SHAREHOLDER LETTER
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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.
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Dear Shareholder:
This annual report for Franklin's AGE High Income Fund covers the fiscal year
ended May 31, 2000. The period under review presented a difficult environment
for fixed income investments, including the type of high yield bonds in which
the fund invests. Fears of rising inflation prompted the Federal Reserve Board
to raise short-term interest rates six times during the 12 months under review,
pushing the federal funds target rate up from 4.75% at the beginning of the
period to 6.50% at the end. The yield on the benchmark 10-year Treasury note
also rose, from 5.76% to 6.27% during the period, exhibiting significant
volatility as it reached a high of 6.79% in the first quarter of 2000. Because
bond prices and yields are inversely related, the overall rise in bond yields
led to a decline in bond prices. Fluctuating interest rates and uncertainty
about future inflation and corporate earnings created an usually volatile
environment for domestic equity markets during the period.
All portfolio holdings mentioned in the report are listed by their complete
legal titles in the fund's Statement of Investments (SOI), which is a complete
listing of the fund's portfolio holdings, including dollar value and number of
shares or principal amount. The SOI begins on page 16.
CONTENTS
Shareholder Letter ........ 1
Performance Summary ....... 8
Financial Highlights &
Statement of Investments .. 12
Financial Statements ...... 25
Notes to
Financial Statements ...... 29
Independent
Auditors' Report .......... 34
Tax Designation ........... 35
[PYRAMID GRAPHIC]
PORTFOLIO BREAKDOWN
Based on Total Net Assets
5/31/00
[PORTFOLIO PIE CHART]
Bonds ................ 91.6%
Equities ............. 4.2%
Short-Term Investments
and Other Assets .... 4.2%
Unfortunately, rising interest rates and equity market volatility, two important
influences on the high yield bond market, tempered demand for such securities.
As a result, the high yield bond market posted relatively weak performance for
the period. The interest rate spread, or risk premium, over the 10-year Treasury
note on the Credit Suisse First Boston Global High Yield Index rose from 5.59%
at the beginning of the period to 7.29% at the period's close.(1)
During the year under review, we generally maintained our strategy of focusing
on growth-oriented sectors that stand to benefit from broad-based economic
strength and favorable industry-specific dynamics. We also took a contrarian
view on the energy sector, seeking to take advantage of that sector's depressed
valuations and cyclical nature. At the close of the period, the fund's largest
sector weightings were in wireless (13.6% of total net assets),
telecommunications (13.5%), energy (6.0%), transportation (5.5%) and cable
television (5.1%).
SECTOR DISCUSSIONS
WIRELESS
The wireless sector continued to grow during the period, as the number of
wireless communications users, or penetration rates, climbed and industry
revenues expanded. In the U.S., penetration rates reached 31% at the end of
1999, a solid increase but still far below penetration rates in many developed
European countries, some of which exceeded 50%. Industry average revenue per
unit (ARPU) was relatively steady over the reporting period, indicating that
price erosion slowed. Adding to the sector's growth was the advent of new data
application technologies, specifically the prospect of data applications (e.g.,
Internet browsers) that can be accessed via cellular handsets. VoiceStream
Wireless, a nationwide cellular operator, performed well during the period, as
it had above-average ARPU and growth rates and has strong support from Sonera
and Hutchison Whampoa, two of the company's equity sponsors. VoiceStream
operates in 23 of the top 25 national markets and is led by a capable management
team. Another fund holding, Rogers Cantel, also benefited from strong equity
sponsorship, as AT&T bought a 33% stake in the company. Rogers Cantel used the
proceeds to lower its debt, and the company's credit rating was upgraded to
investment grade in April of this year. We expect U.S. penetration rates to
reach European levels over the medium term, and our outlook for continued
industry growth is positive.
(1) Source: Standard and Poor's Micropal (Credit Suisse First Boston). The
unmanaged index is constructed to mirror the high yield debt market and includes
reinvested interest. One cannot invest directly in an index, nor is an index
representative of the fund's portfolio.
TELECOMMUNICATIONS
Telecommunications companies with strong management teams and ready access to
capital performed well in the volatile market environment. The growth in data
services drove industry revenue growth, as the need for data transmission
infrastructure has increased dramatically in recent years with widespread access
to the Internet. Competitive local exchange carriers (CLECs) gained greater
market share from the regional bell operating companies (RBOCs) and became
increasingly more competitive, making this group one of the fund's most favored
subsectors. In particular, CLECs increased their exposure to the data services
segment of the business, a trend that was evidenced by the commitment of such
companies as NEXTLINK and McLeod to acquiring and growing data businesses.
During the period, McLeod acquired Splitrock Services Inc., a wholesale provider
of data communications services to Internet service providers and businesses.
NEXTLINK announced plans to purchase Concentric Network Corp., a data network
company that provides intranet/extranet and application hosting solutions for
businesses and consumers. The announcement of both acquisitions positively
impacted the fund's NEXTLINK and McLeod bond holdings because the increased
exposure to data services could improve the companies' revenue growth. Another
noteworthy trend during the reporting period was that companies in need of cash,
on the whole, were able to access capital through the private equity markets to
a greater degree than in the past. Such capital infusions lowered several
companies' funding risk, allowing them to pursue their business plans more
aggressively, which tended to support the price of their debt securities.
"WE EXPECT U.S. PENETRATION RATES TO REACH EUROPEAN LEVELS OVER THE MEDIUM
TERM..."
ENERGY
We took a contrarian approach to the cyclical energy sector during the reporting
period, investing in oil and gas services companies near the bottom of the oil
price cycle when market sentiment was particularly depressed. We focused on oil
and gas services companies, rather than refiners, to capitalize on the volatile
but recovering commodity price environment. The fund's position in Key Energy,
the largest onshore well-service company in the U.S., benefited from the oil
price rally more fully than most, and the company has been using recent gains to
reduce its debt. Our equity warrants in Key Energy, which we received with the
debt issue, appreciated significantly, and we exercised the warrants, realizing
a significant gain. Another fund holding, R&B Falcon, also participated in the
energy price rebound, and the bonds performed well. R&B Falcon operates the
world's largest, most technologically advanced fleet of deep-water drilling
rigs, and is a major market player in the shallow water and onshore markets, as
well. Because exploration and production capital spending tends to lag oil price
movements, R&B Falcon may benefit from this cycle, garnering attractive cash
generation and debt-reduction prospects as a result.
CABLE
During the reporting period, the domestic cable industry's rapid pace of
consolidation slowed. Many cable companies began turning to marketing and
distributing new services as the main contributor of revenue growth. Therefore,
high speed Internet access and voice applications became larger contributors to
overall industry cash flow. Seeking to take advantage of these trends, we
focused on companies that demonstrated strong management teams, adept handling
of service and execution issues, and a wide variety of service offerings. During
the period, Charter Communications acquired one of the fund's positions, Bresnan
Communications, and the fund exercised a change-of-control option on the Bresnan
bonds that resulted in a significant gain.
TRANSPORTATION
In this sector, we focused on companies that may benefit from stable,
broad-based infrastructure growth, as well as solid shipping companies
benefiting from the strong economy. In general, the fund avoided more cyclical
subsectors during the year under review. On the infrastructure side, we
concentrated on companies we believed were well-positioned to take advantage of
increased, planned public spending on infrastructure development. Measures, such
as the Transportation and Equity Act for the 21st Century (TEA 21), which
reaffirmed the current administration's commitment to spending on infrastructure
development, have positively impacted companies that are sensitive to public
funding. During the period, we added bonds from URS, a high-quality, globally
diversified engineering firm with interests in transportation, utilities, waste
management and civil design. The company has benefited significantly since its
merger with Dames & Moore, another global design firm, and boasts valuable
intellectual capital. On the shipping side, we focused on niche operators with
valuable assets, strong customer relationships and visionary management teams.
