FRANKLIN MULTI INCOME TRUST, N-30D, 1999-06-10

FRANKLIN MULTI INCOME TRUST
N-30D, 1999-06-10

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SHAREHOLDER LETTER

Dear Shareholder:

This annual report for Franklin Multi-Income Trust covers the period ended March
31, 1999.

The U.S. economy grew at a healthy pace during the period under review. Higher
income levels coupled with a robust real estate market and increasing stock
prices fueled the consumer sector, which was the primary driver of domestic
growth. Consumption also buoyed the labor market, with the unemployment rate
falling to 4.2% in March, the lowest in 28 years. The overall economy, as
measured by U.S. gross domestic product, grew at an annualized rate of 6.0% for
the fourth quarter of 1998, well above the Federal Reserve Board's (the Fed's)
targeted long-term growth rate of 2.50%.(1) However, outside of the U.S.,
economic conditions were far from ideal.

The financial crises in Asia, Latin America and Eastern Europe caused
significant currency and market volatility in many countries. As a result, the
affected countries experienced a slowdown in economic growth and suffered from
recessionary forces, and in certain cases from outright depression. These
countries purchased fewer U.S. goods as a consequence, negatively impacting even
the seemingly invincible U.S. economy, particularly its export-oriented sectors.
With global troubles apparently worsening, the Fed moved to stimulate economic
growth worldwide and instill confidence in the financial markets. In the fall
1998, the Fed's monetary policy panel, the Federal Open Market

CONTENTS

Shareholder Letter ..................................................... 1

Manager's Discussion ................................................... 3

Performance Summary .................................................... 9

Dividend Reinvestment and Cash Purchase Plan ........................... 11

Annual Meeting of Shareholders ......................................... 15

Financial Highlights & Statement of Investments ........................ 17

Financial Statements ................................................... 23

Notes to Financial Statements .......................................... 27

Independent Auditors' Report ........................................... 30

Tax Information ........................................................ 31

(1.) Source: Bureau of Labor Statistics.

<PAGE>
Committee, three times made quarter-point cuts to the federal funds target rate,
lowering it to 4.75% on November 17, 1998.

The global problems contributed to dramatic U.S. market swings during the period
under review. The Dow Jones(R) Industrial Average (the Dow), after reaching a
historically high 9337.97 on July 17, 1998, suffered the second-largest one-day
point decline in its history, falling 512.61 points to 7539.07 on August 31,
1998. The Dow continued to be volatile in September, before roaring upward to
flirt with the psychologically important 10000 level in the middle of March. The
Dow ended the period at 9786.16, almost 30% higher than its low at the end of
August. The Standard & Poor's(R) 500 (S&P 500(R)) Stock Index, a much broader
measure of the U.S. market, acted in much the same manner, ending the period at
1286.37, after falling as low as 957.28 on August 31, 1998.

Such volatility reminds us of the importance of investing for the long term, so
daily market fluctuations and short-term volatility have minimal impact on
overall investment goals. We encourage you to discuss your financial goals with
your investment representative. He or she can address concerns about market
volatility, and help you diversify your investments and stay focused on the long
term.

As always, we appreciate your continued investment in Franklin Multi-Income
Trust and look forward to serving your future investment needs.

Sincerely,

/s/ Charles B. Johnson
- ----------------------

Charles B. Johnson
Chairman
Franklin Multi-Income Trust

<PAGE>
MANAGER'S DISCUSSION

- --------------------------------------------------------------------------------
Your Fund's Objective: Franklin Multi-Income Trust seeks to provide high,
current income consistent with preservation of capital.
- --------------------------------------------------------------------------------

OVERVIEW

The 12-month period under review was a challenging one for the Trust, as the
environment for high yield bonds and utility equities came under pressure, and
volatility in both markets continued. In the summer of 1998, turmoil in Russia
spread to other developing markets, eventually impacting assets in the domestic
market. Hedge fund failures and margin calls, when brokerage firms demand
immediate repayment of loans, exacerbated asset price declines, and investors'
preference for risk fell sharply as sentiment shifted toward assets of
relatively higher credit quality. The risk premium demanded by investors for
high yield bonds, as measured by the interest rate spread over U.S. Treasury
bonds, increased substantially, compared with levels at the beginning of the
reporting period, and remained large by historical standards through the
period's close, pushing the prices of these bonds lower. Utility equities
experienced a rebound from their September lows, but weakened significantly over
the first quarter of 1999, giving up much of their gains. Although
stronger-than-expected domestic economic conditions contributed to a general
U.S. stock market recovery, electric utility stocks were negatively impacted due
to their relatively defensive nature, as an expected weaker domestic economy
failed to materialize.

You will find a complete listing of the Trust's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 18 of
this report.

<PAGE>
PORTFOLIO BREAKDOWN
Based on Total Market Value
3/31/99

[PIE CHART]

<TABLE>
<S> <C>
Corporate Bonds 52.06%
Utilities Stocks 34.08%
Misc. Equities & Preferred Stocks 11.52%
Convertible Bonds 0.63%
Foreign Currency Denominated Bonds 0.38%
Cash & Equivalents 1.33%
</TABLE>

In this difficult environment, both of the Trust's primary asset classes -- high
yield bonds and utility equities -- generated negative returns over the
reporting period. Naturally, the Trust's performance also suffered, and it
generated historically below-average returns for the 12-month period. However,
it should be noted that the Trust has performed well over longer time periods
and we believe that the volatility experienced over the reporting period was
historically unusually high, and we expect volatility to revert to more normal
levels over time. Furthermore, we continue our strategy of investing for
long-term performance, and despite recent declines we believe the Trust is
relatively well-positioned to take advantage of positive sector fundamentals
going forward.

