood Park, senior sub. note, B, 9.25%, 2/15/07 ........................ 35,000 36,006
Nexstar Finance Inc., senior sub. note, 144A, 7.00%, 1/15/14 ............... 600,000 597,000
Park Place Entertainment Corp., senior sub. note, 7.875%, 3/15/10 .......... 500,000 560,000
Pinnacle Entertainment, senior sub. note, 8.75%, 10/01/13 .................. 100,000 102,250
Royal Caribbean Cruises Ltd., senior note, 8.00%, 5/15/10 .................. 200,000 227,000
Royal Caribbean Cruises Ltd., senior note, 6.875%, 12/01/13 ................ 400,000 423,000
Six Flags Inc., senior note, 9.50%, 2/01/09 ................................ 600,000 636,000
Station Casinos, 6.875%, 3/01/16 ........................................... 600,000 619,500
Telewest Communications PLC, senior disc. note, zero cpn. to
4/15/04, 9.25% thereafter,
4/15/09 (United Kingdom) ................................................... 500,000 260,000
Young Broadcasting Inc., senior sub. note, 144A, 8.75%, 1/15/14 ............ 300,000 310,500
--------------
7,668,756
--------------
Distribution Services
b AmeriServe Food Distribution Inc., senior note, 8.875%, 10/15/06 ........... 250,000 --
--------------
Electronic Technology 5.7%
Communications & Power Industries, senior sub. note, 144A, 8.00%,
2/01/12 .................................................................... 500,000 510,625
Flextronics International Ltd., senior sub. note, 6.50%, 5/15/13
(Singapore) ................................................................ 600,000 634,500
Inmarsat Finance PLC, senior note, 144A, 7.625%, 6/30/12
(United Kingdom) ........................................................... 200,000 209,500
Invensys PLC, 144A, 9.875%, 3/15/11 (United Kingdom) ....................... 400,000 412,000
New Asat Finance Ltd., senior note, 144A, 9.25%, 2/01/11 ................... 500,000 538,750
Vought Aircraft Industries Inc., senior note, 144A, 8.00%, 7/15/11 ......... 500,000 520,000
--------------
2,825,375
--------------
Energy Minerals 2.6%
Arch Western Finance, senior note, 144A, 6.75%, 7/01/13 .................... 400,000 428,000
Peabody Energy Corp., senior note, B, 6.875%, 3/15/13 ...................... 300,000 325,500
Vintage Petroleum, senior sub. note, 7.875%, 5/15/11 ....................... 500,000 540,000
--------------
1,293,500
--------------
Government Bonds .7%
Eskom, 11.00%, 6/01/08 (South Africa) ...................................... 2,175,000 ZAR 357,180
--------------
Health Services 1.1%
Tenet Healthcare Corp., senior note, 7.375%, 2/01/13 ....................... 600,000 544,500
--------------
Health Technology 1.0%
Alliance Imaging Inc., senior sub. note, 10.375%, 4/15/11 .................. 500,000 501,250
--------------
Industrial Services 5.1%
Allied Waste North America Inc., senior note, 7.875%, 4/15/13 .............. 500,000 548,750
Grant Prideco Escrow, senior note, 9.00%, 12/15/09 ......................... 200,000 227,000
Gulfterra Energy Partners, senior sub. note, 10.625%, 12/01/12 ............. 340,000 428,400
Hanover Equipment Trust 01, senior secured note, B, 8.75%, 9/01/11 ......... 600,000 654,000
URS Corp., senior sub. note, 12.25%, 5/01/09 ............................... 600,000 642,000
--------------
2,500,150
--------------
Annual Report | 13
Franklin Multi-Income Trust
STATEMENT OF INVESTMENTS, MARCH 31, 2004 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT C VALUE
BONDS (CONT.)
Non-Energy Minerals 1.3%
Ispat Inland Ulc., 144A, 9.75%, 4/01/14 .................................... $ 600,000 $ 627,000
--------------
Process Industries 9.2%
Equistar Chemicals LP, senior note, 10.625%, 5/01/11 ....................... 300,000 324,750
b FiberMark Inc., senior note, 10.75%, 4/15/11 ............................... 500,000 285,000
Georgia-Pacific Corp., senior note, 144A, 8.00%, 1/15/24 ................... 600,000 636,000
Graham Packaging Co., senior disc. note, B, 10.75%, 1/15/09 ................ 200,000 207,500
Graham Packaging Co., senior sub. note, 144A, 8.75%, 1/15/08 ............... 200,000 206,000
Graham Packaging Co., senior sub. note, B, 8.75%, 1/15/08 .................. 200,000 206,000
Huntsman ICI Holdings LLC, senior disc. note, zero cpn., 12/31/09 .......... 1,500,000 697,500
IMC Global Inc., 10.875%, 8/01/13 .......................................... 600,000 754,500
MDP Acquisitions PLC, senior note, 9.625%, 10/01/12
(Irish Republic) ........................................................... 300,000 340,500
Nalco Co., senior sub. note, 144A, 8.875%, 11/15/13 ........................ 400,000 419,000
b Pindo Deli Finance Mauritius Ltd., senior note, 10.25%, 10/01/02
(Indonesia) ................................................................ 1,000,000 262,500
United Industries Corp., senior sub. note, 9.875%, 4/01/09 ................. 200,000 210,876
--------------
4,550,126
--------------
Producer Manufacturing 5.4%
Case New Holland Inc., senior note, 144A, 9.25%, 8/01/11 ................... 600,000 681,000
Fimep SA, senior note, 10.50%, 2/15/13 (France) ............................ 500,000 597,500
NMHG Holding Co., senior note, 10.00%, 5/15/09 ............................. 400,000 442,000
Norcraft Cos. LP, senior sub. note, 144A, 9.00%, 11/01/11 .................. 200,000 214,000
TRW Automotive Inc., senior note, 9.375%, 2/15/13 .......................... 272,000 314,160
Westinghouse Air Brake, senior note, 6.875%, 7/31/13 ....................... 400,000 428,000
--------------
2,676,660
--------------
Real Estate Investment Trusts 3.4%
Corrections Corp. of America, senior note, 7.50%, 5/01/11 .................. 400,000 423,500
Corrections Corp. of America, senior note, 144A, 7.50%, 5/01/11 ............ 200,000 211,750
Host Marriott LP, senior note, 9.25%, 10/01/07 ............................. 500,000 562,500
Ventas Realty LP/Capital Corp., senior note, 9.00%, 5/01/12 ................ 400,000 464,000
--------------
1,661,750
--------------
Retail Trade .9%
Rite Aid Corp., senior note, 144A, 6.125%, 12/15/08 ........................ 500,000 467,500
--------------
Transportation 1.6%
Great Lakes Dredge & Dock, senior sub. note, 144A, 7.75%, 12/15/13 ......... 100,000 101,500
Laidlaw International Inc., senior note, 144A, 10.75%, 6/15/11 ............. 600,000 675,000
--------------
776,500
--------------
Utilities 3.0%
AES Corp., senior note, 9.375%, 9/15/10 .................................... 400,000 438,000
Calpine Corp., senior secured note, 144A, 8.75%, 7/15/13 ................... 600,000 552,000
Dynegy Holdings Inc., senior note, 8.75%, 2/15/12 .......................... 500,000 475,000
--------------
1,465,000
--------------
TOTAL BONDS (COST $33,573,443) ............................................... 33,300,643
--------------
14 | Annual Report
Franklin Multi-Income Trust
STATEMENT OF INVESTMENTS, MARCH 31, 2004 (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT C VALUE
- ---------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE BOND (COST $315,618) .8%
Electronic Technology
Nortel Networks Corp., senior note, cvt., 4.25%, 9/01/08 (Canada) .......... $ 400,000 $ 408,500
--------------
TOTAL LONG TERM INVESTMENTS (COST $55,179,375) ............................... 61,331,174
--------------
----------------
SHARES
----------------
SHORT TERM INVESTMENT (COST $860,204) 1.7%
d Franklin Institutional Fiduciary Trust Money Market Portfolio ................ 860,204 860,204