We remain optimistic about prospects for our position in Gearbulk Holding, a
quality shipping company that operates in several international markets.
Gearbulk is an industry leader with solid financials and will likely enjoy low
replacement costs going forward due to its relatively new fleet of ships.
Overall, the fund's transportation sector weighting increased during the period.
TOP 10 HOLDINGS
5/31/00
COMPANY % OF TOTAL
SECTOR NET ASSETS
-------------------------------------------
AMFM Inc. 1.6%
Consumer Services
NEXTLINK
Communications Inc. 1.5%
Telecommunications
R&B Falcon Corp. 1.4%
Industrial Services
Global Crossing Holdings Ltd. 1.3%
Telecommunications
Allegiance Telecom Inc. 1.3%
Telecommunications
Intermedia
Communications Inc. 1.3%
Telecommunications
Level 3 Communications Inc. 1.3%
Telecommunications
Dobson/Sygnet
Communications Co. 1.3%
Telecommunications
Allied Waste
North America Inc. 1.2%
Industrial Services
P&L Coal Holdings Corp. 1.2%
Energy Minerals
DIVIDEND DISTRIBUTIONS
6/1/99 - 5/31/00
DIVIDEND PER SHARE
--------------------------------------------------------------
MONTH CLASS A CLASS B CLASS C ADVISOR CLASS
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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
December 2.2 cents 2.10 cents 2.10 cents 2.23 cents
January 2.2 cents 2.10 cents 2.10 cents 2.23 cents
February 2.2 cents 2.10 cents 2.10 cents 2.23 cents
March 2.2 cents 2.09 cents 2.09 cents 2.23 cents
April 2.2 cents 2.09 cents 2.09 cents 2.23 cents
May 2.2 cents 2.09 cents 2.09 cents 2.22 cents
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TOTAL 26.4 CENTS 25.08 CENTS 25.11 CENTS 26.75 CENTS
LOOKING FORWARD
Despite recent market volatility, the domestic economy's outlook remains
positive. Data suggest the economy's remarkable expansion could continue,
although possibly at a more moderate pace, and that corporate fundamentals
remain strong. Inflation, as measured by the Consumer Price Index, rose from a
2.0% annualized pace at the beginning of the period to an annualized 3.1% at the
period's close, but is still relatively low, and we do not expect it to exert
undue pressure on the economy in the near term. At recent interest rate spread
levels of 7.29%, high yield valuations are quite attractive on a historical
basis -- considerably wider than the 10-year average of 4.95% and the 5-year
average of 4.69%. In our opinion, domestic economic strength and solid corporate
fundamentals should underpin the performance of high yield companies. This,
coupled with historically attractive valuations, provides a favorable outlook
for high yield bonds 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 May
31, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
fund. 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: 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: 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.
ONE-YEAR PERFORMANCE SUMMARY
AS OF 5/31/00
One-year 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, as well as the level of operating expenses for
each class. Past distributions are not indicative of future trends. All total
returns include reinvested distributions at net asset value.
CLASS A
One-Year Total Return -5.01%
Net Asset Value (NAV) $2.30 (5/31/00) $2.69 (5/31/99)
Change in NAV -$0.39
Distributions (6/1/99 - 5/31/00) Dividend Income $0.2640
CLASS B
One-Year Total Return -5.49%
Net Asset Value (NAV) $2.30 (5/31/00) $2.69 (5/31/99)
Change in NAV -$0.39
Distributions (6/1/99 - 5/31/00) Dividend Income $0.2508
CLASS C
One-Year Total Return -5.46%
Net Asset Value (NAV) $2.31 (5/31/00) $2.70 (5/31/99)
Change in NAV -$0.39
Distributions (6/1/99 - 5/31/00) Dividend Income $0.2511
ADVISOR CLASS
One-Year Total Return -4.88%
Net Asset Value (NAV) $2.30 (5/31/00) $2.69 (5/31/99)
Change in NAV -$0.39
Distributions (6/1/99 - 5/31/00) Dividend Income $0.2675
Past performance does not guarantee future results.
ADDITIONAL PERFORMANCE
AS OF 6/30/00
INCEPTION
CLASS A 1-YEAR 5-YEAR 10-YEAR (12/31/69)
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Cumulative Total Return(1) -2.50% +36.36% +161.39% +1,024.92%
Average Annual Total Return(2) -6.69% +5.50% +9.62% +8.10%
Value of $10,000 Investment(3) $9,331 $13,070 $25,062 $107,621
INCEPTION
CLASS B 1-YEAR (1/1/99)
--------------------------------------------------------------------------------
Cumulative Total Return(1) -3.00% -1.71%
Average Annual Total Return(2) -6.50% -3.44%
Value of $10,000 Investment(3) $9,350 $9,490
INCEPTION
CLASS C 1-YEAR 5-YEAR (5/16/95)
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Cumulative Total Return(1) -2.98% +33.04% +34.54%
Average Annual Total Return(2) -4.92% +5.65% +5.74%
Value of $10,000 Investment(3) $9,508 $13,161 $13,310
INCEPTION
ADVISOR CLASS(4) 1-YEAR 5-YEAR 10-YEAR (12/31/69)
--------------------------------------------------------------------------------
Cumulative Total Return(1) -2.37% +37.42% +163.43% +1,033.70%
Average Annual Total Return(2) -2.37% +6.56% +10.17% +8.29%
Value of $10,000 Investment(3) $9,763 $13,742 $26,343 $113,370
AS OF 5/31/00
SHARE CLASS A B C ADVISOR
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Distribution Rate(5) 11.00% 10.90% 10.76% 11.58%
30-Day Standardized Yield(6) 11.73% 11.69% 11.58% 12.43%
For updated performance figures, see "Prices and Performance" at
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. Figures represent the value of a hypothetical $10,000 investment in the fund
for the periods shown and include the current, applicable, maximum sales
charge(s) for that class.
4. Effective January 1, 1997, the fund began offering Advisor Class shares,
which do not have sales charges nor Rule 12b-1 plans. Performance quotations for
this class reflect the following methods of calculation: (a) For periods prior
to January 1, 1997, a restated figure is used based upon the fund's Class A
performance, excluding the effect of Class A's maximum initial sales charge and
including the effect of the Class A Rule 12b-1 fees; and (b) for periods after
January 1, 1997, an actual Advisor Class figure is used reflecting a deduction
of all charges and fees applicable to that class. Since January 2, 1997
(commencement of sales), the cumulative and average annual total returns of
Advisor Class shares were +3.69% and +13.51%, respectively.
5. Distribution rate is based on an annualization of the respective class's May
dividend and the maximum offering price (net asset value for Class B and Advisor
Class) per share on May 31, 2000.
6. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended May 31, 2000.
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.
AVERAGE ANNUAL TOTAL RETURN
5/31/00
CLASS A
------------------------------------
1-Year -9.06%
5-Year +5.10%
10-Year +9.59%
Since Inception (12/31/69) +8.03%
AVERAGE ANNUAL TOTAL RETURN
5/31/00
CLASS B
------------------------------------
1-Year -8.91%
Since Inception (1/1/99) -5.44%
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 interest. One cannot invest directly in an index.
