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.
January 20, 1995
Dear Shareholder,
It's a pleasure to bring you the 51st semi-annual report for Franklin's AGE
High Income Fund. This report covers the six months ended November 30, 1994.
Stock and bond markets continued to be dominated by two major trends during the
reporting period: consistent strong economic growth and an accompanying rise in
interest rates. In response to persistent economic growth, the Federal Reserve
Board continued its restrictive monetary policy, raising interest rates in
November for the sixth time since February. As reported in the fund's annual
report dated May 31, 1994, the Federal Reserve Board increased interest rates
in hopes of restraining inflation. Since the first tightening in February, the
federal funds rate -- the rate banks charge each other for overnight loans --
has risen two and one-half percentage points, from 3.00% to 5.50%.
Interest rate increases usually result in bond market declines since previously
issued bonds, with lower yields, are less attractive than new issues. Not
surprisingly, the high yield corporate bond market, in which the fund
concentrates its investments, was hurt by rising interest rates. Fortunately,
many issuers of high yield bonds benefited from the low interest rates of the
early 1990s, as well as recent strong economic conditions, both of which helped
to improve their financial situations and profitability. And, lower rated bonds
are generally less sensitive to interest rate fluctuations than higher rated
bonds. Thus, this sector weathered the impact of rising interest rates better
than higher grade bonds, such as Treasuries and municipal bonds.
Within the high yield corporate bond sector, investors increasingly favored
higher quality investments during the latter part of 1994. The fund benefited
from this "flight to quality," having previously upgraded the quality of the
overall portfolio.
Stock and bond markets continued to undergo a rotation process, as different
sectors moved in and out of favor. In response, the fund emphasized investments
in a variety of areas during the reporting period. Cable television was one of
the fund's largest sectors, accounting for 9.9% of its total net assets on
November 30, 1994. We believe this sector shows positive long-term
fundamentals, and the recent talk of consolidation among the industry's leaders,
such as TeleCommunications, Inc. (TCI) and Continental Cablevision (the fund
currently owns bonds from both) bodes well for holders of these securities. We
also initiated an international position in the cable
<PAGE>
industry, purchasing Bell Cablemedia, a cable and telephony provider in the
United Kingdom. The development of the U.K. cable market appears to be
following that of the U.S. market, and early entry into this market should
benefit the fund over the long term.
The fund also increased its exposure to the healthcare industry. The recent
controversy surrounding the proposed national healthcare plan provided ample
opportunity to purchase quality securities at bargain prices. This sector also
benefited in recent months from a trend toward consolidation. Two of the fund's
significant holdings in this area are Ornda Healthcorp and Healthtrust, two of
the largest hospital chains in the United States. At the end of the reporting
period, investments in the healthcare industry accounted for 5.7% of the fund's
total net assets, up from 5.1% on May 31, 1994.
Management also highlighted investments in the media/broadcast industry during
the reporting period. This sector has improved with the growing economy, and
international demand for media products is currently quite strong. On November
30, 1994, this sector represented 5.5% of the fund's total net assets.
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 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. As the table on page 3 illustrates, the fund's largest
holding represents only 2.28% 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.
Recent economic data indicates that moderate economic growth should continue
over the foreseeable future. This should bode well for most domestic
corporations, as this environment tends to lead to improved earnings and
financial conditions.
2
<PAGE>
We believe that our management approach should present positive, long-term
investment opportunities for shareholders of Franklin's AGE High Income Fund.
As always, we appreciate your continued support and look forward to serving you
in the years to come.
Sincerely,
RUPERT H. JOHNSON, JR.
- ----------------------------
Rupert H. Johnson, Jr.
President
Franklin's AGE High Income Fund
FRANKLIN'S AGE HIGH INCOME FUND
TOP 10 HOLDINGS ON 11/30/94
As a percentage of total net assets
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
INDUSTRY NET ASSETS
- -------- ----------
<S> <C>
American Standard, Inc. ................ 2.28%
Industrial
Dr. Pepper/7-Up Cos. ................... 2.20%
Food and Beverage
Fort Howard, Corp. ..................... 2.17%
Forest & Paper Products
Rogers Communications, Inc. ............ 2.05%
Cable/Wireless
RJR Nabisco, Inc. ...................... 2.01%
Consumer Products
Healthtrust, Inc. ...................... 1.85%
Healthcare Services
Continental Cablevision, Inc. .......... 1.68%
Cable Television
IMC Global, Inc. ....................... 1.63%
Chemicals
United Mexican State.................... 1.58%
Foreign Government Agencies
Comcast Corp. .......................... 1.56%
Cable/Wireless
</TABLE>
FOR A DETAILED LISTING OF PORTFOLIO HOLDINGS, PLEASE SEE PAGE 5 OF THIS REPORT.
3
<PAGE>
PERFORMANCE SUMMARY
The fund's share price, as measured by net asset value, declined from $2.70 on
May 31, 1994, to $2.60 on November 30, 1994. This decline was largely due to
rising interest rates, as reported in the preceding shareholder letter.
Despite the negative impact that recent market conditions had on the fund's
share price, Franklin's AGE High Income Fund continued to provide its
shareholders with a high level of current income. For the six months ended
November 30, 1994, the fund paid monthly income distributions totaling 13.2
cents ($0.132) per share. Based on an annualization of the current monthly
dividend of 2.2 cents ($0.022) per share and the maximum offering price of
$2.72 on November 30, 1994, your fund's distribution rate was 9.71%. Dividends
will vary based on the earnings of the fund's portfolio, and past distributions
are not necessarily predictive of future trends.
Franklin's AGE High Income Fund posted a total return of +1.19% and -0.85%,
respectively, for the six months and one year ended November 30, 1994. While
the fund's returns were lower than its typical return, the returns were higher
than the bond market as a whole. Total return measures the change in value of
an investment over the periods indicated. It does not include the maximum
initial sales charge and assumes reinvestment of dividends and capital gains at
net asset value. Past performance cannot guarantee future results.