SECTOR DISCUSSIONS

WIRELESS

During the reporting period, the wireless sector continued to benefit from
strong industry growth and increased market penetration, as industry revenues
grew despite increasing pricing pressures. Although highly competitive, the
market for wireless services provided attractive opportunities for companies
with sound, aggressive business plans. In general, we focused on lower-cost
operators who successfully expanded their networks to offer customers better
coverage. On the cellular side, our holdings in Nextel Communications Inc. and
Comcast Cellular Corp. benefited the Trust. Over the reporting period, Nextel
furthered its rapid network expansion and boasted the highest average revenue
per unit (ARPU) in the industry. Comcast Cellular entered into an agreement to
be acquired by SBC Communications Inc., a significantly positive development
given SBC Communications' superior credit profile. The Trust also initiated a
position during the period in Dobson/Sygnet Communications Co., which performed
strongly due to favorable growth prospects and industry trends.

<PAGE>
TELECOMMUNICATIONS

The telecommunications sector significantly outperformed the overall high yield
market during the period, and the Trust was able to take advantage of this
strength. Global deregulation, technological convergence and the rise of data
services are trends of central importance that continued to impact the industry.
Similar to the U.S.'s restructuring and deregulation initiatives of the past few
years, regulatory barriers are falling in Europe. Additionally, "silicon
economics" became the driving force behind the data services growth, as the
increasing need for Internet traffic, client-server networks and
computer-to-computer communication dramatically increased the number of users.
Seeking to take advantage of these trends, we focused on companies with their
own networks, strong management teams, and established access to capital
markets. Among the competitive local exchange carriers (CLECs), we focused on
diversified services providers, which generally have the ability to cross-sell
higher margin products and reduce customer turnover rates. We focused on
companies like NEXTLINK Communications Inc., which is well-capitalized, has a
strong management team and employs a myriad of technologies to serve its
customers.

INDUSTRIAL

During the reporting period, we maintained our strategy of looking for companies
that provide some defense against fluctuations in economic conditions, as well
as those consolidators that enjoy a higher degree of pricing power. In
particular, we liked companies that demonstrated ample liquidity, favorable cost
structures, strong management strategies and successful integration of
acquisitions. Allied Waste North America Inc., a leader in the waste management
services industry, continued to pursue its successful acquisition strategy, and
the bonds performed well over the period. In particular, Allied Waste announced
the

<PAGE>
purchase of Browning-Ferris Industries Inc., making the company the
second-largest in the industry, in terms of volume and revenue. Nortek Inc., a
leader in the building products sector, benefited from a strong building cycle,
particularly in the heating-ventilation-air conditioning (HVAC) segment of the
market. Nortek also performed well due to effective cost-cutting measures,
increased market penetration and leadership by a capable management team.

CABLE AND MEDIA

The cable and media sectors continued to benefit from a healthy advertising
environment and a strong domestic economy during the period. Consolidation
remained a dominant theme, as industry leaders gained market share and realized
efficiencies from mergers and acquisitions. In general, we maintained our
strategy of looking for larger consolidators with lower cost structures. On the
cable side, the advent of new technologies generally impacted asset prices
favorably, as the anticipated introduction of services such as telephony, cable
modems, digital tiering and videos on demand are likely to generate additional
revenue for many companies in the sector going forward. The Trust's position in
Century Communications Corp., a leading U.S. cable provider, performed well
during the period, aided by strengthening industry fundamentals as well as the
company's rumored acquisition by an investment grade suitor. The Trust took
advantage of the news and sold the bonds for a healthy gain. In the media
sector, Outdoor Systems Inc., the nation's largest outdoor advertiser, performed
well due to strong demand for billboard space and more effective, lower-cost
vinyl technology.

<PAGE>
ELECTRIC UTILITIES

Electric utility stocks enjoyed a strong rally over the third quarter of 1998 as
many investors shifted into more defensive assets due to concerns that U.S.
economic conditions were deteriorating. Unfortunately, the flight to quality
peaked in the third quarter as economic data releases eased investor concerns
regarding a growth slowdown, and the demand for utility equities fell. Despite
recent price declines, we believe sector fundamentals are improving and recent
valuations offer attractive opportunities. Deregulation continues to be a key
trend in the electric utilities sector, as many states are in the process of
opening their power generation markets to competition. Given this outlook, we
maintained our strategy of looking for attractively valued companies in
favorable regulatory environments. Such companies exhibit competitive cost
structures, visionary management teams and non-regulated investments. Montana
Power Co. embodies these strategic elements and performed well over the period
due to improved regulatory clarity in the state of Montana as well as the sale
of its generation plant. Additionally, Montana Power's expansion of its
fiber-optic cable operation should allow the company to continue generating
above-average revenue growth going forward.

WHAT'S AHEAD

Recent economic data suggest that domestic growth is likely to continue,
although possibly at a slower pace, and that inflation is still very much under
control. Within this context, interest rates should remain stable over the near
term, which should provide a relatively favorable environment for high yield
bonds

TOP 10 HOLDINGS
Based on Total Market Value
3/31/99

COMPANY
SECTOR (SECURITY TYPE)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
New Century Energies Inc. 2.58%
Utility (stock)

FPL Group Inc. 2.46%
Utility (stock)

CMS Energy Corp. 2.31%
Utility (stock)

Cinergy Corp. 2.14%
Utility (stock)

Unicom Corp. 2.09%
Utility (stock)

Dominion Resources Inc.2.06%
Utility (stock)

Millicom Int'l Cellular SA 2.00%
Utilities and
Telecommunications (bond)

Enron Corp. 1.89%
Utility (stock)

Duke Energy Corp. 1.68%
Utility (stock)

Southern Co. 1.63%
Utility (stock)
</TABLE>

<PAGE>
DIVIDEND DISTRIBUTIONS
4/1/98-3/31/99

<TABLE>
<CAPTION>
DIVIDEND
MONTH PER SHARE
- --------------------------------------------------------------------------------
<S> <C>
April 6.4 cents

May 6.4 cents

June 6.4 cents

July 6.4 cents

August 6.4 cents

September 6.4 cents

October 6.4 cents

November 6.4 cents

December 6.4 cents

January 6.4 cents

February 6.4 cents

March 6.4 cents
- --------------------------------------------------------------------------------
TOTAL 76.8 CENTS
</TABLE>

and utility equities. We believe that positive fundamentals are likely to
support the recent recovery in the high yield market, and that many utility
equities offer value given current market conditions. Thus, our outlook for high
yield bonds and utility equities remains positive, and we believe there will
continue to be attractive opportunities in high yield and utility equity markets
over the near to intermediate term.

