SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Dear Shareholder:
This semiannual report for Franklin's AGE High Income Fund covers the six-month
period ended November 30, 1999. After slowing somewhat in the second quarter of
1999, the U.S. economy's growth accelerated in the third quarter to an
annualized 5.7%, a remarkably strong number. Inflation, as measured by the
Consumer Price Index (CPI), edged up from 2.0% at the beginning of the period to
2.6% at its close, and interest rates rose markedly.
This environment was challenging for most fixed-income assets, including high
yield bonds, the fund's principal investments. Despite robust economic growth
and historically low inflation, the Federal Reserve Board's three successive
0.25% interest rate hikes increased corporate financing costs as well as
curtailed investor preference for high yield market risk. During the period, the
benchmark 10-year Treasury bond's yield rose from 5.76% on June 1, 1999, to
6.19% on November 30, 1999, causing the 10-year bond to return -1.05% for the
period. Bond prices generally move in the opposite direction from interest
rates, so as one rises the other falls. The risk premium demanded for high yield
issues, the additional yield expected for such bonds over U.S. Treasuries, rose
53 basis points, from 4.93% at the beginning of the period to 5.46% at the
period's close, as measured by the Chase High Yield Index. The Chase High Yield
Index and CS First Boston High Yield Index, the fund's benchmark, returned
- -1.23% and -0.70%, respectively, over the six-month period, significantly better
than the 10-year U.S. Treasury bond, and reflected the strong corporate sector
fundamentals during the six months under review.(1)
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 16 of
this report.
CONTENTS
<TABLE>
<S> <C>
Shareholder Letter ..... 1
Performance Summary .... 10
Financial Highlights &
Statement of Investments 12
Financial Statements ... 24
Notes to
Financial Statements ... 27
</TABLE>
[FUND CATEGORY PYRAMID GRAPHIC]
<PAGE>
PORTFOLIO BREAKDOWN
Based on Total Net Assets
11/30/99
[PIE CHART GRAPHIC]
<TABLE>
<CAPTION>
<S> <C>
Bonds 92.7%
Equities 3.5%
Short-Term Obligations
& Other Net Assets 3.8%
</TABLE>
PORTFOLIO UPDATE
Interest-rate volatility caused most fixed-income products' performance to
suffer, and the fund generated historically below-average returns during the
period. However, the fund's returns were in line with its benchmark index, and
the fund's Class A shares produced a -1.03% cumulative total return for the
period.(2) During the six months under review, we focused on growth sectors and
prudent individual security selection, and by doing this, believed the fund
would be well-positioned to take advantage of positive industry trends once
interest-rate volatility decreased. Additionally, high yield interest-rate
spreads (5.46%) remained wide by historical standards on November 30, 1999,
higher than the 10-year average of 5.27% and significantly higher than
the 5-year average of 4.28%, as measured by the Chase High Yield Index. If
spreads do return to their historical averages, the lower rates could cause high
yield bonds' values to increase.
1. Indexes are unmanaged and include reinvested dividends. One cannot invest
directly in an index.
2. Cumulative total return measures the change in value of an investment,
assuming reinvestment of all distributions and does not include the sales
charge.
As of November 30, 1999, the fund's largest industry weightings were in
telecommunications (13.5% of total net assets), wireless communication (11.6%),
cable & broadcasting (8.8%), energy (6.2%) and media (5.4%).
SECTOR DISCUSSIONS
TELECOMMUNICATIONS
The telecommunications sector performed well over the reporting period. We
maintained our focus on companies with strong management teams, ready access to
capital, their own networks and equipment, and the ability to provide a complete
spectrum of services (known as bundling) to their customers. Consolidation was
one of the sector's most important trends, and the fund was strategically
positioned to take advantage of several mergers and acquisitions during the
reporting period. One example is the merger between fund holding IXC
Communications Inc. and Cincinnati Bell Inc. The merger significantly improved
IXC's performance, as Cincinnati Bell's financial position was substantially
stronger than IXC's, which resulted in a healthier credit profile for IXC
following the merger. Consolidation for competitive local exchange carriers
(CLECs) has taken place a little slower than expected; however, we believe it is
likely to accelerate and recent valuations for many CLECs were still attractive.
Overall, the fund materially increased its weighting in the telecommunications
sector during the period from 10.6% of total net assets on May 31, 1999, to
13.5% at the end of the reporting period. This was largely due to the addition
of Williams Communications Group Inc. and PSINet Inc. to the portfolio. Williams
is a wholesale communications provider that boasts good access to capital, and a
strong engineering and construction background that it is using to build out its
network. PSINet is an Internet service provider (ISP) that concentrates
primarily on business customers, but also sells wholesale services to other ISPs
to maximize its network utilization. PSINet is a global, rapidly growing
company, and we believe it will be a valuable addition to the portfolio going
forward.
WIRELESS
During the reporting period, the wireless sector benefited from increased market
penetration and strong demand. On the cellular side, ongoing growth in the
subscriber base largely offset pricing pressures, as wireless phones continued
their transition from a luxury good to a more standard consumer product. In
addition to favorable demand dynamics, many of the fund's holdings benefited
from growth in voice applications as well as optimism surrounding the future
growth of data applications such as the Internet and email. During the six
months under review, holdings such as Rogers Cantel Mobile Communications Inc.
and Dobson/Sygnet Communications Co. performed well due to their efforts to
strengthen their relationships with AT&T Corp. AT&T purchased 33% of Rogers
Cantel, and the company used the cash infusion to pay down debt, strengthening
its credit profile. Dobson/Sygnet bolstered its strategic relationship with
AT&T, and continued using its own free cash flow to rapidly reduce its debt.
Several of the fund's other wireless holdings also performed strongly during the
period. Triton PCS Inc.'s and Nextel Partners Inc.'s bonds increased in value
due to the successful construction of their respective networks ahead of
schedule. Triton PCS completed its initial public offering (IPO) successfully in
November, and later in the period we sold the position to take advantage of
their bond's strong price appreciation. The fund initiated two new positions on
the cellular side during the period -- VoiceStream Wireless Corp. and Crown
Castle International Corp. Crown Castle is a leading wireless tower operator,
and VoiceStream is a consolidator of wireless operators using GSM technology (an
international digital radio standard) and is expanding its network to achieve
national coverage. We believe both are poised to benefit from strong cellular
growth trends going forward.
The fund's paging sector positions, unfortunately, came under increasing
pressure due to intense industry competition and concern over the substitution
effect toward cellular phones from pagers. Pricing power declined, and we expect
competition to remain fierce in this sector. However, it should be noted that
much of the paging sector competition is coming from the cellular providers, a
trend that benefits many of the fund's cellular holdings.
TOP 10 HOLDINGS
11/30/99
<TABLE>
<CAPTION>
COMPANY % OF TOTAL
INDUSTRY NET ASSETS
- ----------------------------------------
<S> <C>
AMFM Inc.
Consumer Services 1.38%
NEXTLINK
Communications Inc.
Telecommunications 1.35%
HMH Properties Inc.
Real Estate 1.31%
Amkor Technology Inc.
Electronic Technology 1.15%
P&L Coal Holdings Corp.
Energy Minerals 1.15%
Allied Waste
North America Inc.
Industrial Services 1.15%
PSINet Inc.
Electronic Technology 1.15%
Global Crossings
Holdings Ltd.
Telecommunications 1.14%
Level 3
Communications Inc.
Telecommunications 1.11%
Allegiance Telecom Inc.