--------------
TOTAL INVESTMENTS (COST $56,039,579) 126.1% .................................. 62,191,378
OTHER ASSETS, LESS LIABILITIES (26.1)% ....................................... (12,869,197)
--------------
NET ASSETS 100.0% ............................................................ $ 49,322,181
==============
CURRENCY ABBREVIATION | ZAR - South African Rand
a Non-income producing.
b The fund discontinues accruing income on defaulted securities. See Note 8.
c The principal amount is stated in U.S. dollars unless otherwise indicated.
d See Note 7 regarding investments in the Franklin Institutional Fiduciary Trust Money Market Portfolio.
Annual Report | See notes to financial statements. | 15
Franklin Multi-Income Trust
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2004
Assets:
Investments in securities:
Cost ....................................................... $ 56,039,579
==============
Value ...................................................... 62,191,378
Receivables:
Investment securities sold ................................. 1,352,036
Dividends and interest ..................................... 693,547
Note issuance costs (Note 3) ................................ 10,109
--------------
Total assets ........................................... 64,247,070
--------------
Liabilities:
Payables:
Investment securities purchased ............................ 600,000
Affiliates ................................................. 44,719
Note (Note 3) .............................................. 14,000,000
Accrued interest (Note 3) .................................. 39,375
Distributions to shareholders ............................... 205,016
Other liabilities ........................................... 35,779
--------------
Total liabilities ...................................... 14,924,889
--------------
Net assets, at value .................................. $ 49,322,181
==============
Net assets consist of:
Distributions in excess of net investment income ............ $ (523,205)
Net unrealized appreciation (depreciation) .................. 6,152,403
Accumulated net realized gain (loss) ........................ (10,090,639)
Capital shares .............................................. 53,783,622
--------------
Net assets, at value .................................. $ 49,322,181
==============
Net asset value per share ($49,322,181 / 5,857,600
shares outstanding) .......................................... $8.42
==============
16 | See notes to financial statements. | Annual Report
Franklin Multi-Income Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
for the year ended March 31, 2004
Investment income:
Dividends ..................................................... $ 1,212,860
Interest ...................................................... 2,934,495
------------
Total investment income .................................. 4,147,355
------------
Expenses:
Management fees (Note 4) ...................................... 500,040
Transfer agent fees ........................................... 32,397
Custodian fees ................................................ 1,067
Reports to shareholders ....................................... 29,566
Registration and filing fees .................................. 350
Professional fees ............................................. 37,335
Trustees' fees and expenses ................................... 5,651
Amortization of note issuance costs (Note 3) .................. 14,372
Other ......................................................... 7,039
------------
Expenses before interest expense .......................... 627,817
Interest expense (Note 3) ................................. 945,000
------------
Total expenses ........................................... 1,572,817
------------
Net investment income ................................... 2,574,538
------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments .................................................. (1,278,531)
Foreign currency transactions ................................ 2,010
------------
Net realized gain (loss) ................................ (1,276,521)
Net unrealized appreciation
(depreciation) on:
Investments .................................................. 12,973,815
Translation of assets and liabilities
denominated in foreign currencies ........................... (122)
------------
Net unrealized appreciation (depreciation) .............. 12,973,693
------------
Net realized and unrealized gain (loss) ........................ 11,697,172
------------
Net increase (decrease) in net assets
resulting from operations ..................................... $ 14,271,710
============
Annual Report | See notes to financial statements. | 17
Franklin Multi-Income Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended March 31, 2004 and 2003
------------------------------
2004 2003
------------------------------
Increase (decrease) in net assets:
Operations:
Net investment income .......................... $ 2,574,538 $ 3,010,702
Net realized gain (loss) from investments and
foreign currency transactions ............... (1,276,521) (8,364,558)
Net unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities denominated in foreign
currencies ................................... 12,973,693 (4,860,983)
------------------------------
Net increase (decrease) in
net assets resulting from operations ..... 14,271,710 (10,214,839)
Distributions to shareholders from net
investment income .............................. (2,460,192) (3,321,259)
------------------------------
Net increase (decrease) in net assets ...... 11,811,518 (13,536,098)
Net assets:
Beginning of year ............................... 37,510,663 51,046,761
------------------------------
End of year ..................................... $ 49,322,181 $ 37,510,663
==============================
Distributions in excess of net investment
income included in net assets:
End of year ..................................... $ (523,205) $ (661,039)
==============================
18 | See notes to financial statements. | Annual Report
Franklin Multi-Income Trust
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF CASH FLOWS
for the year ended March 31, 2004
Cash flow from operating activities:
Dividends and interest received .................. $ 3,948,945
Operating expenses paid .......................... (608,981)
Interest expense paid ............................ (945,000)
-------------
Cash provided - operations ....................... 2,394,964
=============
Cash flow from investing activities:
Investment purchases ............................. (46,918,442)
Investment sales and maturities .................. 46,983,670
-------------
Cash provided - investments ...................... 65,228
=============
Cash flow from financing activities:
Distributions to shareholders .................... (2,460,192)
-------------
Cash used - financing ........................... (2,460,192)
=============
Net change in cash ................................ --
Cash at beginning of year ......................... --
-------------
Cash at end of year ............................... $ --
=============
RECONCILIATION OF NET INVESTMENT INCOME
TO NET CASH PROVIDED BY OPERATIONS
FOR THE YEAR ENDED MARCH 31, 2004
Net investment income ............................. $ 2,574,538
