SHAREHOLDER LETTER
Dear Shareholder:
This annual report for Franklin's AGE High Income Fund covers the period ended
May 31, 1999.
During the 12 months under review, the U.S. economy grew at a remarkable pace.
Despite the economic and financial turmoil overseas, the U.S. gross domestic
product increased by an annualized rate of 6.0% and 4.3%, in fourth quarter 1998
and first quarter 1999 respectively.
However, inflation, which was subdued for much of the period, reared its head
again in April, registering 2.1% gains in the Consumer Price Index (CPI) for the
one-year period ended May 31, 1999. Although at first glance this figure seems
benign, April's CPI jumped 0.7%, the largest monthly increase since September
1990. This number sparked investor concerns that interest rates would soon rise,
sending the yield for the 30-year U.S. Treasury bond to 5.82% on May 31, 1999.
Furthermore, the Federal Open Market Committee, the Federal Reserve Board's
policy making panel, announced that it had changed from a neutral to a
tightening bias in its May meeting, partly as a result of the strong CPI number.
CONTENTS
Shareholder Letter .................................................... 1
Manager's Discussion .................................................. 3
Performance Summary ................................................... 10
Financial Highlights & Statement of Investments ....................... 14
Financial Statements .................................................. 26
Notes to Financial Statements ......................................... 29
Independent Auditors' Report .......................................... 33
Tax Designation ....................................................... 34
[INCOME FUND PYRAMID]
Although investors generally perceive rising interest rates negatively for any
type of bond, the bonds in which the fund typically invests -- high yield,
lower-rated bonds -- are driven as much by company-specific fundamentals as by
interest rate movements. For such bonds, the stronger-than-expected economic
growth could be positive, as faster growth usually leads to solid corporate
profits and improved financial conditions for many companies.
We encourage you to discuss your financial goals with an investment
representative. He or she can address concerns about volatility and help you
diversify your investments and stay focused on the long term. Mutual funds offer
a level of diversification that is almost impossible for individual investors to
achieve on their own. In addition, high yield bonds continue to be an attractive
investment for diversifying a heavily weighted stock portfolio, for those who
are willing to accept the risks associated with these securities. As always, we
appreciate your support, welcome your questions and comments, and look forward
to serving your investment needs in the years ahead.
Sincerely,
/s/ Rupert H. Johnson, Jr.
Rupert H. Johnson, Jr.
President
Franklin's AGE High Income Fund
MANAGER'S DISCUSSION
Your Fund's Goal: Franklin's AGE High Income Fund seeks to
provide investors with high, current income, with a secondary objective of
principal appreciation. The fund invests in a diversified portfolio consisting
primarily of high yield, lower-rated corporate bonds.
OVERVIEW
During the 12-month period under review, the domestic economy experienced four
quarters of robust growth. Many corporations' financial conditions also
improved, as the economy's overall strength generally enhanced corporate
profitability.
However, while the corporate sector enjoyed healthy fundamentals, fixed-income
assets, in general, experienced above-average volatility. In the summer of 1998,
turmoil in Russia spread to other developing markets, eventually impacting
assets in the domestic market. Hedge fund failures and margin calls (when
brokerage firms demand immediate repayment of loans) exacerbated asset price
declines, and investors' preference for risk fell sharply as sentiment shifted
toward assets of relatively higher credit quality. As a result, the risk premium
on high yield bonds, as measured by the interest rate spreads over U.S. Treasury
bonds, increased substantially compared with levels at the beginning of the
reporting period. In October, the Chase High Yield Index yield was 764 basis
points, or 7.64%, higher than the 10-year U.S. Treasury yield, the widest spread
during the period.
Despite the pressures abroad, the domestic economy remained strong. Repeated
interest rate cuts by the Federal Reserve Board (the Fed) and several foreign
central banks over the third and fourth quarters of 1998 contributed to
increased confidence in the global economic system. In addition, the U.S. stock
market, which had paused in September, rebounded significantly during the fourth
quarter of 1998. The combination of sound economic fundamentals and a strong
equity market lent support to the high yield market, which enjoyed a general
recovery over the remainder of the reporting period.
You will find a complete listing of the fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 18 of
this report.
[PORTFOLIO BREAKDOWN PIE CHART]
Based on Total Net Assets
5/31/99
Bonds 93.1%
Equities 4.3%
Short-Term Obligations & Other Net Assets 2.6%
In first quarter 1999, however, the sharp U.S. stock market rally combined with
remarkably robust economic data releases, fueled fears that inflation might soon
rise. The Fed's interest rate-easing trend slowed, then reversed course in
February, and rates continued to rise through the end of the period. Despite
more supportive corporate fundamentals, the tightening in interest rates over
the last few months of the reporting period created a difficult environment for
all fixed-income classes, including high yield bonds. For the 12-month period
under review, the fund's Class A shares had a cumulative total return of -0.74%,
which was in line with the -0.70% return on the fund's benchmark, the CS First
Boston High Yield Index. Furthermore, Franklin's AGE High Income Fund
outperformed a majority of its peers over the period. Cumulative total return
measures the change in value of an investment, assuming reinvestment of all
distributions, and does not include sales charges. The unmanaged CS First Boston
High Yield Index includes reinvested dividends, and one cannot invest directly
in an index.
PORTFOLIO UPDATE
Recently, we favored industries such as wireless, telecommunications, cable,
broadcasting and media, which offer significant potential for growth while
providing some insulation from fluctuations in the business cycle. As of May 31,
1999, the fund's weightings in wireless communications were 11.61% of total net
assets; telecommunications, 10.60%; cable television, 5.77% and media, 5.81%.
WIRELESS
During the reporting period, the wireless sector continued to benefit from
strong industry growth overall and increased market penetration, as industry
revenues grew despite increasing pricing pressures. Although highly competitive,
the market for wireless services provided attractive opportunities for companies
with sound, aggressive business plans. In general, we focused on lower-cost
operators that continued to successfully expand their networks to offer their
customers better coverage.
In the cellular industry, our holdings in Comcast Cellular Corp., Dobson/Sygnet
Communications Co. and Rogers Cantel Mobile benefited the fund. Comcast Cellular
entered into an agreement to be acquired by SBC Communications Inc., a
significantly positive development given SBC's superior credit profile. The fund
initiated a position in Dobson/Sygnet Communications, which performed well due
to favorable growth prospects and industry trends. Dobson/Sygnet is the
successor company to Sygnet Wireless, whose bonds the fund sold back to the
company at a high premium. Rogers Cantel, a leading Canadian cellular provider,
improved its operational base in Canada, jumpstarting subscriber growth and
undertaking meaningful initiatives to reduce costs.
On the personal communication services (PCS) side, the fund's Sprint Spectrum LP
bonds were upgraded to an investment grade rating, reflecting the majority
ownership and operational control assumed by the parent, Sprint Corp. The fund
reduced its exposure to the paging sector in response to slowing sector growth
and weakening sector fundamentals.
TELECOMMUNICATIONS
The telecommunications sector significantly outperformed the overall high yield
market during the period, and the fund was able to take advantage of this
strength. Global deregulation, technological convergence, consolidation and the
rise of data services are centrally important trends that continued to impact
the industry. With the formation of the European Union, regulatory barriers are
falling in Europe, just as they are in the U.S. Additionally, the rapid growth
in demand for data services such as the Internet has caused the overall demand
for telecommunications services to increase dramatically.
TOP 10 HOLDINGS
5/31/99
COMPANY % OF TOTAL
INDUSTRY NET ASSETS
- -------- ----------
CSC Holdings Inc. 1.59%
Consumer Services
Nextel Communications Inc. 1.37%
Telecommunications
Amkor Technology Inc. 1.34%
Electronic Technology
Chancellor Media Corp. 1.29%
Consumer Services
HMH Properties Inc. 1.27%
Real Estate
NEXTLINK 1.24%
Communications Inc.
Telecommunications
P&L Coal Holdings Corp. 1.11%
Energy Minerals
Anchor Glass 1.11%
Process Industries
Revlon Consumer 1.09%
Products Corp.
Consumer Durables
Rogers Cantel Mobile 1.04%
Telecommunications
Seeking to take advantage of these trends, we focused on companies with
high-quality networks, strong management teams and adequate access to capital
markets. Among the competitive local exchange carriers (CLECs), we focused on
providers of diversified services, which generally have the ability to
cross-sell higher margin products and reduce customer turnover rates. Our
holdings in Allegiance Telecom Inc., NEXTLINK Communications Inc. and Level 3
Communications Inc. all benefited the fund. Allegiance, an early-stage CLEC,
benefited from an insightful management team, strong customer support and
back-office functions, and a successful network build-out strategy. NEXTLINK
Communications is also led by a strong management team, and the company's
strategy of building a complete point-to-point network -- local and long
distance -- in the top 30 U.S. markets contributed to the company's solid
performance. NEXTLINK's use of multiple technologies such as fixed wireless and
digital subscriber line (DSL) technology to reach additional end users has
enhanced its market share and provided substantial flexibility to its network.
Level 3 Communications employs a point-to-point network strategy, much the same
as NEXTLINK, and is focusing on employing state-of-the-art Internet Protocol
(IP) technologies throughout its network. Additionally, the company's investment
in flexible conduit technologies should allow it to upgrade and improve its
existing network much more easily in the future as "next generation" standards
enter the market.
CABLE & MEDIA
The cable and media sectors continued to benefit from a healthy advertising
environment and a strong domestic economy during the period. Consolidation
remained a dominant theme, as industry leaders gained market share and realized
efficiencies from mergers and acquisitions.
In general, we maintained our strategy of looking for larger consolidators with
lower cost structures. On the cable side, the advent of new technologies has
generally impacted asset prices favorably, as the anticipated introduction of
services such as telephony, cable modems, digital tiering and videos on demand
are likely to generate additional revenue for many companies in the sector going
forward. We initiated a position in Charter Communications Holdings LLC, a
domestic cable consolidator that is well-positioned to benefit from new revenue
sources. The company may look to raise equity capital soon to reduce its debt
and fund future acquisitions.
In the media sector, Outdoor Systems Inc., the nation's largest outdoor
advertiser, performed well due to strong demand for billboard space and more
effective, lower-cost vinyl technology. Shortly before the close of the period,
Outdoor Systems announced it would be purchased by Infinity Broadcasting Corp.,
a leading U.S. radio broadcaster with a superior credit profile. The bonds
reacted favorably to the news and posted a healthy gain, demonstrating the
continued impact of industry consolidation.
LOOKING FORWARD
Recent economic data suggest that domestic economic conditions are likely to
remain robust over the near to intermediate term. Although growth may slow
somewhat from its torrid pace over the past two quarters, it is likely to remain
by strong demand trends and stable productive capacity. In addition, high yield
asset valuations are attractive relative to U.S. Treasury bonds on a historical
basis, and we anticipate significant investment opportunities in the high yield
market going forward. Solid economic fundamentals and attractive valuations
should provide a favorable environment for high yield bonds over the near to
intermediate term, and our outlook for the asset class remains positive.
On a long-term basis, we believe the volatility seen over the reporting period
was unusually high, and should diminish with time as strong economic trends
prevail. We continue to focus on industries that we believe offer the best
risk/reward tradeoff and will position the fund to take advantage of favorable
long-term fundamentals.