Telecommunications 1.11%
</TABLE>
CABLE & BROADCASTING
Mergers and acquisitions continued during the period, and the cable sector
benefited from strong demand and efficiencies of scale that come with
consolidation. In addition, many cable companies have dependable, utility-like
revenue streams from their core video products, an attribute we find attractive
especially in light of the industry's high growth potential. During the period,
we maintained our emphasis on competitive companies with lower cost structures,
and in general, we looked for companies that were leaders in their respective
markets. Fund position NTL Inc. announced a merger with Cable & Wireless PLC
(U.K.) that will create the U.K.'s largest cable operator. Moreover, France
Telecom is expected to invest additional equity into NTL as part of the
transaction, which should further strengthen NTL's credit profile. Fund holding
United Pan-Europe Communications NV (UPC), one of Europe's largest television
operators, benefited from the issuance of additional equity and a favorable
outlook for new services such as the Internet and telephony.
On the broadcasting side, consolidation and deregulation benefited many of the
fund's holdings. Chancellor Media Corp. merged with Clear Channel Communications
Inc., one of the largest radio and outdoor advertising companies in the U.S.,
forming a much larger, more diversified company (AMFM Inc.) that should produce
better credit profiles going forward. Deregulation continued in the television
subsector with favorable rulings by the Federal Communications Commission, which
increased the promise of further consolidation in the future.
DIVIDEND DISTRIBUTIONS
6/1/99 - 11/30/99
<TABLE>
<CAPTION>
DIVIDEND PER SHARE
----------------------------------------------------
MONTH CLASS A CLASS B CLASS C ADVISOR
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
June 2.2 cents 2.09 cents 2.09 cents 2.23 cents
July 2.2 cents 2.09 cents 2.09 cents 2.23 cents
August 2.2 cents 2.09 cents 2.09 cents 2.23 cents
September 2.2 cents 2.08 cents 2.09 cents 2.23 cents
October 2.2 cents 2.08 cents 2.09 cents 2.23 cents
November 2.2 cents 2.08 cents 2.09 cents 2.23 cents
- ----------------------------------------------------------------
TOTAL 13.2 CENTS 12.51 CENTS 12.54 CENTS 13.38 CENTS
</TABLE>
ENERGY
Energy sector companies delivered quite mixed performances over the reporting
period. In general, refiners suffered the impact of lower refining margins due
to the sharp rise in crude oil and natural gas prices, whereas service companies
and exploration and production companies benefited from oil and gas strength.
Many were able to adapt their business plans and rebound, such as fund holdings
Chesapeake Energy Corp. and Bellwether Exploration Co. Overall, we favored
companies possessing high-quality assets with the infrastructure necessary to
leverage improving oil-sector fundamentals. The fund's investment in R&B Falcon
Corp. exemplified this strategy. R&B Falcon has high quality assets, operates
the world's largest fleet of offshore drill rigs and is heavily exposed to deep
water drilling, a segment that is likely to be the industry's growth engine
going forward. R&B Falcon bonds performed strongly during the period due to
optimism surrounding the company's medium- to long-term prospects, and the most
recent debt issue was priced attractively.
MEDIA
In general, companies within the media sector benefited from strong domestic
growth and a flourishing service economy. The media sector is composed of a very
diverse group of companies, ranging from printers to outdoor advertisers, and
even theme parks, providing a variety of business models. Consequently, we
maintained our bottom-up, company-specific approach to investing in the sector,
concentrating principally on industry leaders with strong business plans,
visionary management teams and favorable cost structures. One of the fund's
holdings, Big Flower Press Holdings Inc., announced a recapitalization plan
whereby the bonds will be repurchased at a significant premium. The deal is
expected to close by the end of 1999, and the bonds performed well on the
positive news.
LOOKING FORWARD
Recent economic data suggests that growth should continue to remain positive as
underlying fundamentals remain supportive. Inflation, although slightly higher,
is relatively benign and low by historical standards, and the three interest
rate hikes on the part of the Federal Reserve Board have, in our opinion,
provided increased interest rate clarity. An environment of continued, positive
economic growth with historically low inflation should provide a favorable
environment for high yield bonds over the near to intermediate term, provided
interest rates remain stable. In general, we believe high yield valuations are
attractive on a historical basis, and that improving fundamentals lend
encouragement for sector performance going forward.
Sincerely,
/s/ CHRISTOPHER J. MOLUMPHY
Christopher J. Molumphy
Senior Portfolio Manager
Franklin's AGE High Income Fund
- --------------------------------------------------------------------------------
This discussion reflects our views, opinions and portfolio holdings as of
November 30, 1999, the end of the reporting period. Our strategies and the
fund's portfolio composition will change depending on market and economic
conditions. Although historical performance is no guarantee of future results,
these insights may help you understand our investment and management philosophy.
- --------------------------------------------------------------------------------
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
eliminated the sales charge on reinvested dividends and 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.
SIX-MONTH PERFORMANCE SUMMARY AS OF 11/30/99
Six-month total return does not include sales charges. 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.
<TABLE>
<S> <C> <C>
CLASS A
Six-Month Total Return -1.03%
Net Asset Value (NAV) (11/30/99) $2.53 (5/31/99) $2.69
Change in NAV -$0.16
Distributions (6/1/99-11/30/99) Dividend Income $0.132
CLASS B
Six-Month Total Return -1.68%
Net Asset Value (NAV) (11/30/99) $2.52 (5/31/99) $2.69
Change in NAV -$0.17
Distributions (6/1/99-11/30/99) Dividend Income $0.1251
CLASS C
Six-Month Total Return -1.66%
Net Asset Value (NAV) (11/30/99) $2.53 (5/31/99) $2.70
Change in NAV -$0.17
Distributions (6/1/99-11/30/99) Dividend Income $0.1254
ADVISOR CLASS
Six-Month Total Return -0.96%
Net Asset Value (NAV) (11/30/99) $2.53 (5/31/99) $2.69
Change in NAV -$0.16
Distributions (6/1/99-11/30/99) Dividend Income $0.1338
</TABLE>
Past performance does not guarantee future results.
ADDITIONAL PERFORMANCE
AS OF QUARTER ENDED 12/31/99
<TABLE>
<CAPTION>
INCEPTION
CLASS A 1-YEAR 5-YEAR 10-YEAR (12/31/69)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) +0.48% +54.96% +165.55% +1,041.96%
Average Annual Total Return(2) -3.70% +8.17% +9.79% +8.30%
Value of $10,000 Investment(3) $9,630 $14,812 $25,452 $109,252
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS B 1-YEAR (1/1/99)
- ----------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Total Return(1) +0.03% +0.03%
Average Annual Total Return(2) -3.60% -3.60%
Value of $10,000 Investment(3) $9,640
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
CLASS C 1-YEAR 3-YEAR (5/16/95)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return(1) -0.03% +12.86% +36.92%
Average Annual Total Return(2) -2.00% +3.76% +6.78%
Value of $10,000 Investment(3) $9,800 $11,171 $13,545
</TABLE>
<TABLE>
<CAPTION>
INCEPTION
ADVISOR CLASS(4) 1-YEAR 5-YEAR 10-YEAR (12/31/69)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return(1) +0.61% +56.07% +167.45% +1,050.15%
Average Annual Total Return(2) +0.61% +9.31% +10.34% +8.48%
Value of $10,000 Investment(3) $10,061 $15,607 $26,745 $115,015
</TABLE>
AS OF 11/30/99
<TABLE>
<CAPTION>
SHARE CLASS A B C ADVISOR
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Distribution Rate(5) 10.00% 9.90% 9.80% 10.58%
30-Day Standardized Yield(6) 10.77% 10.77% 10.65% 11.42%
</TABLE>
For updated performance figures, see "Prices and Performance" on the Internet at
www.franklintempleton.com, or call Franklin Templeton at 1-800/342-5236.
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.
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. 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 +15.16% and +4.82% respectively.