CLASS A (6/1/90-5/31/00)
FRANKLIN'S AGE HIGH INCOME FUND - CS FIRST
CLASS A BOSTON
GLOBAL
HIGH YIELD
INDEX*
------------------------------------------------------------------------------
06/01/1990 $9,583 $10,000
06/30/1990 $9,821 3.15% $10,315
07/31/1990 $10,062 3.23% $10,648
08/31/1990 $9,441 -4.62% $10,156
09/30/1990 $8,771 -7.63% $9,381
10/31/1990 $8,131 -2.51% $9,146
11/30/1990 $8,305 2.01% $9,330
12/31/1990 $8,396 0.48% $9,374
01/31/1991 $8,575 2.74% $9,631
02/28/1991 $9,530 8.63% $10,462
03/31/1991 $10,106 6.20% $11,111
04/30/1991 $10,558 4.15% $11,572
05/31/1991 $10,630 0.50% $11,630
06/30/1991 $10,973 2.62% $11,935
07/31/1991 $11,321 3.38% $12,338
08/31/1991 $11,627 1.82% $12,563
09/30/1991 $11,841 2.27% $12,848
10/31/1991 $12,247 3.31% $13,273
11/30/1991 $12,323 0.80% $13,379
12/31/1991 $12,449 0.73% $13,477
01/31/1992 $12,867 4.07% $14,026
02/29/1992 $13,142 2.43% $14,366
03/31/1992 $13,400 1.49% $14,581
04/30/1992 $13,510 0.08% $14,592
05/31/1992 $13,722 1.36% $14,791
06/30/1992 $13,783 0.99% $14,937
07/31/1992 $14,049 1.54% $15,167
08/31/1992 $14,266 1.38% $15,376
09/30/1992 $14,432 0.65% $15,476
10/31/1992 $14,180 -1.04% $15,315
11/30/1992 $14,349 1.50% $15,545
12/31/1992 $14,520 1.13% $15,721
01/31/1993 $14,853 2.73% $16,150
02/28/1993 $15,081 1.98% $16,470
03/31/1993 $15,310 2.11% $16,817
04/30/1993 $15,432 0.57% $16,913
05/31/1993 $15,610 1.46% $17,160
06/30/1993 $15,956 1.81% $17,471
07/31/1993 $16,137 1.04% $17,652
08/31/1993 $16,205 0.85% $17,802
09/30/1993 $16,273 0.57% $17,904
10/31/1993 $16,746 1.83% $18,231
11/30/1993 $16,816 1.26% $18,461
12/31/1993 $17,080 1.26% $18,694
01/31/1994 $17,446 1.78% $19,027
02/28/1994 $17,279 0.15% $19,055
03/31/1994 $16,512 -2.94% $18,495
04/30/1994 $16,404 -1.34% $18,247
05/31/1994 $16,477 0.57% $18,351
06/30/1994 $16,489 -0.67% $18,228
07/31/1994 $16,564 0.47% $18,314
08/31/1994 $16,702 0.72% $18,446
09/30/1994 $16,777 0.40% $18,519
10/31/1994 $16,853 0.07% $18,532
11/30/1994 $16,674 -1.16% $18,317
12/31/1994 $16,817 1.06% $18,512
01/31/1995 $16,960 1.05% $18,706
02/28/1995 $17,630 2.46% $19,166
03/31/1995 $17,776 1.13% $19,383
04/30/1995 $18,257 2.22% $19,813
05/31/1995 $18,675 2.82% $20,372
06/30/1995 $18,825 0.66% $20,506
07/31/1995 $19,181 1.55% $20,824
08/31/1995 $19,265 0.28% $20,882
09/30/1995 $19,418 1.15% $21,122
10/31/1995 $19,572 1.11% $21,357
11/30/1995 $19,657 0.47% $21,457
12/31/1995 $19,956 1.27% $21,730
01/31/1996 $20,329 1.90% $22,143
02/29/1996 $20,489 0.53% $22,260
03/31/1996 $20,358 -0.27% $22,200
04/30/1996 $20,446 0.54% $22,320
05/31/1996 $20,683 0.81% $22,501
06/30/1996 $20,698 0.22% $22,550
07/31/1996 $20,864 0.90% $22,753
08/31/1996 $21,258 1.09% $23,001
09/30/1996 $21,732 1.72% $23,397
10/31/1996 $21,902 0.84% $23,593
11/30/1996 $22,384 1.56% $23,961
12/31/1996 $22,791 1.95% $24,428
01/31/1997 $22,965 0.73% $24,607
02/28/1997 $23,378 1.88% $25,069
03/31/1997 $22,833 -1.12% $24,789
04/30/1997 $23,092 0.89% $25,009
05/31/1997 $23,596 2.01% $25,512
06/30/1997 $24,023 1.36% $25,859
07/31/1997 $24,700 2.12% $26,407
08/31/1997 $24,717 0.54% $26,550
09/30/1997 $25,153 1.98% $27,075
10/31/1997 $25,001 -0.01% $27,073
11/30/1997 $25,357 0.71% $27,265
12/31/1997 $25,546 0.91% $27,513
01/31/1998 $25,821 1.70% $27,981
02/28/1998 $26,100 0.78% $28,199
03/31/1998 $26,381 0.50% $28,340
04/30/1998 $26,487 0.75% $28,553
05/31/1998 $26,504 0.30% $28,638
06/30/1998 $26,523 0.21% $28,698
07/31/1998 $26,721 0.70% $28,899
08/31/1998 $24,738 -6.79% $26,937
09/30/1998 $24,850 -0.01% $26,934
10/31/1998 $24,407 -1.99% $26,398
11/30/1998 $26,009 5.07% $27,737
12/31/1998 $25,934 -0.23% $27,673
01/31/1999 $26,331 0.94% $27,933
02/28/1999 $26,062 -0.21% $27,874
03/31/1999 $26,370 0.91% $28,128
04/30/1999 $26,875 2.21% $28,750
05/31/1999 $26,307 -1.08% $28,439
06/30/1999 $26,328 0.05% $28,453
07/31/1999 $26,347 0.05% $28,468
08/31/1999 $25,867 -0.89% $28,214
09/30/1999 $25,583 -0.77% $27,997
10/31/1999 $25,502 -0.49% $27,860
11/30/1999 $26,037 1.36% $28,239
12/31/1999 $26,059 1.21% $28,580
01/31/2000 $25,767 -0.40% $28,466
02/29/2000 $25,895 0.62% $28,643
03/31/2000 $25,382 -1.48% $28,219
04/30/2000 $25,403 -0.15% $28,176
05/31/2000 -1.63% $24,990 -1.60% $27,725
CLASS B (1/1/99-5/31/00)
<TABLE>
<CAPTION>
FRANKLIN'S AGE HIGH INCOME FUND - CS FIRST
CLASS B BOSTON GLOBAL
HIGH YIELD
INDEX*
------------------------------------------------------------------------------
<S> <C> <C> <C>
01/01/1999 $10,000 $10,000
01/31/1999 $10,153 0.94% $10,094
02/28/1999 $10,046 -0.21% $10,073
03/31/1999 $10,123 0.91% $10,164
04/30/1999 $10,351 2.21% $10,389
05/31/1999 $10,129 -1.08% $10,277
06/30/1999 $10,133 0.05% $10,282
07/31/1999 $10,098 0.05% $10,287
08/31/1999 $9,947 -0.89% $10,196
09/30/1999 $9,834 -0.77% $10,117
10/31/1999 $9,759 -0.49% $10,068
11/30/1999 $9,959 1.36% $10,204
12/31/1999 $10,003 1.21% $10,328
01/31/2000 $9,887 -0.40% $10,287
02/29/2000 $9,932 0.62% $10,350
03/31/2000 $9,691 -1.48% $10,197
04/30/2000 $9,736 -0.15% $10,182
05/31/2000 $9,239 -1.60% $10,019
</TABLE>
Past performance does not guarantee future results.