Please remember, this discussion reflects our views, opinions and portfolio
holdings as of March 31, 1999, the end of the reporting period. However, market
and economic conditions are changing constantly, which can be expected to affect
our strategies and the fund's portfolio composition. Although historical
performance is no guarantee of future results, these insights may help you
understand our investment and management philosophy.

<PAGE>
PERFORMANCE SUMMARY AS OF 3/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions according to the terms specified in the Trust's dividend
reinvestment and cash purchase plan.

PRICE AND DISTRIBUTION INFORMATION (4/1/98 - 3/31/99)

<TABLE>
<CAPTION>
CHANGE 3/31/99 3/31/98
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value - $1.93 $10.05 $11.98

Market Price (NYSE) - $2.00 $ 9.00 $11.00
</TABLE>

<TABLE>
<CAPTION>
DISTRIBUTIONS
--------------------------------------
<S> <C>
Dividend Income $0.7680

Long-Term Capital Gain $0.2028

Short-Term Capital Gain $0.0283

TOTAL $0.9991
</TABLE>

PERFORMANCE

<TABLE>
<CAPTION>
INCEPTION
1-YEAR 5-YEAR (10/9/89)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1)

Based on change in net
asset value -7.36% +74.11% +216.16%

Based on change in
market price -9.58% +61.54% +163.50%

Average Annual Total Return(1)

Based on change in net
asset value -7.36% +11.73% +12.92%

Based on change in
market price -9.58% +10.07% +10.77%

Distribution Rate(2) 7.64%
</TABLE>

1. Total return calculations represent the cumulative and average annual change
in value of an investment over the periods indicated.

2. Distribution rate is based on an annualization of the Trust's 6.4 cent per
share March monthly dividend and the NYSE closing price of $9.00 on March 31,
1999.

- --------------------------------------------------------------------------------
Since markets can go down as well as up, investment return and principal value
will fluctuate with market conditions, currency volatility, and the economic,
social and political climates of countries where the Trust invests. Emerging
markets involve heightened risks related to the same factors, in addition to
those associated with their relatively small size and lesser liquidity. You may
have a gain or loss when you sell your shares.
- --------------------------------------------------------------------------------

Franklin Multi-Income Trust paid distributions derived from long-term capital
gains of 20.28 cents ($0.2028) per share in November 1998. The Trust hereby
designates such distributions as capital gain dividends per Internal Revenue
Code Section 852 (b)(3).

Past performance is not predictive of future results.

<PAGE>
PORTFOLIO OPERATIONS

CHRISTOPHER MOLUMPHY
Senior Portfolio Manager
Franklin Advisers, Inc.
- --------------------------------------------------------------------------------

Christopher Molumphy earned his Bachelor of Arts degree in economics from
Stanford University and his master's degree in finance from the University of
Chicago. He has been with Franklin Advisers, Inc. since 1988. Mr. Molumphy is a
Chartered Financial Analyst and a member of several securities industry
associations. He has managed Franklin Universal Trust since 1991.

<PAGE>
DIVIDEND REINVESTMENT
AND CASH PURCHASE PLAN

The Trust's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers you
a prompt and simple way to reinvest dividends and capital gain distributions in
shares of the Trust. The Plan also allows you to purchase additional shares of
the Trust by making voluntary cash payments. First Data Investor Services Group
(the "Plan Agent"), P.O. Box 8030, Boston, Massachusetts, 02266-8030, acts as
your Plan Agent in administering the Plan. The complete Terms and Conditions of
the Dividend Reinvestment and Cash Purchase Plan are contained in the Trust's
Dividend Reinvestment and Cash Purchase Plan Brochure. A copy of that Brochure
may be obtained from the Trust at the address on the back cover of this report.

You are automatically enrolled in the Plan unless you elect to receive dividends
or distributions in cash. If you own shares in your own name, you should notify
the Plan Agent, in writing, if you wish to receive dividends or distributions in
cash.

If the Trust declares a dividend or capital gain distribution, you, as a
participant in the Plan, will automatically receive an equivalent amount of
shares of the Trust purchased on your behalf by the Plan Agent.

The Plan permits you on a voluntary basis to submit in cash payments of not less
than $100 each up to a total of $5,000 per month to purchase additional shares
of the Trust. It is entirely up to you whether you wish to buy additional shares
with voluntary cash payments, and you do not have to send in the

<PAGE>
same amount each time if you do. These payments should be made by check or money
order payable to Franklin Multi-Income Trust and sent to First Data Investor
Services Group, P.O. Box 8030, Boston, Massachusetts, 02266-8030.

Your cash payment will be aggregated with the payments of other participants and
invested on your behalf by the Plan Agent in shares of the Trust, which are
purchased in the open market.

The Plan Agent will invest cash payments on approximately the 15th of each month
in which no dividend or distribution is payable and, during each month in which
a dividend or distribution is payable, will invest cash payments beginning on
the dividend payment date. Under no circumstances will interest be paid on your
funds held by the Plan Agent. Accordingly, you should send any voluntary cash
payments which you wish to make shortly before an investment date but in
sufficient time to ensure that your payment will reach the Plan Agent not less
than 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.

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

<PAGE>
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.

<PAGE>
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.