5. Distribution rate is based on an annualization of the respective class's
November dividend and the maximum offering price (net asset value price for
Class B and Advisor Class) per share on November 30, 1999.
6. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended November 30, 1999.
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 does not guarantee future results.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 1999 YEAR ENDED MAY 31,
-----------------------------------------------------------------------
(UNAUDITED)*** 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the
period)
Net asset value, beginning of period .. $2.69 $2.98 $2.90 $2.79 $2.77 $2.70
----------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ................ .13 .26 .26 .26 .25 .26
Net realized and unrealized gains
(losses) ............................ (.16) (.29) .08 .11 .03 .07
----------------------------------------------------------------------------------------
Total from investment operations ...... (.03) (.03) .34 .37 .28 .33
----------------------------------------------------------------------------------------
Less distributions from net investment
income .............................. (.13) (.26) (.26) (.26) (.26) (.26)
----------------------------------------------------------------------------------------
Net asset value, end of period ........ $2.53 $2.69 $2.98 $2.90 $2.79 $2.77
========================================================================================
Total return** ........................ (1.03%) (.74%) 12.32% 14.09% 10.75% 13.34%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ..... $2,895,822 $3,108,809 $3,236,134 $2,638,914 $2,183,738 $1,908,853
Ratios to average net assets:
Expenses ............................. .74%* .72% .70% .71% .70% .66%
Net investment income ................ 10.02%* 9.40% 9.04% 9.31% 9.07% 9.71%
Portfolio turnover rate ............... 14.59% 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.
***Based on average shares outstanding.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 1999 YEAR ENDED
(UNAUDITED)*** MAY 31, 1999(1)
-------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ...................... $2.68 $2.76
-------------------------------------------------
Income from investment operations:
Net investment income .................................... .12 .11
Net realized and unrealized gains (losses) ............... (.16) (.08)
-------------------------------------------------
Total from investment operations .......................... (.04) .03
-------------------------------------------------
Less distributions from net investment income ............. (.12) (.11)
-------------------------------------------------
Net asset value, end of period ............................ $2.52 $2.68
=================================================
Total return** ............................................ (1.68%) 1.29%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ......................... $58,554 $26,095
Ratios to average net assets:
Expenses ................................................. 1.25%* 1.24%*
Net investment income .................................... 9.46%* 8.41%*
Portfolio turnover rate ................................... 14.59% 27.55%
</TABLE>
*Annualized
**Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
***Based on average shares outstanding.
(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
----------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 1999 YEAR ENDED MAY 31,
----------------------------------------------------
(UNAUDITED)*** 1999 1998 1997 1996 1995(2)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout
the period)
Net asset value, beginning of period .... $2.69 $2.98 $2.90 $2.79 $2.77 $2.76
----------------------------------------------------------------------
Income from investment operations:
Net investment income .................. .12 .25 .25 .25 .25 --
Net realized and unrealized gains
(losses) .............................. (.16) (.29) .08 .11 .02 .01
----------------------------------------------------------------------
Total from investment operations ........ (.04) (.04) .33 .36 .27 .01
----------------------------------------------------------------------
Less distributions from net investment
income ................................ (.12) (.25) (.25) (.25) (.25) --
----------------------------------------------------------------------
Net asset value, end of period .......... $2.53 $2.69 $2.98 $2.90 $2.79 $2.77
======================================================================
Total return** .......................... (1.66%) (.93%) 11.69% 13.41% 10.06% .36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ....... $448,084 $487,196 $394,612 $151,073 $46,064 $713
Ratios to average net assets:
Expenses ............................... 1.25%* 1.24% 1.23% 1.25% 1.25% 1.14%*
Net investment income .................. 9.50%* 8.89% 8.51% 8.75% 8.50% 6.91%*
Portfolio turnover rate ................. 14.59% 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.
***Based on average shares outstanding.
(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
------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MAY 31,
NOVEMBER 30, 1999 ----------------------------------
(UNAUDITED)*** 1999 1998 1997(3)
------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ................... $2.69 $2.98 $2.90 $2.90
------------------------------------------------------
Income from investment operations:
Net investment income ................................. .13 .27 .27 .12
Net realized and unrealized gains (losses) ............ (.16) (.29) .08 (.01)
------------------------------------------------------
Total from investment operations ....................... (.03) (.02) .35 .11
------------------------------------------------------
Less distributions from net investment income .......... (.13) (.27) (.27) (.11)
------------------------------------------------------
Net asset value, end of period ......................... $2.53 $2.69 $2.98 $2.90
======================================================
Total return** (.96%) (.61%) 12.46% 3.94%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ...................... $46,951 $39,354 $28,026 $6,224
Ratios to average net assets:
Expenses .............................................. .60%* .59% .58% .61%*
Net investment income ................................. 10.16%* 9.52% 9.17% 9.25%*
Portfolio turnover rate ................................ 14.59% 27.55% 29.69% 20.01%
</TABLE>
*Annualized
**Total return is not annualized.
***Based on average shares outstanding.
(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, NOVEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES/
RIGHTS/
WARRANTS VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, WARRANTS AND RIGHTS 1.2%
(a) Advantica Restaurant Group Inc., A 612,439 $ 1,071,768
(a) Darling International Inc. 504,447 1,103,478
(a) Gaylord Container Corp., wts., 11/01/02 232,762 1,396,572
(a) Gulf States Steel Inc., wts., 4/15/03 27,800 28
(a,e) Harvard Industries Inc. 793,966 6,847,957
(a) International Wire Holding Co., wts., 8/15/01 36,400 36
(a) Jack in the Box Inc. 24,090 507,396
(a) Key Energy Services Inc., wts., 1/15/09 30,000 603,750
(a) Loral Space & Communications Ltd., wts., 1/15/07 35,300 300,294
(a) McCaw International Ltd., wts., 4/15/07 28,500 228,000
(a) McMoran Exploration Co. 25,937 565,751
Nabisco Group Holdings Corp. 510,000 5,896,875
(a) Nextel Communications Inc., A 64,337 6,377,405
(a) Occidente Y Caribe Celular, 144A, wts., 3/15/04 (Columbia) 152,660 2,289,900
(a) Penn Traffic Co. 389,598 2,970,685
Phosphate Resource Partners LP 415,000 4,435,313
(a) Poland Telecom Finance, 144A, wts., 12/01/07 (Poland) 30,000 105,000
(a) R & B Falcon Corp., 144A, wts., 5/01/09 11,750 2,937,500
R.J. Reynolds Tobacco Holdings Inc. 170,000 3,623,125
(a) Specialty Foods Corp., 144A 97,500 --
(a) United Mexican States, rts., 6/30/03 (Mexico) 3,000 --
Walter Industries Inc. 189,505 2,013,491
-----------
TOTAL COMMON STOCKS, WARRANTS AND RIGHTS (COST $87,502,443) 43,274,324
-----------
PREFERRED STOCKS 2.3%
Asia Pulp & Paper Co. Ltd., 12.00%, pfd. (Indonesia) 24,700 15,808,000
CMS Energy Trust I, 7.75%, cvt. pfd. 530,000 24,048,750
Fresenius Medical Care AG, 9.00%, pfd. 13,100 12,641,500
(a) R&B Falcon Corp., 13.875%, pfd., PIK 12,621 13,126,308
Sinclair Capital, 11.625%, pfd. 147,000 14,442,750
-----------
TOTAL PREFERRED STOCKS (COST $91,047,481) 80,067,308
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT*
-----------
<S> <C> <C>
BONDS 92.7%
COMMERCIAL SERVICES 4.5%
American Commercial Lines LLC, senior note, 10.25%, 6/30/08 $ 22,700,000 21,792,000
AmeriServe Food Distribution Inc., senior note, 8.875%, 10/15/06 11,350,000 6,185,750
AmeriServe Food Distribution Inc., senior sub. note, 10.125%, 7/15/07 19,010,000 5,798,050
Big Flower Press Holdings Inc., 8.625%, 12/01/08 17,300,000 17,732,500
Big Flower Press Holdings Inc., senior sub. note, 8.875%, 7/01/07 12,100,000 12,402,500
Fleming Cos. Inc., senior sub. note, B, 10.50%, 12/01/04 15,000,000 13,987,500
Fleming Cos. Inc., senior sub. note, B, 10.625%, 7/31/07 14,000,000 12,775,000
Intertek Finance PLC, senior sub. note, B, 10.25%, 11/01/06
(United Kingdom) 9,400,000 8,894,750
Iron Mountain Inc., 8.25%, 7/01/11 7,500,000 6,881,250
Iron Mountain Inc., senior sub. note, 8.75%, 9/30/09 16,650,000 15,900,750
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, NOVEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
COMMERCIAL SERVICES (CONT.)