Amortization income .............................. (306,352)
Amortization of note issuance costs .............. 14,372
Decrease in dividends and interest receivable .... 107,942
Increase in other liabilities .................... 4,464
-------------
Cash provided - operations ........................ $ 2,394,964
=============
Annual Report | See notes to financial statements. | 19
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 non-diversified, closed-end investment company. The
Fund has two classes of securities: senior fixed-rate notes (the Note) 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 last reported sales price. Securities listed or traded on NASDAQ
are valued at their official closing 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. Debt securities are valued by
independent pricing services or market makers under procedures approved by the
Board of Trustees. Foreign securities are valued at the close of trading of the
foreign exchange or the NYSE, whichever is earlier. If events occur that
materially affect the values of securities after the prices or foreign exchange
rates are determined but prior to 4:00 PM ET or the close of trading on the
NYSE, or if market quotations are deemed not readily available or reliable, the
securities will be valued at fair value as determined following procedures
approved by the Board of Trustees. Investments in open-end mutual funds are
valued at the closing net asset value.
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.
20 | Annual Report
Franklin Multi-Income Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. Discounts and premiums
on securities purchased are amortized over the lives of the respective
securities. Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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.
F. GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Funds. Additionally, in the normal course of business, the Fund
enters into contracts with service providers that contain general
indemnification clauses. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.
2. SHARES OF BENEFICIAL INTEREST
At March 31, 2004, there were an unlimited number of shares authorized ($0.01
par value). During the year ended March 31, 2004, there were no share
transactions; all reinvested distributions were satisfied with previously issued
shares purchased in the open market.
3. SENIOR FIXED-RATE NOTE
On August 16, 1999, the Fund issued $16 million principal amount of a new class
of five-year senior notes (the Note). On September 6, 2002, the Fund retired $2
million of the Note's principal amount, leaving a remaining $14 million
outstanding. The Note is a general unsecured obligation of the Fund and ranks
senior to Trust shares and all existing or future unsecured indebtedness of the
Fund.
Annual Report | 21
Franklin Multi-Income Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. SENIOR FIXED-RATE NOTE (CONTINUED)
The Note bears interest, payable semi-annually, at the rate of 6.75% per year,
to maturity on September 15, 2004. The Note was issued in a private placement,
and is not available for resale; therefore, no market value can be obtained for
the Note. 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 Note of at least 300%. The Fund has met these requirements
during the year ended March 31, 2004.
The issuance costs of $96,069 incurred by the Fund are deferred and amortized on
an interest method basis over the term of the Note.
4. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Fund are also officers or directors of the
following entities:
- --------------------------------------------------------------------------------
ENTITY AFFILIATION
Franklin Advisers, Inc. (Advisers) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
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
Note.
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, 2004, the Fund has tax basis capital losses of $9,610,384 which may
be carried over to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2008 ..................................................... $ 24,985
2010 ..................................................... 150,106
2011 ..................................................... 5,087,216
2012 ..................................................... 4,348,077
------------
$ 9,610,384
============
At March 31, 2004, the Fund had deferred capital losses occurring subsequent to
October 31, 2003 of $111,477. For tax purposes, such losses will be reflected in
the year ending March 31, 2005.
22 | Annual Report
Franklin Multi-Income Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The tax character of distributions paid during the years ended March 31, 2004
and 2003, was as follows:
-------------------------------------------
2004 2003
-------------------------------------------
Distributions paid from
- -ordinary income ............... $2,460,192 $3,321,259
At March 31, 2004, the cost of investments, net unrealized appreciation
(depreciation), and undistributed ordinary income for income tax purposes were
as follows:
Cost of investments ........................................ $56,596,546
===========
Unrealized appreciation .................................... $ 9,520,069
Unrealized depreciation .................................... (3,925,237)
----------
Net unrealized appreciation (depreciation) ................. $ 5,594,832
===========
Distributable earnings - undistributed ordinary income ..... $ 80,657
===========
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of defaulted securities, foreign currency
transactions, and bond discounts and premiums. Net realized losses differ for
financial statement and tax purposes primarily due to differing treatment of
wash sales, foreign currency transactions and bond discounts and premiums.
6. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended March 31, 2004 aggregated $26,536,431 and $28,048,558, respectively.
7. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO
The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Advisers. Management fees paid by the Fund are reduced on assets invested in the
Sweep Money Fund, in an amount not to exceed the management fees paid by the
Sweep Money Fund. The Fund earned $6,498 of dividend income from investment in
the Sweep Money Fund for the year ended March 31, 2004.
8. CREDIT RISK AND DEFAULTED SECURITIES
The Fund has 55.05% of its portfolio invested in below investment grade 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.
Annual Report | 23
Franklin Multi-Income Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. CREDIT RISK AND DEFAULTED SECURITIES (CONTINUED)
The Fund held defaulted and/or other securities for which the income has been
deemed uncollectible. The Fund discontinues accruing income on these securities
and provides an estimate for losses on interest receivable. At March 31, 2004,
the value of these securities was $1,535,000 representing 3.1% of the Fund's net
assets. For information as to specific securities, see the accompanying
Statement of Investments.
9. REGULATORY MATTERS
MASSACHUSETTS ADMINISTRATIVE PROCEEDING
On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company")
claiming violations of the Massachusetts Uniform Securities Act ("Massachusetts
Act") with respect to an alleged arrangement to permit market timing (the "Mass.