<PAGE>
FRANKLIN MULTI-INCOME TRUST
ANNUAL MEETING OF SHAREHOLDERS

At an Annual Meeting of Shareholders of Franklin Multi-Income Trust (the "Fund")
held on October 29, 1998, shareholders of the Fund voted as follows:

1. Regarding the election of three (3) Class 3 Trustees of the Fund.

<TABLE>
<CAPTION>
% OF % OF
SHARES OUTSTANDING % OF SHARES OUTSTANDING % OF
TRUSTEES FOR SHARES VOTED AGAINST SHARES VOTED
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Edward B. Jamieson 3,466,229.389 59.175 96.80 113,620.780 1.940 3.20

Charles B. Johnson 3,471,521.113 59.265 96.97 108,329.056 1.849 3.03

Rupert H. Johnson, Jr. 3,469,321.113 59.228 96.91 110,529.056 1.887 3.09
</TABLE>

2. Regarding the ratification of the selection of PricewaterhouseCoopers LLP,
Certified Public Accountants, as the independent auditor for the Fund for
the fiscal year ending March 31, 1999.

<TABLE>
<CAPTION>
% OF % OF % OF
OUTSTANDING % OF SHARES OUTSTANDING % OF WITHHELD OUTSTANDING
SHARES FOR SHARES VOTED AGAINST SHARES VOTED OR ABSTAIN SHARES
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3,415,079.435 58.302 95.40 39,995.344 .683 1.11 124,775.39 2.130
</TABLE>

3. Regarding the proposal to eliminate the Fund's fundamental investment
restriction regarding the purchase and sale of oil, gas, mineral and/or real
estate interests.

<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
SHARES FOR SHARES % OF VOTED SHARES AGAINST SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2,733,152.921 46.660 76.35 245,652.974 4.194
</TABLE>

<TABLE>
<CAPTION>
% OF % OF
WITHHELD OUTSTANDING BROKER OUTSTANDING
OR ABSTAIN SHARES NON-VOTE SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
178,742.274 3.051 422,302.00 7.209
</TABLE>

<PAGE>
4. Regarding the proposal to eliminate the Fund's fundamental investment
restriction regarding short sales of securities.

<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
SHARES FOR SHARES % OF VOTED SHARES AGAINST SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2,605,358.594 44.478 72.78 310,205.962 5.296
</TABLE>

5. Regarding the proposal to amend the Fund's fundamental investment
restriction regarding lending.

<TABLE>
<CAPTION>
% OF % OF
OUTSTANDING OUTSTANDING
SHARES FOR SHARES % OF VOTED SHARES AGAINST SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2,676,140.110 45.687 74.76 255,570.054 4.363
</TABLE>

6. Regarding the proposal to grant the proxy holders the authority to vote upon
any other business that may legally come before the meeting.

<TABLE>
<CAPTION>
% OF % OF % OF
OUTSTANDING % OF SHARES OUTSTANDING WITHHELD OUTSTANDING
SHARES FOR SHARES VOTED AGAINST SHARES OR ABSTAIN SHARES
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
3,262,656.141 55.700 91.14 173,485.368 2.962 143,708.660 2.453
</TABLE>

<PAGE>
FRANKLIN MULTI-INCOME TRUST
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .............. $ 11.98 $ 10.34 $ 10.61 $ 9.60 $ 9.97
------------------------------------------------------------
Income from investment operations:
Net investment income .......................... .76 .72 .79 .78 .78
Net realized and unrealized gains (losses) ..... (1.70) 2.18 -- 1.11 (.08)
------------------------------------------------------------
Total from investment operations ................ (.94) 2.90 .79 1.89 .70
------------------------------------------------------------
Less distributions from:
Net investment income .......................... (.76) (.74) (.77) (.77) (.78)
In excess of net investment income ............. (.01) (.03) -- -- (.01)
Net realized gains ............................. (.23) (.49) (.29) (.11) (.28)
------------------------------------------------------------
Total distributions ............................. (1.00) (1.26) (1.06) (.88) (1.07)
------------------------------------------------------------
Net asset value, end of year .................... $ 10.04 $ 11.98 $ 10.34 $ 10.61 $ 9.60
============================================================
Market value, end of year(1) .................... $ 9.000 $ 11.000 $ 9.375 $ 9.000 $ 8.750
============================================================

Total return (based on market value per share)(2) (9.58)% 32.57% 16.24% 12.87% 1.46%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................. $ 58,827 $ 70,190 $ 60,594 $ 62,153 $ 56,230
Ratios to average net assets:
Expenses ....................................... 3.07% 3.00% 3.14% 3.21% 3.00%
Net investment income .......................... 6.87% 6.47% 7.48% 7.53% 6.37%
Portfolio turnover rate ......................... 24.31% 45.31% 44.40% 35.06% 29.77%
Total debt outstanding at end of year (000's) ... $ 16,000 $ 16,000 $ 16,000 $ 16,000 $ 16,000
Asset coverage per $1,000 of debt ............... $ 3,677 $ 4,387 $ 3,787 $ 3,885 $ 3,514
Average amount of notes per share during the year $ 2.73 $ 2.73 $ 2.73 $ 2.73 $ 2.73
</TABLE>

(1) Based on the last sale on the New York Stock Exchange.

(2) Total return is not annualized for periods less than one year.

See notes to financial statements.

<PAGE>
FRANKLIN MULTI-INCOME TRUST
STATEMENT OF INVESTMENTS, MARCH 31, 1999

<TABLE>
<CAPTION>
SHARES/
WARRANTS VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS 49.6%
COMMERCIAL SERVICES
(a) Sodexho Marriott Services Inc. ............... 131 $ 2,890
----------

CONSUMER SERVICES .1%
Marriott International Inc., A ............... 1,052 35,374
----------

ENERGY MINERALS 1.2%
Ultramar Diamond Shamrock Corp. .............. 33,300 720,113
----------

NON-ENERGY MINERALS
(a) Gulf States Steel, wts., 4/15/03 ............. 1,000 10
----------

PRODUCER MANUFACTURING .9%
(a) Anacomp Inc. ................................. 20,565 330,325
(a) Harvard Industries Inc. ...................... 27,466 219,728
----------
550,053
----------