Lamar Advertising Co., senior sub. note, 9.625%, 12/01/06 ............ $ 20,000,000 $ 20,700,000
Tembec Finance Corp., senior note, 9.875%, 9/30/05 (Canada) .......... 11,000,000 11,495,000
-----------
154,545,050
-----------
CONSUMER DURABLES .7%
Dura Operating Corp., senior sub. note, B, 9.00%, 5/01/09 ............ 11,000,000 10,450,000
Sealy Mattress Co., senior disc. note, B, zero cpn. to
12/15/02, 10.875% thereafter, 12/15/07 ........................... 10,200,000 7,191,000
Sealy Mattress Co., senior sub. note, B, 9.875%, 12/15/07 ............ 6,800,000 6,800,000
-----------
24,441,000
-----------
CONSUMER NON-DURABLES 3.7%
Agrilink Foods Inc., 11.875%, 11/01/08 ............................... 17,000,000 16,490,000
Delta Beverage Group Inc., senior note, 9.75%, 12/15/03 .............. 2,800,000 2,786,000
Hartmarx Corp., senior sub. note, 10.875%, 1/15/02 ................... 15,000,000 14,962,500
International Home Foods Inc., senior sub. note, 10.375%, 11/01/06 ... 11,200,000 11,690,000
Premier International Foods, senior note, 144A, 12.00%, 9/01/09 ...... 16,000,000 16,240,000
Revlon Consumer Products Corp., senior sub. note, 8.625%, 2/01/08 .... 42,000,000 23,940,000
SFC New Holdings Inc., senior note, 11.25%, 8/15/01 .................. 19,000,000 17,480,000
SFC New Holdings Inc., zero cpn. to 6/15/05, 11.00% thereafter,
12/15/09 .......................................................... 909,980 --
Specialty Retailers Inc., senior sub. note, 8.5%, 7/15/05 ............ 7,250,000 5,473,750
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 14,410,000
-----------
126,347,250
-----------
CONSUMER SERVICES 16.1%
Advantica Restaurant Group Inc., senior note, 11.25%, 1/15/08 ........ 13,896,030 10,977,864
AMF Bowling Worldwide Inc., senior disc. note, B, zero cpn. to
3/15/01, 12.25% thereafter, 3/15/06 ............................... 9,951,000 4,428,195
AMFM Inc., 144A, 9.00%, 10/01/08 ..................................... 8,400,000 8,820,000
AMFM Inc., senior note, 8.00%, 11/01/08 .............................. 23,500,000 23,735,000
AMFM Inc., senior sub. note, B, 8.75%, 6/15/07 ....................... 15,000,000 15,225,000
Ascent Entertainment Group Inc., senior disc. note, zero cpn.
to 12/15/02, 11.875% thereafter, 12/15/04 ......................... 19,500,000 14,625,000
Aztar Corp., senior sub. note, 8.875%, 5/15/07 ....................... 30,500,000 29,508,750
Benedek Communications Corp., senior disc. note, zero cpn.
to 5/15/01, 13.25% thereafter, 5/15/06 ............................ 24,500,000 22,295,000
Charter Communications Holdings LLC, senior disc. note,
zero cpn. to 4/01/04, 9.92% thereafter, 4/01/11 ................... 39,000,000 23,692,500
CKE Restaurants Inc., senior sub. note, 9.125%, 5/01/09 .............. 19,500,000 14,235,000
CSC Holdings Inc., senior sub. deb., 10.50%, 5/15/16 ................. 20,000,000 22,350,000
CSC Holdings Inc., senior sub. deb., 9.875%, 4/01/23 ................. 5,000,000 5,175,000
Diamond Cable Communication Co., senior disc. note, zero cpn. to
2/15/02, 10.75% thereafter, 2/15/07 (United Kingdom) .............. 7,850,000 6,280,000
Diamond Holdings PLC, senior note, 9.125%, 2/01/08 (United Kingdom) .. 10,600,000 10,600,000
Family Restaurant Inc., senior note, 9.75%, 2/01/02 .................. 10,850,000 5,045,250
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 15,337,500
Granite Broadcasting Corp., senior sub. note, A, 10.375%, 5/15/05 .... 7,100,000 7,277,500
Hammons (John Q) Hotels, first mortgage, 8.875%, 2/15/04 ............. 20,000,000 18,200,000
Hammons (John Q) Hotels, first mortgage, 9.75%, 10/01/05 ............. 4,500,000 4,162,500
Harrah's Operating Co. Inc., senior sub. note, 7.875%, 12/15/05 ...... 15,250,000 14,754,375
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, NOVEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
CONSUMER SERVICES (CONT.)
Hollinger International Inc., senior sub. note, 9.25%, 2/01/06 ....... $ 6,400,000 $ 6,304,000
Hollinger International Publishing Inc., senior sub. note,
9.25%, 3/15/07 ................................................... 12,800,000 12,608,000
Horseshoe Gaming Holding, senior sub. note, 8.625%, 5/15/09 .......... 30,200,000 28,992,000
Jacor Communications Co., senior sub. note, 9.75%, 12/15/06 .......... 6,400,000 7,104,192
LIN Holdings Corp., senior disc. note, zero cpn. to
3/01/03, 10.00% thereafter, 3/01/08 .............................. 17,300,000 11,764,000
LIN Television Corp., senior sub. note, 8.375%, 3/01/08 .............. 19,000,000 18,050,000
Players International Inc., senior note, 10.875%, 4/15/05 ............ 4,750,000 5,046,875
Premier Parks Inc., senior disc. note, zero cpn. to
4/01/03, 10.00% thereafter, 4/01/08 .............................. 8,000,000 5,425,000
Premier Parks Inc., senior note, 9.25%, 4/01/06 ...................... 8,000,000 7,800,000
Premier Parks Inc., senior note, 9.75%, 6/15/07 ...................... 22,500,000 22,443,750
Prime Hospitality Corp., senior sub. note, B, 9.75%, 4/01/07 ......... 23,200,000 22,388,000
Protection One Alarm Monitoring Inc., senior sub. note,
144A, 8.125%, 1/15/09 ............................................ 37,000,000 15,910,000
Regal Cinemas Inc., senior sub. note, 9.50%, 6/01/08 ................. 39,500,000 32,686,250
Rogers Cablesystems, senior secured deb., 10.125%, 9/01/12 (Canada) .. 5,000,000 5,387,500
Sinclair Broadcast Group Inc., senior sub. note, 10.00%, 9/30/05 ..... 14,400,000 14,364,000
Telewest Communications PLC, senior disc. note, 144A, zero cpn.
