MESSAGE FROM THE CHAIRMAN
================================================================================
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Message
from the Chairman.................. 1
Manager's Discussion............... 4
Performance Summary................ 8
Results of
Shareholder Meeting................ 12
Statement of Investments........... 13
Financial Statements............... 22
Report of
Independent Auditors............... 32
</TABLE>
July 21, 1995
Fellow Shareholder:
We're pleased to bring you the annual report of Franklin's AGE High Income Fund
for the fiscal year ended May 31, 1995.
Fiscal year '94 -'95 was one of contrasts. The first half of the period was
marked by falling bond prices brought on by sharply rising interest rates.
Fortunately, the latter half of the fiscal year was more encouraging as bond
markets rallied following news of slower economic growth and continued mild
inflation.
In February 1995, the Federal Reserve Board apparently completed the series of
interest rate increases it began in February 1994, which were designed to
restrain inflation and slow down a rapidly growing economy.
- --------------------------------------------------------------------------------
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
- - ARE NOT FDIC INSURED;
- - ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY FINANCIAL
INSTITUTION;
- - ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.
- --------------------------------------------------------------------------------
================================================================================
Including the final increase, the federal funds rate was raised seven
times, to 6% from 3%. This policy seems to have been successful, as first
quarter GDP was only 2.7%, significantly slower than the 4.1% pace recorded
during all of 1994, while inflation, as measured by the Consumer Price Index,
has remained around the 3% level. During the final six months of the fiscal
year, U.S. Treasury bonds rallied strongly, as measured by the Lehman Brothers
Long Treasury Bond Index.(1) For example, this index increased to 5989.77 from
5008.95, or 19.58% between November 30, 1994 and May 31, 1995.
Of course, there's no guarantee that these markets will continue to rise as they
have recently. As you know, markets experience ups and downs, which is a normal
part of investing. That's why we've always encouraged our shareholders to focus
on their long-term investment goals. History has shown that, over the long term,
stocks and bonds have delivered impressive results.(2) By concentrating on
long-term investment goals, you need not be unduly concerned with short-term
market fluctuations.
Furthermore, many financial experts agree that a technique known as "dollar cost
averaging" may be one of the best ways to take advantage of market downturns and
rallies. With dollar cost averaging, you invest a fixed dollar amount at regular
intervals, regardless of the market's direction. Using this method, you
automatically purchase more shares when prices are low, and fewer shares when
prices are high, which can significantly reduce your average cost per share. Of
course, no investment technique can assure a profit or protect against loss. But
dollar cost
1. Source: Lehman Brothers Long Treasury Bond Index measures the total return on
all 10-year and longer Treasuries.
2. Past performance cannot guarantee future results.
2
================================================================================
averaging can provide you with a simple investment strategy that can minimize
the effects of market volatility and help you make the most of your investment
dollars.(3) For more information on dollar cost averaging, please see your
investment advisor. Or, call Franklin Templeton Fund Information, toll free, at
1-800/DIAL BEN.
You can also help minimize the effects of mar- ket fluctuations by diversifying
your investments. Mutual funds offer a level of diversification that would be
almost impossible for individual investors to achieve on their own. In addition,
the Franklin Templeton Group offers over 110 different mutual funds, each with
its own investment objective. If your objectives change, chances are that we
offer a fund to match your new goal. You can exchange shares between most
Franklin and Templeton funds within the same class, usually without paying any
additional fees or charges.(4)
As always, we welcome your questions, appreciate your trust and support, and
look forward to serving you in the years to come.
Sincerely,
Rupert H. Johnson, Jr.
President
Franklin's AGE High Income Fund
3. When using this strategy, you should consider your financial ability to
continue purchases through periods of low price levels or changing economic
conditions.
4. Shares of the fund, if held for at least six months, may be exchanged for
shares of the same class of most other Franklin or Templeton funds, without any
additional fees or charges. Shareholders using timing services will be charged a
$5 fee for each exchange. Certain funds do not permit timing accounts or there
may be certain restrictions, as detailed in the fund's prospectus. The exchange
program may be modified or discontinued by the fund.
3
MANAGER'S DISCUSSION
================================================================================
FUND OBJECTIVE
Franklin's AGE High Income Fund seeks to provide investors with high current
income, with a secondary objective of principal appreciation, through a
diversified portfolio consisting primarily of high-yield, lower-rated corporate
bonds.
We're pleased to report that Franklin's AGE High Income Fund successfully stood
up to the bond market's challenges during this past fiscal year. As shown in the
Performance Summary on page 9, its Class I shares delivered a total return of
+13.34%, which earned the fund the #4 ranking out of 103 funds in the high yield
bond fund category from Lipper Analytical Services, Inc.(5,6) Total return
represents the change in the fund's net asset value per share assuming
reinvestment of dividends and capital gains.
According to government statistics, the current business expansion celebrated
its fourth anniversary in March 1995. Since this is already one of the longer
periods of business expansion, we may be closer to the end of this business
cycle than to its beginning. With this in mind, our strategy this past year has
been to focus on debt securities of companies whose business prospects are not
dependent on the economic cycle.
While our focus remains on high yielding, lower-rated securities, we have been
increasing the fund's exposure to better quality bonds. In fact, we have
increased the fund's weighting in invest-
5. The historical total return figures shown above pertain only to Class I
shares of the Fund. Class II shares, which the fund began offering on May 16,
1995, are subject to different fees and expenses, which will affect their
performance. Please see the prospectus for more details regarding Class I and
Class II shares.
6. The fund was ranked #4 out of 103 high yield bond funds for the one-year
period ended May 31, 1995, #18 out of 60 for the five-year period ended March
31, 1995, and #19 out of 32 for the ten-year period ended March 31, 1995, as
measured by Lipper Analytical Services, Inc., a nationally recognized mutual
fund research organization. Lipper rankings do not include sales charges, and
may have been different if such charges had been considered. Past performance is
not predictive of future results.
4
================================================================================
ment grade issues (those rated Baa3 and higher by Moody's Investor Services) to
9.10% of total net assets on May 31, 1995, from 5.49% on May 31, 1994. We took
this action because the marketplace, which appears to be concerned with the
longevity of the economy's growth stage, seems to be rewarding better-quality,
less risky and more defensive securities at the expense of lesser-quality, more
cyclical securities.
In particular, we have emphasized the bonds of companies in defensive,
non-cyclical industries such as cable television, food & beverages, food
retailing, healthcare, and gaming & leisure. Four of the fund's top 10 bond
holdings are: Dr. Pepper/Seven-Up (which traded significantly higher after
management agreed to a buyout by Cadbury Schweppes PLC in January 1995), Rogers
Communications, Healthtrust, and Continental Cablevision. As of May 31, 1995,
our bond holdings in the five industries mentioned above were among the seven
largest sectors in our portfolio comprising a total of 36.2% of total net
assets.
- --------------------------------------------------------------------------------
FRANKLIN'S AGE HIGH INCOME FUND
Top 10 Holdings on 5/31/95
As a Percentage of Total Net Assets
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
INDUSTRY NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
Dr. Pepper/Seven-Up Cos. 2.31%
Food & Beverages
- --------------------------------------------------------------------------------
American Standard, Inc. 2.22%
Industrial
- --------------------------------------------------------------------------------
Fort Howard Corp. 2.06%
Forest & Paper Products
- --------------------------------------------------------------------------------
Healthtrust, Inc. 2.01%
Healthcare
- --------------------------------------------------------------------------------
Rogers Communications, Inc. 1.89%
Cable Television
- --------------------------------------------------------------------------------
RJR Nabisco, Inc. 1.81%
Consumer Goods
- --------------------------------------------------------------------------------
Continental Cablevision, Inc. 1.67%
Cable Television
- --------------------------------------------------------------------------------
Repap New Brunswick 1.65%
Forest & Paper Products
- --------------------------------------------------------------------------------
Comcast Cellular Communications, Inc. 1.55%
Wireless Communications
- --------------------------------------------------------------------------------
Delta Air Lines, Inc. 1.49%
Transportation
- --------------------------------------------------------------------------------
</TABLE>
FOR A DETAILED LISTING OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 13 OF THIS REPORT.
5
================================================================================
We also focused on large, leading market-share companies, particularly those in
cyclical industries. We believe these issues tend to benefit from investors'
"flight to quality" when markets become skittish. Such cyclical companies in our
portfolio include American Standard, Inc., which successfully completed an
initial public offering in the past year and turned in stellar financial
results, Container Corp. of America, IMC Fertilizer Group, Inc., Owens Illinois,
Inc., and WestPoint Stevens, Inc.
Superior performance of individual securities also contributed to the fund's
high returns over the reporting period. For example, many of the fund's
healthcare holdings have performed well because of consolidation within the
industry. Among these is Healthtrust, which was purchased by Columbia HCA
Healthcorp, National Medical Enterprises and Ornda Healthcorp. Improved industry
conditions also benefited our gaming and leisure holdings in Embassy Suites and
Showboat, as well as our transportation holdings in Delta Air Lines and United
Air Lines. We were particularly pleased that our position in Nextel
Communications, which we purchased near the end of 1994 at bargain prices,
traded up about 50% as of May 31, 1995.
As stated in the fund's prospectus, because of the fund's policy of investing in
higher yielding, higher risk securities, an investment in the fund is
accompanied by a higher degree of risk than is present with an investment in
higher rated, lower yielding securities. Accordingly, an investment in the fund
should not be considered a complete investment program, and should be carefully
evaluated for its appropriateness in light of the investor's overall investment
needs and goals. Persons on fixed incomes, such as retired
6
================================================================================
persons, should also consider the increased risk of loss to principal that is
present with an investment in higher risk securities such as those in which the
fund invests.