Please remember, this discussion reflects our views, opinions and portfolio
holdings as of May 31, 1999. However, market and economic conditions are
changing constantly, which can be expected to affect our strategies and the
fund's portfolio composition. Although historical performance is no guarantee of
future results, these insights may help you understand our investment and
management philosophy.
Sincerely,
/s/ Christopher J. Molumphy
Christopher J. Molumphy
Senior Portfolio Manager
Franklin's AGE High Income Fund
DIVIDEND DISTRIBUTIONS
6/1/98 - 5/31/99
DIVIDEND PER SHARE
-------------------------------------------------
MONTH CLASS A CLASS B* CLASS C ADVISOR
- -------------------------------------------------------------
June 2.2 cents -- 2.06 cents 2.24 cents
July 2.2 cents -- 2.07 cents 2.23 cents
August 2.2 cents -- 2.07 cents 2.23 cents
September 2.2 cents -- 2.07 cents 2.23 cents
October 2.2 cents -- 2.08 cents 2.23 cents
November 2.2 cents -- 2.08 cents 2.23 cents
December 2.2 cents -- 2.08 cents 2.23 cents
January 2.2 cents 2.20 cents 2.08 cents 2.23 cents
February 2.2 cents 2.08 cents 2.08 cents 2.23 cents
March 2.2 cents 2.10 cents 2.07 cents 2.23 cents
April 2.2 cents 2.10 cents 2.07 cents 2.23 cents
May 2.2 cents 2.10 cents 2.07 cents 2.23 cents
- -------------------------------------------------------------
TOTAL 26.4 CENTS 10.58 CENTS 24.88 CENTS 26.77 CENTS
*January 1, 1999, the fund began offering Class B shares to investors. See
the prospectus for details.
PERFORMANCE SUMMARY AS OF 5/31/99
Distributions will vary based on earnings of the fund's portfolio and any
profits realized from the sale of the portfolio's securities. Past distributions
are not indicative of future trends. All total returns include reinvested
distributions at net asset value.
CLASS A (formerly Class I):
Subject to the current, maximum 4.25% initial sales charge. Prior to July 1,
1994, fund shares were offered at a lower initial sales charge; thus actual
total returns may differ. Effective May 1, 1994, the fund implemented a Rule
12b-1 plan, which affects subsequent performance.
CLASS B:
Subject to no initial sales charge, but subject to a contingent deferred sales
charge (CDSC) declining from 4% to 0% over six years. These shares have higher
annual fees and expenses than Class A shares.
CLASS C (formerly Class II):
Subject to 1% initial sales charge and 1% CDSC for shares redeemed within 18
months of investment. These shares have higher annual fees and expenses than
Class A shares.
ADVISOR CLASS:
No initial sales charge or Rule 12b-1 fees and are available to a limited class
of investors.
PRICE AND DISTRIBUTION INFORMATION (6/1/98 - 5/31/99)
CLASS A CHANGE 5/31/99 5/31/98
- -------------------------------------------------
Net Asset Value -$0.29 $2.69 $2.98
DISTRIBUTIONS
---------------------------
Dividend Income $0.264
CLASS B CHANGE 5/31/99 1/1/99
- -------------------------------------------------
Net Asset Value -$0.07 $2.69 $2.76
DISTRIBUTIONS
---------------------------
Dividend Income $0.1058
CLASS C CHANGE 5/31/99 5/31/98
- -------------------------------------------------
Net Asset Value -$0.28 $2.70 $2.98
DISTRIBUTIONS
---------------------------
Dividend Income $0.2488
ADVISOR CLASS CHANGE 5/31/99 5/31/98
- -------------------------------------------------
Net Asset Value -$0.29 $2.69 $2.98
DISTRIBUTIONS
---------------------------
Dividend Income $0.2677
Past performance is not predictive of future results.
PERFORMANCE
INCEPTION
CLASS A 1-YEAR 5-YEAR 10-YEAR (12/31/69)
- -------------------------------------------------------------------------
Cumulative Total Return(1) -0.74% +59.66% +153.71% +1,052.84%
Average Annual Total Return(2) -4.89% +8.86% +9.29% +8.50%
Value of $10,000 Investment(3) $9,511 $15,287 $24,301 $110,292
Distribution Rate(4) 9.40%
30-Day Standardized Yield(5) 9.51%
5/31/95 5/31/96 5/31/97 5/31/98 5/31/99
- --------------------------------------------------------------------------
One-Year Total Return(6) +13.34% +10.75% +14.09% +12.32% -0.74%
INCEPTION
CLASS B (1/1/99)
- -----------------------------------------------
Cumulative Total Return(1) +1.29%
Aggregate Total Return(2) -2.61%
Value of $10,000 Investment(3) $9,739
Distribution Rate(4) 9.37%
30-Day Standardized Yield(5) 9.38%
INCEPTION
CLASS C 1-YEAR 3-YEAR (5/16/95)
- -----------------------------------------------------------
Cumulative Total Return(1) -0.93% +25.49% +38.62%
Average Annual Total Return(2) -2.82% +7.48% +8.13%
Value of $10,000 Investment(3) $9,718 $12,416 $13,713
Distribution Rate(4) 9.10%
30-Day Standardized Yield(5) 9.29%
5/31/96 5/31/97 5/31/98 5/31/99
- ----------------------------------------------------------------
One-Year Total Return(6) +10.06% +13.41% +11.69% -0.93%
INCEPTION
ADVISOR CLASS(7) 1-YEAR 5-YEAR 10-YEAR (12/31/69)
- -------------------------------------------------------------------------
Cumulative Total Return(1) -0.61% +60.68% +155.33% +1,060.20%
Average Annual Total Return(2) -0.61% +9.95% +9.83% +8.69%
Value of $10,000 Investment(3) $9,939 $16,068 $25,533 $116,020
Distribution Rate(4) 9.95%
30-Day Standardized Yield(5) 10.09%
5/31/95 5/31/96 5/31/97 5/31/98 5/31/99
- -------------------------------------------------------------------------
One-Year Total Return(6) +13.34% +10.75% +14.09% +12.46% -0.61%
1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include sales charges.
2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes the current, applicable,
maximum sales charge(s) for that class. Since Class B shares have existed for
less than one year, aggregate total return for that class represents total
return since inception, including the maximum sales charge.
3. These figures represent the value of a hypothetical $10,000 investment in the
fund over the periods indicated and include the current, applicable, maximum
sales charge(s) for that class.
4. Distribution rate is based on an annualization of the respective class's May
monthly dividend and the maximum offering price (net asset value price for
Advisor Class) per share on May 31, 1999.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended May 31, 1999. 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.
6. One-year total return represents the change in value of an investment over
the one-year periods ended on the specified dates and does not include sales
charges.
7. On January 2, 1997, the fund began selling Advisor Class shares to certain
eligible investors as described in the prospectus. This share class does not
have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
Class A performance, excluding the effect of the Class A sales charge, but
including the effect of Rule 12b-1 fees and other Class A expenses; and (b) for
periods after January 1, 1997, figures reflect actual Advisor Class performance,
including the deduction of all fees and expenses applicable only to that class.
Since January 2, 1997 (commencement of sales), the cumulative and average annual
total returns of Advisor Class shares were +16.17% and +6.41% respectively.
Bond prices, and thus the fund's share price, generally move in the opposite
direction from interest rates. Since markets can go down as well as up,
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.
TOTAL RETURN INDEX COMPARISON
FOR HYPOTHETICAL $10,000 INVESTMENT
Total return represents the change in value of an investment over the periods
shown. It includes the current, applicable, maximum sales charge(s), fund
expenses, account fees and reinvested distributions. The unmanaged index differs
from the fund in composition, does not pay management fees or expenses and
includes reinvested dividends. One cannot invest directly in an index.
AVERAGE ANNUAL TOTAL RETURN
5/31/99
CLASS A
- -----------------------------------
1-Year -4.89%
5-Year +8.86%
10-Year +9.29%
Since Inception (12/31/69) +8.50%
[CLASS A LINE GRAPH]
This graph compares the performance of Franklin's AGE High Income Fund's Class A
shares as tracked by the growth in value of a $10,000 investment, to that of
the CS First Boston High Yield Index from 6/1/89-5/31/99. Source: Standard and
Poor's Micropal.