to 4/15/04, 9.25% thereafter, 4/15/09 (United Kingdom) ........... 14,750,000 9,292,500
Telewest Communications PLC, senior note, 11.25%, 11/01/08
(United Kingdom) ................................................. 4,000,000 4,360,000
United Pan-Europe Communications NV, senior disc. note,144A, zero
cpn. to 8/01/04, 12.50% thereafter, 8/01/09 (Netherlands) ....... 52,500,000 30,187,500
-----------
555,071,251
-----------
ELECTRONIC TECHNOLOGY 4.8%
Amkor Technology Inc., senior note, 144A, 9.25%, 5/01/06 ............. 40,000,000 39,800,000
Amphenol Corp., senior sub. note, 9.875%, 5/15/07 .................... 5,000,000 5,075,000
Bresnan Communications Group LLC, senior note, 8.00%, 2/01/09 ........ 4,400,000 4,433,000
Bresnan Communications Group LLC, zero cpn. to 2/01/04, 9.25%
thereafter, 2/01/09 ............................................... 10,000,000 6,875,000
Focal Communications Corp., senior disc. note, B, zero cpn.
to 2/15/03, 12.125% thereafter, 2/15/08 ........................... 29,000,000 17,835,000
Hadco Corp., senior sub. note, 9.50%, 6/15/08 ........................ 25,000,000 24,312,500
L-3 Communications Holdings Inc., senior sub. note, 10.375%,
5/01/07 ........................................................... 5,400,000 5,589,000
(c) PSINet Inc., senior note, 10.50%, 12/01/06 ........................... 11,500,000 11,500,000
PSINet Inc., senior note, 144A, 11.00%, 8/01/09 ...................... 27,250,000 28,067,500
Telecommun Techniques Co., senior sub. note, 9.75%, 5/15/08 .......... 24,000,000 22,560,000
-----------
166,047,000
-----------
ENERGY MINERALS 4.7%
Abraxas Petroleum Corp., senior note, D, 11.50%, 11/01/04 ............ 37,100,000 25,784,500
AEI Resources Inc., senior sub. note, 144A, 11.50%, 12/15/06 ......... 20,000,000 14,100,000
Bellwether Exploration Co., senior sub. note, 10.875%, 4/01/07 ....... 5,000,000 4,550,000
Chesapeake Energy Corp., senior note, B, 9.625%, 5/01/05 ............. 7,000,000 6,755,000
Clark R&M Inc., senior sub. note, 8.875%, 11/15/07 ................... 9,000,000 5,805,000
Clark USA Inc., senior note, 10.875%, 12/01/05 ....................... 22,000,000 11,110,000
Conproca SA, S.F., senior secured note, 144A, 12.00%,
6/16/10 (Mexico) .................................................. 33,300,000 32,467,500
Mesa Operating Co., zero cpn. to 7/01/01,11.625% thereafter,
7/01/06 ........................................................... 4,300,000 3,805,500
Nuevo Energy Co., senior sub. note, 9.50%, 6/01/08 ................... 17,900,000 17,944,750
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, NOVEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
ENERGY MINERALS (CONT.)
P&L Coal Holdings Corp., senior note, B, 8.875%, 5/15/08 ............. $ 7,000,000 $ 6,965,000
P&L Coal Holdings Corp., senior sub. note, B, 9.625%, 5/15/08 ........ 33,000,000 32,711,250
-----------
161,998,500
-----------
FINANCE 1.4%
Sovereign Bancorp Inc., senior note, 10.50%, 11/15/06 ................ 23,000,000 23,230,000
Willis Corroon Corp., senior sub. note, 9.00%, 2/01/09 ............... 30,000,000 25,350,000
-----------
48,580,000
-----------
GOVERNMENT BONDS .4%
ESCOM, E168, 11.00%, 6/01/08 (South Africa) .......................... 108,800,000 ZAR 14,425,911
-----------
HEALTH SERVICES 3.0%
Abbey Healthcare Group Inc., senior sub. note, 9.50%, 11/01/02 ....... 605,000 580,800
Everest Healthcare Services Corp., senior sub. note, 9.75%, 5/01/08 .. 18,000,000 16,650,000
Fresenius Medical Care Capital Trust, 7.875%, 2/01/08 ................ 24,000,000 21,840,000
Iasis Healthcare Corp., senior sub. note, 144A, 13.00%, 10/15/09 ..... 35,000,000 35,962,500
Magellan Health Services Inc., senior sub. note, 9.00%, 2/15/08 ...... 20,000,000 16,200,000
Pharmerica Inc., senior sub. note, 8.375%, 4/01/08 ................... 8,400,000 6,153,000
(d) Vencor Operating Inc., senior sub. note, 9.875%, 5/01/05 ............. 29,000,000 5,800,000
-----------
103,186,300
-----------
HEALTH TECHNOLOGY .4%
Conmed Corp., senior sub. note, 9.00%, 3/15/08 ....................... 15,000,000 13,725,000
-----------
INDUSTRIAL SERVICES 4.9%
Allied Waste North America Inc., senior note, B, 7.875%, 1/01/09 ..... 34,000,000 30,430,000
Allied Waste North America Inc., senior sub. note, 144A, 10.00%,
8/01/09 ........................................................... 10,000,000 9,162,500
Great Lakes Dredge & Dock Corp., senior sub. note, 11.25%, 8/15/08 ... 4,750,000 4,910,313
Key Energy Services Inc., 14.00%, 1/15/09 ............................ 30,000,000 32,850,000
Pride Petroleum Services Inc., senior note, 9.375%, 5/01/07 .......... 6,600,000 6,600,000
R & B Falcon Corp., 9.50%, 12/15/08 .................................. 7,400,000 7,474,000
R & B Falcon Corp., senior note, 12.25%, 3/15/06 ..................... 10,850,000 11,826,500
RBF Finance Co., senior note, 11.375%, 3/15/09 ....................... 8,750,000 9,450,000
Safety Kleen Services, senior sub. note, 9.25%, 6/01/08 .............. 20,000,000 19,800,000
Universal Compression Inc., senior disc. note, zero cpn.