While investments in high yielding, lower-rated securities are accompanied by a
greater degree of credit risk, investors generally receive a higher yield for
assuming the additional risk. And, many investors have found that broad
diversification and professional management can help to offset the risks
involved. Franklin's AGE High Income Fund spreads such risk over many different
issues and industries. On May 31, 1995, the fund had 179 positions, with the
fund's largest holding representing only 2.31% of its total net assets. By
limiting the fund's exposure to the fortunes of any one industry or issuer, we
seek to reduce the impact that a poorly performing security or sector could have
on your investment.
Going forward, we are optimistic that the prospects remain reasonably bright for
the high yield corporate bond sector. Since inflation represents the primary
fundamental factor that could cause interest rates to increase and bonds to
perform poorly, comfort can be derived from the evidence that inflation remains
under control. In addition, the recent increase in yields of high yield
corporate bonds, relative to Treasuries, appears to compensate investors for the
added risk some companies may face if the economy does slow down.
We believe that our management approach should present a positive, long-term
investment opportunity for shareholders of the fund. As always, we appreciate
your continued support and look forward to serving you in the years to come.
7
PERFORMANCE SUMMARY
================================================================================
As of May 16, 1995, your fund now offers two classes of shares, designated as
"Class I" and "Class II." Original shares, now designated as Class I, will
continue to have the same pricing structure, which is the standard front-end
sales charge (with breakpoints) and annual 12b-1 Plan fees. Class II shares
have a different pricing structure, with a lower initial sales charge than
Class I shares; however, they have higher annual 12b-1 Plan fees. Also, with
certain exceptions, a contingent deferred sales charge (back-end sales charge)
will generally be assessed on Class II shares redeemed within 18 months of a
purchase. The different expenses borne by each class of shares will result in
different net asset values, dividends and, ultimately, different total
performance. Please see the prospectus for more details regarding Class I and
Class II shares.
The fund's Class I share price, as measured by net asset value, rose to $2.77 on
May 31, 1995 from $2.70 on May 31, 1994. Class II shares, which were initially
offered on May 16, 1995, rose from $2.76 on that date to $2.77 on May 31, 1995.
For the 12-month period ended May 31, 1995, Class I shares of your fund paid
income distributions totaling 26.4 cents ($0.264) per share. Based on an
annualization of the current monthly dividend for Class I shares of 2.2 cents
($0.022) per share and the maximum offering price of $2.89 on May 31, 1995, your
fund's distribution rate for Class I shares was 9.13%. Dividends will vary based
on the earnings of the fund's portfolio, and past distributions are not
necessarily predictive of future trends. Class II shares will begin paying
dividends in June 1995.
8
================================================================================
Franklin's AGE High Income Fund Class I shares posted a total return of +13.34%
for the one-year period ended May 31, 1995. Total return measures the change in
value of an investment over the periods indicated, assuming the reinvestment of
dividends and capital gains, if any. This calculation does not include the
maximum initial sales charge and past performance is not predictive of future
results.
We maintain a long-term perspective when managing Franklin's AGE High Income
Fund and encourage shareholders to do the same. While the fund may experience
volatility from time to time, we believe that its performance will be rewarding
over the long term. For example, as the table on page 11 represents, Class I
shares of the fund provided an average annual total return of +13.31% over the
past five years.
The graph on the following page compares the performance of Franklin's AGE High
Income Fund Class I shares with the Salomon Brothers Combined Corporate Index
(SBCC) and the CS First Boston High Yield Index (FBHY) for the 10-year period
ended May 31, 1995. The SBCC index includes all corporate issues, rated from AAA
to CCC, from the High Yield Market Index and the corporate component from the
Salomon Brothers Broad Investment Grade Bond Index. The FBHY index has been
added this year because management believes that its composition of
approximately 1500 high-yield corporate securities rated BBB and lower by
Standard & Poor's bond rating service provides for a more appropriate
comparison. For the same reason, the SBCC index may be excluded from the Index
Comparison graph in next year's report.
9
================================================================================
As you can see, the fund's performance slightly lagged that of the indices. Of
course, unmanaged market indices have inherent performance differentials in
comparison to any fund. The unmanaged market indices, such as the Salomon
Brothers Combined Corporate Index and the CS First Boston High Yield Index,
don't pay commissions or market spreads to buy and sell bonds. They don't pay
management fees to cover salaries to securities analysts or portfolio managers.
And unlike the unmanged indices, investment companies are never 100% invested
because of the need to have cash on hand to redeem shares. In addition, the
performance shown for the fund includes the maximum initial sales charge, all
fund expenses and account fees. If operating expenses, such as the AGE High
Income Fund's, had been applied to the indices, their performance would have
been lower. Please remember that an index is simply a measure of performance,
and cannot be invested in directly.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT.
*Class II shares, which the fund began offering on May 16, 1995, are not
included in this Index Comparison as the performance data was insufficient for
demonstration. They are subject to different fees and expenses than Class I
shares, which will affect their performance.
**This performance graph assumes an initial $10,000 investment and includes the
maximum 4.25% initial sales charge, all fund expenses and account fees. It also
assumes that your dividends and capital gains were reinvested at net asset
value. The Salomon Brothers Combined Corporate Index and the CS First Boston
High Yield Index include price appreciation or depreciation and distributions as
a percentage of the original investment. Past performance is not predictive of
future results.
10
================================================================================
FRANKLIN'S AGE HIGH INCOME FUND
Periods ended May 31, 1995
<TABLE>
<CAPTION>
SINCE
INCEPTION
1-YEAR 5-YEAR 10-YEAR (12/31/69)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return(1)
Class I shares ............................................... 13.34% 94.87% 157.51% 718.4%
Average Annual Total Return(2)
Class I shares ............................................... 8.52% 13.31% 9.43% 8.43%
Distribution Rate:(3)
Class I shares 9.13%
30-Day Standardized Yield:(4)
Class I shares 9.26%
</TABLE>
1. Cumulative total return measures the change in value of an investment over
the periods indicated. For Class I shares, it does not reflect the maximum 4.25%
initial sales charge. See note below.
2. Average annual total return represents the average annual change in value of
an investment over the specified periods. For Class I shares, it includes the
maximum 4.25% initial sales charge. See note below.
3. Class I shares' distribution rate is based on an annualization of the fund's
current monthly dividend of 2.2 cents ($0.022) per share, and the maximum
offering price of $2.89 on May 31, 1995. Class II shares will begin paying
dividends in June 1995.
4. Yield for Class I shares, calculated as required by the SEC, is based on the
earnings of the fund's portfolio during the 30 days ended May 31, 1995. The
fund's high distribution rate and yield reflect the higher credit risk
associated with certain lower-rated securities in the fund's portfolio and, in
some cases, the lower market prices for these instruments. The yield for Class
II shares is not shown since the shares were not offered for the full 30-day
period.
Note: Prior to July 1, 1994, Class I fund shares were offered at a lower initial
sales charge, with dividends reinvested at the offering price. Thus, actual
total returns for purchasers of shares during that period would have been
different than noted above. Effective May 1, 1994, for Class I shares, the fund
eliminated the sales charge on reinvested dividends, and implemented a plan of
distribution under Rule 12b-1, which will affect future performance. All total
return figures assume reinvestment of dividends and capital gains at net asset
value, and take into account the effect of the 12b-1 plan from the date of its
implementation. Investment return and principal value will fluctuate with market
conditions and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
NOTE: THE HISTORICAL PERFORMANCE DATA SHOWN ABOVE DO NOT REPRESENT THE FUND'S
CLASS II SHARES, WHICH THE FUND BEGAN OFFERING ON MAY 16, 1995. CLASS II SHARES
ARE SUBJECT TO DIFFERENT FEES AND EXPENSES THAN CLASS I SHARES, WHICH WILL
AFFECT THEIR PERFORMANCE. PLEASE SEE THE PROSPECTUS FOR MORE DETAILS REGARDING
CLASS I AND CLASS II SHARES.
11
AGE HIGH INCOME FUND, INC.