Proceeding"). On February 14, 2004, the Company filed an answer denying all
violations of the Massachusetts Act.
GOVERNMENTAL INVESTIGATIONS
As part of ongoing investigations by the U.S. Securities and Exchange Commission
(SEC), the U.S. Attorney for the Northern District of California, the New York
Attorney General, the California Attorney General, the U.S. Attorney for the
District of Massachusetts, the Florida Department of Financial Services and the
Commissioner of Securities, the West Virginia Attorney General and the Vermont
Department of Banking, Insurance, Securities, and Health Care Administration,
relating to certain practices in the mutual fund industry, including late
trading, market timing and payments to securities dealers who sell Fund shares,
the Company, as well as certain current or former executives and employees of
the Company, have received requests for information and/or subpoenas to testify
or produce documents. The Company and its current employees are providing
documents and information in response to these requests and subpoenas. In
addition, the Company has responded to requests for similar kinds of information
from regulatory authorities in some of the foreign countries where the Company
conducts its global asset management business.
The staff of the SEC has informed the Company that it intends to recommend that
the SEC authorize a civil injunctive action against the Fund's investment
manager. The SEC's investigation is focused on the activities that are the
subject of the Mass. Proceeding described above and other instances of alleged
market timing by a limited number of third parties that ended in 2000. The
Company currently believes that the charges the SEC staff is contemplating are
unwarranted. There are discussions underway with the SEC staff in an effort to
resolve the issues raised in their investigation.
24 | Annual Report
Franklin Multi-Income Trust
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. REGULATORY MATTERS (CONTINUED)
GOVERNMENTAL INVESTIGATIONS (CONTINUED)
In response to requests for information and subpoenas from the SEC and the
California Attorney General, the Company has provided documents and testimony
has been taken relating to payments to security dealers who sell Fund shares.
Effective November 28, 2003, the Company determined not to direct any further
brokerage commissions where the allocation is based, not only on best execution,
but also on the sale of Fund shares.
OTHER LEGAL PROCEEDINGS
The Fund, in addition to other entities within Franklin Templeton Investments,
including the Company and certain of its subsidiaries, other funds, and current
and former officers, employees, and directors have been named in multiple
lawsuits in different federal courts in Nevada, California, Illinois, New York,
New Jersey, and Florida, alleging violations of various federal securities laws
and seeking, among other things, monetary damages and costs. Specifically, the
lawsuits claim breach of duty with respect to alleged arrangements to permit
market timing and/or late trading activity, or breach of duty with respect to
the valuation of the portfolio securities of certain funds managed by Company
subsidiaries, resulting in alleged market timing activity. The majority of these
lawsuits duplicate, in whole or in part, the allegations asserted in the Mass.
Proceeding detailed above. The lawsuits are styled as class actions or
derivative actions.
In addition, the Company and its subsidiaries, as well as certain current and
former officers, employees, and directors have been named in multiple lawsuits
alleging violations of various securities laws and pendent state law claims
relating to the disclosure of directed brokerage payments and payment of
allegedly excessive commissions and advisory fees. These lawsuits are styled as
class actions and derivative actions.
Management strongly believes that the claims made in each of these lawsuits are
without merit and intends to vigorously defend against them.
The Company cannot predict with certainty the eventual outcome of the foregoing
Mass. Proceeding, other governmental investigations or class actions or other
lawsuits. The impact, if any, of these matters on the Fund is uncertain at this
time. If it is determined that the Company bears responsibility for any unlawful
or inappropriate conduct that caused losses to the Fund, it is committed to
making the Fund or its shareholders whole, as appropriate.
Annual Report | 25
Franklin Multi-Income Trust
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FRANKLIN MULTI-INCOME TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations, cash
flows, and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of Franklin Multi-Income Trust
(the "Fund") at March 31, 2004, the results of its operations and its cash flows
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at March 31, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
San Francisco, California
May 11, 2004
26 | Annual Report
Franklin Multi-Income Trust
TAX DESIGNATION (UNAUDITED)
Under Section 854(b)(2) of the Internal Revenue Code (Code), the Fund hereby
designates up to a maximum of $1,045,882 as qualified dividends for purposes of
the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
March 31, 2004. In January 2005, shareholders will receive Form 1099-DIV which
will include their share of qualified dividends distributed during the calendar
year 2004. Shareholders are advised to check with their tax advisors for
information on the treatment of these amounts on their individual income tax
returns.
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
32.06% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended March 31, 2004.
Annual Report | 27
Board Members and Officers
The name, age and address of the officers and board members, as well as their
affiliations, positions held with the Trust, principal occupations during the
past five years and number of portfolios overseen in the Franklin Templeton
Investments fund complex are shown below. Each board member will serve until
that person's successor is elected and qualified..
INDEPENDENT BOARD MEMBERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
HARRIS J. ASHTON (71) Trustee Since 1989 142 Director, Bar-S Foods
One Franklin Parkway (meat packing company).
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director of various companies; and FORMERLY, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President,
Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and
craft centers) (until 1998).
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT F. CARLSON (76) Trustee Since 2000 52 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President and past President, Board of Administration, California Public Employees Retirement Systems (CALPERS); and FORMERLY,
member and Chairman of the Board, Sutter Community Hospitals; member, Corporate Board, Blue Shield of California; and Chief
Counsel, California Department of Transportation.
- ------------------------------------------------------------------------------------------------------------------------------------
S. JOSEPH FORTUNATO (71) Trustee Since 1989 143 None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Attorney; and FORMERLY, member of the law firm of Pitney, Hardin, Kipp & Szuch.
- ------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (52) Trustee Since January 96 Director, Amerada Hess
One Franklin Parkway 2004 Corporation (exploration and
San Mateo, CA 94403-1906 refining of oil and gas);
Beverly Enterprises, Inc.
(health care); H.J. Heinz
Company (processed foods and
allied products); RTI
International Metals, Inc.
(manufacture and distribution
titanium); and Canadian Nation
Railway (railroad).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director or Trustee of various companies and trusts; and FORMERLY, Assistant to the President of the United States and Secretary of
the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and
Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK W.T. LAHAYE (74) Trustee Since 1989 115 Director, The California Center
One Franklin Parkway for Land Recycling
San Mateo, CA 94403-1906 (redevelopment).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Partner, Las Olas L.P. (Asset Management); and FORMERLY, Chairman, Peregrine Venture Management Company (venture capital).