to 2/15/03, 9.875% thereafter, 2/15/08 ............................ 31,800,000 19,596,750
URS Corp., senior sub. note, 12.25%, 5/01/09 ......................... 16,500,000 17,118,750
-----------
169,218,813
-----------
NON-ENERGY MINERALS 1.4%
Armco Inc., senior note, 9.00%, 9/15/07 .............................. 5,200,000 5,278,000
Bear Island Paper Co. LLC, senior note, B, 10.00%, 12/01/07 .......... 11,700,000 11,290,500
Doman Industries Ltd., senior note, B, 9.25%, 11/15/07 (Canada) ...... 2,800,000 2,198,000
LTV Corp., senior note, 8.20%, 9/15/07 ............................... 27,500,000 24,750,000
Sheffield Steel Corp., first mortgage, B, 11.50%, 12/01/05 ........... 8,000,000 6,680,000
-----------
50,196,500
-----------
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, NOVEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
PROCESS INDUSTRIES 8.1%
Anchor Glass Container, senior note, 9.875%, 3/15/08 ................. $ 17,300,000 $ 15,224,000
Anchor Glass, first mortgage, 11.25%, 4/01/05 ........................ 23,700,000 22,159,500
Ball Corp., senior sub. note, 8.25%, 8/01/08 ......................... 5,500,000 5,348,750
Climachen Inc., senior sub. note, B, 10.75%, 12/01/07 ................ 7,500,000 4,162,500
Container Corp. of America, senior note, A, 9.75%, 4/01/03 ........... 12,000,000 12,480,000
Equistar Chemicals LP, senior note, 8.75%, 2/15/09 ................... 20,000,000 19,700,000
Four M Corp., senior note, B, 12.00%, 6/01/06 ........................ 23,700,000 21,981,750
Graham Packaging Co., senior disc. note, B, zero cpn.,
to 1/15/03, 10.75% thereafter, 1/15/09 ........................... 5,600,000 3,584,000
Graham Packaging Co., senior sub. note, B, 8.75%, 1/15/08 ............ 6,600,000 6,270,000
Huntsman Corp., senior sub. note, 144A, 9.50%, 7/01/07 ............... 5,000,000 4,725,000
Huntsman ICI Chemicals LLC, senior disc. note, 144A,
zero cpn., 12/31/09 .............................................. 76,130,000 22,648,675
Lyondell Chemical Co., 9.625%, 5/01/07 ............................... 2,400,000 2,472,000
Lyondell Chemical Co., 9.875%, 5/01/07 ............................... 11,600,000 11,948,000
Lyondell Chemical Co., 10.875%, 5/01/09 .............................. 2,400,000 2,472,000
Pindo Deli Finance Mauritius, senior note, 11.75%,
10/01/17 (Indonesia) ............................................. 30,900,000 20,703,000
(d) Polysindo International Finance Co. BV, secured note, 9.375%,
7/30/07 (Indonesia) .............................................. 27,750,000 6,382,500
(d) Purina Mills Inc., senior sub. note, 9.00%, 3/15/10 .................. 40,000,000 9,000,000
Radnor Holdings Inc., senior note, 10.00%, 12/01/03 .................. 6,250,000 6,281,250
Repap New Brunswick, senior note, 9.00%, 6/01/04 (Canada) ............ 13,600,000 13,464,000
Terra Industries Inc., senior note, B, 10.50%, 6/15/05 ............... 15,000,000 9,525,000
Tjiwi Kimia Finance Mauritius, senior note, 10.00%, 8/01/04
(Indonesia) ...................................................... 11,000,000 8,030,000
Westpoint Stevens Inc., senior note, 7.875%, 6/15/08 ................. 17,500,000 16,450,000
ZSC Specialty Chemicals PLC, 144A, 11.00%, 7/01/09 ................... 33,000,000 33,825,000
-----------
278,836,925
-----------
PRODUCER MANUFACTURING 6.2%
Advanced Accessory Systems, senior sub. note, B, 9.75%, 10/01/07 ..... 8,000,000 7,220,000
Airxcel Inc., senior sub. note, B, 11.00%, 11/15/07 .................. 13,500,000 13,297,500
American Axle & Manufacturing Inc., 9.75%, 3/01/09 ................... 26,800,000 26,934,000
Cambridge Industries Inc., senior sub. note, B, 10.25%, 7/15/07 ...... 4,700,000 2,843,500
Collins & Aikman Products, senior sub. note, 11.50%, 4/15/06 ......... 9,500,000 9,357,500
(d) Goss Graphic Systems Inc., senior sub. note, 12.00%, 10/15/06 ........ 15,150,000 2,651,250
Keystone Consolidated Industries Inc., senior note, 9.625%, 8/01/07 .. 7,000,000 6,440,000
Neenah Corp., F, 11.125%, 5/01/07 .................................... 6,100,000 5,673,000
Neenah Corp., senior sub. note, B, 11.125%, 5/01/07 .................. 6,100,000 5,657,750
Nortek Inc., 8.875%, 8/01/08 ......................................... 8,000,000 7,640,000
Nortek Inc., senior note, B, 9.125%, 9/01/07 ......................... 19,200,000 18,816,000
Oshkosh Truck Corp., senior sub. note, 8.75%, 3/01/08 ................ 13,200,000 12,870,000
Talon Automotive Group Inc., senior sub. note, B, 9.625%, 5/01/08 .... 20,850,000 13,031,250
Tenneco Automotive Inc., senior sub. note, 144A, 11.625%, 10/15/09 ... 30,000,000 30,300,000
Terex Corp., 8.875%, 4/01/08 ......................................... 9,500,000 9,025,000
Terex Corp., senior sub. note, 8.875%, 4/01/08 ....................... 24,750,000 23,512,500
Thermadyne Industries Inc., sub. note, 10.75%, 11/01/03 .............. 19,781,000 18,297,425
-----------
213,566,675
-----------
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, NOVEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
BONDS (CONT.)
REAL ESTATE 2.3%
<S> <C> <C>
HMH Properties Inc., senior secured note, B, 7.875%, 8/01/08 ..................... $50,000,000 $45,250,000
Lodgian Finance Corp, 12.25%, 7/15/09 ............................................ 34,250,000 33,736,250
-----------
78,986,250
-----------
RETAIL TRADE .4%
(d) Bruno's Inc., senior sub. note, 10.50%, 8/01/05 .................................. 12,500,000 93,750
Penn Traffic Co., 11.00%, 6/29/09 ................................................ 2,048,250 1,761,495
Pueblo Xtra International, senior note, 9.50%, 8/01/03 ........................... 9,500,000 6,697,500
Pueblo Xtra International, senior note, C, 9.50%, 8/01/03 ........................ 5,000,000 3,525,000
-----------
12,077,745
-----------
TECHNOLOGY SERVICES .8%
Anacomp Inc., senior sub. note, D, 10.875%, 4/01/04 .............................. 28,200,000 28,200,000
-----------
TELECOMMUNICATIONS 23.5%
Allegiance Telecom Inc., senior disc. note, B, zero cpn. to 2/15/03,
11.75%, thereafter, 2/15/08 ..................................................... 22,000,000 15,400,000
Allegiance Telecom Inc., senior note, 12.875%, 5/15/08 ........................... 20,500,000 22,755,000
Arch Escrow Corp., 13.75%, 4/15/08 ............................................... 14,500,000 11,817,500
Arch Communications Group Inc., senior disc. note, zero cpn. to 3/15/01,
10.875% thereafter, 3/15/08 ..................................................... 33,450,000 15,219,750
Call-Net Enterprises Inc., senior disc. note, zero cpn. to 5/15/04,
10.80% thereafter, 5/15/09 (Canada) ............................................. 29,500,000 14,750,000
Clearnet Communications Inc., senior disc. note, zero cpn. to 5/01/04,
10.125% thereafter, 5/01/09 ..................................................... 48,250,000 29,673,750
Crown Castle International Corp., senior disc. note, 144A, zero cpn. to
8/01/04, 11.25% thereafter, 8/01/11 ............................................ 51,000,000 31,620,000
Dobson/Sygnet Communications, 12.25%, 12/15/08 ................................... 34,250,000 37,931,875
Global Crossing Holdings Ltd., senior sub. note, 144A, 9.50%,
11/15/09 (Bermuda) .............................................................. 40,000,000 39,500,000
(d) ICO Global Communications Holdings Ltd., 15.00%, 8/01/05 ......................... 35,000,000 17,500,000
IntelCom Group Inc., senior secured disc. note, zero cpn. to 5/01/01,
12.50% thereafter, 5/01/06 ...................................................... 32,500,000 24,456,250
Intermedia Communications Inc., senior disc. note, B, zero cpn. to
7/15/02, 11.25% thereafter, 7/15/07 ............................................. 37,500,000 27,562,500
Intermedia Communications Inc., senior note, 9.50%, 3/01/09 ...................... 10,000,000 9,600,000
(d) International Wireless Holding Co., senior disc. note, 8/15/01 ................... 36,400,000 3,731,000
(d) Iridium LLC/CAP, senior note, Series D, 10.875%, 7/15/05 ......................... 17,000,000 1,190,000
IXC Communications Inc., senior sub. note, 9.00%, 4/15/08 ........................ 15,900,000 16,138,500
Level 3 Communications Inc., zero cpn. to 12/01/03,10.50% thereafter,
12/01/08 ........................................................................ 63,000,000 38,430,000
Loral Space & Communications Ltd., senior disc. note, zero cpn ...................