We encourage you to view your investment in Franklin's AGE High Income Fund
from a long-term perspective. While the fund may encounter volatility from time
to time, management is confident that it will continue to perform
satisfactorily over the long term. In fact, over the past 10 years, Franklin's
AGE High Income Fund provided cumulative and average annual total returns of
over 155% and 9%, respectively.
FRANKLIN'S AGE HIGH INCOME FUND
Periods ended 11/30/94
<TABLE>
<CAPTION>
SINCE
ONE- FIVE- TEN- INCEPTION
YEAR YEAR YEAR (12/31/69)
---- ----- ---- ----------
<S> <C> <C> <C> <C>
Cumulative
Total
Return:(1) -0.85% 69.05% 155.06% 630.69%
Average
Annual Total
Return:(2) -5.12% 10.08% 9.34% 8.11%
Distribution Rate:(3) 9.71%
30-Day Standardized Yield:(4) 9.83%
</TABLE>
(1) Cumulative total returns show the change in value of an investment over the
periods indicated and do not include the current, maximum 4.25% initial sales
charge. See note below.
(2) Average annual total returns represent the average annual change in value of
an investment over the periods indicated and have been restated to reflect the
current, maximum 4.25% initial sales charge. See note below.
(3) Based on an annualization of the current 2.2 cent per share dividend and the
maximum offering price of $2.72 on November 30, 1994.
(4) Yield, calculated as required by the SEC, is based on earnings of the fund's
portfolio during the 30 days ended November 30, 1994. High yields reflect the
higher credit risks associated with certain lower rated securities in the
fund's portfolio, and in some cases, the lower market prices for these
instruments.
Note: Prior to July 1, 1994, 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, the fund eliminated the sales charge
on reinvested dividends and implemented a plan of distribution under Rule
12b-l, 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
cannot guarantee future results.
4
<PAGE>
AGE HIGH INCOME FUND, INC.
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, NOVEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
------------ -----------
<S> <C> <C>
BONDS 88.6%
AUTOMOTIVE 1.2%
$ 15,010,000 a,d,jClevite Industries, Inc., S.F., sub. deb., 12.375%, 06/30/01 ............. $ 6,079,050
15,150,000 SPX Corp., senior sub. notes, 11.75%, 06/01/02 ........................... 14,998,500
-----------
21,077,550
-----------
CABLE TELEVISION 9.9%
29,000,000 eBell Cablemedia, Plc., senior disc. notes, zero coupon to 07/15/99,
(original accretion rate 11.95%), 11.95% thereafter, 07/15/04 ............ 15,515,000
17,400,000 Cablevision Industries Corp., senior notes, 10.75%, 01/30/02 ............. 17,139,000
20,000,000 Cablevision System Corp., S.F., senior sub. deb., 10.75%, 04/01/04 ....... 19,800,000
5,000,000 Cablevision System Corp., senior sub. deb., 9.875%, 04/01/23 ............. 4,475,000
16,000,000 eCentury Communications Corp., senior disc. notes, (original accretion rate
8.875%), 0.00%, 03/15/03 ............................................... 6,320,000
3,000,000 Continental Cablevision, Inc., senior deb., 8.875%, 09/15/05 ............. 2,685,000
8,500,000 Continental Cablevision, Inc., senior deb., 9.50%, 08/01/13 .............. 7,607,500
13,000,000 Continental Cablevision, Inc., senior sub. deb., 11.00%, 06/01/07 ........ 13,065,000
5,800,000 Continental Cablevision, Inc., senior sub. deb., 9.00%, 09/01/08 ......... 5,133,000
22,400,000 eDiamond Cable Communications Co., senior disc. notes, zero coupon to
09/30/99, (original accretion rate 13.25%), 13.25% thereafter, 09/30/04. 11,200,000
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 ................................... 8,500,000
5,000,000 Rogers Cablesystems, Inc., senior secured deb., 10.125%, 09/01/12 ........ 4,787,500
15,300,000 iRogers Cablesystems, Inc., senior secured deb. (Canada), 9.65%, 01/15/14 . 9,233,622
10,000,000 Rogers Communications, Inc., senior deb., 10.875%, 04/15/04 .............. 10,100,000
7,000,000 Scott Cable Communications, Inc., S.F., sub. deb., 12.25%, 04/15/01....... 4,935,000
20,000,000 Tele-Communications, Inc., senior deb., 9.80%, 02/01/12 .................. 20,182,820
9,500,000 Turner Broadcasting Systems, Inc., senior deb., 8.40%, 02/01/24 .......... 7,338,750
-----------
168,017,192
-----------
CHEMICALS 5.4%
18,000,000 Arcadian Partners, S.F., senior notes, Series B, 10.75%, 05/01/05 ........ 17,550,000
18,750,000 eHarris 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................................................................ 14,906,250
20,000,000 Huntsman Corp., first mortgage, 11.00%, 04/15/04.......................... 20,500,000
3,400,000 IMC Fertilizer Group, Inc., senior deb., 9.45%, 12/15/11 ................. 3,077,000
12,000,000 IMC Fertilizer Group, Inc., senior notes, 9.25%, 10/01/00 ................ 11,760,000
6,000,000 IMC Fertilizer Group, Inc., senior notes, Series B, 10.125%, 06/15/01..... 6,030,000
6,550,000 IMC Fertilizer Group, Inc., senior notes, Series B, 10.75%, 06/15/03 ..... 6,779,250
3,500,000 Uniroyal Chemical Corp., senior notes, 10.50%, 05/01/02 .................. 3,421,250
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
AGE HIGH INCOME FUND, INC.