CLASS C (5/16/95-5/31/00)
<TABLE>
<CAPTION>
FRANKLIN'S AGE HIGH INCOME FUND CS FIRST
- CLASS C BOSTON GLOBAL
HIGH YIELD
INDEX*
------------------------------------------------------------------------------
<S> <C> <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% $10,362
08/31/1995 $10,223 0.28% $10,391
09/30/1995 $10,297 1.15% $10,510
10/31/1995 $10,373 1.11% $10,627
11/30/1995 $10,412 0.47% $10,677
12/31/1995 $10,565 1.27% $10,812
01/31/1996 $10,756 1.90% $11,018
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% $11,106
05/31/1996 $10,927 0.81% $11,196
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% $11,445
09/30/1996 $11,500 1.72% $11,642
10/31/1996 $11,584 0.84% $11,739
11/30/1996 $11,792 1.56% $11,923
12/31/1996 $12,001 1.95% $12,155
01/31/1997 $12,087 0.73% $12,244
02/28/1997 $12,340 1.88% $12,474
03/31/1997 $12,006 -1.12% $12,334
04/30/1997 $12,136 0.89% $12,444
05/31/1997 $12,393 2.01% $12,694
06/30/1997 $12,611 1.36% $12,867
07/31/1997 $12,960 2.12% $13,140
08/31/1997 $13,007 0.54% $13,210
09/30/1997 $13,230 1.98% $13,472
10/31/1997 $13,144 -0.01% $13,471
11/30/1997 $13,281 0.71% $13,566
12/31/1997 $13,419 0.91% $13,690
01/31/1998 $13,511 1.70% $13,923
02/28/1998 $13,650 0.78% $14,031
03/31/1998 $13,836 0.50% $14,101
04/30/1998 $13,839 0.75% $14,207
05/31/1998 $13,842 0.30% $14,250
06/30/1998 $13,844 0.21% $14,280
07/31/1998 $13,989 0.70% $14,380
08/31/1998 $12,902 -6.79% $13,403
09/30/1998 $13,001 -0.01% $13,402
10/31/1998 $12,765 -1.99% $13,135
11/30/1998 $13,594 5.07% $13,801
12/31/1998 $13,549 -0.23% $13,769
01/31/1999 $13,750 0.94% $13,899
02/28/1999 $13,605 -0.21% $13,870
03/31/1999 $13,708 0.91% $13,996
04/30/1999 $14,014 2.21% $14,305
05/31/1999 $13,713 -1.08% $14,151
06/30/1999 $13,718 0.05% $14,158
07/31/1999 $13,671 0.05% $14,165
08/31/1999 $13,467 -0.89% $14,039
09/30/1999 $13,315 -0.77% $13,931
10/31/1999 $13,215 -0.49% $13,862
11/30/1999 $13,486 1.36% $14,051
12/31/1999 $13,545 1.21% $14,221
01/31/2000 $13,388 -0.40% $14,164
02/29/2000 $13,449 0.62% $14,252
03/31/2000 $13,123 -1.48% $14,041
04/30/2000 $13,184 -0.15% $14,020
05/31/2000 -1.66% $12,964 -1.60% $13,796
</TABLE>
ADVISOR CLASS (6/1/90-5/31/00)
<TABLE>
<CAPTION>
FRANKLIN'S AGE HIGH INCOME FUND CS FIRST
- ADVISOR CLASS BOSTON GLOBAL
HIGH YIELD
INDEX*
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
06/01/1990 $10,000 $10,000
06/30/1990 $10,248 3.15% $10,315
07/31/1990 $10,499 3.23% $10,648
08/31/1990 $9,852 -4.62% $10,156
09/30/1990 $9,153 -7.63% $9,381
10/31/1990 $8,485 -2.51% $9,146
11/30/1990 $8,666 2.01% $9,330
12/31/1990 $8,761 0.48% $9,374
01/31/1991 $8,947 2.74% $9,631
02/28/1991 $9,944 8.63% $10,462
03/31/1991 $10,546 6.20% $11,111
04/30/1991 $11,017 4.15% $11,572
05/31/1991 $11,092 0.50% $11,630
06/30/1991 $11,451 2.62% $11,935
07/31/1991 $11,813 3.38% $12,338
08/31/1991 $12,132 1.82% $12,563
09/30/1991 $12,356 2.27% $12,848
10/31/1991 $12,780 3.31% $13,273
11/30/1991 $12,859 0.80% $13,379
12/31/1991 $12,990 0.73% $13,477
01/31/1992 $13,426 4.07% $14,026
02/29/1992 $13,713 2.43% $14,366
03/31/1992 $13,982 1.49% $14,581
04/30/1992 $14,097 0.08% $14,592
05/31/1992 $14,318 1.36% $14,791
06/30/1992 $14,382 0.99% $14,937
07/31/1992 $14,660 1.54% $15,167
08/31/1992 $14,886 1.38% $15,376
09/30/1992 $15,059 0.65% $15,476
10/31/1992 $14,797 -1.04% $15,315
11/30/1992 $14,973 1.50% $15,545
12/31/1992 $15,151 1.13% $15,721
01/31/1993 $15,499 2.73% $16,150
02/28/1993 $15,737 1.98% $16,470
03/31/1993 $15,976 2.11% $16,817
04/30/1993 $16,103 0.57% $16,913
05/31/1993 $16,288 1.46% $17,160
06/30/1993 $16,650 1.81% $17,471
07/31/1993 $16,838 1.04% $17,652
08/31/1993 $16,909 0.85% $17,802
09/30/1993 $16,981 0.57% $17,904
10/31/1993 $17,475 1.83% $18,231
11/30/1993 $17,547 1.26% $18,461
12/31/1993 $17,823 1.26% $18,694
01/31/1994 $18,205 1.78% $19,027
02/28/1994 $18,030 0.15% $19,055
03/31/1994 $17,230 -2.94% $18,495
04/30/1994 $17,117 -1.34% $18,247
05/31/1994 $17,193 0.57% $18,351
06/30/1994 $17,206 -0.67% $18,228
07/31/1994 $17,284 0.47% $18,314
08/31/1994 $17,428 0.72% $18,446
09/30/1994 $17,507 0.40% $18,519
10/31/1994 $17,586 0.07% $18,532
11/30/1994 $17,399 -1.16% $18,317
12/31/1994 $17,548 1.06% $18,512
01/31/1995 $17,697 1.05% $18,706
02/28/1995 $18,397 2.46% $19,166
03/31/1995 $18,549 1.13% $19,383
04/30/1995 $19,051 2.22% $19,813
05/31/1995 $19,487 2.82% $20,372
06/30/1995 $19,644 0.66% $20,506
07/31/1995 $20,015 1.55% $20,824
08/31/1995 $20,102 0.28% $20,882
09/30/1995 $20,262 1.15% $21,122
10/31/1995 $20,423 1.11% $21,357
11/30/1995 $20,511 0.47% $21,457
12/31/1995 $20,824 1.27% $21,730
01/31/1996 $21,213 1.90% $22,143
02/29/1996 $21,379 0.53% $22,260
03/31/1996 $21,243 -0.27% $22,200
04/30/1996 $21,335 0.54% $22,320
05/31/1996 $21,582 0.81% $22,501
06/30/1996 $21,598 0.22% $22,550
07/31/1996 $21,771 0.90% $22,753
08/31/1996 $22,182 1.09% $23,001
09/30/1996 $22,677 1.72% $23,397
10/31/1996 $22,854 0.84% $23,593
11/30/1996 $23,357 1.56% $23,961
12/31/1996 $23,782 1.95% $24,428
01/31/1997 1.11% $24,046 0.73% $24,607
02/28/1997 1.81% $24,481 1.88% $25,069
03/31/1997 -2.32% $23,913 -1.12% $24,789
04/30/1997 1.14% $24,186 0.89% $25,009
05/31/1997 2.19% $24,716 2.01% $25,512
06/30/1997 1.82% $25,165 1.36% $25,859
07/31/1997 2.83% $25,878 2.12% $26,407
08/31/1997 0.08% $25,898 0.54% $26,550
09/30/1997 1.77% $26,357 1.98% $27,075
10/31/1997 -0.26% $26,288 -0.01% $27,073
11/30/1997 1.10% $26,577 0.71% $27,265
12/31/1997 0.75% $26,777 0.91% $27,513
01/31/1998 1.09% $27,068 1.70% $27,981
02/28/1998 1.09% $27,364 0.78% $28,199
03/31/1998 1.09% $27,662 0.50% $28,340
04/30/1998 0.41% $27,775 0.75% $28,553
05/31/1998 0.08% $27,797 0.30% $28,638
06/30/1998 0.08% $27,820 0.21% $28,698
07/31/1998 0.76% $28,031 0.70% $28,899
08/31/1998 -7.41% $25,954 -6.79% $26,937
09/30/1998 0.46% $26,073 -0.01% $26,934
10/31/1998 -1.77% $25,612 -1.99% $26,398
11/30/1998 6.58% $27,297 5.07% $27,737
12/31/1998 -0.28% $27,221 -0.23% $27,673
01/31/1999 1.54% $27,640 0.94% $27,933
02/28/1999 -0.65% $27,460 -0.21% $27,874
03/31/1999 0.82% $27,685 0.91% $28,128
04/30/1999 1.92% $28,217 2.21% $28,750
05/31/1999 -2.10% $27,624 -1.08% $28,439
06/30/1999 0.09% $27,649 0.05% $28,453
07/31/1999 0.08% $27,671 0.05% $28,468
08/31/1999 -1.81% $27,171 -0.89% $28,214
09/30/1999 -1.08% $26,877 -0.77% $27,997
10/31/1999 -0.30% $26,796 -0.49% $27,860
11/30/1999 2.11% $27,362 1.36% $28,239
12/31/1999 0.09% $27,386 1.21% $28,580
01/31/2000 -1.11% $27,083 -0.40% $28,466
02/29/2000 0.91% $27,329 0.62% $28,643
03/31/2000 -2.37% $26,681 -1.48% $28,219
04/30/2000 0.10% $26,708 -0.15% $28,176
05/31/2000 -1.62% $26,277 -1.60% $27,725
</TABLE>
* Source: Standard and Poor's Micropal.