<TABLE>
<CAPTION>
Franklin's AGE High CS First Boston High
Income Fund - Class A Yield Index
<S> <C> <C> <C>
06/01/1989 $ 9,578 $10,000
06/30/1989 $ 9,748 1.44% $10,144
07/31/1989 $ 9,766 0.22% $10,166
08/31/1989 $ 9,754 -0.01% $10,165
09/30/1989 $ 9,615 -2.27% $ 9,935
10/31/1989 $ 9,187 -2.50% $ 9,686
11/30/1989 $ 9,111 0.20% $ 9,706
12/31/1989 $ 9,065 -0.45% $ 9,662
01/31/1990 $ 8,752 -3.52% $ 9,322
02/28/1990 $ 8,437 -1.85% $ 9,149
03/31/1990 $ 8,628 2.88% $ 9,413
04/30/1990 $ 8,600 0.42% $ 9,452
05/31/1990 $ 8,852 2.08% $ 9,649
06/30/1990 $ 9,072 3.15% $ 9,953
07/31/1990 $ 9,294 3.23% $10,274
08/31/1990 $ 8,721 -4.62% $ 9,800
09/30/1990 $ 8,102 -7.63% $ 9,052
10/31/1990 $ 7,511 -2.51% $ 8,825
11/30/1990 $ 7,671 2.01% $ 9,002
12/31/1990 $ 7,755 0.48% $ 9,045
01/31/1991 $ 7,921 2.74% $ 9,293
02/28/1991 $ 8,803 8.63% $10,095
03/31/1991 $ 9,336 6.20% $10,721
04/30/1991 $ 9,753 4.15% $11,166
05/31/1991 $ 9,819 0.50% $11,222
06/30/1991 $10,136 2.62% $11,516
07/31/1991 $10,458 3.38% $11,905
08/31/1991 $10,740 1.82% $12,122
09/30/1991 $10,938 2.27% $12,397
10/31/1991 $11,313 3.31% $12,807
11/30/1991 $11,383 0.80% $12,910
12/31/1991 $11,499 0.73% $13,004
01/31/1992 $11,885 4.07% $13,533
02/29/1992 $12,140 2.43% $13,862
03/31/1992 $12,378 1.49% $14,069
04/30/1992 $12,479 0.08% $14,080
05/31/1992 $12,675 1.36% $14,271
06/30/1992 $12,731 0.99% $14,413
07/31/1992 $12,978 1.54% $14,635
08/31/1992 $13,178 1.38% $14,837
09/30/1992 $13,331 0.65% $14,933
10/31/1992 $13,099 -1.04% $14,778
11/30/1992 $13,255 1.50% $14,999
12/31/1992 $13,412 1.13% $15,169
01/31/1993 $13,721 2.73% $15,583
02/28/1993 $13,931 1.98% $15,892
03/31/1993 $14,143 2.11% $16,227
04/30/1993 $14,255 0.57% $16,319
05/31/1993 $14,419 1.46% $16,558
06/30/1993 $14,739 1.81% $16,857
07/31/1993 $14,906 1.04% $17,033
08/31/1993 $14,969 0.85% $17,177
09/30/1993 $15,032 0.57% $17,275
10/31/1993 $15,469 1.83% $17,591
11/30/1993 $15,534 1.26% $17,813
12/31/1993 $15,777 1.26% $18,038
01/31/1994 $16,116 1.78% $18,359
02/28/1994 $15,961 0.15% $18,386
03/31/1994 $15,253 -2.94% $17,846
04/30/1994 $15,153 -1.34% $17,607
05/31/1994 $15,220 0.57% $17,707
06/30/1994 $15,232 -0.67% $17,588
07/31/1994 $15,301 0.47% $17,671
08/31/1994 $15,428 0.72% $17,798
09/30/1994 $15,498 0.40% $17,869
10/31/1994 $15,568 0.07% $17,882
11/30/1994 $15,402 -1.16% $17,674
12/31/1994 $15,534 1.06% $17,862
01/31/1995 $15,666 1.05% $18,049
02/28/1995 $16,286 2.46% $18,493
03/31/1995 $16,420 1.13% $18,702
04/30/1995 $16,865 2.22% $19,117
05/31/1995 $17,251 2.82% $19,657
06/30/1995 $17,389 0.66% $19,786
07/31/1995 $17,718 1.55% $20,093
08/31/1995 $17,795 0.28% $20,149
09/30/1995 $17,937 1.15% $20,381
10/31/1995 $18,079 1.11% $20,607
11/30/1995 $18,157 0.47% $20,704
12/31/1995 $18,434 1.27% $20,967
01/31/1996 $18,779 1.90% $21,365
02/29/1996 $18,926 0.53% $21,479
03/31/1996 $18,805 -0.27% $21,421
04/30/1996 $18,886 0.54% $21,536
05/31/1996 $19,105 0.81% $21,711
06/30/1996 $19,120 0.22% $21,759
07/31/1996 $19,273 0.90% $21,954
08/31/1996 $19,637 1.09% $22,194
09/30/1996 $20,075 1.72% $22,575
10/31/1996 $20,231 0.84% $22,765
11/30/1996 $20,676 1.56% $23,120
12/31/1996 $21,052 1.95% $23,571
01/31/1997 $21,213 0.73% $23,743
02/28/1997 $21,595 1.88% $24,189
03/31/1997 $21,092 -1.12% $23,918
04/30/1997 $21,331 0.89% $24,131
05/31/1997 $21,797 2.01% $24,616
06/30/1997 $22,190 1.36% $24,951
07/31/1997 $22,816 2.12% $25,480
08/31/1997 $22,832 0.54% $25,618
09/30/1997 $23,234 1.98% $26,125
10/31/1997 $23,094 -0.01% $26,122
11/30/1997 $23,423 0.71% $26,308
12/31/1997 $23,597 0.91% $26,547
01/31/1998 $23,852 1.70% $26,999
02/28/1998 $24,109 0.78% $27,209
03/31/1998 $24,369 0.50% $27,345
04/30/1998 $24,466 0.75% $27,550
05/31/1998 $24,483 0.30% $27,633
06/30/1998 $24,500 0.21% $27,691
07/31/1998 $24,683 0.70% $27,885
08/31/1998 $22,851 -6.79% $25,991
09/30/1998 $22,954 -0.01% $25,989
10/31/1998 $22,545 -1.99% $25,472
11/30/1998 $24,025 5.07% $26,763
12/31/1998 $23,956 -0.23% $26,701
01/31/1999 $24,322 0.94% $26,952
02/28/1999 $24,075 -0.21% $26,896
03/31/1999 $24,359 0.91% $27,141
04/30/1999 $24,825 2.21% $27,740
05/31/1999 $24,301 -2.11% -1.08% $27,439
Total Return 143.01% 174.39%
</TABLE>
This table shows the one-year, three-year and since-inception average annual
total return for Franklin's AGE High Income Fund's Class C shares on 5/31/99.
CLASS C
- ------------------------------------------
1-Year -2.82%
3-Year +7.48%
Since Inception (5/16/95) +8.13%
[CLASS C LINE GRAPH]
This graph compares the performance of Franklin's AGE High Income Fund's Class C
shares, as tracked by the growth in value of a $10,000 investment, to that of
the CS First Boston High Yield Index from 5/16/95-5/31/99. Source: Standard and
Poor's Micropal.
<TABLE>
<CAPTION>
Franklin's AGE High CS First Boston
Date Income Fund - Class C High Yield Index
<S> <C> <C> <C>
05/16/1995 $ 9,892 $10,000
05/31/1995 $ 9,928 1.36% $10,136
06/30/1995 $10,004 0.66% $10,203
07/31/1995 $10,186 1.55% $10,361
08/31/1995 $10,223 0.28% $10,390
09/30/1995 $10,297 1.15% $10,510
10/31/1995 $10,373 1.11% $10,626
11/30/1995 $10,412 0.47% $10,676
12/31/1995 $10,565 1.27% $10,812
01/31/1996 $10,756 1.90% $11,017
02/29/1996 $10,835 0.53% $11,076
03/31/1996 $10,760 -0.27% $11,046
04/30/1996 $10,840 0.54% $11,105
05/31/1996 $10,927 0.81% $11,195
06/30/1996 $10,930 0.22% $11,220
07/31/1996 $11,052 0.90% $11,321
08/31/1996 $11,215 1.09% $11,444
09/30/1996 $11,500 1.72% $11,641
10/31/1996 $11,584 0.84% $11,739
11/30/1996 $11,792 1.56% $11,922
12/31/1996 $12,001 1.95% $12,154
01/31/1997 $12,087 0.73% $12,243
02/28/1997 $12,340 1.88% $12,473
03/31/1997 $12,006 -1.12% $12,334
04/30/1997 $12,136 0.89% $12,443
05/31/1997 $12,393 2.01% $12,694
06/30/1997 $12,611 1.36% $12,866
07/31/1997 $12,960 2.12% $13,139
08/31/1997 $13,007 0.54% $13,210
09/30/1997 $13,230 1.98% $13,471
10/31/1997 $13,144 -0.01% $13,470
11/30/1997 $13,281 0.71% $13,566
12/31/1997 $13,419 0.91% $13,689
01/31/1998 $13,511 1.70% $13,922
02/28/1998 $13,650 0.78% $14,030
03/31/1998 $13,836 0.50% $14,101
04/30/1998 $13,839 0.75% $14,206
05/31/1998 $13,842 0.30% $14,249
06/30/1998 $13,844 0.21% $14,279
07/31/1998 $13,989 0.70% $14,379
08/31/1998 $12,902 -6.79% $13,403
09/30/1998 $13,001 -0.01% $13,401
10/31/1998 $12,765 -1.99% $13,135
11/30/1998 $13,594 5.07% $13,800
12/31/1998 $13,549 -0.23% $13,769
01/31/1999 $13,750 0.94% $13,898
02/28/1999 $13,605 -0.21% $13,869
03/31/1999 $13,708 0.91% $13,995
04/30/1999 $14,014 2.21% $14,304
05/31/1999 $13,713 -2.15% -1.08% $14,150
Total Return 37.13% 41.50%
</TABLE>
Past performance is not predictive of future results.
This table shows the one-year, five-year, 10-year and since-inception average
annual total return for Franklin's AGE High Income Fund's Advisor Class shares
on 5/31/99.**
ADVISOR CLASS
- ------------------------------------------
1-Year -0.61%
5-Year +9.95%
10-Year +9.83%
Since Inception (12/31/69) +8.69%
** On January 2, 1997, the fund began selling Advisor Class shares to certain
eligible investors as described in the prospectus. This share class does not
have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
Class A performance, excluding the effect of the Class A sales charge, but
including the effect of Rule 12b-1 fees and other Class A expenses; and (b) for
periods after January 1, 1997, figures reflect actual Advisor Class performance,
including the deduction of all fees and expenses applicable only to that class.