- ------------------------------------------------------------------------------------------------------------------------------------
28 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
GORDON S. MACKLIN (75) Trustee Since 1992 142 Director, White
One Franklin Parkway Mountains Insurance
San Mateo, CA 94403-1906 Group, Ltd. (holding
company); Martek
Biosciences Corporation;
MedImmune, Inc.
(biotechnology); and
Overstock.com (Internet
services); and FORMERLY,
Director, MCI
Communication
Corporation
(subsequently known as
MCI WorldCom, Inc. and
WorldCom, Inc.)
(communications
services) (1988-2002)
and Spacehab, Inc.
(aerospace services)
(1994-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Deputy Chairman, White Mountains Insurance Group, Ltd. (holding company); and FORMERLY, Chairman, White River Corporation
(financial services) (1993-1998) and Hambrecht & Quist Group (investment banking) (1987-1992); and President, National Association
of Securities Dealers, Inc. (1970-1987).
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED BOARD MEMBERS AND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX
NAME, AGE AND ADDRESS POSITION TIME SERVED OVERSEEN BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
**EDWARD B. JAMIESON (55) Trustee, President Trustee and 8 None
One Franklin Parkway and Chief Executive President since 1993
San Mateo, CA 94403-1906 Officer - Investment and Chief Executive
Management Officer - Investment
Management since
2002
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and Portfolio Manager, Franklin Advisers, Inc.; and officer and/or trustee, as the case may be, of other
subsidiaries of Franklin Resources, Inc. and of five of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**CHARLES B. JOHNSON (71) Trustee and Chairman Trustee since 1989 142 None
One Franklin Parkway of the Board and Chairman of the
San Mateo, CA 94403-1906 Board since 1993
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member-Office of the Chairman and Director, Franklin Resources, Inc.; Vice President, Franklin Templeton
Distributors, Inc.; Director, Fiduciary Trust Company International; and officer and/or director or trustee, as the case may be, of
some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 29
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX
NAME, AGE AND ADDRESS POSITION TIME SERVED OVERSEEN BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
**RUPERT H. JOHNSON, JR. Trustee and Senior Trustee since 1989 125 None
(63) Vice President and Senior Vice
One Franklin Parkway President since 1992
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member-Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Director, Franklin Advisers, Inc. and Franklin Investment Advisory Services, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other
subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
HARMON E. BURNS (59) Vice President Since 1989 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member-Office of the Chairman and Director, Franklin Resources, Inc.; Vice President and Director, Franklin
Templeton Distributors, Inc.; Executive Vice President, Franklin Advisers, Inc.; Director, Franklin Investment Advisory Services,
Inc.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and
of 49 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
MARTIN L. FLANAGAN (43) Vice President Since 1995 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Co-President and Chief Executive Officer, Franklin Resources, Inc.; Senior Vice President and Chief Financial Officer, Franklin
Mutual Advisers, LLC; Executive Vice President, Chief Financial Officer and Director, Templeton Worldwide, Inc.; Executive Vice
President and Chief Operating Officer, Templeton Investment Counsel, LLC; President and Director, Franklin Advisers, Inc.;
Executive Vice President, Franklin Investment Advisory Services, Inc. and Franklin Templeton Investor Services, LLC; Chief
Financial Officer, Franklin Advisory Services, LLC; Chairman, Franklin Templeton Services, LLC; and officer and/or director or
trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 49 of the investment companies
in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (56) Senior Vice Since 2002 Not Applicable None
500 East Broward Blvd. President and Chief
Suite 2100 Executive Officer-
Fort Lauderdale, FL Finance and
33394-3091 Administration
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of 51 of the investment
companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
30 | Annual Report
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX
NAME, AGE AND ADDRESS POSITION TIME SERVED OVERSEEN BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (56) Vice President Since 2000 Not Applicable None
One Franklin Parkway
San Mateo, CA
94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Associate General Counsel, Franklin Resources, Inc.; officer and director of one of the subsidiaries of Franklin Resources, Inc.;
officer of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY, President, Chief Executive Officer and
Director, Property Resources Equity Trust (until 1999) and Franklin Select Realty Trust (until 2000).
- ------------------------------------------------------------------------------------------------------------------------------------
BARBARA J. GREEN Vice President Since 2000 Not Applicable None
(56) One Franklin
Parkway San Mateo,
CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Deputy General Counsel and Secretary, Franklin Resources, Inc.; Secretary and Senior Vice President, Templeton
Worldwide, Inc.; Secretary, Franklin Advisers, Inc., Franklin Advisory Services, LLC, Franklin Investment Advisory Services, Inc.,
Franklin Mutual Advisers, LLC, Franklin Templeton Alternative Strategies, Inc., Franklin Templeton Investor Services, LLC, Franklin
Templeton Services, LLC, Franklin Templeton Distributors, Inc., Templeton Investment Counsel, LLC, and Templeton/Franklin
Investment Services, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 51 of the investment
companies in Franklin Templeton Investments; and FORMERLY, Deputy Director, Division of Investment Management, Executive Assistant
and Senior Advisor to the Chairman, Counselor to the Chairman, Special Counsel and Attorney Fellow, U.S. Securities and Exchange
Commission (1986-1995); Attorney, Rogers & Wells (until 1986); and Judicial Clerk, U.S. District Court (District of Massachusetts)
(until 1979).
- ------------------------------------------------------------------------------------------------------------------------------------
GREGORY E. JOHNSON (42) Vice President Since 1989 Not Applicable None
One Franklin Parkway
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Co-President and Chief Executive Officer, Franklin Resources, Inc.; Chairman of the Board and Director, Franklin Templeton
Distributors, Inc.; President, Franklin Agency, Inc.; Vice President and Director, Franklin Advisers, Inc.; Director, Fiduciary
Trust Company International; officer and/or director of some of the other subsidiaries of Franklin Resources, Inc.; and officer of
two of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Report | 31
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
LENGTH OF FUND COMPLEX
NAME, AGE AND ADDRESS POSITION TIME SERVED OVERSEEN BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
DIOMEDES LOO-TAM Treasurer, and Since March 2004 Not Applicable None
(65) One Franklin Chief Financial
Parkway San Mateo, Officer
CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Officer of 51 of the investment companies in Franklin Templeton Investments; and Consultant, MyVest Corporation (software
development company and investment advisory services); and FORMERLY, Director and member of Audit and Valuation Committees,
Runkel Funds, Inc. (2002-2003); Treasurer/Controller of most of the investment companies in Franklin Templeton Investments
(1985-2000); and Senior Vice President, Franklin Templeton Services, LLC (1997-2000).