AVERAGE ANNUAL TOTAL RETURN
5/31/00
CLASS C
------------------------------------
1-Year -7.35%
5-Year +5.25%
Since Inception (5/16/95) +5.28%
AVERAGE ANNUAL TOTAL RETURN
5/31/00
ADVISOR CLASS**
------------------------------------
1-Year -4.88%
5-Year +6.16%
10-Year +10.14%
Since Inception (12/31/69) +8.21%
*Source: Standard and Poor's Micropal.
**Effective January 1, 1997, the fund began offering Advisor Class shares, which
do not have sales charges nor Rule 12b-1 plans. Performance quotations for this
class reflect the following methods of calculation: (a) For periods prior to
January 1, 1997, a restated figure is used based upon the fund's Class A
performance, excluding the effect of Class A's maximum initial sales charge and
including the effect of the Class A Rule 12b-1 fees; and (b) for periods after
January 1, 1997, an actual Advisor Class figure is used reflecting a deduction
of all charges and fees applicable to that class.
Past performance does not guarantee future results.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Highlights
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------
YEAR ENDED MAY 31,
----------------------------------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 2.69 $ 2.98 $ 2.90 $ 2.79 $ 2.77
----------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ................... .26 .26 .26 .26 .25
Net realized and unrealized gains (losses) . (.39) (.29) .08 .11 .03
----------------------------------------------------------------------
Total from investment operations ............ (.13) (.03) .34 .37 .28
----------------------------------------------------------------------
Less distributions from net investment income (.26) (.26) (.26) (.26) (.26)
----------------------------------------------------------------------
Net asset value, end of year ................ $ 2.30 $ 2.69 $ 2.98 $ 2.90 $ 2.79
======================================================================
Total return(b) ............................. (5.01%) (.74%) 12.32% 14.09% 10.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $2,442,432 $3,108,809 $3,236,134 $2,638,914 $2,183,738
Ratios to average net assets:
Expenses ................................... .74% .72% .70% .71% .70%
Net investment income ...................... 10.28% 9.40% 9.04% 9.31% 9.07%
Portfolio turnover rate ..................... 18.79% 27.55% 29.69% 20.01% 19.87%
</TABLE>
(a) Based on average shares outstanding effective year ended May 31, 2000.
(b) 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)
CLASS B
--------------------
YEAR ENDED MAY 31,
--------------------
2000 1999(c)
--------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 2.68 $ 2.76
--------------------
Income from investment operations:
Net investment income(a) ................... .24 .11
Net realized and unrealized losses ......... (.37) (.08)
--------------------
Total from investment operations ............ (.13) .03
--------------------
Less distributions from net investment income (.25) (.11)
--------------------
Net asset value, end of year ................ $ 2.30 $ 2.68
====================
Total return(b) ............................. (5.49%) 1.29%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $69,565 $26,095
Ratios to average net assets:
Expenses ................................... 1.25% 1.24%(d)
Net investment income ...................... 9.85% 8.41%(d)
Portfolio turnover rate ..................... 18.79% 27.55%
(a)Based on average shares outstanding effective year ended May 31, 2000.
(b)Total return does not reflect contingent deferred sales charge, and is not
annualized for periods less than one year.
(c)For the period January 1, 1999 (effective date) to May 31, 1999.
(d)Annualized
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------------------
YEAR ENDED MAY 31,
---------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 2.69 $ 2.98 $ 2.90 $ 2.79 $ 2.77
---------------------------------------------------------------------
Income from investment operations:
Net investment income(a) ................... .25 .25 .25 .25 .25
Net realized and unrealized gains (losses) . (.38) (.29) .08 .11 .02
---------------------------------------------------------------------
Total from investment operations ............ (.13) (.04) .33 .36 .27
---------------------------------------------------------------------
Less distributions from net investment income (.25) (.25) (.25) (.25) (.25)
---------------------------------------------------------------------
Net asset value, end of year ................ $ 2.31 $ 2.69 $ 2.98 $ 2.90 $ 2.79
=====================================================================
Total return(b) ............................. (5.46%) (.93%) 11.69% 13.41% 10.06%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $367,151 $487,196 $394,612 $151,073 $ 46,064
Ratios to average net assets:
Expenses ................................... 1.25% 1.24% 1.23% 1.25% 1.25%
Net investment income ...................... 9.76% 8.89% 8.51% 8.75% 8.50%
Portfolio turnover rate ..................... 18.79% 27.55% 29.69% 20.01% 19.87%
</TABLE>
(a)Based on average shares outstanding effective year ended May 31, 2000.
(b)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>
ADVISOR CLASS
----------------------------------------------------
YEAR ENDED MAY 31,
----------------------------------------------------
2000 1999 1998 1997(c)
----------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .......... $ 2.69 $ 2.98 $ 2.90 $ 2.90
------- ------- ------- ------
Income from investment operations:
Net investment income(a) ................... .26 .27 .27 .12
Net realized and unrealized gains (losses) . (.38) (.29) .08 (.01)
------- ------- ------- ------
Total from investment operations ............ (.12) (.02) .35 .11
------- ------- ------- ------
Less distributions from net investment income (.27) (.27) (.27) (.11)
------- ------- ------- ------
Net asset value, end of year ................ $ 2.30 $ 2.69 $ 2.98 $ 2.90
======= ======= ======= ======
Total return(b) ............................. (4.88%) (.61%) 12.46% 3.94%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) ............. $17,234 $39,354 $28,026 $6,224
Ratios to average net assets:
Expenses ................................... .60% .59% .58% .61%(d)
Net investment income ...................... 10.29% 9.52% 9.17% 9.25%(d)
Portfolio turnover rate ..................... 18.79% 27.55% 29.69% 20.01%
</TABLE>
(a)Based on average shares outstanding effective year ended May 31, 2000.