TELECOMMUNICATIONS 4.8%
BellSouth Corp. .............................. 24,000 961,500
GTE Corp. .................................... 10,000 605,000
(a) Loral Orion Network System, wts., 1/15/07 .... 1,000 6,847
SBC Communications Inc. ...................... 7,000 329,875
U.S. West Inc. ............................... 17,000 936,063
----------
2,839,285
----------

UTILITIES 42.6%
Allegheny Energy Inc. ........................ 20,000 590,000
American Electric Power Co. Inc. ............. 17,500 694,531
Central & South West Corp. ................... 29,900 700,781
Cinergy Corp. ................................ 57,200 1,573,000
CMS Energy Corp. ............................. 13,400 536,838
Conectiv Inc. ................................ 20,000 387,500
Dominion Resources Inc. ...................... 41,000 1,514,438
DPL Inc. ..................................... 50,900 839,850
DTE Energy Co. ............................... 20,000 768,750
Duke Energy Corp. ............................ 22,600 1,234,525
Edison International ......................... 26,000 578,500
Enron Corp. .................................. 21,626 1,389,471
Entergy Corp. ................................ 20,000 550,000
FirstEnergy Corp. ............................ 20,000 558,750
Florida Progress Corp. ....................... 10,000 377,500
FPL Group Inc. ............................... 33,900 1,805,175
Montana Power Co. ............................ 14,100 1,037,231
New Century Energies Inc. .................... 55,700 1,897,277
New England Electric System .................. 6,800 329,800
NIPSCO Industries Inc. ....................... 11,700 315,900
Northwestern Corp. ........................... 11,700 303,469
PECO Energy Co. .............................. 20,900 966,625
Puget Sound Energy Inc. ...................... 25,000 576,563
SCANA Corp. .................................. 30,000 650,625
Sempra Energy ................................ 50,000 959,375
</TABLE>

<PAGE>
FRANKLIN MULTI-INCOME TRUST
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)

<TABLE>
<CAPTION>
SHARES/
WARRANTS VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS (CONT.)
UTILITIES (CONT.)
Southern Co. ....................................... 51,300 $ 1,195,931
Texas Utilities Co. ................................ 28,100 1,171,419
Unicom Corp. ....................................... 42,000 1,535,625
-----------
25,039,449
-----------
TOTAL COMMON STOCKS AND WARRANTS (COST $24,641,629) 29,187,174
-----------

PREFERRED STOCKS 1.9%
Sinclair Capital, 11.625%, pfd. (COST $1,000,000) .. 10,000 1,120,000
-----------

CONVERTIBLE PREFERRED STOCKS 5.4%
CONSUMER NON-DURABLES .7%
Ralston-Ralston Purina Group, 7.00%, cvt. pfd ...... 9,300 418,500
-----------

CONSUMER SERVICES .3%
Host Marriot Corp., 6.75%, cvt. pfd ................ 4,400 177,100
-----------

TRANSPORTATION 1.1%
Union Pacific Capital Trust, 6.25%, cvt. pfd ....... 13,300 668,325
-----------

UTILITIES AND TELECOMMUNICATIONS 3.3%
CMS Energy Corp., 7.75%, cvt. pfd .................. 22,000 1,157,750
Nortel Inversora SA, 10.00%, cvt. pfd. (Argentina) . 15,000 733,125
Texas Utilities Co., 9.25%, cvt. pfd ............... 700 37,319
-----------
1,928,194
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $3,174,034) 3,192,119
-----------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT*
---------
<S> <C> <C>
NON-CONVERTIBLE BONDS 65.5%
COMMERCIAL SERVICES 6.6%
American Commercial Lines LLC, senior note, 10.25%, 6/30/08 ......... $ 600,000 619,500
Ameriserve Food Distribution Inc., senior note, 8.875%, 10/15/06 .... 250,000 221,250
Ameriserve Food Distribution Inc., senior sub. note, 10.125%, 7/15/07 750,000 540,000
Big Flower Press Holdings Inc., senior sub. note, 8.875%, 7/01/07 ... 500,000 510,000
Fleming Cos. Inc., senior sub. note, B, 10.50%, 12/01/04 ............ 1,000,000 940,000
Outdoor Systems Inc., senior sub. note, 8.875%, 6/15/07 ............. 1,000,000 1,070,000
-----------
3,900,750
-----------

CONSUMER DURABLES 1.6%
Revlon Consumer Products Corp., senior sub. note, 8.625%, 2/01/08 ... 1,000,000 920,000
-----------

CONSUMER NON-DURABLES 1.0%
RJR Nabisco Inc., senior note, 9.25%, 8/15/13 ....................... 500,000 575,826
-----------

CONSUMER SERVICES 8.4%
Chancellor Media Corp., senior note, 144A, 8.00%, 11/01/08 .......... 500,000 521,250
Chancellor Media Corp., senior sub. note, B, 8.75%, 6/15/07 ......... 500,000 521,250
Charter Communications Holdings LLC, senior disc. note, 144A,
zero cpn. to 4/01/04, 9.92% thereafter, 4/01/11 .................... 1,000,000 645,000
Diamond Holdings PLC, senior note, 9.125%, 2/01/08 (United Kingdom) . 500,000 522,500
</TABLE>

<PAGE>
FRANKLIN MULTI-INCOME TRUST
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
NON-CONVERTIBLE BONDS (CONT.)
CONSUMER SERVICES (CONT.)
Falcon Building Products Inc., senior sub. disc. note, B,
zero cpn. to 6/15/02, 10.50% thereafter, 6/15/07 ................... $ 500,000 $ 312,500
Fox/Liberty Networks LLC, senior disc. note, zero cpn. to 8/15/02,
9.75% thereafter, 8/15/07 .......................................... 1,000,000 747,500
Intertek Finance PLC, senior sub. note, B, 10.25%, 11/01/06
(United Kingdom) ................................................... 700,000 679,000
LIN Holdings Corp., senior disc. note, zero cpn. to 3/01/03, 10.00%
thereafter, 3/01/08 ................................................ 850,000 603,500
Six Flags Entertainment Corp., senior note, 8.875%, 4/01/06 .......... 400,000 411,000
----------
4,963,500
----------