================================================================================
ANNUAL MEETING OF SHAREHOLDERS
At an annual meeting of shareholders (continuation) of the Fund held on May 12,
1995, shareholders of the Fund voted as follows:
Regarding the election of the nominees for directors, shareholders of the Fund
voted as follows:
<TABLE>
<CAPTION>
DIRECTOR FOR (%) % OF VOTED WITHHOLD (%)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Frank H. Abbott, III .... 605,365,619 90.62 95.50 28,535,732 4.27
Harmon E. Burns ......... 609,122,655 91.19 96.09 24,778,696 3.71
Robert F. Carlson ....... 608,463,845 91.09 95.99 25,437,506 3.81
S. Joseph Fortunato ..... 608,809,085 91.14 96.04 25,092,266 3.76
Roy V. Fox .............. 608,243,275 91.05 95.95 25,658,076 3.84
Rupert H. Johnson, Jr. .. 608,934,232 91.16 96.06 24,967,119 3.74
R. Martin Wiskemann ..... 608,829,362 91.14 96.04 25,071,990 3.75
</TABLE>
Regarding the selection of Coopers & Lybrand L.L.P., Certified Public
Accountants, as the independent auditors for the Fund for the fiscal year ending
May 31, 1995, the shareholders of the Fund voted as follows:
<TABLE>
<CAPTION>
FOR (%) OF VOTED AGAINST (%) ABSTAIN (%)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
600,907,437 89.96 94.80 4,781,269 0.72 28,212,644 4.22
</TABLE>
Regarding amendments to the Fund's Articles of Incorporation to permit the
issuance of additional classes of shares and to make other conforming changes,
the proposal was approved by shareholders and the vote was as follows:
<TABLE>
<CAPTION>
BROKER
FOR (%) OF VOTED AGAINST (%) ABSTAIN (%) NON-VOTE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
446,197,007 66.80 70.39 34,734,420 5.20 39,365,894 5.89 113,604,031
</TABLE>
Regarding an amendment to the Fund's investment policies to permit the Fund to
invest in trade claims, the proposal was approved by shareholders and the vote
was as follows:
<TABLE>
<CAPTION>
BROKER
FOR (%) OF VOTED AGAINST (%) ABSTAIN (%) NON-VOTE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
432,498,003 64.75 68.23 50,559,011 7.57 46,085,109 6.90 104,759,229
</TABLE>
Regarding the consideration of and acting upon any other business that may
legally come before the Meeting or any adjournment thereof, the proposal was
approved by the shareholders and the vote was as follows:
<TABLE>
<CAPTION>
FOR (%) OF VOTED AGAINST (%) ABSTAIN (%)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
579,415,673 86.74 91.40 32,633,527 4.89 21,852,151 3.27
</TABLE>
12
AGE HIGH INCOME FUND, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MAY 31, 1995
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS 87.4%
AUTOMOTIVE .9%
$ 16,750,000 SPX Corp., senior sub. notes, 11.75%, 06/01/02 ............................... $ 17,964,375
------------
CABLE TELEVISION 9.8%
29,000,000 (d)Bell Cablemedia, Plc., senior disc. notes, zero coupon to 07/15/99, (original
accretion rate 11.95%), 11.95% thereafter, 07/15/04 ......................... 18,995,000
17,400,000 Cablevision Industries Corp., senior notes, 10.75%, 01/30/02 ................. 18,879,000
5,000,000 Cablevision System Corp., senior sub. deb., 9.875%, 04/01/23 ................. 5,112,500
20,000,000 Cablevision System Corp., S.F., senior sub. deb., 10.75%, 04/01/04 ........... 21,100,000
7,000,000 Century Communications Corp., senior notes, 9.50%, 03/01/05 .................. 6,965,000
3,000,000 Continental Cablevision, Inc., senior deb., 8.875%, 09/15/05 ................. 3,015,000
8,500,000 Continental Cablevision, Inc., senior deb., 9.50%, 08/01/13 .................. 8,627,517
13,000,000 Continental Cablevision, Inc., senior sub. deb., 11.00%, 06/01/07 ............ 14,397,500
5,800,000 Continental Cablevision, Inc., senior sub. deb., 9.00%, 09/01/08 ............. 5,771,000
22,400,000 (d)Diamond Cable Communications Co., senior disc. notes, zero coupon to
09/30/99, (original accretion rate 13.25%), 13.25% thereafter, 09/30/04 ..... 13,888,000
10,000,000 Helicon Group, L.P. Corp., S.F., senior secured notes, 9.00% coupon to 11/1/96,
11.00% thereafter, 11/01/03 ................................................. 9,150,000
5,000,000 Rogers Cablesystems, Inc., senior secured deb., 10.125%, 09/01/12 ............ 5,137,500
15,300,000 (h)Rogers Cablesystems, Inc., senior secured deb. (Canada), 9.65%, 01/15/14 ..... 9,663,393
10,000,000 Rogers Communications, Inc., senior deb., 10.875%, 04/15/04 .................. 10,400,000
7,000,000 Scott Cable Communications, Inc., S.F., sub. deb., 12.25%, 04/15/01 .......... 5,145,000
20,000,000 Tele-Communications, Inc., senior deb., 9.80%, 02/01/12 ...................... 21,914,200
9,500,000 Turner Broadcasting Systems, Inc., senior deb., 8.40%, 02/01/24 .............. 8,039,375
------------
186,199,985
------------
CHEMICALS 4.2%
18,000,000 Arcadian Partners, S.F., senior notes, Series B, 10.75%, 05/01/05 ............ 18,495,000
18,750,000 (d)Harris Chemical North America, Inc., senior secured disc. notes, zero coupon
to 01/15/96, (original accretion rate 10.25%), 10.25% thereafter, 07/15/01... 17,203,125
10,000,000 Huntsman Corp., first mortgage, 11.00%, 04/15/04 ............................. 11,150,000
3,400,000 IMC Fertilizer Group, Inc., senior deb., 9.45%, 12/15/11 ..................... 3,468,000
7,000,000 IMC Fertilizer Group, Inc., senior notes, 9.25%, 10/01/00 .................... 7,175,000
6,000,000 IMC Fertilizer Group, Inc., senior notes, Series B, 10.125%, 06/15/01 ........ 6,420,000
6,550,000 IMC Fertilizer Group, Inc., senior notes, Series B, 10.75%, 06/15/03 ......... 7,106,750
4,850,000 UCC Investors, senior sub. notes, 11.00%, 05/01/03 ........................... 5,092,500
6,000,000 (d)UCC Investors, sub. notes, zero coupon to 05/01/98, (original accretion rate
12.00%), 12.00% thereafter, 05/01/05 ........................................ 4,530,000
------------
80,640,375
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
AGE HIGH INCOME FUND, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MAY 31, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
CONSUMER GOODS 4.5%
$ 9,000,000 Calmar, Inc., S.F., senior notes, 12.00%, 12/15/97 ............................ $ 9,225,000
17,000,000 (d)Coleman Holdings, Inc., senior secured disc. notes, (original accretion rate
10.875%), 0.00%, 05/27/98 .................................................... 12,835,000
10,000,000 Florsheim Shoe Co., senior notes, 12.75%, 09/01/02 ............................ 9,750,000
7,500,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03 ............. 7,162,500
15,000,000 Revlon Consumer Products Corp., senior sub. notes, 10.50%, 02/15/03 ........... 14,887,500
4,900,000 (d)Revlon Worldwide Corp., senior secured disc. notes, (original accretion rate
12.00%), 0.00%, 03/15/98 ..................................................... 3,307,500
20,000,000 RJR Nabisco, Inc., senior notes, 9.25%, 08/15/13 .............................. 20,100,000
9,600,000 Sealy Corp., senior sub. notes, 9.50%, 05/01/03 ............................... 9,504,000
-----------
86,771,500
-----------
CONTAINERS & PACKAGING 2.1%
9,000,000 Container Corp. of America, guaranteed senior notes, Series A, 11.25%,
05/01/04 ..................................................................... 9,720,000
12,000,000 Container Corp. of America, senior notes, Series A, 9.75%, 04/01/03 ........... 12,225,000
12,000,000 Owens Illinois, Inc., senior sub. notes, 9.75%, 08/15/04 ...................... 12,270,000
5,500,000 Owens Illinois, Inc., S.F., senior deb., 11.00%, 12/01/03 ..................... 6,105,000
-----------
40,320,000
-----------
ENERGY 1.5%
6,750,000 Energy Ventures, senior notes, 10.25%, 03/15/04 ............................... 6,851,250
17,000,000 Gulf Canada Resources, Ltd., senior sub. notes, 9.25%, 01/15/04 ............... 16,892,899
4,448,000 Synergy Group, Inc., senior notes, 9.50%, 09/15/00 ............................ 4,292,320
-----------
28,036,469
-----------
FOOD & BEVERAGES 7.8%
9,250,000 Beatrice Foods, Inc., S.F., senior sub. notes, 12.00%, 12/01/01 ............... 8,764,375
3,100,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05 ................ 3,324,750
2,500,000 Darling-Delaware Co., Inc., S.F., senior sub. notes, 11.00%, 07/15/00 ......... 2,487,500
29,427,000 (b)Del Monte Corp., sub. notes, PIK, 12.25%, 09/01/02 ............................ 22,511,655
5,950,000 (b)Dominick's Finer Foods, senior sub. deb., 10.875%, 05/01/05 ................... 6,046,688
1,540,000 Dr Pepper Bottling Co. of Texas, senior notes, 10.25%, 02/15/00 ............... 1,593,900
2,000,000 (d)Dr Pepper Bottling Holdings, S.F., senior disc. notes, zero coupon to 02/15/98,
(original accretion rate 11.625%), 11.625% thereafter, 02/15/03 ............... 1,485,000
49,593,000 (d)Dr Pepper/Seven-Up Cos., Inc., S.F., senior sub. disc. notes, zero coupon to
11/01/97, (original accretion rate 11.50%), 11.50% thereafter, 11/01/02 ....... 44,137,770
7,500,000 PMI Acquisition Corp., senior sub. notes, 10.25%, 09/01/03 .................... 7,781,250
14,000,000 Royal Crown Corp., senior secured notes, 9.75%, 08/01/00 ...................... 13,335,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
AGE HIGH INCOME FUND, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MAY 31, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
FOOD & BEVERAGES (CONT.)