- ------------------------------------------------------------------------------------------------------------------------------------
MURRAY L. SIMPSON (66) Vice President Since 2000 Not Applicable None
One Franklin Parkway and Secretary
San Mateo, CA 94403-1906
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Executive Vice President and General Counsel, Franklin Resources, Inc.; officer and/or director, as the case may be, of some of the
subsidiaries of Franklin Resources, Inc. and of 51 of the investment companies in Franklin Templeton Investments; and FORMERLY,
Chief Executive Officer and Managing Director, Templeton Franklin Investment Services (Asia) Limited (until 2000); and Director,
Templeton Asset Management Ltd. (until 1999).
- ------------------------------------------------------------------------------------------------------------------------------------
*We base the number of portfolios on each separate series of the U.S. registered
investment companies within the Franklin Templeton Investments fund complex.
These portfolios have a common investment adviser or affiliated investment
advisers.
**Charles B. Johnson and Rupert H. Johnson, Jr. are considered to be interested
persons of the Trust under the federal securities laws due to their positions as
officers and directors and major shareholders of Franklin Resources Inc.
(Resources), which is the parent company of the Trust's adviser and distributor.
Edward B. Jamieson is considered to be an interested person of the Trust under
the federal securities laws due to his position as an officer of Franklin
Advisers, Inc., which is the Trust's adviser. Note: Charles B. Johnson and
Rupert H. Johnson, Jr. are brothers and the father and uncle, respectively, of
Gregory E. Johnson.
THE SARBANES-OXLEY ACT OF 2002 AND RULES ADOPTED BY THE SECURITIES AND EXCHANGE
COMMISSION REQUIRE THE FUND TO DISCLOSE WHETHER THE FUND'S AUDIT COMMITTEE
INCLUDES AT LEAST ONE MEMBER WHO IS AN AUDIT COMMITTEE FINANCIAL EXPERT WITHIN
THE MEANING OF SUCH ACT AND RULES. THE FUND'S BOARD OF TRUSTEES HAVE DETERMINED
THAT THERE IS AT LEAST ONE SUCH FINANCIAL EXPERT ON THE AUDIT COMMITTEE AND HAS
DESIGNATED FRANK W.T. LAHAYE AS ITS AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. LAHAYE QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE, INCLUDING SERVICE AS PRESIDENT AND DIRECTOR
OF MCCORMICK SELPH ASSOCIATES FROM 1954 THROUGH 1965; DIRECTOR AND CHAIRMAN OF
TELEDYNE CANADA LTD. FROM 1966 THROUGH 1971; DIRECTOR AND CHAIRMAN OF
QUARTERDECK CORPORATION FROM 1982 THROUGH 1998; AND SERVICES AS A DIRECTOR OF
VARIOUS OTHER PUBLIC COMPANIES INCLUDING U.S. TELEPHONE INC. (1981-1984), FISHER
IMAGING INC. (1991-1998) AND DIGITAL TRANSMISSIONS SYSTEMS (1995-1999). IN
ADDITION, MR. LAHAYE SERVED FROM 1981 TO 2000 AS A DIRECTOR AND CHAIRMAN OF
PEREGRINE VENTURE MANAGEMENT CO., A VENTURE CAPITAL FIRM, AND HAS BEEN A MEMBER
AND CHAIRMAN OF THE FUND'S AUDIT COMMITTEE SINCE ITS INCEPTION. AS A RESULT OF
SUCH BACKGROUND AND EXPERIENCE, THE BOARD OF TRUSTEES BELIEVES THAT MR. LAHAYE
HAS ACQUIRED AN UNDERSTANDING OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND
FINANCIAL STATEMENTS, THE GENERAL APPLICATION OF SUCH PRINCIPLES IN CONNECTION
WITH THE ACCOUNTING ESTIMATES, ACCRUALS AND RESERVES, AND ANALYZING AND
EVALUATING FINANCIAL STATEMENTS THAT PRESENT A BREADTH AND LEVEL OF COMPLEXITY
OF ACCOUNTING ISSUES GENERALLY COMPARABLE TO THOSE OF THE FUND, AS WELL AS AN
UNDERSTANDING OF INTERNAL CONTROLS AND PROCEDURES FOR FINANCIAL REPORTING AND AN
UNDERSTANDING OF AUDIT COMMITTEE FUNCTIONS. MR. LAHAYE IS AN INDEPENDENT TRUSTEE
AS THAT TERM IS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.
THE STATEMENT OF ADDITIONAL INFORMATION (SAI) INCLUDES ADDITIONAL INFORMATION
ABOUT THE BOARD MEMBERS AND IS AVAILABLE, WITHOUT CHARGE, UPON REQUEST.
SHAREHOLDERS MAY CALL 1-800/DIAL BEN (1-800/342-5236) TO REQUEST THE SAI.
32 | Annual Report
Franklin Multi-Income Trust
PROXY VOTING POLICIES AND PROCEDURES
The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group.
Annual Report | 33
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Literature Request
For a brochure and prospectus, which contains more complete information,
including charges, expenses and risks, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, we may
monitor, record and access telephone calls to or from our service departments.
These calls can be identified by the presence of a regular beeping tone.
FRANKLIN TEMPLETON INVESTMENTS
INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund
GLOBAL
Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund
GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1
VALUE
Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 2
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund
BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 4
SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund
ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin's AGE High Income Fund
Franklin Federal Money Fund 5,6
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 3
Franklin Income Fund
Franklin Money Fund 5,6
Franklin Short-Intermediate U.S. Government Securities Fund 5
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 5
Templeton Global Bond Fund
TAX-FREE INCOME 7
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 8
Tax-Exempt Money Fund 5,6
LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund
INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund
STATE-SPECIFIC 7
Alabama
Arizona
California 9
Colorado
Connecticut
Florida 9
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 8
Michigan 8
Minnesota 8
Missouri
New Jersey
New York 9
North Carolina
Ohio 8
Oregon
Pennsylvania
Tennessee
Virginia
INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust 10
1.The fund is closed to new investors. Existing shareholders can continue adding
to their accounts.