[ADVISOR CLASS LINE GRAPH]
This graph compares the performance of Franklin's AGE High Income Fund's Advisor
Class shares, as tracked by the growth in value of a $10,000 investment, to that
of the CS First Boston High Yield Index from 6/1/89-5/31/99. Source: Standard
and Poor's Micropal.**
<TABLE>
<CAPTION>
Franklin's AGE High CS First
Income Fund - Boston High
Date Advisor Class Yield Index
<S> <C> <C> <C>
06/01/1989 $10,000 $10,000
06/30/1989 $10,177 1.44% $10,144
07/31/1989 $10,196 0.22% $10,166
08/31/1989 $10,183 -0.01% $10,165
09/30/1989 $10,038 -2.27% $ 9,935
10/31/1989 $ 9,592 -2.50% $ 9,686
11/30/1989 $ 9,512 0.20% $ 9,706
12/31/1989 $ 9,464 -0.45% $ 9,662
01/31/1990 $ 9,138 -3.52% $ 9,322
02/28/1990 $ 8,808 -1.85% $ 9,149
03/31/1990 $ 9,008 2.88% $ 9,413
04/30/1990 $ 8,979 0.42% $ 9,452
05/31/1990 $ 9,242 2.08% $ 9,649
06/30/1990 $ 9,471 3.15% $ 9,953
07/31/1990 $ 9,704 3.23% $10,274
08/31/1990 $ 9,105 -4.62% $ 9,800
09/30/1990 $ 8,459 -7.63% $ 9,052
10/31/1990 $ 7,842 -2.51% $ 8,825
11/30/1990 $ 8,009 2.01% $ 9,002
12/31/1990 $ 8,097 0.48% $ 9,045
01/31/1991 $ 8,269 2.74% $ 9,293
02/28/1991 $ 9,190 8.63% $10,095
03/31/1991 $ 9,747 6.20% $10,721
04/30/1991 $10,182 4.15% $11,166
05/31/1991 $10,252 0.50% $11,222
06/30/1991 $10,583 2.62% $11,516
07/31/1991 $10,918 3.38% $11,905
08/31/1991 $11,213 1.82% $12,122
09/30/1991 $11,420 2.27% $12,397
10/31/1991 $11,811 3.31% $12,807
11/30/1991 $11,884 0.80% $12,910
12/31/1991 $12,005 0.73% $13,004
01/31/1992 $12,408 4.07% $13,533
02/29/1992 $12,674 2.43% $13,862
03/31/1992 $12,923 1.49% $14,069
04/30/1992 $13,029 0.08% $14,080
05/31/1992 $13,233 1.36% $14,271
06/30/1992 $13,292 0.99% $14,413
07/31/1992 $13,549 1.54% $14,635
08/31/1992 $13,758 1.38% $14,837
09/30/1992 $13,918 0.65% $14,933
10/31/1992 $13,675 -1.04% $14,778
11/30/1992 $13,838 1.50% $14,999
12/31/1992 $14,003 1.13% $15,169
01/31/1993 $14,325 2.73% $15,583
02/28/1993 $14,544 1.98% $15,892
03/31/1993 $14,765 2.11% $16,227
04/30/1993 $14,882 0.57% $16,319
05/31/1993 $15,054 1.46% $16,558
06/30/1993 $15,388 1.81% $16,857
07/31/1993 $15,562 1.04% $17,033
08/31/1993 $15,628 0.85% $17,177
09/30/1993 $15,694 0.57% $17,275
10/31/1993 $16,150 1.83% $17,591
11/30/1993 $16,217 1.26% $17,813
12/31/1993 $16,472 1.26% $18,038
01/31/1994 $16,825 1.78% $18,359
02/28/1994 $16,664 0.15% $18,386
03/31/1994 $15,924 -2.94% $17,846
04/30/1994 $15,820 -1.34% $17,607
05/31/1994 $15,890 0.57% $17,707
06/30/1994 $15,902 -0.67% $17,588
07/31/1994 $15,974 0.47% $17,671
08/31/1994 $16,107 0.72% $17,798
09/30/1994 $16,180 0.40% $17,869
10/31/1994 $16,253 0.07% $17,882
11/30/1994 $16,080 -1.16% $17,674
12/31/1994 $16,218 1.06% $17,862
01/31/1995 $16,356 1.05% $18,049
02/28/1995 $17,003 2.46% $18,493
03/31/1995 $17,143 1.13% $18,702
04/30/1995 $17,607 2.22% $19,117
05/31/1995 $18,010 2.82% $19,657
06/30/1995 $18,155 0.66% $19,786
07/31/1995 $18,498 1.55% $20,093
08/31/1995 $18,579 0.28% $20,149
09/30/1995 $18,726 1.15% $20,381
10/31/1995 $18,875 1.11% $20,607
11/30/1995 $18,957 0.47% $20,704
12/31/1995 $19,245 1.27% $20,967
01/31/1996 $19,606 1.90% $21,365
02/29/1996 $19,759 0.53% $21,479
03/31/1996 $19,633 -0.27% $21,421
04/30/1996 $19,718 0.54% $21,536
05/31/1996 $19,946 0.81% $21,711
06/30/1996 $19,961 0.22% $21,759
07/31/1996 $20,121 0.90% $21,954
08/31/1996 $20,501 1.09% $22,194
09/30/1996 $20,958 1.72% $22,575
10/31/1996 $21,122 0.84% $22,765
11/30/1996 $21,587 1.56% $23,120
12/31/1996 $21,979 1.95% $23,571
01/31/1997 $22,147 0.73% $23,743
02/28/1997 $22,548 1.88% $24,189
03/31/1997 $22,026 -1.12% $23,918
04/30/1997 $22,277 0.89% $24,131
05/31/1997 $22,766 2.01% $24,616
06/30/1997 $23,179 1.36% $24,951
07/31/1997 $23,835 2.12% $25,480
08/31/1997 $23,854 0.54% $25,618
09/30/1997 $24,277 1.98% $26,125
10/31/1997 $24,214 -0.01% $26,122
11/30/1997 $24,479 0.71% $26,308
12/31/1997 $24,663 0.91% $26,547
01/31/1998 $24,932 1.70% $26,999
02/28/1998 $25,203 0.78% $27,209
03/31/1998 $25,477 0.50% $27,345
04/30/1998 $25,582 0.75% $27,550
05/31/1998 $25,601 0.30% $27,633
06/30/1998 $25,623 0.21% $27,691
07/31/1998 $25,817 0.70% $27,885
08/31/1998 $23,904 -6.79% $25,991
09/30/1998 $24,015 -0.01% $25,989
10/31/1998 $23,589 -1.99% $25,472
11/30/1998 $25,141 5.07% $26,763
12/31/1998 $25,071 -0.23% $26,701
01/31/1999 $25,457 0.94% $26,952
02/28/1999 $25,293 -0.21% $26,896
03/31/1999 $25,501 0.91% $27,141
04/30/1999 $25,991 2.21% $27,740
05/31/1999 $25,533 -2.10% -1.08% $27,439
Total Return 155.33% 174.39%
</TABLE>
** On January 2, 1997, the fund began selling Advisor Class shares to certain
eligible investors as described in the prospectus. This share class does not
have sales charges or a Rule 12b-1 plan. Performance quotations have been
calculated as follows: (a) For periods prior to January 2, 1997, figures reflect
Class A performance, excluding the effect of the Class A sales charge, but
including the effect of Rule 12b-1 fees and other Class A expenses; and (b) for
periods after January 1, 1997, figures reflect actual Advisor Class performance,
including the deduction of all fees and expenses applicable only to that class.
Past performance is not predictive of future results.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------------------
YEAR ENDED MAY 31,
-----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............ $ 2.98 $ 2.90 $ 2.79 $ 2.77 $ 2.70
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income ........................ .26 .26 .26 .25 .26
Net realized and unrealized gains (losses) ... (.29) .08 .11 .03 .07
-----------------------------------------------------------------------------------
Total from investment operations .............. (.03) .34 .37 .28 .33
-----------------------------------------------------------------------------------
Less distributions from net investment income.. (.26) (.26) (.26) (.26) (.26)
-----------------------------------------------------------------------------------
Net asset value, end of year .................. $ 2.69 $ 2.98 $ 2.90 $ 2.79 $ 2.77
===================================================================================
Total return** ................................ (.74%) 12.32% 14.09% 10.75% 13.34%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............... $ 3,108,809 $ 3,236,134 $ 2,638,914 $ 2,183,738 $ 1,908,853
Ratios to average net assets:
Expenses ..................................... .72% .70% .71% .70% .66%
Net investment income ........................ 9.40% 9.04% 9.31% 9.07% 9.71%
Portfolio turnover rate ....................... 27.55% 29.69% 20.01% 19.87% 28.56%
</TABLE>
**Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS B
--------------------
PERIOD ENDED MAY 31,
--------------------
1999(1)
--------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ....................... $ 2.76
----------
Income from investment operations:
Net investment income ..................................... .11
Net realized and unrealized loss .......................... (.08)
----------
Total from investment operations ........................... .03
----------
Less distributions from net investment income .............. (.11)
----------
Net asset value, end of period ............................. $ 2.68
==========
Total return** ............................................. 1.29%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .......................... $ 26,095
Ratios to average net assets:
Expenses .................................................. 1.24%*
Net investment income ..................................... 8.41%*
Portfolio turnover rate .................................... 27.55%
</TABLE>
*Annualized.
**Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
(1)For the period January 1, 1999 (effective date) to May 31, 1999.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------------------
YEAR ENDED MAY 31,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995(2)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ...................... $ 2.98 $ 2.90 $ 2.79 $ 2.77 $ 2.76
-----------------------------------------------------------------------
Income from investment operations:
Net investment income .................................. .25 .25 .25 .25 --
Net realized and unrealized gains (losses) ............. (.29) .08 .11 .02 .01
-----------------------------------------------------------------------
Total from investment operations ........................ (.04) .33 .36 .27 .01
-----------------------------------------------------------------------
Less distributions from net investment income ........... (.25) (.25) (.25) (.25) --
-----------------------------------------------------------------------
Net asset value, end of year ............................ $ 2.69 $ 2.98 $ 2.90 $ 2.79 $ 2.77
=======================================================================
Total return** .......................................... (.93%) 11.69% 13.41% 10.06% .36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ......................... $ 487,196 $ 394,612 $ 151,073 $ 46,064 $ 713
Ratios to average net assets:
Expenses ............................................... 1.24% 1.23% 1.25% 1.25% 1.14%*
Net investment income .................................. 8.89% 8.51% 8.75% 8.50% 6.91%*
Portfolio turnover rate ................................. 27.55% 29.69% 20.01% 19.87% 28.56%
</TABLE>
*Annualized.
**Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.
(2)For the period May 16, 1995 (effective date) to May 31, 1995.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
ADVISOR CLASS
--------------------------------------------
YEAR ENDED MAY 31,
--------------------------------------------
1999 1998 1997(3)
--------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ............................................. $ 2.98 $ 2.90 $ 2.90
--------------------------------------------
Income from investment operations:
Net investment income ......................................................... .27 .27 .12
Net realized and unrealized gains (losses) .................................... (.29) .08 (.01)
--------------------------------------------
Total from investment operations ............................................... (.02) .35 .11
--------------------------------------------
Less distributions from net investment income .................................. (.27) (.27) (.11)
--------------------------------------------
Net asset value, end of year ................................................... $ 2.69 $ 2.98 $ 2.90
============================================
Total return** ................................................................. (.61%) 12.46% 3.94%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ................................................ $ 39,354 $ 28,026 $ 6,224
Ratios to average net assets:
Expenses ...................................................................... .59% .58% .61%*
Net investment income ......................................................... 9.52% 9.17% 9.25%*
Portfolio turnover rate ........................................................ 27.55% 29.69% 20.01%
</TABLE>
*Annualized.
**Total return is not annualized for periods less than one year.
(3)For the period January 2, 1997 (effective date) to May 31, 1997.
See notes to financial statements.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 1999
<TABLE>
<CAPTION>
SHARES/RIGHTS/
WARRANTS VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, WARRANTS AND RIGHTS 1.1%
(a) Advantica Restaurant Group ...................................................... 612,439 $ 2,832,530
(a) Darling International Inc. ...................................................... 504,447 945,838
(a) Foodmaker Inc. .................................................................. 24,090 650,430
(a) Gaylord Container Corp., wts., 11/01/02 ......................................... 232,762 1,862,096
(a) Gulf States Steel, wts., 4/15/03 ................................................ 27,800 278
(a,d) Harvard Industries Inc. ......................................................... 793,966 6,153,237
(a) International Wireless Communications Holdings Inc., wts., 8/15/01 .............. 36,400 182
(a) Loral Orion Network System, wts., 1/15/07 ....................................... 35,300 278,319
(a) McMoRan Exploration Co. ......................................................... 25,937 468,487
(a) Nextel Communications Inc. ...................................................... 64,337 2,372,427
(a) Nextel International Inc., wts., 4/15/07 ........................................ 28,500 71,250
(a) Occidente Y Caribe Celular, 144A, wts., 3/15/04 (Colombia) ...................... 152,660 2,595,220
(a) Penn Traffic Co. ................................................................ 39,757 9,144
Phosphate Resources Partner LP .................................................. 415,000 4,824,375
(a) Poland Telecom Finance, wts., 144A, 12/01/07 (Poland) ........................... 30,000 105,000
RJR Nabisco Holdings Corp. ...................................................... 510,000 15,778,125
(a) Specialty Foods Corp., 144A ..................................................... 97,500 683
(a) United Mexican States, rts., 6/30/03 (Mexico) ................................... 3,000 --
(a) Walter Industries Inc., A ....................................................... 189,505 2,487,253
-------------
TOTAL COMMON STOCKS, WARRANTS AND RIGHTS (COST $75,635,833) 41,434,874
-------------
PREFERRED STOCKS 3.2%
Asia Pulp & Paper Co. Ltd., 12.00%, pfd. (Indonesia) ............................ 24,700 14,820,000
(a) CMS Energy Trust I, 7.75%, cvt. pfd. ............................................ 530,000 31,203,750
(a) CSC Holdings Inc., 11.125%, pfd., M, PIK ........................................ 252,313 29,268,308
Fresenius Medical Care AG, 9.00%, pfd. .......................................... 13,100 13,296,500
(a) R & B Falcon Corp., 13.875%, pfd., 144A, PIK .................................... 11,750 12,102,500
Sinclair Capital, 11.625%, pfd. ................................................. 147,000 15,986,250
-------------
TOTAL PREFERRED STOCKS (COST $108,649,935) ...................................... 116,677,308
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT*
-----------
<S> <C> <C>
BONDS 93.1%
COMMERCIAL SERVICES 5.1%
American Commercial Lines LLC, senior note, 10.25%, 6/30/08 ....................... $22,700,000 23,210,750
AmeriServe Food Distribution Inc., senior note, 8.875%, 10/15/06 .................. 11,350,000 10,612,250
AmeriServe Food Distribution Inc., senior sub. note, 10.125%, 7/15/07 ............. 21,500,000 19,027,500
Big Flower Press Holdings Inc., senior sub. note, 8.875%, 7/01/07 ................. 12,100,000 11,918,500
Big Flower Press Holdings Inc., senior sub. note, 144A, 8.625%, 12/01/08 .......... 17,300,000 16,521,500
Fleming Cos. Inc., senior sub. note, B, 10.50%, 12/01/04 .......................... 15,000,000 14,325,000
Fleming Cos. Inc., senior sub. note, B, 10.625%, 7/31/07 .......................... 14,000,000 13,300,000
Intertek Finance PLC, senior sub. note, B, 10.25%, 11/01/06 (United Kingdom) ...... 9,400,000 9,447,000
Lamar Advertising Co., senior sub. note, 9.625%, 12/01/06 ......................... 20,000,000 21,200,000
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
COMMERCIAL SERVICES (CONT.)