$ 19,000,000 Specialty Foods Corp., senior notes, Series B, 10.25%, 08/15/01 .............. $ 19,095,000
19,000,000 Texas Bottling Group, Inc., senior sub. notes, 9.00%, 11/15/03 ............... 18,477,500
------------
149,040,388
------------
FOOD RETAILING 6.3%
9,500,000 Food 4 Less Supermarkets, Inc., S.F., senior notes, 10.45%, 04/15/00 ......... 9,500,000
2,000,000 Food 4 Less Supermarkets, Inc., S.F., senior sub. notes, 13.75%, 06/15/01..... 2,180,000
99,850,400 (a,c,d)Grand Union Capital Corp., guaranteed senior sub. notes, Series A, (original
accretion rate 16.50%), 0.00%, 01/15/07 ..................................... 624,066
12,500,000 (a,c,d)Grand Union Capital Corp., senior notes, Series B, zero coupon to 07/15/99,
(original accretion rate 15.00%), 15.00% thereafter, 07/15/04 ............... 93,750
11,600,000 P & C Food Markets, Inc., senior sub. notes, 11.50%, 10/15/01 ................ 12,325,000
14,000,000 Pathmark Stores, Inc., senior sub. notes, 9.625%, 05/01/03 ................... 13,790,000
10,000,000 Pathmark Stores, Inc., S.F., sub. notes, 11.625%, 06/15/02 ................... 10,525,000
5,000,000 Penn Traffic Co., senior notes, 8.625%, 12/15/03 ............................. 4,712,500
10,000,000 Penn Traffic Co., senior notes, 10.375%, 10/01/04 ............................ 10,312,500
11,000,000 Pueblo Xtra International, senior notes, 9.50%, 08/01/03 ..................... 10,120,000
9,750,000 (i)Ralphs Grocery Co., senior notes, 10.45%, 06/15/04 ........................... 9,750,000
21,000,000 Ralphs Grocery Co., senior sub. notes, 10.25%, 07/15/02 ...................... 21,262,500
15,000,000 Smitty's Supervalu, Inc., senior sub. notes, 12.75%, 06/15/04 ................ 14,775,000
------------
119,970,316
------------
FOREST & PAPER PRODUCTS 6.7%
25,500,000 Fort Howard Corp., senior sub. notes, 9.00%, 02/01/06 ........................ 23,810,625
7,961,256 Fort Howard Corp., S.F., pass through trust, 11.00%, 01/02/02 ................ 8,180,190
7,500,000 Fort Howard Corp., sub. notes, 10.00%, 03/15/03 .............................. 7,471,875
8,000,000 Repap New Brunswick, floating rate senior notes, 9.50%, 07/15/00 ............. 8,080,000
10,000,000 Repap New Brunswick, senior notes, first priority, 9.875%, 07/15/00 .......... 10,200,000
12,900,000 Repap New Brunswick, senior notes, second priority, 10.625%, 04/15/05 ........ 13,222,500
11,300,000 (b)S.D. Warren Co., senior sub. notes, 12.00%, 12/15/04 ......................... 12,430,000
16,000,000 Stone Container Corp., senior notes, 9.875%, 02/01/01 ........................ 15,960,000
6,200,000 Stone Container Corp., senior notes, 11.50%, 10/01/04 ........................ 6,665,000
18,900,000 Tjiwi Kimia International, guaranteed senior notes, 13.25%, 08/01/01 ......... 20,223,000
------------
126,243,190
------------
GAMING & LEISURE 5.9%
19,900,000 Aztar Corp., senior sub. notes, 13.75%, 10/01/04 ............................. 22,487,000
1,249,800 (d)Divi Hotels, Inc., secured cvt. sub. deb., (original accretion rate 0.00%),
01/28/02 .................................................................... 218,715
17,500,000 Embassy Suites, Inc., guaranteed senior sub. notes, 10.875%, 04/15/02 ........ 19,140,625
20,000,000 (b)HMH Properties, Inc., senior notes, 9.50%, 05/15/05 .......................... 19,600,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
AGE HIGH INCOME FUND, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MAY 31, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
GAMING & LEISURE (CONT.)
$ 20,000,000 John Q. Hammons Hotels, first mortgage, 8.875%, 02/15/04 .................... $ 19,325,000
4,750,000 (b)Players International, Inc., senior notes, 10.875, 04/15/05 ................. 4,815,313
10,000,000 Red Roof Inns, Inc., senior notes, 9.625%, 12/15/03 ......................... 9,775,000
17,000,000 Showboat, Inc., senior sub. notes, 13.00%, 08/01/09 ......................... 17,935,000
------------
113,296,653
------------
HEALTHCARE 6.4%
14,830,000 Abbey Healthcare Group, Inc., senior sub. notes, 9.50%, 11/01/02 ............ 15,386,125
3,344,681 Amerisource Distribution Corp., senior deb., PIK, 11.25%, 07/15/05 .......... 3,737,681
20,000,000 (b)Dade International Inc., senior sub. notes, 13.00%, 02/01/05 ................ 21,000,000
20,700,000 Healthtrust, Inc. - The Hospital Co., sub. notes, 10.75%, 05/01/02 .......... 23,002,875
13,500,000 Healthtrust, Inc. - The Hospital Co., sub. notes, 10.25%, 04/15/04 .......... 15,457,500
3,400,000 National Medical Enterprises, senior notes, 9.625%, 09/01/02 ................ 3,604,000
12,300,000 National Medical Enterprises, senior sub. notes, 10.125%, 03/01/05 .......... 13,068,750
16,900,000 OrNda Healthcorp., guaranteed senior sub. notes, 11.375%, 08/15/04 .......... 18,590,000
9,000,000 Sola Group, Ltd., senior sub. notes, 6.00% coupon to 12/15/98, 9.625%
thereafter, 12/15/03 ....................................................... 8,280,000
------------
122,126,931
------------
HOME BUILDING 1.0%
19,361,376 Walter Industries, Inc., senior notes, Series B, 12.19%, 03/15/00 ........... 19,651,797
------------
INDUSTRIAL 6.6%
23,000,000 American Standard, Inc., senior deb., 11.375%, 05/15/04 ..................... 25,185,000
22,850,000 (d)American Standard, Inc., S.F., senior sub. deb., zero coupon to 06/01/98,
(original accretion rate 10.50%), 10.50% thereafter, 06/01/05 .............. 17,280,313
5,000,000 Coltec Industries, Inc., senior notes, 9.75%, 11/01/99 ...................... 5,175,000
18,000,000 Coltec Industries, Inc., senior sub. notes, 10.25%, 04/01/02 ................ 18,450,000
4,400,000 (b,i)Day International Group, senior sub. notes, 11.125%, 06/01/05 ............... 4,444,000
29,000,000 (d)Eagle Industries, Inc., senior notes, zero coupon to 07/15/98, (original
accretion rate 10.50%), 10.50% thereafter, 07/15/03 ........................ 20,445,000
12,000,000 Inter-City Products Corp., senior secured notes, 9.75%, 03/01/00 ............ 11,010,000
10,376,000 Thermadyne Industries, Inc., senior sub. notes, 10.25%, 05/01/02 ............ 10,220,360
14,387,000 Thermadyne Industries, Inc., sub. notes, 10.75%, 11/01/03 ................... 14,027,325
------------
126,236,998
------------
MEDIA & BROADCASTING 3.7%
12,000,000 Ackerley Communications, Inc., senior secured notes, Series B, 10.75%,
10/01/03 ................................................................... 12,660,000
8,700,000 American Media Operation, senior sub. notes, 11.625%, 11/15/04 .............. 9,309,000
7,000,000 (b)Benedek Broadcasting, senior notes, 11.875%, 03/01/05 ....................... 7,280,000
7,100,000 (b)Granite Broadcasting Corp., senior sub. notes, Series A, 10.375%, 05/15/05... 7,144,375
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
AGE HIGH INCOME FUND, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MAY 31, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
MEDIA & BROADCASTING (CONT.)