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, NOVEMBER 30, 1994
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
----------- -----------
<S> <C> <C>
BONDS (CONT.)
CHEMICALS (CONT.)
$4,850,000 Uniroyal Chemical Corp., senior sub. notes, 11.00%, 05/01/03 ............. $ 4,740,875
6,000,000 eUniroyal Chemical Corp., sub. notes, zero coupon to 05/01/98, (original
accretion rate 12.00%), 12.00% thereafter, 05/01/05 .................... 3,765,000
-----------
92,529,625
-----------
CONSUMER GOODS 4.7%
9,000,000 Calmar, Inc., S.F., senior notes, 12.00%, 12/15/97 ....................... 9,045,000
17,000,000 eColeman Holdings, Inc., senior secured disc. notes, (original accretion rate
10.875%), 0.00%, 05/27/98 .............................................. 11,390,000
10,000,000 Florsheim Shoe Co., senior notes, 12.75%, 09/01/02........................ 9,775,000
7,500,000 Playtex Family Products Corp., senior sub. notes, 9.00%, 12/15/03......... 6,412,500
15,000,000 Revlon Consumer Products Corp., senior sub. notes, 10.50%, 02/15/03 ...... 13,200,000
4,900,000 eRevlon Worldwide Corp., senior secured disc. notes, (original accretion rate
12.00%), 0.00%, 03/15/98 ............................................... 2,695,000
20,000,000 RJR Nabisco, Inc., senior notes, 9.25%, 08/15/13 ......................... 18,150,000
9,600,000 Sealy Corp., senior sub. notes, 9.50%, 05/01/03 .......................... 9,072,000
-----------
79,739,500
-----------
CONTAINERS & PACKAGING 1.0%
3,360,000 a,d,eKane Industries, Inc., senior sub. disc. notes, zero coupon to 02/01/95, (original
accretion rate 8.00%), 8.00% thereafter, 02/01/98 ...................... 18,480
5,500,000 Owens Illinois, Inc., S.F., senior deb., 11.00%, 12/01/03 ................ 5,623,750
12,000,000 Owens Illinois, Inc., senior sub. notes, 9.75%, 08/15/04.................. 11,400,000
-----------
17,042,230
-----------
ENERGY 1.5%
6,750,000 Energy Ventures, senior notes, 10.25%, 03/15/04........................... 6,412,500
17,000,000 Gulf Canada Resources, Ltd., senior sub. notes, 9.25%, 01/15/04 .......... 15,640,000
4,448,000 Synergy Group, Inc., senior notes, 9.50%, 09/15/00 ....................... 3,780,800
-----------
25,833,300
-----------
FOOD & BEVERAGES 8.0%
9,250,000 Beatrice Foods, Inc., S.F., senior sub. notes, 12.00%, 12/01/01........... 9,319,375
3,100,000 bCurtice-Burns Foods, Inc., senior sub. notes, 12.75%, 02/01/05............ 3,123,250
2,500,000 Darling-Delaware Co., Inc., S.F., senior sub. notes, 13.75% coupon to 01/01/95,
11.00% thereafter, 07/15/00 ............................................ 2,287,500
27,729,000 bDel Monte Corp., sub. notes, PIK, 12.25%, 09/01/02 ....................... 26,342,550
1,540,000 Dr Pepper Bottling Co. of Texas, senior notes, 10.25%, 02/15/00 .......... 1,547,700
2,000,000 eDr 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 ........ 1,390,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
AGE HIGH INCOME FUND, INC.
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, NOVEMBER 30, 1994
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
------------ ------------
<S> <C>
BONDS (CONT.)
FOOD & BEVERAGES (CONT.)
$ 43,550,000 eDr 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 $ 34,840,000
7,500,000 PMI Acquisition Corp., senior sub. notes, 10.25%, 09/01/03 ............... 7,162,500
17,000,000 Royal Crown Corp., senior secured notes, 9.75%, 08/01/00 ................. 15,215,000
19,000,000 Specialty Foods Corp., senior notes, Series B, 10.25%, 08/15/01 .......... 17,100,000
19,000,000 Texas Bottling Group, Inc., senior sub. notes, 9.00%, 11/15/03 ........... 17,195,000
------------
135,522,875
------------
FOOD RETAILING 6.3%
9,500,000 Food 4 Less Supermarkets, Inc., S.F., senior notes, 10.45%, 04/15/00...... 9,357,500
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,e,kGrand Union Capital Corp., guaranteed senior sub. notes, Series A, (original
accretion rate 16.50%), 0.00%, 01/15/07 ................................ 976,253
12,500,000 a,e,kGrand Union Capital Corp., senior notes, Series B, zero coupon to 07/15/99,
(original accretion rate 15.00%), 15.00% thereafter, 07/15/04 .......... 437,500
2,955,000 a,dKash N' Karry Food Stores, Inc., S.F., sub. deb., 14.00%, 02/01/01........ 989,925
11,600,000 P & C Food Markets, Inc., senior sub. notes, 11.50%, 10/15/01............. 11,919,000
14,000,000 Pathmark Stores, Inc., S.F., sub. notes, 11.625%, 06/15/02 ............... 12,320,000
10,000,000 Pathmark Stores, Inc., senior sub. notes, 9.625%, 05/01/03 ............... 9,562,500
5,000,000 Penn Traffic Co., senior notes, 8.625%, 12/15/03 ......................... 4,331,250
10,000,000 Penn Traffic Co., senior notes, 10.375%, 10/01/04 ........................ 9,625,000
11,000,000 Pueblo Xtra International, senior notes, 9.50%, 08/01/03 ................. 9,295,000
21,000,000 Ralphs Grocery Co., senior sub. notes, 10.25%, 07/15/02 .................. 20,317,500
15,000,000 bSmitty's Supervalu, Inc., senior sub. notes, 12.75%, 06/15/04 ............ 14,887,500
------------
106,198,928
------------
FOREST & PAPER PRODUCTS 5.7%
9,000,000 Container Corp. of America, guaranteed senior notes, Series A, 11.25%,
05/01/04................................................................ 9,112,500
12,000,000 Container Corp. of America, senior notes, Series A, 9.75%, 04/01/03 ...... 11,220,000
8,066,240 Fort Howard Corp., S.F., pass through trust, 11.00%, 01/02/02 ............ 8,247,731
25,500,000 Fort Howard Corp., senior sub. notes, 9.00%, 02/01/06 .................... 21,611,250
7,500,000 Fort Howard Corp., sub. notes, 10.00%, 03/15/03 .......................... 6,956,250
16,000,000 Stone Container Corp., senior notes, 9.875%, 02/01/01..................... 14,720,000
6,200,000 Stone Container Corp., senior notes, 11.50%, 10/01/04 .................... 6,153,500
18,900,000 Tjiwi Kimia International, guaranteed senior notes, 13.25%, 08/01/01...... 19,467,000
------------
97,488,231
------------
GAMING & LEISURE 5.3%
19,900,000 Aztar Corp., senior sub. notes, 13.75%, 10/01/04.......................... 19,601,500
1,249,800 eDivi Hotels, Inc., secured cvt. sub. deb., (original accretion rate
0.00%), 02/07/02........................................................ 256,209
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
AGE HIGH INCOME FUND, INC.