to 1/15/02, 12.50% thereafter, 1/15/07 .......................................... 35,300,000 16,414,500
McCaw International Ltd., senior disc. note, zero cpn. to 4/15/02,
13.00% thereafter, 4/15/07 ...................................................... 28,500,000 19,539,600
McLeodUSA Inc., senior disc. note, zero cpn. to 3/01/02,
10.50% thereafter, 3/01/07 ...................................................... 10,000,000 8,000,000
McLeodUSA Inc., senior note, 9.50%, 11/01/08 ..................................... 16,000,000 16,240,000
Metrocall Inc., senior sub. note, 9.75%, 11/01/07 ................................ 31,000,000 18,290,000
Metrocall Inc., senior sub. note, 11.00%, 9/15/08 ................................ 10,000,000 6,125,000
Microcell Telecommunications Inc., senior disc. note, B, zero cpn ................
to 12/01/01, 14.00% thereafter, 6/01/06 (Canada) ................................ 17,550,000 15,005,250
Millicom International Cellular SA, senior disc. note, zero cpn ..................
to 6/01/01, 13.50% thereafter, 6/01/06 (Luxembourg) ............................. 22,300,000 17,617,000
Netia Holdings BV, senior disc. note, B, zero cpn. to 11/01/01,
11.25% thereafter, 11/01/07 (Poland) ............................................ 15,000,000 9,525,000
Netia Holdings BV, senior note, B, 10.25%, 11/01/07 (Poland) ..................... 9,000,000 7,650,000
Nextel Communications Inc., senior disc. note, zero cpn. to 10/31/02,
9.75% thereafter, 10/31/07 ...................................................... 35,500,000 25,915,000
Nextel International Inc., senior disc. note, zero cpn. to 4/15/03,
12.125% thereafter, 4/15/08 ..................................................... 20,000,000 11,300,000
Nextel Partners Inc., zero cpn. to 2/01/04, 14.00% thereafter, 2/01/09 ........... 24,000,000 15,510,000
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, NOVEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS (CONT.)
TELECOMMUNICATIONS (CONT.)
NEXTLINK Communications Inc., senior disc. note, zero cpn. to
4/15/03, 9.45% thereafter, 4/15/08 .............................................. $20,250,000 $12,453,750
NEXTLINK Communications Inc., senior note, 9.625%, 10/01/07 ...................... 17,350,000 16,916,250
NEXTLINK Communications Inc., senior note, 9.00%, 3/15/08 ........................ 18,150,000 17,151,750
NTL Inc., senior note, zero cpn. to 4/01/03, 9.75% thereafter, 4/01/08 ........... 50,000,000 34,750,000
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 19,273,325
Paging Network Inc., senior sub. note, 10.125%, 8/01/07 .......................... 7,000,000 2,345,000
Paging Network Inc., senior sub. note, 10.00%, 10/15/08 .......................... 12,800,000 4,288,000
Poland Telecom Finance, senior note, B, 14.00%, 12/01/07 (Poland) ................ 30,000,000 22,650,000
RSL Communications PLC, senior disc. note, zero cpn. to 3/01/03,
10.125% thereafter, 3/01/08 (United Kingdom) .................................... 44,500,000 26,477,500
RSL Communications PLC, senior note, 12.00%, 11/01/08 (United Kingdom) ........... 6,250,000 6,343,750
Rogers Cantel Mobile Inc., senior secured deb., 9.75%, 6/01/16 (Canada) .......... 21,500,000 24,429,375
Spectrasite Holdings Inc., senior disc. note, zero cpn. to 4/15/04,
11.25% thereafter, 4/15/09 ...................................................... 20,500,000 10,762,500
Triton PCS Inc., sub. disc. note, zero cpn. to 5/01/03,
11.00% thereafter, 5/01/08 ...................................................... 25,000,000 17,875,000
VoiceStream Wireless Corp., senior disc. note, 144A, zero cpn. to
11/15/04, 11.875% thereafter, 11/15/09 .......................................... 29,750,000 17,924,375
Williams Communications Group Inc., senior note, 10.875%, 10/01/09 ............... 32,500,000 34,043,750
-------------
812,091,800
-------------
TRANSPORTATION 3.4%
Gearbulk Holding Ltd., senior note, 11.25%, 12/01/04 (Bermuda) ................... 19,000,000 19,570,000
GS Superhighway (Holdings) Ltd., senior note, 10.25%, 8/15/07 (China) ............ 35,000,000 19,035,800
Sea Containers Ltd., senior note, 10.50%, 7/01/03 ................................ 10,000,000 10,150,000
Sea Containers Ltd., senior note, 144A, 10.75%, 10/15/06 ......................... 19,700,000 19,897,000
Ultrapetrol Ltd., first mortgage, 10.50%, 4/01/08 (Bahamas) ...................... 34,000,000 26,010,000
United Air Lines Inc., S.F., pass-through equipment trust, B-2, 9.06%, 9/26/14 ... 20,422,000 21,823,210
-------------
116,486,010
-------------
UTILITIES 2.0%
AES China Generating Co., 10.125%, 12/15/06 (China) .............................. 4,400,000 2,970,000
AES Corp., senior note, 9.50%, 6/01/09 ........................................... 7,500,000 7,575,000
ESI Tractebel Acq. Corp., 7.99%, 12/30/11 ........................................ 8,000,000 7,200,000
Midland Cogeneration Venture, S.F., senior lease obligation, A,
11.75%, 7/23/05 ................................................................. 4,500,000 4,972,500
Midland Cogeneration Venture, S.F., senior lease obligation, B,
13.25%, 7/23/06 ................................................................. 11,500,000 13,588,745
SCG Holding Corp., senior sub. note, 144A, 12.00%, 8/01/09 ....................... 30,000,000 31,800,000
-------------
68,106,245
-------------
TOTAL BONDS (COST $3,685,865,807) ................................................ 3,196,134,225
-------------
TOTAL LONG TERM INVESTMENTS (COST $3,864,415,731) ................................ 3,319,475,857
-------------
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, NOVEMBER 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(b)REPURCHASE AGREEMENT 2.0%
Joint Repurchase Agreement, 5.601%, 12/01/99, (Maturity Value $68,971,413)
(COST $68,960,684) ................................................................ $68,960,684 $68,960,684
Banc of America Securities LLC
Barclays Capital Inc.
Bear Stearns & Co. Inc.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Goldman, Sachs & Co.
Paine Webber Inc.
Paribas Corp.
Warburg Dillon Read LLC
Collateralized by U.S. Treasury Bills & Notes
--------------
TOTAL INVESTMENTS (COST $3,933,376,415) 98.2% ...................................... 3,388,436,541
OTHER ASSETS, LESS LIABILITIES 1.8% ................................................ 60,974,501
--------------
NET ASSETS 100.0% .................................................................. $3,449,411,042
--------------
</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 November 30, 1999, all repurchase
agreements had been entered into on that date.
(c)Sufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
(d)See Note 6 regarding defaulted securities.
(e)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 non-controlled "affiliated
companies" at November 30, 1999 were $6,847,957.