(b)Total return is not annualized.
(c)For the period January 2, 1997 (effective date) to May 31, 1997.
(d)Annualized
See notes to financial statements.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 2000
<TABLE>
<CAPTION>
SHARES/
WARRANTS/
COUNTRY RIGHTS VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS, WARRANTS AND RIGHTS 1.7%
CONSUMER NON-DURABLES .6%
Nabisco Group Holdings Corp. ........................................ United States 510,000 $ 11,124,375
R.J. Reynolds Tobacco Holdings Inc. ................................. United States 170,000 4,717,500
(a) Specialty Foods Corp., 144A ......................................... United States 97,500 --
------------
15,841,875
------------
(a) CONSUMER SERVICES
Advantica Restaurant Group Inc., A .................................. United States 612,439 459,329
Jack in the Box Inc. ................................................ United States 24,090 597,733
------------
1,057,062
------------
ENERGY MINERALS .2%
(a) Abraxas Petroleum Corp. ............................................. United States 2,211,842 3,317,763
Abraxas Petroleum Corp., rts., 11/01/04 ............................. United States 2,211,842 1,105,921
(a) McMoran Exploration Co. ............................................. United States 25,937 403,645
------------
4,827,329
------------
GOVERNMENT BONDS
United Mexican States, rts., 6/30/03 ................................ Mexico 3,000 --
------------
INDUSTRIAL SERVICES .2%
(a) Key Energy Services Inc. ............................................ United States 59,488 646,932
R&B Falcon Corp., 144A, wts., 5/01/09 ............................... United States 11,750 5,757,500
------------
6,404,432
------------
NON-ENERGY MINERALS
Gulf States Steel Inc., wts., 4/15/03 ............................... United States 27,800 28
------------
PROCESS INDUSTRIES .1%
(a) Darling International Inc. .......................................... United States 504,447 599,031
(a) Gaylord Container Corp., wts., 11/01/02 ............................. United States 232,762 931,048
Walter Industries Inc. .............................................. United States 189,505 2,049,023
------------
3,579,102
------------
(a) PRODUCER MANUFACTURING .1%
Goss Holdings Inc., B ............................................... United States 211,174 422,348
(e) Harvard Industries Inc. ............................................. United States 793,966 3,572,847
------------
3,995,195
------------
(a) RETAIL TRADE .1%
Penn Traffic Co. .................................................... United States 389,598 2,142,789
------------
TELECOMMUNICATIONS .4%
International Wireless Communications Holdings Inc. ................. United States 1,759,743 1,055,846
International Wireless Communications Holdings Inc., wts, 8/15/01 ... United States 36,400 36
Loral Space & Communications Ltd., wts., 1/15/07 .................... United States 35,300 126,604
McCaw International Ltd., wts., 4/15/07 ............................. United States 28,500 855,000
(a) Nextel Communications Inc., A ....................................... United States 64,337 5,959,215
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
SHARES/
WARRANTS/
COUNTRY RIGHTS VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS, WARRANTS AND RIGHTS (CONT.)
TELECOMMUNICATIONS (CONT.)
Occidente Y Caribe Celular, 144A, wts., 3/15/04 ..................... Colombia 152,660 $ 2,289,900
(d) Poland Telecom Finance, wts., 12/01/07 .............................. Poland 30,000 375
------------
10,286,976
------------
TOTAL COMMON STOCKS, WARRANTS AND RIGHTS (COST $91,317,666) ......... 48,134,788
------------
PREFERRED STOCKS 1.8%
Asia Pulp & Paper Co. Ltd., 12.00% .................................. Indonesia 24,700 11,238,500
Fresenius Medical Care Capital Trust, 9.00% ......................... United States 13,100 12,314,000
R&B Falcon Corp., 13.875%, pfd., PIK ................................ United States 13,511 14,997,143
Sinclair Capital, 11.625%, pfd. ...................................... United States 147,000 13,303,500
------------
TOTAL PREFERRED STOCKS (COST $65,470,854) ........................... 51,853,143
------------
CONVERTIBLE PREFERRED STOCKS .6%
UTILITIES .6%
CMS Energy Trust I, 7.75%, cvt. pfd. (COST $26,500,000) ............. United States 530,000 18,748,750
------------
PARTNERSHIP UNITS .1%
PROCESS INDUSTRIES .1%
Phosphate Resource Partners LP (COST $3,639,277) .................... United States 415,000 2,619,688
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT*
-------
<S> <C> <C> <C>
BONDS 91.1%
COMMERCIAL SERVICES 2.5%
(c) AmeriServe Food Distribution Inc., senior note, 8.875%, 10/15/06 .... United States $16,150,000 565,250
(c) AmeriServe Food Distribution Inc., senior sub. note, 10.125%, 7/15/07 United States 14,210,000 213,150
Fleming Cos. Inc., senior sub. note, B, 10.50%, 12/01/04 ............ United States 13,200,000 11,880,000
Fleming Cos. Inc., senior sub. note, B, 10.625%, 7/31/07 ............ United States 14,000,000 11,760,000
Intertek Finance PLC, senior sub. note, B, 10.25%, 11/01/06 ......... United Kingdom 9,400,000 7,849,000
Iron Mountain Inc., senior sub. note, 8.75%, 9/30/09 ................ United States 16,650,000 14,901,750
Iron Mountain Inc., senior sub. note, 8.25%, 7/01/11 ................ United States 7,500,000 6,412,500
Lamar Advertising Co., senior sub. note, 9.625%, 12/01/06 ........... United States 20,000,000 19,800,000
------------
73,381,650
------------
CONSUMER DURABLES .8%
Dura Operating Corp., senior sub. note, Series B, 9.00%, 5/01/09 .... United States 11,000,000 9,625,000
Sealy Mattress Co., senior disc. note, B, zero cpn. to 12/15/02,
10.875% thereafter, 12/15/07 ....................................... United States 10,200,000 7,140,000
Sealy Mattress Co., senior sub. note, B, 9.875%, 12/15/07 ........... United States 6,800,000 6,494,000
------------
23,259,000
------------
CONSUMER NON-DURABLES 2.5%
Agrilink Foods Inc., senior sub. note, 11.875%, 11/01/08 ............ United States 17,000,000 14,280,000
Hartmarx Corp., senior sub. note, 10.875%, 1/15/02 .................. United States 12,400,000 12,214,000
Premier International Foods, senior note, 144A, 12.00%, 9/01/09 ..... United States 8,000,000 7,720,000
Revlon Consumer Products Corp., senior sub. note, 8.625%, 2/01/08 ... United States 42,000,000 21,210,000
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS (CONT.)
CONSUMER NON-DURABLES (CONT.)