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, NOVEMBER 30, 1994
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
------------ ------------
<S> <C> <C>
BONDS (CONT.)
GAMING & LEISURE (CONT.)
$ 17,500,000 Embassy Suites, Inc., guaranteed senior sub. notes, 10.875%, 04/15/02 .... $ 17,981,250
9,400,000 Harrah's Jazz Co., first mortgage, 14.25%, 11/15/01....................... 9,729,000
20,000,000 John Q. Hammons Hotels, first mortgage, 8.875%, 02/15/04.................. 17,550,000
10,000,000 Red Roof Inns, Inc., senior notes, 9.625%, 12/15/03....................... 9,050,000
17,000,000 Showboat, Inc., senior sub. notes, 13.00%, 08/01/09....................... 16,235,000
------------
90,402,959
------------
HEALTHCARE 5.7%
14,830,000 Abbey Healthcare Group, Inc., senior sub. notes, 9.50%, 11/01/02 ......... 13,680,675
11,400,000 eAmerican Medical, Inc., junior sub. disc. deb., zero coupon to 11/25/95,
(original accretion rate 15.00%), 15.00% thereafter, 11/26/05........... 20,577,000
6,338,000 Amerisource Distribution Corp., senior deb., PIK, 11.25%, 07/15/05........ 6,401,380
18,000,000 Healthtrust, Inc. - The Hospital Co., sub. notes, 10.75%, 05/01/02 ....... 19,125,000
11,500,000 Healthtrust, Inc. - The Hospital Co., sub. notes, 10.25%, 04/15/04 ....... 12,218,750
16,900,000 Ornda Healthcorp., guaranteed senior sub. notes, 11.375%, 08/15/04 ....... 17,153,500
9,000,000 Sola Group, Ltd., senior sub. notes, 6.00% coupon to 12/15/98, 9.625%
thereafter, 12/15/03 ................................................... 6,930,000
------------
96,086,305
------------
HOME BUILDING .7%
12,660,774 a,dWalter Industries, Inc., extendable senior sub. reset notes, PIK, 16.625%,
01/01/95................................................................ 11,584,608
------------
INDUSTRIAL 6.6%
23,000,000 American Standard, Inc., senior deb., 11.375%, 05/15/04 .................. 23,690,000
6,450,000 American Standard, Inc., senior sub. notes, 9.875%, 06/01/01 ............. 6,143,625
14,000,000 eAmerican Standard, Inc., S.F., senior sub. deb., zero coupon to 06/01/98,
(original accretion rate 10.50%), 10.50% thereafter, 06/01/05........... 8,890,000
5,000,000 Coltec Industries, Inc., senior notes, 9.75%, 11/01/99 ................... 4,912,500
18,000,000 Coltec Industries, Inc., senior sub. notes, 10.25%, 04/01/02 ............. 18,000,000
24,000,000 eEagle Industries, Inc., senior notes, zero coupon to 07/15/98, (original
accretion rate 10.50%), 10.50% thereafter, 07/15/03 .................... 15,360,000
12,000,000 Inter-City Products Corp., senior secured notes, 9.75%, 03/01/00 ......... 10,980,000
10,376,000 Thermadyne Industries, Inc., senior sub. notes, 10.25%, 05/01/02 ......... 10,012,840
14,387,000 Thermadyne Industries, Inc., sub. notes, 10.75%, 11/01/03 ................ 13,451,845
------------
111,440,810
------------
MEDIA & BROADCASTING 5.5%
12,000,000 Ackerley Communications, Inc., senior secured notes, Series B, 10.75%,
10/01/03................................................................ 11,340,000
6,000,000 Act III Broadcasting, senior sub. notes, 9.625%, 12/15/03 ................ 5,490,000
8,700,000 American Media Operation, senior sub. notes, 11.625%, 11/15/04............ 8,765,250
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
AGE HIGH INCOME FUND, INC.
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, NOVEMBER 30, 1994
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
------------ ------------
<S> <C> <C>
BONDS (CONT.)
MEDIA & BROADCASTING (CONT.)