Outdoor Systems Inc., senior sub. note, 8.875%, 6/15/07 ................................................ $34,750,000 $ 36,487,500
Tembec Finance Corp., senior note, 9.875%, 9/30/05 (Canada) ............................................ 11,000,000 11,440,000
------------
187,490,000
------------
CONSUMER DURABLES 1.8%
Dura Operating Corp., senior sub. note, 144A, 9.00%, 5/01/09 ........................................... 11,000,000 11,027,500
Revlon Consumer Products Corp., senior sub. note, 8.625%, 2/01/08 ...................................... 42,000,000 39,900,000
Sealy Mattress Co., senior disc. note, B, zero cpn. to 12/15/02, 10.875% thereafter, 12/15/07 .......... 10,200,000 6,681,000
Sealy Mattress Co., senior sub. note, B, 9.875%, 12/15/07 .............................................. 6,800,000 6,664,000
------------
64,272,500
------------
CONSUMER NON-DURABLES 2.5%
Agrilink Foods Inc., senior sub. note, 144A, 11.875%, 11/01/08 ......................................... 17,000,000 17,892,500
Delta Beverage Group, senior note, 9.75%, 12/15/03 ..................................................... 2,800,000 2,880,500
Hartmarx Corp., senior sub. note, 10.875%, 1/15/02 ..................................................... 15,000,000 15,337,500
International Home Foods, senior sub. note, 10.375%, 11/01/06 .......................................... 11,200,000 11,984,000
Specialty Foods Corp., senior note, B, 10.25%, 8/15/01 ................................................. 19,000,000 18,572,500
Specialty Retailers Inc., senior sub. note, B, 9.00%, 7/15/07 .......................................... 5,000,000 2,875,000
Styling Technology Corp., senior sub. note, 10.875%, 7/01/08 ........................................... 22,000,000 21,230,000
------------
90,772,000
------------
CONSUMER SERVICES 17.6%
Advantica Restaurant Group, senior note, 11.25%, 1/15/08 ............................................... 13,896,030 13,687,590
AMF Bowling Worldwide Inc., senior disc. note, B, zero cpn. to 3/15/01, 12.25% thereafter, 3/15/06 ..... 9,951,000 6,418,395
Ascent Entertainment Group Inc., senior disc. note, zero cpn. to 12/15/02, 11.875% thereafter, 12/15/04 19,500,000 14,113,125
Aztar Corp., senior sub. note, 144A, 8.875%, 5/15/07 ................................................... 30,500,000 29,585,000
Benedek Communications Corp., senior disc. note, zero cpn. to 5/15/01, 13.25% thereafter, 5/15/06 ...... 24,500,000 20,580,000
Chancellor Media Corp., senior note, 144A, 8.00%, 11/01/08 ............................................. 23,500,000 23,441,250
Chancellor Media Corp., senior sub. note, 9.00%, 10/01/08 .............................................. 8,400,000 8,736,000
Chancellor Media Corp., senior sub. note, B, 8.75%, 6/15/07 ............................................ 15,000,000 15,187,500
Charter Communications Holdings LLC, senior note, 144A, zero cpn. to 4/01/04, 9.92%
thereafter, 4/01/11 ................................................................................. 39,000,000 24,180,000
CKE Restaurants Inc., senior sub. note, 144A, 9.125%, 5/01/09 .......................................... 19,500,000 18,817,500
CSC Holdings Inc., senior sub. deb., 10.50%, 5/15/16 ................................................... 20,000,000 23,250,000
CSC Holdings Inc., senior sub. deb., 9.875%, 4/01/23 ................................................... 5,000,000 5,537,500
Diamond Cable Communication Co. PLC, senior disc. note, zero cpn. to 12/15/00, 11.75% thereafter,
12/15/05 (United Kingdom) ........................................................................... 18,850,000 16,894,313
Diamond Cable Communication Co., senior disc. note, zero cpn. to 2/15/02, 10.75% thereafter,
2/15/07 (United Kingdom) ............................................................................ 7,850,000 6,123,000
Diamond Holdings PLC, senior note, 9.125%, 2/01/08 (United Kingdom) .................................... 10,600,000 11,063,750
Falcon Building Products Inc., senior sub. disc. note, B, zero cpn. to 6/15/02, 10.50%
thereafter, 6/15/07 ................................................................................. 7,250,000 4,748,750
Family Restaurant Inc., senior note, 9.75%, 2/01/02 .................................................... 10,850,000 5,506,375
Fox Family Worldwide Inc., senior disc. note, zero cpn. to 11/01/02, 10.25% thereafter, 11/01/07 ....... 6,450,000 4,224,750
Fox Family Worldwide Inc., senior note, 9.25%, 11/01/07 ................................................ 3,300,000 3,151,500
Fox/Liberty Networks LLC, senior disc. note, zero cpn. to 8/15/02, 9.75% thereafter, 8/15/07 ........... 22,650,000 18,233,250
Fox/Liberty Networks LLC, senior note, 8.875%, 8/15/07 ................................................. 15,000,000 15,975,000
Granite Broadcasting Corp., senior sub. note, A, 10.375%, 5/15/05 ...................................... 7,100,000 7,286,375
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
CONSUMER SERVICES (CONT.)
Hammons (John Q) Hotels, first mortgage, 8.875%, 2/15/04 ................................................ $20,000,000 $ 18,700,000
Hammons (John Q) Hotels, first mortgage, 9.75%, 10/01/05 ................................................ 4,500,000 4,308,750
Harrah's Operating Co. Inc., senior sub. note, 7.875%, 12/15/05 ......................................... 25,250,000 24,492,500
Hollinger International Inc., senior sub. note, 9.25%, 2/01/06 .......................................... 6,400,000 6,656,000
Hollinger International Publishing, senior sub. note, 9.25%, 3/15/07 .................................... 12,800,000 13,360,000
Horseshoe Gaming Holding Corp., senior sub. note, 144A, 8.625%, 5/15/09 ................................. 30,200,000 29,294,000
Jacor Communications Co., senior sub. note, 9.75%, 12/15/06 ............................................. 6,400,000 7,088,000
LIN Holdings Corp., senior disc. note, zero cpn. to 3/01/03, 10.00% thereafter, 3/01/08 ................. 17,300,000 11,331,500
LIN Television Corp., senior sub. note, 8.375%, 3/01/08 ................................................. 19,000,000 18,240,000
Players International Inc., senior note, 10.875%, 4/15/05 ............................................... 4,750,000 5,035,000
Premier Parks Inc., senior disc. note, zero cpn. to 4/01/03, 10.00% thereafter, 4/01/08 ................. 8,000,000 5,470,000
Premier Parks Inc., senior note, 9.25%, 4/01/06 ......................................................... 8,000,000 8,080,000
Prime Hospitality Corp., senior sub. note, B, 9.75%, 4/01/07 ............................................ 23,200,000 24,070,000
Protection One Alarm Monitoring Inc., senior sub. note, 144A, 8.125%, 1/15/09 ........................... 37,000,000 35,150,000
Red Roof Inns Inc., senior note, 9.625%, 12/15/03 ....................................................... 10,000,000 10,100,000
Regal Cinemas Inc., senior sub. note, 9.50%, 6/01/08 .................................................... 39,500,000 37,623,750
Rogers Cablesystems, senior secured deb., 10.125%, 9/01/12 (Canada) ..................................... 5,000,000 5,450,000
SFX Broadcasting Inc., senior sub. note, B, 10.75%, 5/15/06 ............................................. 22,478,000 23,939,070
Sinclair Broadcast Group Inc., senior sub. note, 10.00%, 9/30/05 ........................................ 14,400,000 15,228,000
Telewest Communications PLC, senior disc. deb., zero cpn. to 10/01/00, 11.00% thereafter,
10/01/07 (United Kingdom) .......................................................................... 24,500,000 21,805,000
Telewest Communications PLC, senior disc. note, 144A, zero cpn. to 4/15/04, 9.25% thereafter, 4/15/09 ... 14,750,000 9,661,250
Telewest Communications PLC, senior note, 144A, 11.25%, 11/01/08 (United Kingdom) ....................... 4,000,000 4,530,000
Turner Broadcasting System Inc., senior deb., 8.40%, 2/01/24 ............................................ 9,500,000 9,832,757
------------
646,186,500
------------
ELECTRONIC TECHNOLOGY 5.1%
Amkor Technology Inc., senior note, 144A, 9.25%, 5/01/06 ................................................ 50,000,000 49,000,000
Amphenol Corp., senior sub. note, 9.875%, 5/15/07 ....................................................... 5,000,000 5,200,000
Bresnan Communications Group LLC, senior disc. note, 144A, zero cpn. to 11/01/00, 15.00%
thereafter, 8/15/07 ................................................................................ 10,000,000 6,650,000
Bresnan Communications Group LLC, senior note, 144A, 8.00%, 2/01/09 ..................................... 4,400,000 4,378,000
Celestica International Inc., senior sub. note, 10.50%, 12/31/06 (Canada) ............................... 4,880,000 5,343,600
EZ Communication, senior sub. note, 9.75%, 12/01/05 ..................................................... 17,500,000 18,987,500
Focal Communications Corp., senior disc. note, B, zero cpn. to 2/15/03, 12.125% thereafter, 2/15/08 ..... 29,000,000 16,675,000
Hadco Corp., senior sub. note, 9.50%, 6/15/08 ........................................................... 25,000,000 24,375,000
Iron Mountain Inc., senior sub. note, 8.75%, 9/30/09 .................................................... 16,650,000 16,774,875
Iron Mountain Inc., senior sub. note, 144A, 8.25%, 7/01/11 .............................................. 7,500,000 7,406,250
L-3 Communications Corp., senior sub. note, 10.375%, 5/01/07 ............................................ 5,400,000 5,751,000
Telecommun Techniques Co., senior sub. note, 9.75%, 5/15/08 ............................................. 24,000,000 24,780,000
------------
185,321,225
------------
ENERGY MINERALS 4.6%
Abraxas Petroleum Corp., senior note, D, 11.50%, 11/01/04 ............................................... 37,100,000 21,703,500
AEI Resources Inc., senior sub. note, 144A, 11.50%, 12/15/06 ............................................ 20,000,000 19,700,000
Bellwether Exploration Co., senior sub. note, 10.875%, 4/01/07 .......................................... 5,000,000 4,675,000
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
ENERGY MINERALS (CONT.)