See notes to financial statements.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (Cost $3,933,376,415) .......................................... $3,388,436,541
Receivables:
Investment securities sold ........................................................................ 1,589,250
Capital shares sold ............................................................................... 10,156,902
Dividends and interest ............................................................................ 73,397,100
Other ............................................................................................. 91,000
--------------
Total assets .................................................................................. 3,473,670,793
--------------
Liabilities:
Payables:
Investment securities purchased ................................................................... 11,500,000
Capital shares redeemed ........................................................................... 9,377,511
Affiliates ........................................................................................ 2,685,669
Shareholders ...................................................................................... 623,701
Other liabilities .................................................................................. 72,870
--------------
Total liabilities ............................................................................. 24,259,751
--------------
Net assets, at value ......................................................................... $3,449,411,042
--------------
Net assets consist of:
Undistributed net investment income ................................................................ $13,892,936
Net unrealized depreciation ........................................................................ (544,881,438)
Accumulated net realized loss ...................................................................... (115,307,140)
Capital shares ..................................................................................... 4,095,706,684
--------------
Net assets, at value ......................................................................... $3,449,411,042
--------------
CLASS A:
Net asset value per share* ($2,895,821,916 / 1,146,531,575 shares outstanding) ..................... $2.53
--------------
Maximum offering price per share ($2.53 / 95.75%) .................................................. $2.64
--------------
CLASS B:
Net asset value and maximum offering price per share*
($58,553,944 / 23,218,787 shares outstanding) ...................................................... $2.52
--------------
CLASS C:
Net asset value per share* ($448,084,405 / 176,959,735 shares outstanding) ......................... $2.53
--------------
Maximum offering price per share ($2.53 / 99.00%) .................................................. $2.56
--------------
ADVISOR CLASS:
Net asset value and maximum offering price per share
($46,950,777 / 18,574,118 shares outstanding) ...................................................... $2.53
--------------
</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 SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Dividends ............................................................................................ $3,632,871
Interest ............................................................................................. 186,240,958
------------
Total investment income ......................................................................... 189,873,829
------------
Expenses:
Management fees (Note 3) ............................................................................. 8,042,224
Distribution fees (Note 3)
Class A ............................................................................................. 2,031,739
Class B ............................................................................................. 137,685
Class C ............................................................................................. 1,519,487
Transfer agent fees (Note 3) ......................................................................... 1,810,152
Custodian fees ....................................................................................... 24,867
Reports to shareholders .............................................................................. 394,792
Registration and filing fees ......................................................................... 194,754
Professional fees .................................................................................... 40,759
Trustees' fees and expenses .......................................................................... 33,456
Other ................................................................................................ 45,732
------------
Total expenses .................................................................................. 14,275,647
------------
Net investment income .......................................................................... 175,598,182
------------
Realized and unrealized losses:
Net realized loss from:
Investments ......................................................................................... (20,372,088)
Foreign currency transactions ....................................................................... (27,573)
--------------
Net realized loss .............................................................................. (20,399,661)
Net unrealized appreciation (depreciation) on:
Investments ......................................................................................... (198,581,520)
Translation of assets and liabilities denominated in foreign currencies ............................. 83,325
------------
Net unrealized depreciation .................................................................... (198,498,195)
------------
Net realized and unrealized loss ...................................................................... (218,897,856)
------------
Net decrease in net assets resulting from operations .................................................. $(43,299,674)
=============
</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 six months ended November 30, 1999
(unaudited) and the year ended May 31, 1999
<TABLE>
<CAPTION>
Six Months Ended Year Ended
November 30, 1999 May 31, 1999
---------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................................... $175,598,182 $339,921,053
Net realized gain (loss) from investments and foreign currency transactions (20,399,661) 73,264,684
Net unrealized depreciation on investments and translation
of assets and liabilities denominated in foreign currencies ............. (198,498,195) (437,470,931)
---------------------------------------------
Net decrease in net assets resulting from operations ................. (43,299,674) (24,285,194)
Distributions to shareholders from:
Net investment income:
Class A ................................................................. (151,983,457) (299,008,521)
Class B ................................................................. (1,934,084) (367,466)
Class C ................................................................. (22,612,726) (40,073,283)
Advisor Class ........................................................... (2,269,397) (2,875,463)
---------------------------------------------
Total distributions to shareholders ....................................... (178,799,664) (342,324,733)
Capital share transactions: (Note 2)
Class A .................................................................. (25,565,221) 191,216,722
Class B .................................................................. 34,775,947 26,621,191
Class C .................................................................. (9,597,799) 136,698,940
Advisor Class ............................................................ 10,443,147 14,754,823
---------------------------------------------
Total capital share transactions .......................................... 10,056,074 369,291,676
Net increase (decrease) in net assets ................................ (212,043,264) 2,681,749
Net assets
Beginning of period ....................................................... 3,661,454,306 3,658,772,557
---------------------------------------------
End of period ............................................................. $3,449,411,042 $3,661,454,306
=============================================
Undistributed net investment income included in net assets:
End of period ............................................................. $13,892,936 $17,094,418
=============================================
</TABLE>
See notes to financial statements.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin High Income Trust (the Trust) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company, consisting of
one Fund, the Franklin AGE High Income Fund (the Fund). The Fund 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 (unaudited) (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 B, 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 November 30, 1999, there were an unlimited number of shares authorized (no
par value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1999 MAY 31, 1999*
------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold ........................ 159,693,783 $412,484,050 414,087,089 $1,147,083,301
Shares issued in reinvestment of
distributions ..................... 25,832,451 66,575,358 48,411,868 134,052,298
Shares redeemed .................... (195,441,779) (504,624,629) (393,225,617) (1,089,918,877)
------------------------------------------------------------------------------------
Net increase (decrease) ............ (9,915,545) $(25,565,221) 69,273,340 $191,216,722
====================================================================================
CLASS B
Shares sold ........................ 14,071,647 $36,253,261 10,082,048 $27,600,679
Shares issued in reinvestment of
distributions ..................... 346,395 887,031 67,548 184,499
Shares redeemed .................... (921,073) (2,364,345) (427,778) (1,163,987)
------------------------------------------------------------------------------------
Net increase ....................... 13,496,969 $34,775,947 9,721,818 $26,621,191
====================================================================================
CLASS C
Shares sold ........................ 25,115,898 $65,154,604 92,143,685 $257,265,284
Shares issued in reinvestment of
distributions ..................... 4,750,676 12,284,598 8,220,312 22,770,924
Shares redeemed .................... (33,700,095) (87,037,001) (51,874,088) (143,337,268)
------------------------------------------------------------------------------------
Net increase (decrease) ............ (3,833,521) $(9,597,799) 48,489,909 $136,698,940
====================================================================================
ADVISOR CLASS
Shares sold ........................ 13,267,938 $34,673,168 17,315,590 $47,913,887
Shares issued in reinvestment of
distributions .................... 837,319 2,160,502 985,497 2,728,550
Shares redeemed .................... (10,155,668) (26,390,523) (13,089,579) (35,887,614)
------------------------------------------------------------------------------------
Net increase ....................... 3,949,589 $10,443,147 5,211,508 $14,754,823
====================================================================================
</TABLE>
*For the period January 1, 1999 (effective date) to May 31, 1999 for Class B
shares.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Notes to Financial Statements (unaudited) (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:
<TABLE>
<CAPTION>
Annualized
Fee Rate Month-End Net Assets
---------------------------------------------------------------
<S> <C>
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% In excess of $250 million
</TABLE>
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 $1,150,423 and $279,014,
respectively.
The Fund paid transfer agent fees of $1,810,152, of which $1,561,936 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:
<TABLE>
<S> <C>
Capital loss carryovers expiring in:
2000 $63,753,106
2001 14,304,993
2002 12,243,104
2003 4,606,276
-----------
$94,907,479
===========
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES (cont.)
At November 30, 1999, the net unrealized depreciation based on the cost of
investments for income tax purposes of $3,933,376,415 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 62,177,997
Unrealized depreciation (607,117,871)
-------------
Net unrealized depreciation $(544,939,874)
=============
</TABLE>
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
period ended November 30, 1999 aggregated $501,605,515 and $579,051,095,
respectively.
6. CREDIT RISK AND DEFAULTED SECURITIES
The Fund has 94.6% 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 November 30, 1999, the
Fund held defaulted securities with a value aggregating $46,348,500 representing
1.34% 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 that
industry.
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 Communication 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.
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