$ 16,000,000 Continental Broadcasting, Ltd., senior sub. notes, 10.625%, 07/01/03 ..... $ 16,200,000
9,075,000 Infinity Broadcasting Corp., senior sub. notes, 10.375%, 03/15/02 ........ 9,143,062
10,500,000 K-III Communications Corp., S.F., senior notes, 10.625%, 05/01/02 ........ 10,185,000
15,000,000 New World Television, Inc., S.F., senior notes, 11.00%, 06/30/05 ......... 15,075,000
25,000,000 ePanAmSat 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 16,625,000
------------
92,823,312
------------
METALS & MINING 4.5%
23,400,000 eAcme Metals, Inc., senior secured disc. notes, zero coupon to 08/01/97,
(original accretion rate 13.50%), 13.50% thereafter, 08/01/04 .......... 15,561,000
20,000,000 AK Steel Corporation, senior notes, 10.75%, 04/01/04 ..................... 19,350,000
11,042,000 a,dBucyrus-Erie Co., senior notes, 16.00%, 01/01/96 ......................... 6,293,940
17,000,000 Envirosource, Inc., senior notes, 9.75%, 06/15/03 ........................ 14,705,000
19,000,000 Joy Technologies, Inc., senior notes, 10.25%, 09/01/03 ................... 19,902,500
------------
75,812,440
------------
RESTAURANTS 2.5%
10,850,000 Family Restaurants, Inc., senior notes, 9.75%, 02/01/02................... 8,788,500
2,000,000 Flagstar Corp., senior notes, 10.75%, 09/15/01............................ 1,835,000
11,000,000 Flagstar Corp., senior notes, 10.875%, 12/01/02 .......................... 10,065,000
13,614,000 Flagstar Corp., S.F., senior sub. deb., 11.25%, 11/01/04 ................. 11,061,374
2,900,000 Foodmaker, Inc., senior notes, 9.25%, 03/01/99............................ 2,443,250
11,500,000 Foodmaker, Inc., senior sub. notes, 9.75%, 06/01/02 ...................... 8,625,000
------------
42,818,124
------------
TECHNOLOGY & INFORMATION SYSTEMS 1.3%
10,000,000 ADT Operations, guaranteed senior sub. notes, 9.25%, 08/01/03 ............ 9,100,000
7,500,000 eBell & Howell Co., senior deb., zero coupon to 03/01/00, (original
accretion rate 11.50%), 11.50% thereafter, 03/01/05 .................... 3,787,500
3,550,000 Bell & Howell Co., senior notes, 9.25%, 07/15/00 ......................... 3,283,750
6,500,000 Bell & Howell Co., senior sub. notes, 10.75%, 10/01/02 ................... 6,207,500
------------
22,378,750
------------
TEXTILES & APPAREL 2.9%
10,300,000 Forstmann & Co., Inc., S.F., senior sub. notes, 14.75%, 04/15/99 ......... 11,046,750
15,000,000 Hartmarx Corp., senior sub. notes, 10.875%, 01/15/02 ..................... 14,137,500
3,356,000 JPS Textiles Group, Inc., S.F., disc. notes, 10.85%, 06/01/99 ............ 2,533,780
10,056,000 JPS Textiles Group, Inc., S.F., sub. notes, 10.25%, 06/01/99.............. 7,441,440
6,000,000 WestPoint Stevens, Inc., senior notes, 8.75%, 12/15/01.................... 5,460,000
10,000,000 WestPoint Stevens, Inc., senior sub. deb., 9.375%, 12/15/05............... 8,800,000
------------
49,419,470
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
AGE HIGH INCOME FUND, INC.
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, NOVEMBER 30, 1994
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
------------ ------------
<S> <C> <C>
BONDS (CONT.)
TRANSPORTATION 4.6%
$ 9,000,000 Delta Air Lines, Inc., S.F., pass through equipment trust, 10.06%, 01/02/16 $ 8,228,357
15,000,000 Delta Air Lines, Inc., S.F., pass through equipment trust, 10.50%, 04/30/16 14,289,494
19,000,000 Gearbulk Holding, Ltd., senior notes, 11.25%, 12/01/04 ................... 19,071,250
9,500,000 Southern Pacific Rail Corp., senior notes, 9.375%, 08/15/05 .............. 8,787,500
10,000,000 Southern Pacific Transportation Co., S.F., senior secured notes, Series B,
10.50%, 07/01/99........................................................ 10,217,390
20,422,000 United Airlines, S.F., pass through equipment trust, Series B-2,
9.06%, 09/26/14 ........................................................ 17,256,590
-------------
77,850,581
-------------
UTILITIES 2.4%
22,500,000 eCalifornia Energy, senior notes, zero coupon to 01/15/97, (original accretion
rate 10.25%), 10.25% thereafter, 01/15/04 .............................. 16,200,000
10,000,000 eCMS Energy Corp., senior notes, Series B, zero coupon to 10/01/95, (original
accretion rate 9.875%), 9.875% thereafter, 10/01/99 .................... 9,347,600
4,500,000 Midland Funding II, S.F., senior lease obligation, Series A, 11.75%, 07/23/05 4,138,286
11,500,000 Midland Funding II, S.F., senior lease obligation, Series B, 13.25%, 07/23/06 11,355,284
-------------
41,041,170
-------------
WIRELESS COMMUNICATION 2.9%
20,000,000 eComcast Cellular Communications, Inc., senior notes, Series B, (original
accretion rate 11.37%), 0.00%, 03/05/00................................. 13,100,000
15,000,000 Comcast Corp., senior sub. deb., 9.50%, 01/15/08.......................... 13,443,750
27,250,000 eDial Call Communications, units, senior disc. notes, zero coupon to 04/15/99,
(original accretion rate 12.25%), 12.25% thereafter, 04/15/04........... 11,308,750
10,500,000 Rogers Cantel Mobile Communications, Inc., S.F., senior sub. notes, 10.75%,
11/01/01................................................................ 10,710,000
-------------
48,562,500
-------------
TOTAL BONDS (COST $1,613,779,440) .............................. 1,503,670,460
-------------
FOREIGN CURRENCY NOTES 1.1%
SOUTH AFRICA
108,800,000 iESCOM, E168, utility deb., 11.00%, 06/01/08 (COST $25,027,120) ........... 18,581,609
-------------
FOREIGN GOVERNMENT AGENCIES 2.1%
MEXICO 1.6%
4,000,000 United Mexican States, floating rate notes, Series B, 6.25%, 12/31/19 .... 2,560,000
28,000,000 United Mexican States, floating rate notes, Series D, 5.812%, 12/31/19.... 24,185,000
-------------
26,745,000
-------------
VENEZUELA .5%
20,000,000 Republic of Venezuela, 5.75%, 12/18/07.................................... 9,400,000
-------------
TOTAL FOREIGN GOVERNMENT AGENCIES (COST $36,535,311)............ 36,145,000
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
AGE HIGH INCOME FUND, INC.