ELECTRONIC TECHNOLOGY 1.4%
Celestica International Inc., senior sub. note, 10.50%, 12/31/06
(Canada) ........................................................... 325,000 359,125
Derlan Industries Ltd., senior note, 10.00%, 1/15/07 (Canada) ........ 500,000 453,125
----------
812,250
----------

ENERGY MINERALS 5.2%
Chesapeake Energy Corp., senior note, B, 9.625%, 5/01/05 ............. 200,000 169,000
Clark R&M Inc., senior sub. note, 8.875%, 11/15/07 ................... 1,000,000 845,000
Conproca SA, S.F., senior secured note, 144A, 12.00%, 6/16/10 (Mexico) 900,000 882,000
Pride Petroleum Services Inc., senior note, 9.375%, 5/01/07 .......... 500,000 485,000
RBF Finance Co., senior secured note, 144A, 11.375%, 3/15/09 ......... 650,000 687,375
----------
3,068,375
----------

HEALTH SERVICES 2.5%
Abbey Healthcare Group Inc., senior sub. note, 9.50%, 11/01/02 ...... 1,000,000 975,000
Magellan Health Services Inc., senior sub. note, 9.00%, 2/15/08 ...... 600,000 519,000
----------
1,494,000
----------

INDUSTRIAL SERVICES 2.2%
Allied Waste North America Inc., senior note, B, 7.875%, 1/01/09 ..... 900,000 884,250
Dailey International Inc., senior note, B, 9.50%, 2/15/08 ............ 300,000 112,500
Universal Compression Inc., senior disc. note, zero cpn. to 2/15/03,
9.875% thereafter, 2/15/08 ......................................... 500,000 295,000
----------
1,291,750
----------

NON-ENERGY MINERALS 1.6%
LTV Corp., senior note, 8.20%, 9/15/07 ............................... 1,000,000 940,000
----------

PROCESS INDUSTRIES 6.6%
Anchor Glass, first mortgage, 11.25%, 4/01/05 ........................ 1,000,000 1,037,500
Ball Corp., senior note, 7.75%, 8/01/06 .............................. 250,000 257,813
Ball Corp., senior sub. note, 8.25%, 8/01/08 ......................... 150,000 154,688
Graham Packaging Co., senior disc. note, B, zero cpn. to 1/15/03,
10.75% thereafter, 1/15/09 ......................................... 200,000 139,000
Graham Packaging Co., senior sub. note, B, 8.75%, 1/15/08 ............ 200,000 198,000
Huntsman Corp., senior sub. note, 144A, 9.50%, 7/01/07 ............... 1,000,000 995,000
Pindo Deli Finance Mauritius Ltd., senior note, 10.25%, 10/01/02
(Indonesia) ........................................................ 1,000,000 550,000
U.S. Can Corp., senior sub. note, B, 10.125%, 10/15/06 ............... 500,000 530,000
----------
3,862,001
----------

PRODUCER MANUFACTURING 7.2%
Advanced Accessory Systems, senior sub. note, B, 9.75%, 10/01/07 ..... 500,000 492,500
Aetna Industries Inc., senior note, 11.875%, 10/01/06 ................ 1,000,000 1,065,000
Collins & Aikman Corp., senior sub. note, B, 10.00%, 1/15/07 ......... 1,000,000 1,042,500
</TABLE>

<PAGE>
FRANKLIN MULTI-INCOME TRUST
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
NON-CONVERTIBLE BONDS (CONT.)
PRODUCER MANUFACTURING (CONT.)
Falcon Building Products Inc., senior sub. note, B, 9.50%, 6/15/07 .. $ 500,000 $ 462,500
Nortek Inc., senior note, 144A, 8.875%, 8/01/08 ..................... 250,000 258,750
Nortek Inc., senior note, B, 9.125%, 9/01/07 ........................ 500,000 521,250
Oshkosh Truck Corp., senior sub. note, 8.75%, 3/01/08 ............... 400,000 405,000
-----------
4,247,500
-----------

RETAIL TRADE 1.2%
Shoppers Food Warehouse Corp., senior note, 9.75%, 6/15/04 .......... 250,000 270,000
Specialty Retailers Inc., senior note, B, 8.50%, 7/15/05 ............ 500,000 435,000
-----------
705,000
-----------

TELECOMMUNICATIONS 17.2%
Arch Communications Group, senior disc. note, zero cpn. to 3/15/01,
10.875% thereafter, 3/15/08 ....................................... 1,000,000 455,000
Comcast Cellular Corp., senior note, B, 9.50%, 5/01/07 .............. 1,000,000 1,140,000
Dobson/Sygnet Communications Co., senior note, 144A, 12.25%, 12/15/08 1,000,000 1,070,000
Flag Ltd., senior note, 8.25%, 1/30/08 (Bermuda) .................... 200,000 196,000
Intermedia Communications Inc., senior disc. note, B, zero cpn. to
7/15/02, 11.25% thereafter, 7/15/07 ............................... 1,250,000 953,125
IXC Communications Inc., senior sub. note, 9.00%, 4/15/08 ........... 450,000 468,000
Loral Space and Communications Ltd., senior disc. note, zero cpn.
to 1/15/02, 12.50% thereafter, 1/15/07 ............................ 1,000,000 575,000
Metrocall Inc., senior sub. note, 144A, 11.00%, 9/15/08 ............. 1,000,000 915,000
Millicom International Cellular SA, senior disc. note, zero cpn. to
6/01/01, 13.50% thereafter, 6/01/06 (Luxembourg) .................. 2,000,000 1,470,000
Nextel Communications Inc., senior disc. note, 9.75%, 8/15/04 ....... 1,000,000 1,041,250
NEXTLINK Communications Inc., senior note, 9.625%, 10/01/07 ......... 500,000 511,250
NEXTLINK Communications Inc., senior note, 9.00%, 3/15/08 ........... 500,000 497,500
Paging Network Inc., senior sub. note, 8.875%, 2/01/06 .............. 1,000,000 795,000
-----------
10,087,125
-----------