Chesapeake Energy Corp., senior note, B, 9.625%, 5/01/05 ....................................... $ 7,000,000 $ 6,230,000
Clark R&M Inc., senior sub. note, 8.875%, 11/15/07 ............................................. 9,000,000 7,976,250
Clark USA Inc., senior note, 10.875%, 12/01/05 ................................................. 22,000,000 18,975,000
Conproca SA, S.F., senior secured note, 144A, 12.00%, 6/16/10 (Mexico) ......................... 33,300,000 31,551,750
Nuevo Energy Co., senior sub. note, 9.50%, 4/15/06 ............................................. 8,600,000 8,524,750
Nuevo Energy Co., senior sub. note, B, 8.875%, 6/01/08 ......................................... 9,300,000 9,160,500
P&L Coal Holdings Corp., senior note, B, 8.875%, 5/15/08 ....................................... 7,000,000 7,070,000
P&L Coal Holdings Corp., senior sub. note, B, 9.625%, 5/15/08 .................................. 33,000,000 33,495,000
------------
169,061,750
------------
FINANCE 1.1%
Arch Escrow Corp., senior note, 144A, 13.75%, 4/15/08 .......................................... 14,500,000 12,397,500
Willis Corron Corp., senior sub. note, 144A, 9.00%, 2/01/09 .................................... 30,000,000 28,950,000
------------
41,347,500
------------
GOVERNMENT BONDS .4%
ESCOM, E168, 11.00%, 6/01/08 (South Africa) .................................................... 108,800,000 ZAR 13,474,629
------------
HEALTH SERVICES 3.2%
Abbey Healthcare Group Inc., senior sub. note, 9.50%, 11/01/02 ................................. 14,830,000 14,959,763
Everest Healthcare Services Corp., senior sub. note, 9.75%, 5/01/08 ............................ 18,000,000 17,730,000
Fresenius Medical Care Capital Trust, 7.875%, 2/01/08 .......................................... 24,000,000 22,920,000
Magellan Health Services Inc., senior sub. note, 9.00%, 2/15/08 ................................ 20,000,000 16,900,000
Pharmerica Inc., senior sub. note, 8.375%, 4/01/08 ............................................. 8,400,000 8,841,000
(c) Sun Healthcare Group Inc., senior sub. note, 144A, 9.375%, 5/01/08 ............................. 30,000,000 6,150,000
Tenet Healthcare Corp., senior note, 8.625%, 12/01/03 .......................................... 4,000,000 4,070,000
Tenet Healthcare Corp., senior sub. note, 8.625%, 1/15/07 ...................................... 17,800,000 17,933,500
(c) Vencor Operating Inc., senior sub. note, 9.875%, 5/01/05 ....................................... 29,000,000 6,380,000
------------
115,884,263
------------
HEALTH TECHNOLOGY .4%
Conmed Corp., senior sub. note, 9.00%, 3/15/08 ................................................. 15,000,000 15,056,250
------------
INDUSTRIAL SERVICES 4.6%
Allied Waste North America Inc., senior note, B, 7.875%, 1/01/09 ............................... 34,000,000 32,130,000
(c) Dailey International Inc., senior note, B, 9.50%, 2/15/08 ...................................... 10,800,000 6,534,000
Envirosource Inc., senior note, 9.75%, 6/15/03 ................................................. 17,000,000 10,795,000
Envirosource Inc., senior note, B, 9.75%, 6/15/03 .............................................. 9,000,000 5,715,000
Great Lakes Dredge & Dock Corp., senior sub. note, 11.25%, 8/15/08 ............................. 4,750,000 4,963,750
Key Energy Services Inc., senior sub. note, 144A, 14.00%, 1/15/09 .............................. 30,000,000 30,750,000
Mesa Operating Co., zero cpn. to 7/01/01, 11.625% thereafter, 7/01/06 .......................... 4,300,000 3,300,250
Pride Petroleum Services Inc., senior note, 9.375%, 5/01/07 .................................... 6,600,000 6,583,500
R & B Falcon Corp., senior note, 144A, 12.25%, 3/15/06 ......................................... 10,850,000 10,958,500
R & B Falcon Corp., senior sub. note, 144A, 9.50%, 12/15/08 .................................... 7,400,000 6,660,000
RBF Finance Co., senior secured note, 144A, 11.375%, 3/15/09 ................................... 8,750,000 8,837,500
Safety Kleen Services, senior sub. note, 9.25%, 6/01/08 ........................................ 20,000,000 20,950,000
Universal Compression Inc., senior disc. note, zero cpn. to 2/15/03, 9.875% thereafter, 2/15/08. 31,800,000 20,352,000
------------
168,529,500
------------
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
NON-ENERGY MINERALS 1.6%
Armco Inc., senior note, 9.00%, 9/15/07 ........................................................... $ 5,200,000 $ 5,460,000
Doman Industries Ltd., senior note, B, 9.25%, 11/15/07 (Canada) ................................... 6,800,000 4,522,000
LTV Corp., senior note, 8.20%, 9/15/07 ............................................................ 34,500,000 32,775,000
Sheffield Steel Corp., first mortgage, B, 11.50%, 12/01/05 ........................................ 16,000,000 15,000,000
------------
57,757,000
------------
PROCESS INDUSTRIES 8.6%
Anchor Glass Container, senior note, 9.875%, 3/15/08 .............................................. 17,300,000 16,002,500
Anchor Glass, first mortgage, 11.25%, 4/01/05 ..................................................... 23,700,000 24,529,500
Ball Corp., senior note, 7.75%, 8/01/06 ........................................................... 9,250,000 9,296,250
Ball Corp., senior sub. note, 8.25%, 8/01/08 ...................................................... 5,500,000 5,555,000
Bear Island Paper Company LLC, senior note, B, 10.00%, 12/01/07 ................................... 11,700,000 11,524,500
Climachen Inc., senior sub. note, B, 10.75%, 12/01/07 ............................................. 7,500,000 7,312,500
Container Corp. of America, senior note, A, 9.75%, 4/01/03 ........................................ 12,000,000 12,540,000
Equistar Chemicals, senior note, 144A, 8.75%, 2/15/09 ............................................. 20,000,000 20,350,000
Four M Corp., senior note, B, 12.00%, 6/01/06 ..................................................... 23,700,000 17,182,500
Graham Packaging Co., senior disc. note, B, zero cpn., to 1/15/03, 10.75% thereafter, 1/15/09 ..... 5,600,000 3,892,000
Graham Packaging Co., senior sub. note, B, 8.75%, 1/15/08 ......................................... 6,600,000 6,501,000
Huntsman Corp., senior sub. note, 144A, 9.50%, 7/01/07 ............................................ 4,000,000 3,840,000
Huntsman Corp., senior sub. note, 144A, 9.50%, 7/01/07 ............................................ 27,500,000 26,812,500
Lyondell Chemical Co., secured, 144A, 9.625%, 5/01/07 ............................................. 2,400,000 2,436,000
Lyondell Chemical Co., secured, 144A, 9.875%, 5/01/07 ............................................. 11,600,000 11,629,000
Lyondell Chemical Co., senior sub. note, 144A, 10.875%, 5/01/09 ................................... 2,400,000 2,436,000
Packaging Corp. of America, senior sub. note, 144A, 9.625%, 4/01/09 ............................... 7,750,000 7,885,625
Pindo Deli Finance Mauritius, senior note, 11.75%, 10/01/17 (Indonesia) ........................... 30,900,000 18,462,750
(c) Polysindo International Finance Co. BV, secured note, 9.375%, 7/30/07 (Indonesia) ................. 27,750,000 6,937,500
Purina Mills Inc., senior sub. note, 9.00%, 3/15/10 ............................................... 40,000,000 31,800,000
Radnor Holdings Inc., senior note, 10.00%, 12/01/03 ............................................... 6,250,000 6,343,750
Repap New Brunswick, senior note, 9.00%, 6/01/04 (Canada) ......................................... 13,600,000 12,852,000
Terra Industries Inc., senior note, B, 10.50%, 6/15/05 ............................................ 15,000,000 15,150,000
Tjiwi Kimia Finance Mauritius, senior note, 10.00%, 8/01/04 (Indonesia) ........................... 11,000,000 7,040,000
Westpoint Stevens Inc., senior note, 7.875%, 6/15/08 .............................................. 27,500,000 27,362,500
------------
315,673,375
------------
PRODUCER MANUFACTURING 7.0%
Advanced Accessory Systems, senior sub. note, B, 9.75%, 10/01/07 .................................. 8,000,000 7,440,000
Airxcel Inc., senior sub. note, B, 11.00%, 11/15/07 ............................................... 13,500,000 13,145,625
American Axle & Manufacturing, senior sub. note, 144A, 9.75%, 3/01/09 ............................. 26,800,000 27,135,000
Cambridge Industries Inc., senior sub. note, B, 10.25%, 7/15/07 ................................... 5,800,000 4,843,000
Collins & Aikman Corp., senior sub. note, 11.50%, 4/15/06 ......................................... 9,500,000 9,737,500
Falcon Building Products Inc., senior sub. note, B, 9.50%, 6/15/07 ................................ 25,300,000 24,161,500
Goss Graphic Systems Inc., senior sub. note, 12.00%, 10/15/06 ..................................... 15,150,000 5,226,750
International Comfort Products Inc., senior note, B, 8.625%, 5/15/08 .............................. 34,500,000 34,672,500
Keystone Consolidated Industries Inc., senior note, 9.625%, 8/01/07 ............................... 7,000,000 6,825,000
Neenah Corp., senior sub. note, 144A, 11.125%, 5/01/07 ............................................ 6,100,000 6,084,750
Neenah Corp., senior sub. note, B, 11.125%, 5/01/07 ............................................... 6,100,000 6,069,500
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
PRODUCER MANUFACTURING (CONT.)