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, NOVEMBER 30, 1994
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
SHARES,
WARRANTS VALUE
& RIGHTS (NOTE 1)
------------ ------------
<S> <C> <C>
COMMON STOCKS 1.4%
168,149 aDarling Delaware Co. ..................................................... $ 2,017,788
611,655 a,fDivi Hotels, Inc. ........................................................ 160,254
1,436,971 a,fNVR, Inc. ................................................................ 7,544,098
39,757 aPenn Traffic Co. ......................................................... 1,570,402
1,833,563 a,fPrice Communications Corp. ............................................... 12,605,746
97,500 a,bSpecialty Food Corp. ..................................................... 97,500
38,615 Thermadyne Holdings Corp. ................................................ 473,034
-------------
TOTAL COMMON STOCKS (COST $74,753,866) ......................... 24,468,822
-------------
PREFERRED STOCKS 2.3%
199,000 First Nationwide Bank, 11.50% pfd......................................... 19,800,500
378,839 aGlendale Federal Bank, 1.00% cvt. pfd., Series D ......................... 3,456,906
2,550,000 aRJR Nabisco Holdings Corp., $0.835 cvt. pfd. ............................. 15,937,500
-------------
TOTAL PREFERRED STOCKS (COST $44,089,325) ...................... 39,194,906
-------------
PARTNERSHIP UNITS .4%
415,000 Freeport-McMoRan Resource Partners, Ltd., depository units (COST $7,194,392) 6,017,500
-------------
aWARRANTS & RIGHTS .5%
103,000 Dr Pepper/Seven-Up Cos., Inc. ............................................ 2,549,250
8,030 Foodmaker, Inc. .......................................................... 104,069
827,526 Gaylord Container Corp. .................................................. 5,689,241
6,253 Gilbert Robinson Holdings Corp. .......................................... 625
9,982 Glendale Federal Bank .................................................... 998
1,215 cGrand Union Capital Corp. ................................................ 304
5,896 Kendall International, Inc., rights ...................................... 251,111
120,000 NVR, Inc. ................................................................ 75,000
20,000 Payless Cashways, Inc. ................................................... 60,000
-------------
TOTAL WARRANTS & RIGHTS (COST $5,736,517)....................... 8,730,598
-------------
TOTAL COMMON STOCKS, PREFERRED STOCKS, PARTNERSHIP UNITS, AND
WARRANTS & RIGHTS (COST $131,774,100) ........................ 78,411,826
-------------
TOTAL LONG TERM INVESTMENTS (COST $1,807,115,971) .............. 1,636,808,895
-------------
<CAPTION>
FACE
AMOUNT
------------
<S> <C> <C>
SHORT TERM INVESTMENTS
COMMERCIAL PAPER .6%
$ 10,000,000 General Electric Capital Corp., 5.45%, 01/03/95 (COST $9,950,042)......... 9,950,042
-------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS
(COST $1,817,066,013).......................................... 1,646,758,937
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
AGE HIGH INCOME FUND, INC.
STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, NOVEMBER 30, 1994
(UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1)
------------ ------------
<S> <C>
SHORT TERM INVESTMENTS (CONT.)
g,hRECEIVABLES FROM REPURCHASE AGREEMENTS .4%
$ 6,145,699 Joint Repurchase Agreement, 5.707%, 12/01/94 (Maturity Value $5,905,841)
(COST $5,904,905)
Collateral: U.S. Treasury Bills, 02/09/95 - 05/11/95...................... $ 5,904,905
--------------
TOTAL INVESTMENTS (COST $1,822,970,918) 97.4% ................. 1,652,663,842
OTHER ASSETS AND LIABILITIES, NET 2.6% ........................ 43,823,745
--------------
NET ASSETS 100.0% ............................................ $1,696,487,587
==============
At November 30, 1994, the net unrealized depreciation based
on the cost of investments for income tax purposes of $1,822,970,918
was as follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost ......................... $ 26,704,380
Aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value ......................... (197,011,456)
--------------
Net unrealized depreciation........................................... $ (170,307,076)
==============
</TABLE>
PORTFOLIO ABBREVIATIONS:
L.P. - Limited Partnership
PIK - Payment-in-Kind
S.F. - Sinking Fund
aNon-income producing.
bSee Note 6 regarding Rule 144A securities.
cSee Note 7 regarding restricted securities.
dSee Note 8 regarding defaulted securities.
eZero coupon/Step-up bonds. The current effective yield may vary. The
original accretion rate by security will remain constant.
fSee Note 10 regarding holdings of 5% voting securities.
gFace amount for repurchase agreements is for the underlying collateral.
hSee Note 1(f) regarding Joint Repurchase Agreement.
iFace amount stated in foreign currencies, value in U.S. dollars.
jDue to the uncertainty of future interest payments, the fund discontinued the
accrual of income on 6/30/94, the date the last interest payment was received.
kDue to the uncertainity of future interest payments, the fund discontinued the
accrual of income on 11/29/94.