SFC New Holdings Inc., senior note, 11.25%, 8/15/01 ................. United States $14,405,000 $ 13,900,825
SFC New Holdings Inc., zero cpn. to 6/15/05, 11.00% thereafter,
12/15/09 ........................................................... United States 909,980 --
Specialty Retailers Inc., senior note, B, 8.50%, 7/15/05 ............ United States 7,250,000 761,250
Specialty Retailers Inc., senior sub. note, B, 9.00%, 7/15/07 ....... United States 5,000,000 75,000
Styling Technology Corp., senior sub. note, 10.875%, 7/01/08 ........ United States 22,000,000 3,190,000
------------
73,351,075
------------
CONSUMER SERVICES 18.6%
Advantica Restaurant Group Inc., senior note, 11.25%, 1/15/08 ....... United States 13,896,030 9,240,860
AMF Bowling Worldwide Inc., senior disc. note, B, zero cpn. to
3/15/01, 12.25% thereafter, 3/15/06 ................................ United States 9,951,000 2,338,485
AMFM Inc., senior note, 8.00%, 11/01/08 ............................. United States 23,500,000 23,529,375
AMFM Inc., senior sub. note, 9.00%, 10/01/08 ........................ United States 8,400,000 8,547,000
AMFM Inc., senior sub. note, B, 8.75%, 6/15/07 ...................... United States 15,000,000 15,075,000
Ascent Entertainment Group Inc., senior disc. note, zero cpn. to
12/15/02, 11.875% thereafter, 12/15/04 ............................. United States 19,500,000 15,892,500
Aztar Corp., senior sub. note, 8.875%, 5/15/07 ...................... United States 30,500,000 28,288,750
Benedek Communications Corp., senior disc. note, zero cpn. to
5/15/01, 13.25% thereafter, 5/15/06 ................................ United States 24,500,000 21,560,000
Charter Communications Holdings LLC, senior disc. note, zero cpn. to
4/01/04, 9.92% thereafter, 4/01/11 ................................. United States 44,000,000 22,990,000
CKE Restaurants Inc., senior sub. note, 9.125%, 5/01/09 ............. United States 19,500,000 11,310,000
CSC Holdings Inc., senior sub. deb., 10.50%, 5/15/16 ................ United States 20,000,000 21,000,000
CSC Holdings Inc., senior sub. deb., 9.875%, 4/01/23 ................ United States 5,000,000 5,025,000
Diamond Cable Communication Co., senior disc. note, zero cpn. to
2/15/02, 10.75% thereafter, 2/15/07 ................................ United Kingdom 7,850,000 6,005,250
Diamond Holdings PLC, senior note, 9.125%, 2/01/08 .................. United Kingdom 10,600,000 9,805,000
Family Restaurant Inc., senior note, 9.75%, 2/01/02 ................. United States 10,850,000 4,828,250
Fox/Liberty Networks LLC, senior disc. note, zero cpn. to 8/15/02,
9.75% thereafter, 8/15/07 .......................................... United States 22,650,000 17,553,750
Fox/Liberty Networks LLC, senior note, 8.875%, 8/15/07 .............. United States 15,000,000 14,737,500
Granite Broadcasting Corp., senior sub. note, A, 10.375%, 5/15/05 ... United States 7,100,000 6,780,500
Hammons (John Q) Hotels, first mortgage, 8.875%, 2/15/04 ............ United States 20,000,000 17,650,000
Hammons (John Q) Hotels, first mortgage, 9.75%, 10/01/05 ............ United States 4,500,000 3,960,000
Harrah's Operating Co. Inc., senior sub. note, 7.875%, 12/15/05 ..... United States 15,250,000 13,991,875
Hollinger International Inc., senior sub. note, 9.25%, 2/01/06 ...... United States 6,400,000 6,304,000
Hollinger International Publishing Inc., senior sub. note, 9.25%,
3/15/07 ............................................................ United States 12,800,000 12,480,000
Horseshoe Gaming Holding, senior sub. note, 8.625%, 5/15/09 ......... United States 30,200,000 27,708,500
LIN Holdings Corp., senior disc. note, zero cpn. to 3/01/03, 10.00%
thereafter, 3/01/08 ................................................ United States 17,300,000 10,380,000
LIN Television Corp., senior sub. note, 8.375%, 3/01/08 ............. United States 19,000,000 16,340,000
NTL Inc., senior note, zero cpn. to 4/01/03, 9.75% thereafter, 4/01/08 United States 50,000,000 31,375,000
Premier Parks Inc., senior disc. note, zero cpn. to 4/01/03, 10.00%
thereafter, 4/01/08 ................................................ United States 8,000,000 5,260,000
Premier Parks Inc., senior note, 9.25%, 4/01/06 ..................... United States 8,000,000 7,430,000
Premier Parks Inc., senior note, 9.75%, 6/15/07 ..................... United States 22,500,000 21,290,625
Prime Hospitality Corp., senior sub. note,B,9.75%, 4/01/07........... United States 23,200,000 22,504,000
Protection One Alarm Monitoring Inc., senior sub. note, 144A, 8.125%,
1/15/09............................................................. United States 37,000,000 22,200,000
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS (CONT.)
CONSUMER SERVICES (CONT.)
Regal Cinemas Inc., senior sub. note, 9.50%, 6/01/08 ................ United States $29,650,000 $ 12,156,500
Sinclair Broadcast Group Inc., senior sub. note, 10.00%, 9/30/05 .... United States 14,400,000 13,392,000
Telewest Communications PLC, 144A, zero cpn. to 2/01/05, 11.375%
thereafter, 2/01/10 ................................................ United Kingdom 28,000,000 14,840,000
Telewest Communications PLC, senior disc. note, zero cpn. to 4/15/04,
9.25% thereafter, 4/15/09 .......................................... United Kingdom 14,750,000 8,186,250
Telewest Communications PLC, senior note, 11.25%, 11/01/08 .......... United Kingdom 4,000,000 4,000,000
United Pan-Europe Communications NV, zero cpn. to 8/01/04, 12.50%
thereafter, 8/01/09 ................................................ Netherlands 52,500,000 23,625,000
-------------
539,580,970
-------------
ELECTRONIC TECHNOLOGY 3.1%
Amkor Technology Inc., senior notes, 9.25%, 5/01/06 ................. United States 30,000,000 29,250,000
L-3 Communications Holdings Inc., senior sub. note, 10.375%, 5/01/07 United States 5,400,000 5,440,500
SCG Holding and Semiconductor Co., senior sub. note, 12.00%, 8/01/09 United States 30,000,000 31,950,000
Telecommun Techniques Co., senior sub. note, 9.75%, 5/15/08 ......... United States 24,000,000 21,960,000
-------------
88,600,500
-------------
ENERGY MINERALS 3.6%
Abraxas Petroleum Corp., senior note, 11.50%, 11/01/04 .............. United States 25,970,000 21,944,650
AEI Resources Inc., senior sub. note, 144A, 11.50%, 12/15/06 ........ United States 20,000,000 1,075,000
Bellwether Exploration Co., senior sub. note, 10.875%, 4/01/07 ...... United States 5,000,000 4,525,000
Clark R&M Inc., senior sub. note, 8.875%, 11/15/07 .................. United States 9,000,000 4,815,000
Clark USA Inc., senior note, 10.875%, 12/01/05 ...................... United States 17,000,000 8,415,000
Conproca SA, S.F., senior secured note, 144A, 12.00%, 6/16/10 ....... Mexico 23,300,000 23,008,750
Mesa Operating Co., zero cpn. to 7/01/01, 11.625% thereafter, 7/01/06 United States 4,300,000 3,622,750
P&L Coal Holdings Corp., senior note, B, 8.875%, 5/15/08 ............ United States 7,000,000 6,405,000
P&L Coal Holdings Corp., senior sub. note, B, 9.625%, 5/15/08 ....... United States 33,000,000 29,535,000
-------------
103,346,150
-------------
FINANCE 2.6%
Lodgian Finance Corp, 12.25%, 7/15/09 ............................... United States 34,250,000 27,571,250
Sovereign Bancorp Inc., senior note, 10.50%, 11/15/06 ............... United States 23,000,000 22,540,000
Willis Corroon Corp., senior sub. note, 9.00%, 2/01/09 .............. United States 30,000,000 24,150,000
-------------
74,261,250
-------------
GOVERNMENT BONDS .5%
ESCOM, E168, utility deb., 11.00%, 6/01/08 .......................... South Africa 108,800,000 ZAR 12,906,820
-------------
HEALTH SERVICES 3.0%
Everest Healthcare Services Corp., senior sub. note, 9.75%, 5/01/08 . United States 18,000,000 15,210,000
Fresenius Medical Care Capital Trust, 7.875%, 2/01/08 ............... United States 24,000,000 21,120,000
Iasis Healthcare Corp., senior sub. note, 144A, 13.00%, 10/15/09 .... United States 35,000,000 35,087,500
Magellan Health Services Inc., senior sub. note, 9.00%, 2/15/08 ..... United States 20,000,000 7,100,000
Pharmerica Inc., senior sub. note, 8.375%, 4/01/08 .................. United States 8,400,000 4,662,000
(c)Vencor Operating Inc., senior sub. note, 9.875%, 5/01/05 ............ United States 29,000,000 3,045,000
-------------
86,224,500
-------------
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS (Cont.)