UTILITIES 2.8%
AES Corp., senior sub. note, 8.50%, 11/01/07 ........................ 750,000 738,750
ESCOM, E168, 11.00%, 6/01/08 (South Africa) ......................... 2,175,000 ZAR 278,688
Niagara Mohawk Power Corp., senior note, G, 7.75%, 10/01/08 ......... 600,000 645,000
-----------
1,662,438
-----------
TOTAL NON-CONVERTIBLE BONDS (COST $39,340,922) ...................... 38,530,515
-----------

CONVERTIBLE BONDS .8%
Macerich Co., cvt., senior sub. note, 144A, 7.25%, 12/15/02
(COST $500,000) ................................................... 500,000 462,500
-----------
</TABLE>

<PAGE>
FRANKLIN MULTI-INCOME TRUST
STATEMENT OF INVESTMENTS, MARCH 31, 1999 (CONT.)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>

(b) REPURCHASE AGREEMENT 1.7%
Joint Repurchase Agreement, 4.875%, 4/01/99 (Maturity Value
$974,690) (COST $974,558) ............................... $ 974,558 $ 974,558
Barclays Capital Inc.
Bear, Stearns & Co. Inc.
Chase Securities Inc.
CIBC Oppenheimer Corp.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Lehman Brothers Inc.
Paribas Corp.
Warburg Dillon Read LLC
Collateralized by U.S. Treasury Bills & Notes

------------
TOTAL INVESTMENTS (COST $69,631,143) 124.9% ............... 73,466,866
OTHER ASSETS, LESS LIABILITIES (24.9)% .................... (14,639,926)
------------
NET ASSETS 100.0% ......................................... $ 58,826,940
============
</TABLE>

CURRENCY ABBREVIATIONS
ZAR - South African Rand

* Securities traded in U.S. dollars unless otherwise indicated.
(a) Non-income producing
(b) Investment is through participation in a joint account with other funds
managed by the investment advisor. At March 31,1999, all repurchase
agreements had been entered into on that date.

See notes to financial statements.

<PAGE>
FRANKLIN MULTI-INCOME TRUST
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999

<TABLE>
<S> <C>
Assets:
Investments in securities:
Cost ......................................................... $ 69,631,143
============
Value ........................................................ 73,466,866

Receivables:
Investment securities sold ................................... 2,544,173
Dividends and interest ....................................... 1,069,356

Note issuance costs (Note 3) .................................. 13,458
------------
Total assets ............................................ 77,093,853
------------

Liabilities:
Payables:
Investment securities purchased .............................. 1,722,441
Affiliates ................................................... 58,089
Notes (Note 3) ............................................... 16,000,000
Accrued interest (Note 3) .................................... 48,000
Distributions to shareholders ................................. 374,886
Other liabilities ............................................. 63,497
------------
Total liabilities ....................................... 18,266,913
------------
Net assets, at value .................................... $ 58,826,940
============

Net assets consist of:
Accumulated distributions in excess of net investment income .. $ (218,928)
Net unrealized appreciation ................................... 3,835,425
Accumulated net realized gain ................................. 1,420,329
Capital shares ................................................ 53,790,114
------------
Net assets, at value .................................... $ 58,826,940
============
Net asset value per share ($58,826,940 / 5,857,600
shares outstanding) .......................................... $ 10.04
============
</TABLE>

See notes to financial statements.
23

<PAGE>
FRANKLIN MULTI-INCOME TRUST
Financial Statements (continued)

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1999

<TABLE>
<S> <C>
Investment income: (Net of foreign taxes of $2,779)
Dividends ................................................... $ 1,923,408
Interest .................................................... 4,514,375
------------
Total investment income ............................. 6,437,783
------------
Expenses:
Management fees (Note 4) .................................... 685,965
Transfer agent fees ......................................... 26,542
Custodian fees .............................................. 670
Reports to shareholders ..................................... 28,901
Professional fees ........................................... 24,680
Trustees' fees and expenses (Note 4) ........................ 5,072
Amortization of note issuance costs ......................... 29,250
Other ....................................................... 33,007
------------
Total expenses ...................................... 834,087
Interest expense (Note 3) ........................... 1,152,000
------------
Net expenses ....................................... 1,986,087
------------
Net investment income ............................ 4,451,696
------------

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ................................................ 1,446,921
Foreign currency transactions .............................. (264)
------------
Net realized gain ................................... 1,446,657
Net unrealized appreciation (depreciation) on:
Investments ................................................ (11,408,978)
Translation of assets and liabilities denominated in
foreign currencies ...................................... 63
------------
Net unrealized depreciation ......................... (11,408,915)
------------
Net realized and unrealized loss ............................. (9,962,258)
============
Net decrease in net assets resulting from operations ......... $ (5,510,562)
============
</TABLE>

See notes to financial statements.

<PAGE>
FRANKLIN MULTI-INCOME TRUST
FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998

<TABLE>
<CAPTION>
1999 1998
----------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................ $ 4,451,696 $ 4,244,894
Net realized gain from investments and foreign currency
transactions ....................................................... 1,446,657 3,138,584
Net unrealized appreciation (depreciation) on investments
and translation of assets and liabilities
denominated in foreign currencies .................................. (11,408,915) 9,593,117
----------------------------
Net increase (decrease) in net assets resulting from operations (5,510,562) 16,976,595
Distributions to shareholders from:
Net investment income ................................................ (4,451,432) (4,326,914)
In excess of net investment income ................................... (47,205) (171,723)
Net realized gains ................................................... (1,353,691) (2,881,939)
----------------------------
Total distributions to shareholders .................................... (5,852,328) (7,380,576)
----------------------------
Net increase (decrease) in net assets ......................... (11,362,890) 9,596,019
Net assets:
Beginning of year ..................................................... 70,189,830 60,593,811
----------------------------
End of year ........................................................... $ 58,826,940 $ 70,189,830
============================
Accumulated distributions in excess of net investment income
included in net assets:
End of year ........................................................... $ (218,928) $ (171,723)
============================
</TABLE>