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
AGE HIGH INCOME FUND, INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investment in securities, at value
(identified cost $1,817,066,013) $1,646,758,937
Receivables from repurchase
agreement, at value and cost 5,904,905
Cash 141,528
Receivables:
Dividends and interest 39,062,219
Investment securities sold 24,445,000
Capital shares sold 1,407,497
Prepaid expenses 95,702
--------------
Total assets 1,717,815,788
--------------
Liabilities:
Payables:
Investment securities purchased 19,513,440
Capital shares repurchased 867,446
Management fees 656,985
Distribution fees 145,968
Shareholder servicing costs 51,237
Accrued expenses and other liabilities 93,125
--------------
Total liabilities 21,328,201
--------------
Net assets, at value $1,696,487,587
==============
Net assets consist of:
Undistributed net investment income $ 16,875,051
Unrealized depreciation on
investments and translation of assets
and liabilities denominated in foreign
currencies (170,214,297)
Net realized loss from investments and
foreign currency transactions (502,351,270)
Capital shares 6,513,313
Additional paid-in capital 2,345,664,790
--------------
Net assets, at value $1,696,487,587
==============
Net asset value per share
($1,696,487,587 divided by
651,331,253 shares outstanding) $2.60
==============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1994 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment income:
Interest (Note 1) $89,636,080
Dividends 981,621
-----------
Total Income $90,617,701
Expenses:
Management fees (Note 5) 4,063,959
Distribution fees (Note 5) 501,167
Shareholder servicing
costs (Note 5) 337,704
Reports to shareholders 246,661
Custodian fees 147,549
Professional fees 43,100
Registration and filing fees 41,686
Directors' fees and expenses 35,189
Other 36,768
-----------
Total expenses 5,453,783
------------
Net investment income 85,163,918
------------
Realized and unrealized gain
(loss) on investments:
Net realized gain (loss) on:
Investments (3,392,365)
Foreign currency transactions 289,619
Net unrealized depreciation
on investments and
translation of assets and
liabilities denominated in
foreign currencies (56,990,441)
------------
Net realized and unrealized loss
on investments (60,093,187)
------------
Net increase in net assets
resulting from operations $ 25,070,731
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
AGE HIGH INCOME FUND, INC.
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED NOVEMBER 30,1994 (UNAUDITED)
AND THE YEAR ENDED MAY 31, 1994
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
NOVEMBER 30, 1994 MAY 31,1994
----------------- -----------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................................... $ 85,163,918 $ 186,594,316
Net realized loss from investments and foreign currency transactions...... (3,102,746) (3,681,910)
Net unrealized depreciation on investments and translation of assets and
liabilities denominated in foreign currencies.............................. (56,990,441) (70,177,283)
-------------- --------------
Net increase in net assets resulting from operations.................. 25,070,731 112,735,123
Distributions to shareholders from undistributed net investment income..... (87,589,212) (182,753,717)
Decrease in net assets from capital shares transactions (Note 3)........... (58,474,575) (48,419,402)
-------------- --------------
Net decrease in net assets............................................ (120,993,056) (118,437,996)
Net assets:
Beginning of period ....................................................... 1,817,480,643 1,935,918,639
-------------- --------------
End of period (including undistributed net investment income of
$16,875,051 - 11/30/94 and $19,300,345 - 5/31/94) ......................... $1,696,487,587 $1,817,480,643
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
AGE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 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. Short-term securities and similar investments with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
value.
Securities denominated in foreign currencies and traded on foreign exchanges or
in foreign markets are valued in a similar manner and these values are
translated into U.S. dollars at current market quotations of their respective
currency against U.S. dollars last quoted by a major bank or, if no such
quotation is available, at the rate of exchange determined in accordance with
procedures established 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.
Net investment income differs for financial statement and tax purposes
primarily due to differing treatments of defaulted securities - see Note 8.
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.
15
<PAGE>
AGE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
1. SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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, 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
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at semi-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 has been allocated to the Fund based on its pro rata interest at
November 30, 1994.
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 November 30, 1994, 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
period ended November 30, 1994, 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 period ended November 30, 1994, but affected the classification of
foreign currency transactions from assets and liabilities other than
investments on the income statement.
2. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At May 31, 1994, for tax purposes, the Fund had capital loss carryovers as
follows:
<TABLE>
<S> <C>
Expiring in: 1995 $ 35,165,075
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
------------
$499,248,524
============
</TABLE>
For tax purposes, the aggregate cost of securities and unrealized depreciation
of the Fund are the same as for financial statement purposes at November 30,
1994.
16
<PAGE>
AGE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
3. CAPITAL STOCK
At November 30, 1994, there were 5,000,000,000 shares of $.01 par value capital
stock authorized and paid-in capital aggregated $2,352,178,103. Transactions in
the Fund's shares for the six months ended November 30, 1994 and the year ended
May 31, 1994 were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1994 MAY 31, 1994
--------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold.................................... 24,632,635 $ 65,463,357 82,294,240 $ 233,932,626
Shares issued in reinvestment of distributions. 13,346,838 35,372,388 25,263,574 71,552,168
Shares redeemed................................ (36,995,909) (98,211,574) (114,808,451) (326,553,156)
Changes from exercise of exchange privilege:
Shares sold................................... 106,921,008 285,181,767 224,078,533 629,917,742
Shares redeemed............................... (129,709,205) (346,280,513) (231,793,045) (657,268,782)
------------ ------------ ------------ -------------
Net decrease............................. (21,804,633) $(58,474,575) (14,965,149) $ (48,419,402)
============ ============ ============ =============
</TABLE>
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the six months ended November 30, 1994 aggregated $349,961,254
and $317,765,038, respectively.