$ 5,075,000 Infinity Broadcasting Corp., senior sub. notes, 10.375%, 03/15/02 ............ $ 5,366,813
15,000,000 New World Communications Group, Inc., S.F., senior notes, 11.00%, 06/30/05.... 15,750,000
18,000,000 (d)PanAmSat Capital Corp., L.P., S.F., senior sub. disc. notes, zero coupon to
08/01/98, (original accretion rate 11.375%), 11.375% thereafter, 08/01/03.... 12,960,000
-----------
70,470,188
-----------
METALS & MINING 4.3%
23,400,000 (d)Acme Metals, Inc., senior secured disc. notes, zero coupon to 08/01/97,
(original accretion rate 13.50%), 13.50% thereafter, 08/01/04 ............... 18,427,500
20,000,000 AK Steel Corporation, senior notes, 10.75%, 04/01/04 ......................... 21,100,000
17,000,000 Envirosource, Inc., senior notes, 9.75%, 06/15/03 ............................ 15,385,000
20,000,000 (b)Gulf States Steel, units, 13.50%, 04/15/03 ................................... 20,500,000
5,800,000 (b)UCAR Global Enterprises, Inc., senior sub. notes, 12.00%, 01/15/05 ........... 6,322,000
-----------
81,734,500
-----------
RESTAURANTS 2.2%
10,850,000 Family Restaurants, Inc., senior notes, 9.75%, 02/01/02 ...................... 6,944,000
2,000,000 Flagstar Corp., senior notes, 10.75%, 09/15/01 ............................... 1,870,000
11,000,000 Flagstar Corp., senior notes, 10.875%, 12/01/02 .............................. 10,257,500
13,614,000 Flagstar Corp., S.F., senior sub. deb., 11.25%, 11/01/04 ..................... 10,482,780
2,900,000 Foodmaker, Inc., senior notes, 9.25%, 03/01/99 .............................. 2,602,750
11,500,000 Foodmaker, Inc., senior sub. notes, 9.75%, 06/01/02 .......................... 9,142,500
-----------
41,299,530
-----------
TECHNOLOGY & INFORMATION SYSTEMS 1.3%
10,000,000 ADT Operations, guaranteed senior sub. notes, 9.25%, 08/01/03 ................ 10,300,000
7,500,000 (d)Bell & Howell Co., senior deb., zero coupon to 03/01/00, (original accretion
rate 11.50%), 11.50% thereafter, 03/01/05 ................................... 4,462,500
3,550,000 Bell & Howell Co., senior notes, 9.25%, 07/15/00 ............................. 3,514,500
6,500,000 Bell & Howell Co., senior sub. notes, 10.75%, 10/01/02 ....................... 6,857,500
-----------
25,134,500
-----------
TEXTILES & APPAREL 2.7%
10,300,000 Forstmann & Co., Inc., S.F., senior sub. notes, 14.75%, 04/15/99 ............. 10,660,500
15,000,000 Hartmarx Corp., senior sub. notes, 10.875%, 01/15/02 ......................... 14,850,000
3,356,000 JPS Textiles Group, Inc., S.F., disc. notes, 10.85%, 06/01/99 ................ 2,802,260
10,056,000 JPS Textiles Group, Inc., S.F., sub. notes, 10.25%, 06/01/99 ................. 8,296,200
6,000,000 WestPoint Stevens, Inc., senior notes, 8.75%, 12/15/01 ....................... 5,940,000
10,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05 .................. 9,775,000
-----------
52,323,960
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
AGE HIGH INCOME FUND, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MAY 31, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
TRANSPORTATION 4.2%
$ 9,000,000 Delta Air Lines, Inc., S.F., pass through equipment trust, 10.06%, 01/02/16..... $ 10,431,656
15,000,000 Delta Air Lines, Inc., S.F., pass through equipment trust, 10.50%, 04/30/16..... 18,013,918
19,000,000 Gearbulk Holding, Ltd., senior notes, 11.25%, 12/01/04 ......................... 20,425,000
9,500,000 Southern Pacific Rail Corp., senior notes, 9.375%, 08/15/05 .................... 9,761,250
20,422,000 United Airlines, S.F., pass through equipment trust, Series B-2, 9.06%,
09/26/14 ...................................................................... 20,791,728
-------------
79,423,552
-------------
UTILITIES 2.0%
22,500,000 (d)California Energy, senior notes, zero coupon to 01/15/97, (original accretion
rate 10.25%), 10.25% thereafter, 01/15/04 ..................................... 19,846,664
1,500,000 (d)CMS Energy Corp., senior notes, Series B, zero coupon to 10/01/95, (original
accretion rate 9.875%), 9.875% thereafter, 10/01/99 ........................... 1,531,390
4,500,000 Midland Funding II, S.F., senior lease obligation, Series A, 11.75%, 07/23/05... 4,690,579
11,500,000 Midland Funding II, S.F., senior lease obligation, Series B, 13.25%, 07/23/06... 11,966,670
-------------
38,035,303
-------------
WIRELESS COMMUNICATION 3.3%
20,000,000 (d)Comcast Cellular Communications, Inc., senior notes, Series B, (original
accretion rate 11.37%), 0.00%, 03/05/00 ....................................... 14,700,000
15,000,000 Comcast Corp., senior sub. deb., 9.50%, 01/15/08 ............................... 14,887,500
27,250,000 (d)Dial Call Communications, units, senior disc. notes, zero coupon to 04/15/99,
(original accretion rate 12.25%), 12.25% thereafter, 04/15/04 ................. 14,306,250
15,000,000 (d)Nextel Communications, senior disc. notes, (original accretion rate 9.75%),
0.00%, 08/15/04 ............................................................... 7,500,000
10,500,000 Rogers Cantel Mobile Communications, Inc., S.F., senior sub. notes, 10.75%,
11/01/01 ...................................................................... 10,972,500
-------------
62,366,250
-------------
TOTAL BONDS (COST $1,651,879,680) ........................................ 1,667,286,760
-------------
FOREIGN CURRENCY NOTES 1.1%
SOUTH AFRICA
108,800,000 (h)ESCOM, E168, utility deb., 11.00%, 06/01/08 (COST $25,117,902) ................. 20,436,426
-------------
FOREIGN GOVERNMENT AGENCIES 1.6%
MEXICO 1.1%
28,000,000 United Mexican States, floating rate notes, Series D, 7.25%, 12/31/19 .......... 18,462,500
4,000,000 United Mexican States, Series B, 6.25%, 12/31/19 ............................... 2,260,000
-------------
20,722,500
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
AGE HIGH INCOME FUND, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MAY 31, 1995 (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN GOVERNMENT AGENCIES (CONT.)
VENEZUELA .5%
$ 20,000,000 Republic of Venezuela, floating rate notes, 7.688%, 12/18/07 ............. $ 9,800,000
-----------
TOTAL FOREIGN GOVERNMENT AGENCIES (COST $36,469,899) ............... 30,522,500
-----------
SHARES,
WARRANTS
& RIGHTS
------------
COMMON STOCKS 3.0%
741,331 (a,e)Bucyrus-Erie Co. ......................................................... 4,447,986
168,149 (a)Darling Delaware Co. ..................................................... 3,026,682
611,655 (a,e)Divi Hotels, Inc. ........................................................ 160,254
74,156 (a)Kash N' Karry Food Stores, Inc. .......................................... 2,113,446
1,436,971 (a,e)NVR, Inc. ................................................................ 10,418,040
39,757 (a)Penn Traffic Co. ......................................................... 1,311,981
2,291,953 (a,e)Price Communications Corp. ............................................... 14,038,212
546,646 (a)Pullman Co. .............................................................. 4,919,814
510,000 RJR Nabisco Holdings Corp. ............................................... 14,535,000
97,500 (a,b)Specialty Foods Corp. .................................................... 255,938
38,615 Thermadyne Holdings Corp. ................................................ 547,850
140,557 (a)Walter Industries, Inc., Class A ......................................... 1,879,950
-----------
TOTAL COMMON STOCKS (COST $124,824,416) ............................ 57,655,153
-----------
PREFERRED STOCKS 1.9%
199,000 First Nationwide Bank, 11.50% pfd. ....................................... 21,392,500
379,837 (a)Glendale Federal Bank, 1.00% cvt. pfd., Series D ......................... 5,222,759
9,900 PanAmSat Corp., L.P., 12.75%, pfd., PIK .................................. 10,296,000
-----------
TOTAL PREFERRED STOCKS (COST $35,787,375) .......................... 36,911,259
-----------
PARTNERSHIP UNITS .3%
415,000 Freeport-McMoRan Resource Partners, Ltd., depository units
(COST $6,939,167) ....................................................... 6,588,124
-----------
(a)WARRANTS & RIGHTS .4%
27,250 Dial Page, Inc. .......................................................... 34,062
8,030 Foodmaker, Inc. .......................................................... 101,057
827,526 Gaylord Container Corp. .................................................. 7,033,970
5,896 Kendall International, Inc., rights ...................................... 324,773
120,000 NVR, Inc. ................................................................ 120,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
AGE HIGH INCOME FUND, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MAY 31, 1995 (CONT.)
<TABLE>
<CAPTION>
SHARES,
WARRANTS VALUE
& RIGHTS (NOTE 1)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(a)WARRANTS & RIGHTS (CONT.)
20,000 Payless Cashways, Inc. ........................................................ $ 12,500
15,000 Smitty's Supervalu, Inc. ...................................................... 150,000
--------------
TOTAL WARRANTS & RIGHTS (COST $4,158,645) ............................... 7,776,362
--------------
TOTAL COMMON STOCKS, PREFERRED STOCKS, PARTNERSHIP UNITS, AND
WARRANTS & RIGHTS (COST $171,709,603) .................................. 108,930,898
--------------
TOTAL LONG TERM INVESTMENTS (COST $1,885,177,084) ....................... 1,827,176,584
FACE --------------
AMOUNT
-----------
SHORT TERM INVESTMENTS
COMMERCIAL PAPER .3%
$ 5,000,000 General Electric Capital Corp., 5.95%, 07/18/95 (Cost $4,961,160) ............. 4,959,947
--------------
CERTIFICATES OF DEPOSIT 1.0%
20,000,000 Societe Generale, New York Branch, 6.00% - 6.04%, 06/26/95 - 07/24/95
(COST $20,000,000) ........................................................... 20,000,100
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS
(COST $1,910,138,244) .................................................. 1,852,136,631
--------------
(f,g)RECEIVABLES FROM REPURCHASE AGREEMENTS 1.6%
30,870,306 Joint Repurchase Agreement, 6.15%, 06/01/95 (Maturity Value $30,329,101)
(COST $30,323,921)
Collateral: U.S. Treasury Bills, 08/24/95
U.S. Treasury Notes, 4.00% - 8.50%, 01/31/96 - 10/31/99 ............. 30,323,921
--------------
TOTAL INVESTMENTS (COST $1,940,462,165) 98.6% ...................... 1,882,460,552
OTHER ASSETS AND LIABILITIES, NET 1.4% ............................. 27,104,891
--------------
NET ASSETS 100.0% .................................................. $1,909,565,443
==============
At May 31, 1995, the net unrealized depreciation based on
the cost of investments for income tax purposes of $1,940,462,165 was as
follows:
Aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost ....................................... $ 74,725,800
Aggregate gross unrealized depreciation for all investments in which there
was an excess of tax cost over value ....................................... (132,727,413)
--------------
Net unrealized depreciation ................................................. $ (58,001,613)
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
AGE HIGH INCOME FUND, INC.