See notes to financial statements.
25

<PAGE>
FRANKLIN MULTI-INCOME TRUST
FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1999

<TABLE>
<S> <C>
Cash flow from operating activities:
Dividends and interest received ........................ $ 5,681,036
Operating expenses paid ................................ (790,387)
Interest expense paid .................................. (1,152,000)
-------------
Cash provided - operations ............................ 3,738,649
=============

Cash flow from investing activities:
Investment purchases ................................... (424,403,931)
Investment sales and maturities ........................ 426,609,477
-------------
Cash provided - investments ........................... 2,205,546
=============

Cash flow from financing activities:
Distributions to shareholders .......................... (5,852,328)
-------------
Cash used - financing ................................. (5,852,328)
=============

Net change in cash ...................................... 91,867
Cash at beginning of year ............................... (91,867)
-------------
Cash at end of year ..................................... $ --
=============
</TABLE>

RECONCILIATION OF NET INVESTMENT INCOME TO NET CASH PROVIDED BY OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 1999

<TABLE>
<S> <C>
Net investment income ....................................... $ 4,451,696
Amortization income ........................................ (1,078,750)
Amortization of note issuance costs ........................ 29,250
Decrease in dividends and interest receivable .............. 322,003
Decrease in other liabilities .............................. 14,450
-----------
Cash provided - operations .................................. $ 3,738,649
===========
</TABLE>

See notes to financial statements.
26

<PAGE>
FRANKLIN MULTI-INCOME TRUST
Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Multi-Income Trust (the Fund) is registered under the Investment
Company Act of 1940 as a closed-end, non-diversified investment company. The
Fund has two classes of securities: senior fixed-rate notes (the Notes) and
shares of beneficial interest (the Shares). The Fund seeks high current income.
The following summarizes the Fund's significant accounting policies.

a. SECURITY VALUATION

Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Restricted securities and securities for
which market quotations are not readily available are valued at fair value as
determined by management in accordance with procedures established by the Board
of Trustees.

b. FOREIGN CURRENCY TRANSLATION

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.

The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.

Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollars
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.

c. INCOME TAXES

No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.

d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Bond discount is
amortized on an income tax basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.

e. ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.

<PAGE>
FRANKLIN MULTI-INCOME TRUST
Notes to Financial Statements (continued)

2. SHARES OF BENEFICIAL INTEREST

At March 31, 1999, there were an unlimited number of shares authorized ($0.01
par value). During the year ended March 31, 1999, there were no share
transactions; all reinvested distributions were satisfied with previously issued
shares purchased in the open market.

3. SENIOR FIXED-RATE NOTES

On August 16, 1994, the Fund issued $16 million principal amount of a new class
of five-year senior notes (the Notes). The Notes are general unsecured
obligations of the Fund and rank senior to Trust shares and all existing or
future unsecured indebtedness of the Fund.

The Notes bear interest, payable semi-annually, at the rate of 7.20% per year,
to maturity on September 15, 1999. The Notes were issued in a private placement,
and are not available for resale; therefore, no market value can be obtained for
the Notes. The Fund is required to maintain on a monthly basis a specified
discounted asset value for its portfolio in compliance with guidelines
established by Standard & Poor's Corporation, and is required to maintain asset
coverage for the Notes of at least 300%. The Fund has met these requirements
during the year ended March 31, 1999.

The issuance costs of $146,250 incurred by the Fund are deferred and amortized
on a straight line basis over the term of the Notes.

4. TRANSACTION WITH AFFILIATES

Certain officers and trustees of the Fund are also officers or directors of
Franklin Advisers, Inc. (Advisers) and Franklin Templeton Services, Inc. (FT
Services), the Fund's investment manager and administrative manager,
respectively.

The Fund pays an investment management fee to Franklin Advisers, Inc. of .85%
per year of the average weekly net assets of the Fund, excluding the principal
amount of the Notes.

Under an agreement with Advisers, FT Services provides administrative services
to the Fund. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Fund.

5. INCOME TAXES

At March 31, 1999, the net unrealized appreciation based on the cost of
investments for income tax purposes of $69,631,143 was as follows:

<TABLE>
<S> <C>
Unrealized appreciation $ 6,674,660
Unrealized depreciation (2,838,937)
-----------
Net unrealized appreciation $ 3,835,723
===========
</TABLE>

Net investment income and net realized capital gains differ for financial
statement and tax purposes primarily due to differing treatment of foreign
currency transactions.

<PAGE>
FRANKLIN MULTI-INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the year
ended March 31, 1999 aggregated $19,113,385 and $21,876,254, respectively.

7. CREDIT RISK

The Fund has 57.3% of its portfolio invested in lower rated and comparable
quality unrated high yield securities, which tend to be more sensitive to
economic conditions than higher rated securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of high
yielding securities because such securities are generally unsecured and are
often subordinated to other creditors of the issuer. For information as to
specific securities, see the accompanying Statement of Investments.

For financial reporting purposes, the Fund discontinues accruing income on
defaulted bonds and provides an estimate for losses on interest receivable.

The Fund has investments in excess of 10% of its total net assets in the
Telecommunications industry. Such concentration may subject the Fund more
significantly to economic changes occurring within that industry.

<PAGE>
FRANKLIN MULTI-INCOME TRUST
INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
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 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, 1999, 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 generally accepted accounting principles. 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 generally accepted auditing standards 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, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.

PricewaterhouseCoopers LLP

San Francisco, California
May 6, 1999

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FRANKLIN MULTI-INCOME TRUST
TAX INFORMATION

Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby
designates $1,412,830 as a capital gain dividend for the fiscal year ended March
31, 1999.

Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
32.92% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended March 31, 1999.

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