Nortek Inc., senior note, 144A, 8.875%, 8/01/08 ..................................................... $ 8,000,000 $ 8,060,000
Nortek Inc., senior note, B, 9.125%, 9/01/07 ........................................................ 19,200,000 19,488,000
Oshkosh Truck Corp., senior sub. note, 8.75%, 3/01/08 ............................................... 13,200,000 13,332,000
Talon Automotive Group Inc., senior sub. note, B, 9.625%, 5/01/08 ................................... 20,850,000 18,348,000
Terex Corp., senior sub. note, 8.875%, 4/01/08 ...................................................... 24,750,000 24,007,500
Terex Corp., senior sub. note, 144A, 8.875%, 4/01/08 ................................................ 9,500,000 9,215,000
Thermadyne Industries Inc., sub. note, 10.75%, 11/01/03 ............................................. 19,781,000 19,879,905
------------
257,671,530
------------
REAL ESTATE 1.3%
HMH Properties Inc., senior secured note, B, 7.875%, 8/01/08 ........................................ 50,000,000 46,500,000
------------
RETAIL TRADE 1.2%
(c) Bruno's Inc., senior sub. note, 10.50%, 8/01/05 ..................................................... 12,500,000 1,500,000
Pathmark Stores Inc., senior sub. note, 9.625%, 5/01/03 ............................................. 9,000,000 9,225,000
(c) Penn Traffic Co., senior note, 8.625%, 12/15/03 ..................................................... 5,000,000 2,275,000
(c) Penn Traffic Co., senior note, 10.375%, 10/01/04 .................................................... 10,000,000 4,550,000
Pueblo Xtra International, senior note, 9.50%, 8/01/03 .............................................. 9,500,000 9,381,250
Pueblo Xtra International, senior note, C, 9.50%, 8/01/03 ........................................... 5,000,000 4,937,500
Shoppers Food Warehouse Corp., senior note, 9.75%, 6/15/04 .......................................... 7,375,000 7,568,594
Specialty Retailers Inc., senior note, B, 8.50%, 7/15/05 ............................................ 7,250,000 4,966,250
------------
44,403,594
------------
TECHNOLOGY SERVICES .8%
Anacomp Inc., senior sub. note, D, 10.875%, 4/01/04 ................................................. 28,200,000 29,715,750
------------
TELECOMMUNICATIONS 21.5%
Allegiance Telecom Inc., senior disc. note, B, zero cpn. to 2/15/03, 11.75%, thereafter, 2/15/08 .... 22,000,000 13,310,000
Allegiance Telecom Inc., senior note, 12.875%, 5/15/08 .............................................. 20,500,000 21,935,000
Arch Communications Group, senior disc. note, zero cpn. to 3/15/01, 10.875% thereafter, 3/15/08 ..... 33,450,000 13,547,250
Call-Net Enterprises Inc., senior disc. note, zero cpn. to 5/15/04, 10.80% thereafter, 5/15/09 ...... 29,500,000 16,225,000
Clearnet Communications Inc., senior disc. note, zero cpn. to 5/01/04, 10.125% thereafter, 5/01/09 .. 48,250,000 25,813,750
Comcast Cellular Corp., senior note, B, 9.50%, 5/01/07 .............................................. 25,600,000 28,672,000
Dobson/Sygnet Communications Co., senior note, 144A, 12.25%, 12/15/08 ............................... 34,250,000 36,647,500
Global Crossing Holdings Ltd., senior note, 9.625%, 5/15/08 (Bermuda) ............................... 28,000,000 31,150,000
ICO Global Communications, 15.00%, 8/01/05 (Bermuda) ................................................ 35,000,000 17,850,000
IntelCom Group Inc., senior secured disc. note, zero cpn. to 5/01/01, 12.50% thereafter, 5/01/06 .... 32,500,000 26,812,500
Intermedia Communications Inc., senior disc. note, B, zero cpn. to 7/15/02,
11.25% thereafter, 7/15/07 ........................................................................ 37,500,000 27,187,500
Intermedia Communications Inc., senior note, 144A, 9.50%, 3/01/09 ................................... 10,000,000 9,925,000
(c) International Wireless Communications, senior disc. note, 8/15/01 ................................... 36,400,000 2,912,000
Iridium LLC/CAP, senior note, D, 10.875%, 7/15/05 ................................................... 17,000,000 4,080,000
IXC Communications Inc., senior sub. note, 9.00%, 4/15/08 ........................................... 15,900,000 15,423,000
Level 3 Communications Inc., senior disc. note, 144A, zero cpn. to 12/01/03,
10.50% thereafter, 12/01/08 ....................................................................... 63,000,000 37,485,000
Loral Space and Communications Ltd., senior disc. note, zero cpn. to 1/15/02,
12.50% thereafter, 1/15/07 ........................................................................ 35,300,000 18,532,500
McCaw International Ltd., senior disc. note, zero cpn. to 4/15/02, 13.00% thereafter, 4/15/07 ....... 28,500,000 18,193,260
McLeodUSA Inc., senior disc. note, zero cpn. to 3/01/02, 10.50% thereafter, 3/01/07 ................. 10,000,000 7,650,000
McLeodUSA Inc., senior note, 9.50%, 11/01/08 ........................................................ 16,000,000 16,160,000
Metrocall Inc., senior sub. note, 144A, 11.00%, 9/15/08 ............................................. 10,000,000 8,050,000
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
TELECOMMUNICATIONS (CONT.)
Metrocall Inc., senior sub. note, 9.75%, 11/01/07 .................................................... $ 31,000,000 $ 23,715,000
Microcell Telecommunications, senior disc. note, B, zero cpn. to 12/01/01, 14.00% thereafter,
6/01/06 (Canada) ................................................................................ 17,550,000 14,127,750
Millicom International Cellular SA, senior disc. note, zero cpn. to 6/01/01, 13.50% thereafter,
6/01/06 (Luxembourg) ............................................................................ 22,300,000 16,613,500
Netia Holdings BV, senior disc. note, B, zero cpn. to 11/01/01, 11.25% thereafter, 11/01/07 (Poland) . 15,000,000 9,825,000
Netia Holdings BV, senior note, B, 10.25%, 11/01/07 (Poland) ......................................... 9,000,000 8,257,500
Nextel Communications Inc., senior disc. note, zero cpn. to 10/31/02, 9.75% thereafter, 10/31/07 ..... 35,500,000 24,140,000
Nextel International Inc., senior disc. note, zero cpn. to 4/15/03, 12.125% thereafter, 4/15/08 ...... 20,000,000 10,600,000
Nextel Partners Inc., 144A, zero cpn. to 2/01/04, 14.00% thereafter, 2/01/09 ......................... 24,000,000 12,900,000
NEXTLINK Communications Inc., senior disc. note, zero cpn. to 4/15/03, 9.45% thereafter, 4/15/08 ..... 20,250,000 11,947,500
NEXTLINK Communications Inc., senior note, 9.00%, 3/15/08 ............................................ 18,150,000 16,788,750
NEXTLINK Communications Inc., senior note, 9.625%, 10/01/07 .......................................... 17,350,000 16,656,000
NTL Inc., senior note, zero cpn. to 4/01/03, 9.75% thereafter, 4/01/08 ............................... 50,000,000 33,000,000
Occidente Y Caribe Celular SA, senior disc. note, B, zero cpn. to 3/15/01, 14.00% thereafter,
3/15/04 (Colombia) .............................................................................. 38,165,000 26,143,025
Paging Network Inc., senior sub. note, 10.00%, 10/15/08 .............................................. 12,800,000 8,320,000
Paging Network Inc., senior sub. note, 10.125%, 8/01/07 .............................................. 7,000,000 4,620,000
Poland Telecom Finance, senior note, B, 14.00%, 12/01/07 (Poland) .................................... 30,000,000 27,375,000
Rogers Cantel Mobile, senior secured deb., 9.75%, 6/01/16 (Canada) ................................... 34,000,000 38,250,000
RSL Communications PLC, senior disc. note, zero cpn. to 3/01/03, 10.125% thereafter, 3/01/08
(United Kingdom) ................................................................................ 44,500,000 26,255,000
RSL Communications PLC, senior note, 12.00%, 11/01/08 (United Kingdom) ............................... 6,250,000 6,593,750
Spectrasite Holdings Inc., senior disc. note, 144A, zero cpn. to 4/15/04, 11.25% thereafter, 4/15/09 . 20,500,000 11,787,500
Sprint Spectrum LP, senior disc. note, zero cpn. to 8/15/01, 12.50% thereafter, 8/15/06 .............. 14,500,000 13,267,500
Triton PCS Inc., sub. disc. note, zero cpn. to 5/01/03, 11.00% thereafter, 5/01/08 ................... 48,250,000 29,130,935
--------------
787,874,970
--------------
TRANSPORTATION 3.1%
Gearbulk Holding Ltd., senior note, 11.25%, 12/01/04 (Bermuda) ....................................... 19,000,000 19,332,500
GS Superhighway (Holdings) Ltd., senior note, 10.25%, 8/15/07 (China) ................................ 35,000,000 17,762,500
Sea Containers Ltd., senior note, 10.50%, 7/01/03 .................................................... 25,000,000 26,656,250
Ultrapetrol Ltd., first mortgage, 10.50%, 4/01/08 (Bahamas) .......................................... 34,000,000 28,050,000
United Air Lines Inc., S.F., pass-through equipment trust, B-2, 9.06%, 9/26/14 ....................... 20,422,000 22,206,474
--------------
114,007,724
--------------
UTILITIES 1.6%
AES China Generating Co., 10.125%, 12/15/06 (China) .................................................. 4,400,000 2,662,000
AES Corp., senior sub. note, 8.50%, 11/01/07 ......................................................... 7,500,000 7,350,000
El Paso Electric Co., first mortgage, 9.40%, 5/01/11 ................................................. 12,900,000 14,608,992
ESI Tractebel Acq. Corp., 7.99%, 12/30/11 ............................................................ 8,000,000 7,725,368
Midland Cogeneration Venture, S.F., senior lease obligation, A, 11.75%, 7/23/05 ...................... 4,500,000 5,054,994
Midland Cogeneration Venture, S.F., senior lease obligation, B, 13.25%, 7/23/06 ...................... 11,500,000 13,987,094
Niagara Mohawk Power Corp., senior disc. note, H, zero cpn. to 7/01/03, 8.50% thereafter, 7/01/10 .... 10,850,000 8,164,625
--------------
59,553,073
--------------
TOTAL BONDS (COST $3,730,737,901) .................................................................... 3,410,553,133
--------------
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 1999 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(b) REPURCHASE AGREEMENT .4%
Joint Repurchase Agreement, 4.799%, 6/01/99, (Maturity Value $13,671,051) (Cost $13,663,765) $13,663,765 $ 13,663,765
Barclays Capital Inc.
Bear, Stearns Securities Corp.
CIBC Oppenheimer Corp.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Lehman Brothers Inc.
NationsBanc Montgomery Securities LLC
Paine Webber Inc.
Paribas Corp.
UBS Securities LLC
Collateralized by U.S. Treasury Bills & Notes
--------------
TOTAL INVESTMENTS (COST $3,928,687,434) 97.8% 3,582,329,080
OTHER ASSETS, LESS LIABILITIES 2.2% 79,125,226
--------------
NET ASSETS 100.0% $3,661,454,306
==============
</TABLE>
CURRENCY ABBREVIATIONS
ZAR - South African Rand
*Securities traded in U.S. dollars unless otherwise indicated.
(a)Non-income producing.
(b)Investment is through participation in a joint account with other funds
managed by the investment advisor. At May 28, 1999, all repurchase agreements
held by the Fund had been entered into on that date.
(c)See Note 6 regarding defaulted securities.
(d)The Investment Company Act of 1940 defines affiliated companies as
investments in portfolio companies in which the Fund owns 5% or more of the
outstanding voting securities. Investments in affiliated companies at May 31,
1999 were $6,153,237.