================================================================================
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, MAY 31, 1995 (CONT.)
- --------------------------------------------------------------------------------
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
PIK - Payment-in-Kind
S.F. - Sinking Fund
(a) Non-income producing.
(b) See Note 6 regarding Rule 144A securities.
(c) See Note 7 regarding defaulted securities.
(d) Zero coupon/step-up bonds. The current effective yield may vary. The
original accretion rate by security will remain constant.
(e) See Note 9 regarding holdings of 5% voting securities.
(f) Face amount for repurchase agreements is for the underlying collateral.
(g) See Note 1(f) regarding Joint Repurchase Agreement.
(h) Face amount stated in foreign currencies, value in U.S. dollars.
(i) See Note 1(h) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
21
AGE HIGH INCOME FUND, INC.
================================================================================
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments in securities, at value (identified cost $1,910,138,244).......................... $1,852,136,631
Receivables from repurchase agreements, at value and cost .................................... 30,323,921
Cash.......................................................................................... 1,009,064
Receivables:
Dividends and interest....................................................................... 41,084,324
Capital shares sold.......................................................................... 4,426,177
--------------
Total assets............................................................................. 1,928,980,117
--------------
Liabilities:
Payables:
Investment securities purchased on a when-issued basis (Note 1).............................. 14,150,000
Capital shares repurchased................................................................... 4,160,021
Management fees.............................................................................. 736,152
Distribution fees............................................................................ 126,646
Shareholder servicing costs.................................................................. 55,535
Accrued expenses and other liabilities........................................................ 186,320
--------------
Total liabilities........................................................................ 19,414,674
--------------
Net assets, at value........................................................................... $1,909,565,443
==============
Net assets consist of:
Undistributed net investment income (Note 1).................................................. $ 16,419,841
Unrealized depreciation on investments and translation of assets and liabilities denominated
in foreign currencies........................................................................ (57,928,081)
Accumulated net realized loss................................................................. (468,689,725)
Class I capital shares........................................................................ 6,900,878
Class II capital shares....................................................................... 2,576
Additional paid-in capital.................................................................... 2,412,859,954
--------------
Net assets, at value........................................................................... $1,909,565,443
==============
Computation of net asset value and offering price per share:
Class I shares:
Net asset value* ($1,908,852,863 divided by 690,087,848 shares outstanding).................. $ 2.77
==============
Maximum offering price (100/95.75 of $2.77).................................................. $ 2.89
==============
Class II shares:
Net asset value* ($712,580 divided by 257,620 shares outstanding)............................ $ 2.77
==============
Maximum offering price (100/99 of $2.77)..................................................... $ 2.80
==============
</TABLE>
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
22
AGE HIGH INCOME FUND, INC.
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Investment income:
Interest (Note 1).............................................................. $181,840,658
Dividends (Note 1)............................................................. 2,566,121
------------
Total income.............................................................. $184,406,779
Expenses:
Management fees (Note 5)....................................................... 8,263,271
Distribution fees - Class I (Note 5)........................................... 1,293,780
Distribution fees - Class II (Note 5).......................................... 97
Shareholder servicing costs (Note 5)........................................... 686,572
Reports to shareholders........................................................ 828,041
Custodian fees................................................................. 242,879
Professional fees.............................................................. 203,172
Registration fees.............................................................. 82,414
Directors' fees and expenses................................................... 66,638
Other.......................................................................... 71,700
------------
Total expenses............................................................ 11,738,564
------------
Net investment income.................................................... 172,668,215
------------
Realized and unrealized gain (loss) from investments and foreign currency:
Net realized gain (loss) from:
Investments................................................................... (4,606,276)
Foreign currency transactions................................................. 601,606
Net unrealized appreciation on:
Investments................................................................... 55,182,272
Translation of assets and liabilities denominated in foreign currencies....... 113,503
------------
Net realized and unrealized gain from investments and foreign currencies....... 51,291,105
------------
Net increase in net assets resulting from operations........................... $223,959,320
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
AGE HIGH INCOME FUND, INC.
================================================================================
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MAY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (Note 1)................................................... $ 172,668,215 $ 186,594,316
Net realized loss from investments and foreign currency transactions (Note 1).... (4,004,670) (3,681,910)
Net unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies........................ 55,295,775 (70,177,283)
-------------- --------------
Net increase in net assets resulting from operations......................... 223,959,320 112,735,123
Distributions to Class I shareholders from undistributed net investment income
(Note 10): ....................................................................... (176,150,325) (182,753,717)
Increase (decrease) in net assets from capital share transactions (Note 3)......... 44,275,805 (48,419,402)
-------------- --------------
Net increase (decrease) in net assets........................................ 92,084,800 (118,437,996)
Net assets:
Beginning of year ................................................................ 1,817,480,643 1,935,918,639
-------------- --------------
End of year (including undistributed net investment income of $16,419,841 - 1995
and $19,300,345 - 1994).......................................................... $1,909,565,443 $1,817,480,643
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
AGE HIGH INCOME FUND, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
AGE High Income Fund, Inc. (the Fund) is an open-end, diversified management
investment company (mutual fund) registered under the Investment Company Act of
1940 as amended.
The Fund offers two classes of shares, Class I and Class II. Class I shares are
sold with a higher front-end sales charge. Class II shares are sold with a lower
front-end sales charge, but may be subject to a contingent deferred sales
charge. Each class of shares has the same rights, except with respect to the
effect of the respective sales charges, the distribution fees borne by each
class, voting rights on matters affecting a single class, and the exchange
privilege of each class.
The offering of Class II shares began May 16, 1995, at which time all previously
outstanding shares became Class I shares. Realized and unrealized gains or
losses and net investment income, other than class specific expenses, are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. SECURITIES VALUATIONS: Portfolio securities listed on a securities exchange
or on the NASDAQ National Market System for which market quotations are readily
available are valued at the last quoted sale price of the day or, if there is no
such reported sale, within the range of the most recent quoted bid and ask
prices. Other securities for which market quotations are readily available are
valued at current market values, obtained from a pricing service, which are
based on a variety of factors, including recent trades, institutional size
trading in similar types of securities (considering yield, risk and maturity)
and/or developments related to specific securities. Portfolio securities which
are traded both in the over-the-counter market and on a securities exchange are
valued according to the broadest and most representative market as determined by
the Manager. Other securities for which market quotations are not available, if
any, are valued in accordance with procedures established by the Board of
Directors.
The value of a foreign security is determined as of the close of trading on the
foreign exchange on which it is traded or as of the close of trading on the New
York Stock Exchange, if that is earlier, and that value is then converted into
its U.S. dollar equivalent at the foreign exchange rate in effect at noon, New
York time, on the day the value of the foreign security is determined. If no
sale is reported at that time, the mean between the current bid and asked price
is used. Occasionally, events which affect the values of foreign securities and
foreign exchange rates may occur between the times at which they are determined
and the close of the exchange and will, therefore, not be reflected in the
computation of the Fund's net asset value, unless material. If events materially
affect the value of these foreign securities occur during such period, then
these securities will be valued at fair value as determined by management and
approved in good faith by the Board of Directors.
The fair values of securities restricted as to resale, if any, are determined
following procedures established by the Board of Directors.
b. INCOME TAXES: The Fund intends to continue to qualify for the tax treatment
applicable to regulated investment companies under the Internal Revenue Code and
to make the requisite distributions to its shareholders which will be sufficient
to relieve it from income and excise taxes. Therefore, no income tax provision
is required.
c. SECURITY TRANSACTIONS: Security transactions are accounted for on the date
the securities are purchased or sold (trade date). Realized gains and losses on
security transactions are determined on the basis of specific identification for
both financial statement and income tax purposes.
d. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS: Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Bond discount, if any, is
amortized as required by the Internal Revenue Code.
25
AGE HIGH INCOME FUND, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
1. SIGNIFICANT ACCOUNTING POLICIES (CONT.)
d. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS: (CONT.)
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of defaulted securities - see Note 7.
Net realized capital gain (loss) differs for financial statement and tax
purposes primarily due to differing treatments of net realized gain (loss) from
foreign currency transactions.
e. FOREIGN CURRENCY TRANSLATION: The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at the rate of exchange of such
currencies against U.S. dollars on the date of the valuation. Purchases and
sales of securities, income and expenses are translated at the rate of exchange
quoted on the respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are recognized
when reported by the custodian bank.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade date and settlement dates on securities
transactions, and the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized appreciation
(depreciation) on translation of assets and liabilities denominated in foreign
currencies arise from changes in the value of assets and liabilities other than
investments in securities at fiscal year end, resulting from changes in exchange
rates.
f. REPURCHASE AGREEMENTS: The Fund may enter into a Joint Repurchase Agreement
whereby its uninvested cash balance is deposited into a joint cash account to be
used to invest in one or more repurchase agreements with government securities
dealers recognized by the Federal Reserve Board and/or member banks of the
Federal Reserve system. The value and face amount of the Joint Repurchase
Agreement are allocated to the Fund based on its pro rata interest.