2.The fund is only open to existing shareholders as well as select retirement
plans.
3.The fund is a continuously offered, closed-end fund. Shares may be purchased
daily; there is no daily redemption. However, each quarter, pending board
approval, the fund will authorize the repurchase of 5%-25% of the outstanding
number of shares. Investors may tender all or a portion of their shares during
the tender period.
4.Upon reaching approximately $350 million in assets, the fund intends to close
to all investors.
5.An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.
6.No assurance exists that the fund's $1.00 per share price will be maintained.
It is possible to lose money by investing in the fund.
7.For investors subject to the alternative minimum tax, a small portion of fund
dividends may be taxable. Distributions of capital gains are generally taxable.
8.Portfolio of insured municipal securities.
9.These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
limited-term, intermediate-term and money market portfolios (CA and NY).
10.The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.
02/04 Not part of the annual report
[LOGO OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
One Franklin Parkway
San Mateo, CA 94403-1906
ANNUAL REPORT AND SHAREHOLDER INFORMATION
Franklin Multi-Income Trust
INVESTMENT MANAGER
Franklin Advisers, Inc.
1-800/DIAL BEN(R)
TRANSFER AGENT
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.
FMI A2004 05/04
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 11(a), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers financial
and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant has an audit committee financial expert serving on its
audit committee.
(2) The audit committee financial expert is Frank W.T. LaHaye and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services
rendered by the principal accountant for the audit of the registrant's annual
financial statements or for services that are normally provided by the
principal accountant in connection with statutory and regulatory filings or
engagements were $31,069 for the fiscal year ended March 31, 2004 and $31,685
for the fiscal year ended March 31, 2003.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of Item 4.
The aggregate fees paid to the principal accountant for assurance and related
services rendered by the principal accountant to the registrant's investment
adviser and any entity controlling, controlled by or under common control
with the investment adviser that provides ongoing services to the registrant
that are reasonably related to the performance of the audit of the their
financial statements were $47,910 for the fiscal year ended March 31, 2004
and $0 for the fiscal year ended March 31, 2003. The services for which
these fees were paid included attestation services.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant for tax compliance,
tax advice and tax planning.
There were no fees paid to the principal accountant for professional services
rendered by the principal accountant to the registrant's investment adviser
and any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant for tax
compliance, tax advice and tax planning.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant not reported in
paragraphs (a)-(c) of Item 4 were $29 for the fiscal year ended March 31,
2004 and $0 for the fiscal year ended March 31, 2003. The services for which
these fees were paid included review of materials provided to the fund Board
in connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services
rendered by the principal accountant to the registrant's investment adviser
and any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the registrant not
reported in paragraphs (a)-(c) of Item 4 were $99,971 for the fiscal year
ended March 31, 2004 and $0 for the fiscal year ended March 31, 2003. The
services for which these fees were paid included review of materials provided
to the fund Board in connection with the investment management contract
renewal process.
(e) (1) The Fund's audit committee is directly responsible for approving the
services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to
the Fund by the auditors;
(iii)pre-approval of all non-audit related services to be provided to
the Fund by the auditors to the Fund's investment adviser or to any entity
that controls, is controlled by or is under common control with the Fund's
investment adviser and that provides ongoing services to the Fund where the
non-audit services relate directly to the operations or financial reporting
of the Fund; and
(iv) establishment by the audit committee, if deemed necessary or
appropriate, as an alternative to committee pre-approval of services to be
provided by the auditors, as required by paragraphs (ii) and (iii) above, of
policies and procedures to permit such services to be pre-approved by other
means, such as through establishment of guidelines or by action of a
designated member or members of the committee; provided the policies and
procedures are detailed as to the particular service and the committee is
informed of each service and such policies and procedures do not include
delegation of audit committee responsibilities, as contemplated under the
Securities Exchange Act of 1934, to management; subject, in the case of (ii)
through (iv), to any waivers, exceptions or exemptions that may be available
under applicable law or rules.
(e) (2) None of the services provided to the registrant described in
paragraphs (b)-(d) of Item 4 were pre-approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for
services rendered by the principal accountant to the registrant and the
registrant's investment adviser and any entity controlling, controlled by or
under common control with the investment adviser that provides ongoing
services to the registrant were $147,910 for the fiscal year ended March 31,
2004 and $0 for the fiscal year ended March 31, 2003.
(h) No disclosures are required by this Item 4(h).
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The board of trustees of the Trust has delegated the authority to vote proxies
related to the portfolio securities held by the Fund to the Fund's manager
Franklin Mutual Advisers, LLC, in accordance with the Proxy Voting Policies and
Procedures (Policies) adopted by the manager.
The manager has delegated its administrative duties with respect to the voting
of proxies to the Proxy Group within Franklin Templeton Companies, LLC (Proxy
Group), an affiliate and wholly owned subsidiary of Franklin Resources, Inc. All
proxies received by the Proxy Group will be voted based upon the manager's
instructions and/or policies.
To assist it in analyzing proxies, the manager subscribes to Institutional
Shareholder Services (ISS), an unaffiliated third party corporate governance
research service that provides in-depth analyses of shareholder meeting agendas,
vote recommendations, recordkeeping and vote disclosure services. In addition,
the manager subscribes to Glass Lewis & Co., LLC (Glass Lewis), an unaffiliated
third party analytical research firm, to receive analyses and vote
recommendations on the shareholder meetings of publicly held U.S. companies.
Although ISS' and/or Glass Lewis' analyses are thoroughly reviewed and
considered in making a final voting decision, the manager does not consider
recommendations from ISS, Glass Lewis or any other third party to be
determinative of the manager's ultimate decision. The manager votes proxies
solely in the interests of the Fund and its shareholders. As a matter of policy,
the officers, directors, trustees and employees of the Fund, the manager and the
Proxy Group will not be influenced by outside sources whose interests conflict
with the interests of the Fund and its shareholders. All conflicts are resolved
in the interests of the manager's clients. In situations where the manager
perceives a material conflict of interest, the manager may: disclose the
conflict to the Fund's board of trustees; defer to the voting recommendation of
the Fund's board of trustees, ISS, Glass Lewis or those of another independent
third party provider of proxy services; or take such other action in good faith
(in consultation with counsel) which would protect the interests of the Fund and
its shareholders.