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Franklin Advisers, Inc., 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 $4,063,959 for the six months ended November
30, 1994. 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 six months ended November 30, 1994, 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 received by Franklin/Templeton Distributors,
Inc. and the amounts which were subsequently paid to other dealers for the six
months ended November 30, 1994 totaled $2,357,236 and $2,196,094, respectively.
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.
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 six months ended November 30, 1994
aggregated $337,704, of which $317,323 was paid to Franklin/Templeton Investor
Services, Inc.
Effective May 1,1994, the Fund implemented a plan of distribution under Rule
12b-1 of the Investment Company Act of 1940, pursuant to which the Fund will
reimburse Franklin/Templeton Distributors, Inc. in an amount up to a maximum of
0.15% per annum of the Fund's average daily net assets for costs incurred in
the promotion, offering and marketing of the Fund's shares. Fees incurred by
the Fund under the agreement aggregated $501,167 for the six months ended
November 30, 1994.
17
<PAGE>
AGE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (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 November 30, 1994, the Fund held 144A
securities with a value aggregating $44,450,800 representing 2.6% of the Fund's
net assets. See the accompanying Statement of Investments in Securities and Net
Assets for specific information on such securities.
7. RESTRICTED SECURITIES
A restricted security is a security which has not been registered with the
Securities and Exchange Commission pursuant to the Securities Act of 1933. The
Fund may purchase restricted securities through a private offering and they
cannot be sold without prior registration under the Securities Act of 1933
unless such sale is pursuant to an exemption therefrom. Subsequent costs of
registration of such securities are borne by the issuer. A secondary market
exists for certain privately placed securities. The Fund values these
restricted securities as disclosed in Note 1. At November 30, 1994, the Fund
held restricted securities with a value aggregating $304, as follows:
<TABLE>
<CAPTION>
ACQUISITION
WARRANTS SECURITY DATE COST VALUE
- -------- -------- ----------- --------- -----
<S> <C> <C> <C> <C>
1,215 Grand Union Capital Corp. ...... 07/22/92 1,136,827 $304
====
</TABLE>
8. CREDIT RISK AND DEFAULTED SECURITIES
Although the Fund has a diversified portfolio, 87.3% 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 November 30, 1994, the
Fund held 5 defaulted securities issued by 5 separate companies with a value
aggregating $24,966,003, representing 1.5% 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.
9. 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' committee for Bucyrus-Erie. As a result of this involvement in
this committee, 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.
18
<PAGE>
AGE HIGH INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
10. 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 November 30, 1994, which amounted to $20,310,098.
11. FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each period
are as follows:
<TABLE>
<CAPTION>
SIX MONTHS FOR THE YEAR ENDED MAY 31,
ENDED --------------------------------------------------------------
NOVEMBER 30, 1994 1994 1993 1992 1991 1990
----------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value at beginning
of period..................... $ 2.70 $ 2.81 $ 2.72 $ 2.37 $ 2.53 $ 3.18
------ ------ ------ ------ ------ ------
Net investment income.......... .13 .27 .30 .31 .34 .41
Net realized and unrealized gain
(loss) on securities.......... (.098) (.113) .054 .340 (.122) (.636)
------ ------ ------ ------ ------ ------
Total from investment operations .032 .157 .354 .650 .218 (.226)
------ ------ ------ ------ ------ ------
Less distributions:
Distributions from net
investment income............ (.132) (.267) (.264) (.300) (.359) (.424)
Distributions from paid-in
capital...................... -- -- -- -- (.019) --
------ ------ ------ ------ ------ ------
Total distributions............ (.132) (.267) (.264) (.300) (.378) (.424)
------ ------ ------ ------ ------ ------
Net asset value at end
of period..................... $ 2.60 $ 2.70 $ 2.81 $ 2.72 $ 2.37 $ 2.53
====== ====== ====== ====== ====== ======
TOTAL RETURN*.................. 1.19% 5.19% 13.33% 28.48% 10.18% (8.13)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of year
(in 000's).................... $1,696,488 $1,817,481 $1,935,919 $1,864,195 $1,587,656 $1,675,212
Ratio of expenses to average
net assets................... .62%+ .59% .56% .58% .59% .56%
Ratio of net investment income
to average net assets......... 9.68%+ 9.61% 10.78% 12.18% 14.87% 14.47%
Portfolio turnover rate........ 19.05% 42.32% 38.33% 43.70% 28.55% 17.59%
</TABLE>
*Total return measures the change in value of an investment over the periods
indicated. It does not include the maximum initial sales charge and assumes
reinvestment of dividends at the maximum offering price and capital gains, if
any, at net asset value and is not annualized. Effective May 1, 1994, with the
implementation of the Rule 12b-1 distribution plan, as discussed in Note 5, the
existing sales charge on reinvested dividends has been eliminated.
+Annualized
To ensure the highest quality of service, telephone calls to or from our
service departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
19
<PAGE>
FRANKLIN'S AGE HIGH INCOME FUND -------------------------
777 Mariners Island Blvd., P.O. Box 7777 Bulk Rate
San Mateo, CA 94403-7777 U.S. Postage
- ---------------------------------------- PAID
So. San Francisco, CA
ADDRESS CORRECTION REQUESTED Permit No. 655
-------------------------
SEMI-ANNUAL REPORT
INVESTMENT ADVISER
Franklin Advisers, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404-1585
DISTRIBUTOR
Franklin/Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404-1585
SHAREHOLDER SERVICES AGENT
Franklin/Templeton Investor Services, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94403-7777
1-800/632-2301
This report is intended for distribution to existing shareholders of the fund
who previously received a prospectus.
05 S94 1/95
FRANKLIN'S
AGE HIGH
INCOME FUND
SEMI-ANNUAL REPORT
NOVEMBER 30, 1994
[FRANKLIN TEMPLETON LOGO]
<PAGE>