In a repurchase agreement, the Fund purchases a U.S. government security from a
dealer or bank subject to an agreement to resell it at a mutually agreed upon
price and date. Such a transaction is accounted for as a loan by the Fund to the
seller, collateralized by the underlying security. The transaction requires the
initial collateralization of the seller's obligation by U.S. government
securities with market value, including accrued interest, of at least 102% of
the dollar amount invested by the Fund, with the value of the underlying
security marked to market daily to maintain coverage of at least 100%. The
collateral is delivered to the Fund's custodian and held until resold to the
dealer or bank. At May 31, 1995, the outstanding joint repurchase agreement held
by the Fund had been entered into on that date.
g. CHANGE IN ACCOUNTING POLICY FOR FOREIGN CURRENCY PRESENTATION: During the
year ended May 31, 1995, the Fund adopted AICPA Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. The adoption of SOP 93-4 had no effect on net assets for
the fiscal year ended May 31, 1995, but foreign currency transactions from
assets and liabilities other than investments in securities, have been
reclassified for the year then ended on the Statement of Operations.
26
AGE HIGH INCOME FUND, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
1. SIGNIFICANT ACCOUNTING POLICIES (CONT.)
h. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS: The Fund may
trade securities on a when-issued or delayed delivery basis, with payment and
delivery scheduled for a future date. These transactions are subject to market
fluctuations and are subject to the risk that the value at delivery may be more
or less than the trade date purchase price. Although the Fund will generally
purchase these securities with the intention of acquiring such securities, it
may sell such securities before the settlement date. These securities are
identified on the accompanying Statement of Investments in Securities and Net
Assets. The Fund has set aside sufficient investment securities as collateral
for these purchase commitments.
2. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At May 31, 1995, for tax purposes, the Fund had capital loss carryovers as
follows:
<TABLE>
<S> <C> <C>
Expiring in: 1996 $ 94,919,282
1997 163,832
1998 85,786,601
1999 192,912,531
2000 63,753,106
2001 14,304,993
2002 12,243,104
2003 4,606,276
------------
$468,689,725
============
</TABLE>
Capital loss carryovers of $35,165,075 expired at May 31, 1995 and were
reclassified to paid-in-capital pursuant to Statement of Position (SOP) 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies.
For tax purposes, the aggregate cost of securities and unrealized depreciation
of the Fund are the same as for financial statement purposes at May 31, 1995.
3. CAPITAL STOCK
At May 31, 1995, there were 2,500,000,000 Class I shares and 2.5 billion ClassII
shares of $0.01 par value capital stock authorized. Transactions in the Fund's
Class I and Class IIshares for the years ended May 31, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------------------------------------------------
1995 1994
--------------------------- ---------------------------
CLASS I SHARES: SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold..................................... 52,443,355 $ 139,551,551 82,294,240 $ 233,932,626
Shares issued in reinvestment of distributions.. 27,202,050 71,798,174 25,263,574 71,552,168
Shares redeemed................................. (75,584,219) (200,243,386) (114,808,451) (326,553,156)
Changes from exercise of exchange privilege:
Shares sold.................................... 180,273,401 478,238,917 224,078,533 629,917,742
Shares redeemed................................ (167,382,625) (445,778,895) (231,793,045) (657,268,782)
------------ ------------- ------------ -------------
Net increase (decrease)................... 16,951,962 $ 43,566,361 (14,965,149) $ (48,419,402)
============ ============= ============ =============
</TABLE>
27
AGE HIGH INCOME FUND, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
3. CAPITAL STOCK (CONT.)
<TABLE>
<CAPTION>
MAY 16, 1995 TO
MAY 31, 1995
--------------------------
CLASS II SHARES: SHARES AMOUNT
---------- -----------
<S> <C> <C>
Shares sold.................................... 254,368 $ 700,469
Changes from exercise of exchange privilege:
Shares sold................................... 3,252 8,975
---------- -----------
Net increase ............................ 257,620 $ 709,444
========== ===========
</TABLE>
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the year ended May 31, 1995 aggregated $574,741,721 and
$479,203,899, respectively.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc., ("Manager") under the terms of a management agreement,
provides investment advice, administrative services, office space and facilities
to the Fund, and receives fees, computed monthly on the net assets of the Fund
on the last day of the month at an annualized rate of 5/8 of 1% of the first
$100 million of net assets, 1/2 of 1% of net assets in excess of $100 million up
to $250 million, and 45/100 of 1% of net assets in excess of $250 million. Fees
incurred by the Fund aggregated $8,263,271 for the year ended May 31, 1995. The
terms of the management agreement provide that aggregate annual expenses of the
Fund be limited to the extent necessary to comply with the limitations set forth
in the laws, regulations and administrative interpretations of the states in
which the Fund's shares are registered. For the year ended May 31, 1995, the
Fund's expenses did not exceed these limitations.
In its capacity as underwriter for the capital stock of the Fund,
Franklin/Templeton Distributors, Inc. receives commissions on sales of the
Fund's capital stock. Commissions are deducted from the gross proceeds received
from the sale of the capital stock of the Fund, and as such are not expenses of
the Fund. Franklin/Templeton Distributors, Inc. may also make payments, out of
its own resources, to the dealers for certain sales of Class I and Class II
shares. Commissions received by Franklin/Templeton Distributors, Inc. and the
amounts paid to other dealers for the year ended May 31, 1995 were as follows:
<TABLE>
<CAPTION>
CLASS I CLASS II
-------- --------
<S> <C> <C>
Total commissions received................................. $5,029,244 $ 7,630
========== =======
Paid to other dealers...................................... $4,716,520 $14,191
========== =======
</TABLE>
Under the terms of a shareholder service agreement with Franklin/Templeton
Investor Services, Inc., the Fund pays costs on a per shareholder account basis.
Such costs incurred for the year ended May 31, 1995 aggregated $686,572, of
which $631,139 was paid to Franklin/Templeton Investor Services, Inc.
Under the terms of a Distribution Plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940, which was effective May 1, 1994 for Class I shares, and
which became effective for Class II shares on May 16, 1995, Class I and II
shares will reimburse Franklin/Templeton Distributors, Inc. in an amount up to a
maximum of 0.15% and 0.65% per annum, respectively, of the average daily net
assets of each class for costs incurred in the promotion, offering and marketing
of the Class I and II shares. Fees incurred by the classes under the agreement
aggregated $1,293,877 for the year ended May 31, 1995.
28
AGE HIGH INCOME FUND, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONT.)
Certain officers and directors of the Fund are also officers and/or directors of
Franklin/Templeton Distributors, Inc., Franklin Advisers, Inc. and
Franklin/Templeton Investor Services, Inc., all wholly-owned subsidiaries of
Franklin Resources, Inc.
6. RULE 144A SECURITIES
Rule 144A provides a non-exclusive safe harbor exemption from the registration
requirements of the Securities Act of 1933 for specified resales of restricted
securities to qualified institutional investors. The Fund values these
securities as disclosed in Note 1. At May 31, 1995, the Fund held 144A
securities with a value aggregating $132,349,969 representing 6.9% of the Fund's
net assets. See the accompanying Statement of Investments in Securities and Net
Assets for specific information on such securities.
7. CREDIT RISK AND DEFAULTED SECURITIES
Although the Fund has a diversified portfolio, 83.4% of its portfolio is
invested in lower rated and comparable quality unrated high yield securities.
Investments in higher yield securities are accompanied by a greater degree of
credit risk and such lower quality securities tend to be more sensitive to
economic conditions than higher rated securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of high
yielding securities, because such securities are generally unsecured and are
often subordinated to other creditors of the issuer. At May 31, 1995, the Fund
held two defaulted securities issued by one company with a value aggregating
$717,816, representing 0.04% of the Fund's net assets. For more information as
to specific securities, see the accompanying Statement of Investments in
Securities and Net Assets.
For financial reporting purposes, it is the Fund's accounting practice to
discontinue accrual of income and provide an estimate for probable losses due to
unpaid interest income on defaulted bonds for the current reporting period.
8. OTHER CONSIDERATIONS
Franklin Advisers, Inc., as the Fund's Manager, may serve as a member of various
bondholders' committees, representing bondholders' interests in certain
corporate restructuring negotiations. Currently, the Manager serves on the
bondholders' committees for Bucyrus-Erie and Grand Union. As a result of this
involvement in these committees, Franklin Advisers, Inc. may be in possession of
certain material non-public information. The Fund's Manager has not sold nor
does it intend to sell any of its holdings in these securities while in
possession of material non-public information in contravention of the Federal
Securities Laws.
9. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments in portfolio companies, 5% or more of whose outstanding voting
securities are held by the Fund, are defined in the Investment Company Act of
1940 as affiliated companies. The Fund had investments in such affiliated
companies at May 31, 1995, which amounted to $29,064,492. For more information
as to specific securities, see the accompanying Statement of Investments in
Securities and Net Assets.
29
AGE HIGH INCOME FUND, INC.
================================================================================
NOTES TO FINANCIAL STATEMENTS (CONT.)