The recommendation of management on any issue is a factor which the manager
considers in determining how proxies should be voted, but is not determinative
of the manager's ultimate decision. As a matter of practice, the votes with
respect to most issues are cast in accordance with the position of the company's
management. Each issue, however, is considered on its own merits, and the
manager will not support the position of the company's management in any
situation where it deems that the ratification of management's position would
adversely affect the investment merits of owning that company's shares.
Manager's proxy voting policies and principles The manager has adopted general
proxy voting guidelines, which are summarized below. These guidelines are not an
exhaustive list of all the issues that may arise and the manager cannot
anticipate all future situations. In all cases, each proxy will be considered
based on the relevant facts and circumstances.
Board of directors. The manager supports an independent board of directors, and
prefers that key committees such as audit, nominating, and compensation
committees be comprised of independent directors. The manager will generally
vote against management efforts to classify a board and will generally support
proposals to declassify the board of directors. The manager may withhold votes
from directors who have attended less than 75% of meetings without a valid
reason. While generally in favor of separating Chairman and CEO positions, the
manager will review this issue as well as proposals to restore or provide for
cumulative voting on a case-by-case basis, taking into consideration factors
such as the company's corporate governance guidelines or provisions and
performance.
Ratification of Auditors. In light of several high profile accounting scandals,
the manager will closely scrutinize the role and performance of auditors. On a
case-by-case basis, the manager will examine proposals relating to non-audit
relationships and non-audit fees. The manager will also consider, on a
case-by-case basis, proposals to rotate auditors, and will vote against the
ratification of auditors when there is clear and compelling evidence of
accounting irregularities or negligence.
Management & director compensation. A company's equity-based compensation plan
should be in alignment with its shareholders' long-term interests. The manager
evaluates plans on a case-by-case basis by considering several factors to
determine whether the plan is fair and reasonable, including the ISS
quantitative model utilized to assess such plans and/or the Glass Lewis
evaluation of the plans. The manager will generally oppose plans that have the
potential to be excessively dilutive, and will almost always oppose plans that
are structured to allow the repricing of underwater options, or plans that have
an automatic share replenishment "evergreen" feature. The manager will generally
support employee stock option plans in which the purchase price is at least 85%
of fair market value, and when potential dilution is 10% or less.
Severance compensation arrangements will be reviewed on a case-by-case basis,
although the manager will generally oppose "golden parachutes" that are
considered to be excessive. The manager will normally support proposals that
require a percentage of directors' compensation to be in the form of common
stock, as they align their interests with those of shareholders. The manager
will review on a case-by-case basis any shareholder proposals to adopt policies
on expensing stock option plans.
Anti-takeover mechanisms and related issues. The manager generally opposes
anti-takeover measures since they tend to reduce shareholder rights. On
occasion, the manager may vote with management when the research analyst has
concluded that the proposal is not onerous and would not harm the Fund or its
shareholders' interests. The manager generally supports proposals that require
shareholder rights' plans ("poison pills") to be subject to a shareholder vote
and will closely evaluate such plans on a case-by-case basis to determine
whether or not they warrant support. The manager will generally vote against any
proposal to issue stock that has unequal or subordinate voting rights. The
manager generally opposes any supermajority voting requirements as well as the
payment of "greenmail." The manager generally supports "fair price" provisions
and confidential voting.
Changes to capital structure. The manager will review, on a case-by-case basis,
proposals by companies to increase authorized shares and the purpose for the
increase and proposals seeking preemptive rights. The manager will generally not
vote in favor of dual-class capital structures to increase the number of
authorized shares where that class of stock would have superior voting rights.
The manager will generally vote in favor of the issuance of preferred stock in
cases where the company specifies the voting, dividend, conversion and other
rights of such stock and the terms of the preferred stock issuance are deemed
reasonable.
Mergers and corporate restructuring. Mergers and acquisitions will be subject to
careful review by the research analyst to determine whether each will be
beneficial to shareholders. The manager will analyze various economic and
strategic factors in making the final decision on a merger or acquisition.
Corporate restructuring and reincorporation proposals are also subject to a
thorough examination on a case-by-case basis.
Social and corporate policy issues. The manager will generally give management
discretion with regard to social, environmental and ethical issues, although the
manager may vote in favor of those that are believed to have significant
economic benefits or implications for the Fund and its shareholders.
Global corporate governance. Many of the tenets discussed above are applied to
proxy voting decisions for international companies. However, the manager must be
more flexible in these instances and must be mindful of the varied market
practices of each region.
The manager will attempt to process every proxy it receives for all domestic and
foreign proxies. However, there may be situations in which the manager cannot
process proxies, for example, where a meeting notice was received too late, or
sell orders preclude the ability to vote. The manager may abstain from voting
under certain circumstances or vote against items such as "Other Business" when
the manager is not given adequate information from the company.
Shareholders may view the complete Policies on-line at franklintempleton.com.
Alternatively, shareholders may request copies of the Policies free of charge by
calling the Proxy Group collect at 1-954-847-2268 or by sending a written
request to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite
1500, Fort Lauderdale, FL 33394, Attention: Proxy Group. Copies of the Fund's
proxy voting records will also be made available on-line at
franklintempleton.com and posted on the SEC website at www.sec.gov no later than
August 31, 2004 and will reflect the twelve-month period beginning July 1, 2003,
and ending June 30, 2004.
8. Purchases of Equity Securities by Closed-End Management Investment Company
and Affiliated Purchasers N/A
9. Submission of Matters to a Vote of Security Holders. There have been no
changes to the procedures by which shareholders may recommend nominees to the
Registrant's Board of Trustees that would require disclosure herein.
Item 10. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.
(b) Changes in Internal Controls. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.
ITEM 11. EXHIBITS.
(A) Code of Ethics for Principal Executive and Senior Financial Officers.
(B)(1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Diomedes Tam-Loo, Chief Financial Officer
(B)(2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Diomedes Tam-Loo, Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN MULTI-INCOME TRUST
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date May 11, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date May 11, 2004
By /s/Diomedes Loo-Tam
Chief Financial Officer
Date May 11, 2004