See notes to financial statements.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Assets:
Investments in securities, at value (Cost $3,928,687,434) .................................................... $ 3,582,329,080
Receivables:
Investment securities sold .................................................................................. 8,000,413
Capital shares sold ......................................................................................... 7,601,706
Dividends and interest ...................................................................................... 78,612,912
---------------
Total assets .............................................................................................. 3,676,544,111
---------------
Liabilities:
Payables:
Investment securities purchased .............................................................................. 91,152
Capital shares redeemed ...................................................................................... 6,887,168
Affiliates ................................................................................................... 2,861,753
Shareholders ................................................................................................. 5,068,462
Distributions to shareholders ................................................................................. 4,828
Other liabilities ............................................................................................. 176,442
---------------
Total liabilities .......................................................................................... 15,089,805
---------------
Net assets, at value .................................................................................... $ 3,661,454,306
===============
Net assets consist of:
Undistributed net investment income ........................................................................... $ 17,094,418
Net unrealized depreciation ................................................................................... (346,383,243)
Accumulated net realized loss ................................................................................. (94,907,479)
Capital shares ................................................................................................ 4,085,650,610
---------------
Net assets, at value .................................................................................... $ 3,661,454,306
===============
CLASS A:
Net asset value per share ($3,108,809,441 / 1,156,447,120 shares outstanding)* ................................. $ 2.69
===============
Maximum offering price per share ($2.69 / 95.75%) ............................................................. $ 2.81
===============
CLASS B:
Net asset value and maximum offering price per share ($26,094,872 / 9,721,818 shares outstanding).............. $ 2.68
===============
CLASS C:
Net asset value per share ($487,196,330 / 180,793,256 shares outstanding)* .................................... $ 2.69
===============
Maximum offering price per share ($2.69 / 99.00%) ............................................................. $ 2.72
===============
ADVISOR CLASS:
Net asset value and maximum offering price per share ($39,353,663 / 14,624,529 shares outstanding) ............ $ 2.69
===============
</TABLE>
*Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
See notes to financial statements.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Investment income:
Dividends ................................................................ $ 6,676,882
Interest ................................................................. 361,689,824
-------------
Total investment income .............................................. 368,366,706
-------------
Expenses:
Management fees (Note 3) ................................................. 16,672,024
Distribution fees (Note 3)
Class A ................................................................ 4,156,673
Class B ................................................................ 32,510
Class C ................................................................ 2,938,523
Transfer agent fees (Note 3) ............................................. 3,325,575
Custodian fees ........................................................... 47,693
Reports to shareholders .................................................. 603,462
Registration and filing fees ............................................. 416,743
Professional fees ........................................................ 97,831
Trustees' fees and expenses .............................................. 56,192
Other .................................................................... 98,427
-------------
Total expenses ....................................................... 28,445,653
-------------
Net investment income .............................................. 339,921,053
-------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ........................................................... 73,277,912
Foreign currency transactions ......................................... (13,228)
-------------
Net realized gain .................................................. 73,264,684
Net unrealized appreciation (depreciation) on:
Investments ........................................................... (437,489,190)
Translation of assets and liabilities denominated in foreign currencies 18,259
-------------
Net unrealized depreciation ........................................ (437,470,931)
-------------
Net realized and unrealized loss .......................................... (364,206,247)
-------------
Net decrease in net assets resulting from operations ...................... $ (24,285,194)
=============
</TABLE>
See notes to financial statements.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED MAY 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 339,921,053 $ 292,667,415
Net realized gain from investments and foreign currency transactions .................. 73,264,684 34,259,350
Net unrealized appreciation (depreciation) on investments and translation of assets and
liabilities denominated in foreign currencies ....................................... (437,470,931) 33,894,269
------------------------------------
Net increase (decrease) in net assets resulting from operations ................. (24,285,194) 360,821,034
Distributions to shareholders from:
Net investment income:
Class A ............................................................................... (299,008,521) (261,354,140)
Class B ............................................................................... (367,466) --
Class C ............................................................................... (40,073,283) (21,055,677)
Advisor Class ......................................................................... (2,875,463) (1,879,720)
------------------------------------
Total distributions to shareholders ..................................................... (342,324,733) (284,289,537)
Capital share transactions: (Note 2)
Class A ............................................................................... 191,216,722 525,305,713
Class B ............................................................................... 26,621,191 --
Class C ............................................................................... 136,698,940 239,186,811
Advisor Class ......................................................................... 14,754,823 21,536,823
------------------------------------
Total capital share transactions ........................................................ 369,291,676 786,029,347
Net increase in net assets ...................................................... 2,681,749 862,560,844
Net assets
Beginning of year ....................................................................... 3,658,772,557 2,796,211,713
------------------------------------
End of year ............................................................................. $ 3,661,454,306 $ 3,658,772,557
====================================
Undistributed net investment income included in net assets:
End of year ............................................................................. $ 17,094,418 $ 19,511,326
====================================
</TABLE>
See notes to financial statements.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin High Income Trust (the Trust) is registered under the Investment
Company Act of 1940 as an open-end, diversified investment company. The Trust
consists of one Fund, the Franklin AGE High Income Fund (the Fund), which seeks
to provide a high level of current income while seeking capital appreciation.
The following summarizes the Fund's significant accounting policies.
a. SECURITY VALUATION:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Trustees.
b. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
c. INCOME TAXES:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.
d. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Bond discount is
amortized on an income tax basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
Realized and unrealized gains and 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.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Notes to Financial Statements (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
e. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
The Fund offers four classes of shares: Class A, Class B, Class C, and Advisor
Class. Effective January 1, 1999, Class I and Class II were renamed Class A and
Class C, respectively, and the Fund began offering a new class of shares, Class
B. Each class of shares differs by its initial sales load, distribution fees,
voting rights on matters affecting a single class and its exchange privilege.
At May 31, 1999, there were an unlimited number of shares authorized (no par
value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
MAY 31, 1999 MAY 31, 1998
--------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold .................................. 414,087,089 $ 1,147,083,301 398,847,574 $ 1,185,149,892
Shares issued in reinvestment of distributions 48,411,868 134,052,298 38,784,036 114,687,942
Shares redeemed .............................. (393,225,617) (1,089,918,877) (260,590,614) (774,532,121)
--------------------------------------------------------------------
Net increase ................................. 69,273,340 $ 191,216,722 177,040,996 $ 525,305,713
====================================================================
CLASS B*
Shares sold .................................. 10,082,048 $ 27,600,679
Shares issued in reinvestment of distributions 67,548 184,499
Shares redeemed .............................. (427,778) (1,163,987)
-------------------------------
Net increase ................................. 9,721,818 $ 26,621,191
===============================
CLASS C
Shares sold .................................. 92,143,685 $ 257,265,284 95,362,735 $ 284,202,607
Shares issued in reinvestment of distributions 8,220,312 22,770,924 4,043,761 12,004,240
Shares redeemed .............................. (51,874,088) (143,337,268) (19,128,856) (57,020,036)
--------------------------------------------------------------------
Net increase ................................. 48,489,909 $ 136,698,940 80,277,640 $ 239,186,811
====================================================================
ADVISOR CLASS
Shares sold .................................. 17,315,590 $ 47,913,887 13,161,829 $ 39,058,573
Shares issued in reinvestment of distributions 985,497 2,728,550 606,914 1,799,737
Shares redeemed .............................. (13,089,579) (35,887,614) (6,500,575) (19,321,487)
--------------------------------------------------------------------
Net increase ................................. 5,211,508 $ 14,754,823 7,268,168 $ 21,536,823
====================================================================
</TABLE>
*Effective date of Class B shares was January 1, 1999.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Notes to Financial Statements (continued)
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc.
(Distributors), Franklin Templeton Services, Inc. (FT Services), and
Franklin/Templeton Investor Services, Inc. (Investor Services) the Fund's
investment manager, principal underwriter, administrative manager, and transfer
agent, respectively.
The Fund pays an investment management fee to Advisers based on the average net
assets of the Fund as follows:
ANNUALIZED
FEE RATE MONTH-END NET ASSETS
-------------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% In excess of $250 million
Under an agreement with Advisers, FT Services provides administrative services
to the Fund. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Fund.
The Fund reimburses Distributors up to .15%, .65%, and .65% per year of its
average daily net assets of Class A, Class B, and Class C, respectively, for
costs incurred in marketing the Fund's shares.
Distributors paid net commissions on sales of the Fund shares, and received
contingent deferred sales charges for the period of $2,281,133 and $409,040,
respectively.
The Fund paid transfer agent fees of $3,325,575, of which $3,039,170 was paid to
Investor Services.
4. INCOME TAXES
At May 31, 1999, the Fund had tax basis capital losses which may be carried over
to offset future capital gains. Such losses expire as follows:
Capital loss carryovers expiring in:
2000 ...................................... $63,753,106
2001 ...................................... 14,304,993
2002 ...................................... 12,243,104
2003 ...................................... 4,606,276
-----------
$94,907,479
===========
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Notes to Financial Statements (continued)
4. INCOME TAXES (CONT.)
On May 31, 1999, the Fund had expired capital loss carryovers of $119,622,024
which were reclassified to paid-in-capital.
At May 31, 1999, the net unrealized depreciation based on the cost of
investments for income tax purposes of $3,928,687,434 was as follows:
Unrealized appreciation ....... $ 92,747,000
Unrealized depreciation ....... (439,105,354)
-------------
Net unrealized depreciation ... $(346,358,354)
=============
Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of defaulted securities and foreign currency
transactions. Net realized capital gains differ for financial statement and tax
purposes primarily due to differing treatment of foreign currency transactions.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended May 31, 1999 aggregated $1,273,739,074 and $973,522,960, respectively.
6. CREDIT RISK AND DEFAULTED SECURITIES
The Fund has 95.4% of its portfolio invested in lower rated and comparable
quality unrated high yield securities, which tend to be more sensitive to
economic conditions than higher rated securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of high
yielding securities because such securities are generally unsecured and are
often subordinated to other creditors of the issuer. At May 31, 1999, the Fund
held defaulted securities with a value aggregating $37,238,500 representing 1.0%
of the Fund's net assets. For information as to specific securities, see the
accompanying Statement of Investments.
For financial reporting purposes, the Fund discontinues accruing income on
defaulted bonds and provides an estimate for losses on interest receivable.
The Fund has investments in excess of 10% of its total net assets in the
Consumer Services and Telecommunications industries. Such concentration may
subject the Fund more significantly to economic changes occurring within those
industries.
7. OTHER CONSIDERATIONS
Advisers, as the Fund's Manager, may serve as a member of various bondholder's
steering committees, representing bondholder's interests in certain corporate
restructuring negotiations, or on creditors committees. Currently the Manager
serves on the Official Committee of Unsecured Creditors of International
Wireless Communications Holdings, Inc. As a result of this involvement, Advisers
may be in possession of certain material non-public information. The Fund's
Manager has not nor does it intend to sell any of its holdings in these
securities while in possession of such information.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Independent Auditors' Report
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF FRANKLIN HIGH INCOME TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Franklin High Income Trust (the
"Fund") at May 31, 1999, 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 each of the periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at May 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
July 1, 1999
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Tax Designation
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
1.95% of ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended May 31, 1999.
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