10. SUBSEQUENT EVENTS
On May 10, 1995 and June 20, 1995, the Board of Directors declared distributions
per share as follows:
<TABLE>
<CAPTION>
FROM
UNDISTRIBUTED
RECORD PAYMENT NET INVESTMENT
DATE DATE INCOME
------ ------ --------------
<S> <C> <C> <C>
Class I................. 5/31 6/15 $0.022
Class II................ 5/31 6/15 0.021
Class I................. 6/30 7/15 0.022
Class II................ 6/30 7/15 0.021
</TABLE>
11. FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each year are
as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------------------------
CLASS I SHARES: 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value at beginning of year ................. $ 2.70 $ 2.81 $ 2.72 $ 2.37 $ 2.53
---------- ---------- ---------- ---------- ----------
Net investment income ................................ .26 .27 .30 .31 .34
Net realized and unrealized gain (loss) on
investments and foreign currencies .................. .074 (.113) .054 .340 (.122)
---------- ---------- ---------- ---------- ----------
Total from investment operations ..................... .334 .157 .354 .650 .218
---------- ---------- ---------- ---------- ----------
Less distributions:
Distributions from net investment income ............ (.264) (.267) (.264) (.300) (.359)
Distributions from paid-in capital .................. -- -- -- -- (.019)
---------- ---------- ---------- ---------- ----------
Total distributions .................................. (.264) (.267) (.264) (.300) (.378)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year ....................... $ 2.77 $ 2.70 $ 2.81 $ 2.72 $ 2.37
========== ========== ========== ========== ==========
TOTAL RETURN* ........................................ 13.34% 5.19% 13.33% 28.48% 10.18%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year (in 000's) ................. $1,908,853 $1,817,481 $1,935,919 $1,864,195 $1,587,656
Ratio of expenses to average net assets .............. .66% .59% .56% .58% .59%
Ratio of net investment income to average net assets.. 9.71% 9.61% 10.78% 12.18% 14.87%
Portfolio turnover rate .............................. 28.56% 42.32% 38.33% 43.70% 28.55%
</TABLE>
30
AGE HIGH INCOME FUND, INC.
================================================================================
NOTES TO FINANACIAL STATEMENTS (CONT.)
11. FINANCIAL HIGHLIGHTS (CONT.)
<TABLE>
<CAPTION>
MAY 16, 1995 TO
CLASS II SHARES: MAY 31, 1995
---------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value at beginning of period ....................... $ 2.76
-------
Net investment income ........................................ --
Net realized and unrealized gain on investments
and foreign currencies ...................................... .01
-------
Total from investment operations ............................. .01
-------
Net asset value at end of period ............................. $ 2.77
=======
TOTAL RETURN* ................................................ .36%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (in 000's) ....................... $ 713
Ratio of expenses to average net assets ...................... 1.14%+
Ratio of net investment income to average net assets ......... 6.91%+
Portfolio turnover rate ...................................... 28.56%
*Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum initial sales
charge or the deferred contingent sales charge. The total return for Class I
shares also assumes reinvestment of dividends at the maximum offering price and
capital gains, if any, at net asset value. Effective May 1, 1994, with the
implementation of the Rule 12b-1 distribution plan for Class I shares, as
discussed in Note 5, the sales charge on reinvested dividends was eliminated.
+Annualized
- --------------------------------------------------------------------------------
The percentage of income dividends paid by the Fund during the fiscal year ended
May 31, 1995, which qualified for the 70% dividends received deduction, was
1.49%. The Fund hereby designates these amounts as dividends qualifying for the
dividends received deductions under Internal Revenue Code Section 854(b)(2).
- --------------------------------------------------------------------------------
31
AGE HIGH INCOME FUND, INC.
================================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of AGE High Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of AGE High
Income Fund, Inc. (the Fund), including the statement of investments in
securities and net assets, as of May 31, 1995, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
the periods indicated thereon. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AGE
High Income Fund, Inc. as of May 31, 1995, the results of its operations 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 the periods indicated
thereon, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
June 30, 1995
32
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304(a) of REGULATION S-T)
GRAPHIC MATERIAL (1)
The following line graph hypothetically compares the performance of the Franklin
AGE High Income Fund to that of the Solomon Brothers Combined Corporate Index
and the CS First Boston High Yield Index, based on a $10,000 investment from
6/1/85 to 5/31/95.
</TABLE>
<TABLE>
<CAPTION>
Period Ending AGE High SB Comb Corp CS FB HY
<S> <C> <C> <C>
6/1/85 $ 9,563 $10,000 $10,000
Jun-85 $ 9,642 $10,082 $10,240
Jul-85 $ 9,696 $10,022 $10,356
Aug-85 $ 9,781 $10,234 $10,473
Sep-85 $ 9,757 $10,312 $10,592
Oct-85 $ 9,760 $10,551 $10,807
Nov-85 $ 9,927 $10,828 $11,027
Dec-85 $10,290 $11,207 $11,252
Jan-86 $10,377 $11,287 $11,364
Feb-86 $10,777 $11,858 $11,841
Mar-86 $10,952 $12,127 $12,244
Apr-86 $11,129 $12,190 $12,480
May-86 $11,249 $12,100 $12,650
Jun-86 $11,371 $12,314 $12,713
Jul-86 $11,194 $12,345 $12,465
Aug-86 $11,380 $12,599 $12,677
Sep-86 $11,383 $12,579 $12,779
Oct-86 $11,665 $12,781 $13,028
Nov-86 $11,574 $12,970 $12,976
Dec-86 $11,624 $13,102 $13,012
Jan-87 $12,090 $13,399 $13,548
Feb-87 $12,335 $13,507 $13,722
Mar-87 $12,420 $13,451 $13,803
Apr-87 $12,110 $12,998 $13,389
May-87 $11,899 $12,951 $13,340
Jun-87 $12,053 $13,130 $13,603
Jul-87 $12,073 $13,079 $13,741
Aug-87 $12,196 $13,051 $13,882
Sep-87 $11,802 $12,658 $13,542
Oct-87 $11,229 $13,008 $13,023
Nov-87 $11,639 $13,174 $13,527
Dec-87 $11,768 $13,401 $13,859
Jan-88 $12,259 $13,957 $14,333
Feb-88 $12,645 $14,175 $14,748
Mar-88 $12,520 $14,024 $14,648
Apr-88 $12,655 $13,939 $14,752
May-88 $12,715 $13,915 $14,826
Jun-88 $12,890 $14,292 $15,140
Jul-88 $13,697 $15,011 $16,068
Feb-89 $13,680 $14,932 $16,142
Mar-89 $13,663 $14,997 $16,026
Apr-89 $13,604 $15,249 $15,987
May-89 $13,673 $15,671 $16,368
Jun-89 $13,915 $16,112 $16,603
Jul-89 $13,941 $16,381 $16,640
Aug-89 $13,923 $16,173 $16,638
Sep-89 $13,725 $16,201 $16,261
Oct-89 $13,115 $16,465 $15,854
Nov-89 $13,006 $16,580 $15,886
Dec-89 $12,940 $16,596 $15,814
Jan-90 $12,494 $16,376 $15,258
Feb-90 $12,043 $16,369 $14,975
Mar-90 $12,316 $16,422 $15,407
Apr-90 $12,277 $16,278 $15,471
May-90 $12,637 $16,762 $15,793
Jun-90 $12,950 $17,054 $16,291
Jul-90 $13,268 $17,280 $16,817
Aug-90 $12,449 $16,949 $16,040
Sep-90 $11,566 $16,904 $14,816
Oct-90 $10,722 $16,899 $14,444
Nov-90 $10,951 $17,233 $14,734
Dec-90 $11,071 $17,483 $14,805
Jan-91 $11,306 $17,740 $15,211
Feb-91 $12,566 $18,176 $16,524
Mar-91 $13,326 $18,535 $17,548
Apr-91 $13,922 $18,884 $18,276
May-91 $14,017 $19,022 $18,368
Jun-91 $14,470 $19,099 $18,849
Jul-91 $14,928 $19,405 $19,486
Aug-91 $15,331 $19,824 $19,841
Sep-91 $16,149 $20,454 $20,963
Nov-91 $16,249 $20,667 $21,130
Dec-91 $16,415 $21,260 $21,285
Jan-92 $16,966 $21,166 $22,151
Feb-92 $17,329 $21,409 $22,689
Mar-92 $17,669 $21,371 $23,027
Apr-92 $17,814 $21,513 $23,046
May-92 $18,094 $21,944 $23,359
Jun-92 $18,921 $23,001 $24,551
Dec-92 $19,146 $23,379 $24,828
Jan-93 $19,586 $23,942 $25,506
Feb-93 $19,886 $24,452 $26,011
Mar-93 $20,188 $24,593 $26,560
Apr-93 $20,349 $24,780 $26,711
May-93 $20,583 $24,836 $27,101
Jun-93 $21,040 $25,412 $27,592
Jul-93 $21,278 $25,600 $27,879
Aug-93 $22,174 $26,180 $29,156
Dec-93 $22,522 $26,358 $29,523
Jan-94 $23,005 $26,843 $30,049
Feb-94 $22,784 $26,352 $30,094
Mar-94 $21,773 $25,554 $29,209
Apr-94 $21,727 $25,283 $28,982
Jun-94 $21,743 $25,245 $28,788
Jul-94 $21,842 $25,748 $28,923
Aug-94 $22,023 $25,812 $29,131
Sep-94 $22,123 $25,440 $29,248
Oct-94 $22,223 $25,400 $29,268
Nov-94 $21,986 $25,298 $28,929
Dec-94 $22,174 $25,528 $29,236
Jan-95 $22,364 $26,036 $29,543
Feb-95 $23,247 $26,760 $30,269
Mar-95 $23,440 $26,985 $30,611
Apr-95 $24,074 $27,454 $31,291
May-95 $24,626 $28,665 $32,173
</TABLE>