HEALTH TECHNOLOGY .5%
Conmed Corp., senior sub. note, 9.00%, 3/15/08 ...................... United States $15,000,000 $ 13,875,000
-------------
INDUSTRIAL SERVICES 4.8%
Allied Waste North America Inc., senior note, B, 7.875%, 1/01/09 .... United States 34,000,000 28,220,000
Allied Waste North America Inc., senior sub. note, 10.00%, 8/01/09 .. United States 10,000,000 7,900,000
Great Lakes Dredge & Dock Corp., senior sub. note, 11.25%, 8/15/08 .. United States 4,750,000 4,750,000
Key Energy Services Inc., senior sub. note, 14.00%, 1/15/09 ......... United States 30,000,000 32,550,000
R&B Falcon Corp., senior note, 12.25%, 3/15/06 ...................... United States 10,850,000 11,772,250
R&B Falcon Corp., senior note, 9.50%, 12/15/08 ...................... United States 7,400,000 7,363,000
RBF Finance Co., senior note, 11.375%, 3/15/09 ...................... United States 8,750,000 9,318,750
Safety Kleen Services, senior sub. note, 9.25%, 6/01/08 ............. United States 10,000,000 1,137,500
Universal Compression Inc., senior disc. note, zero cpn. to 2/15/03,
9.875% thereafter, 2/15/08 ......................................... United States 31,800,000 20,829,000
URS Corp., senior sub. note, 12.25%, 5/01/09 ........................ United States 16,500,000 16,252,500
-------------
140,093,000
-------------
NON-ENERGY MINERALS 1.0%
Bear Island Paper Co. LLC, senior note, B, 10.00%, 12/01/07 ......... United States 11,700,000 10,588,500
LTV Corp., senior note, 8.20%, 9/15/07 .............................. United States 15,000,000 11,325,000
Sheffield Steel Corp., first mortgage, B, 11.50%, 12/01/05 .......... United States 8,000,000 5,640,000
-------------
27,553,500
-------------
PROCESS INDUSTRIES 7.8%
Anchor Glass, first mortgage, 11.25%, 4/01/05 ....................... United States 23,700,000 16,708,500
Anchor Glass Container, senior note, 9.875%, 3/15/08 ................ United States 17,300,000 10,726,000
Avecia Group PLC, senior note, 11.00%, 7/01/09 ...................... United Kingdom 33,000,000 32,752,500
Climachen Inc., senior sub. note, B, 10.75%, 12/01/07 ............... United States 7,500,000 1,387,500
Container Corp. of America, senior note, A, 9.75%, 4/01/03 .......... United States 12,000,000 12,120,000
Equistar Chemicals LP, senior note, 8.75%, 2/15/09 .................. United States 20,000,000 19,200,000
Four M Corp., senior note, B, 12.00%, 6/01/06 ....................... United States 7,400,000 7,252,000
Graham Packaging Co., senior disc. note, B, zero cpn., to 1/15/03,
10.75% thereafter, 1/15/09 ......................................... United States 5,600,000 3,052,000
Graham Packaging Co., senior sub. note, B, 8.75%, 1/15/08 ........... United States 6,600,000 5,511,000
Huntsman ICI Chemicals LLC, zero cpn., senior disc. note, 12/31/09 .. United States 76,130,000 23,980,950
Lyondell Chemical Co., senior secured note, 9.875%, 5/01/07 ......... United States 9,000,000 8,685,000
Lyondell Chemical Co., senior sub. note, 10.875%, 5/01/09 ........... United States 2,400,000 2,316,000
Pindo Deli Finance Mauritius, senior note, 11.75%, 10/01/17 ......... Indonesia 30,900,000 15,913,500
(c)Polysindo International Finance Co. BV, secured note, 9.375%, 7/30/07 Indonesia 27,750,000 5,550,000
(c)Purina Mills Inc., senior sub. note, 9.00%, 3/15/10 ................. United States 40,000,000 11,800,000
Radnor Holdings Inc., senior note, 10.00%, 12/01/03 ................. United States 6,250,000 5,453,125
Repap New Brunswick, senior note, 9.00%, 6/01/04 .................... Canada 13,600,000 12,920,000
Terra Industries Inc., senior note, B, 10.50%, 6/15/05 .............. United States 15,000,000 11,475,000
Tjiwi Kimia Finance Mauritius, senior note, 10.00%, 8/01/04 ......... Indonesia 11,000,000 6,215,000
Westpoint Stevens Inc., senior note, 7.875%, 6/15/08 ................ United States 17,500,000 14,000,000
-------------
227,018,075
-------------
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS (CONT.)
PRODUCER MANUFACTURING 6.7%
Advanced Accessory Systems, senior sub. note, B, 9.75%, 10/01/07 .... United States $ 8,000,000 $ 6,840,000
Airxcel Inc., senior sub. note, B, 11.00%, 11/15/07 ................. United States 13,500,000 11,070,000
American Axle & Manufacturing Inc., 9.75%, 3/01/09 .................. United States 26,800,000 25,326,000
c Cambridge Industries Inc., senior sub. note, B, 10.25%, 7/15/07 ..... United States 4,700,000 963,500
Collins & Aikman Products, senior sub. note, 11.50%, 4/15/06 ........ United States 9,500,000 9,072,500
Goss Graphic Systems Inc., senior sub. note, PIK, 12.25%, 11/19/05 .. United States 7,575,000 2,575,500
Keystone Consolidated Industries Inc., senior note, 9.625%, 8/01/07 . United States 7,000,000 5,985,000
Neenah Corp., F, 11.125%, 5/01/07 ................................... United States 6,100,000 4,666,500
Neenah Corp., senior sub. note, B, 11.125%, 5/01/07 ................. United States 6,100,000 4,666,500
Nortek Inc., senior note, 8.875%, 8/01/08 ........................... United States 8,000,000 7,200,000
Nortek Inc., senior note, B, 9.125%, 9/01/07 ........................ United States 19,200,000 17,712,000
Oshkosh Truck Corp., senior sub. note, 8.75%, 3/01/08 ............... United States 13,200,000 12,309,000
Talon Automotive Group Inc., senior sub. note, B, 9.625%, 5/01/08 ... United States 20,850,000 8,444,250
Tenneco Automotive Inc., senior sub. note, 11.625%, 10/15/09 ........ United States 30,000,000 28,125,000
Terex Corp., senior sub. note, 8.875%, 4/01/08 ...................... United States 9,500,000 8,597,500
Terex Corp., senior sub. note, 8.875%, 4/01/08 ...................... United States 24,750,000 22,398,750
Thermadyne Industries Inc., sub. note, 10.75%, 11/01/03 ............. United States 19,781,000 18,371,604
-------------
194,323,604
-------------
REAL ESTATE 1.2%
HMH Properties Inc., senior secured note, B, 7.875%, 8/01/08 ........ United States 40,000,000 34,300,000
-------------
RETAIL TRADE .2%
c Bruno's Inc., senior sub. note, 10.50%, 8/01/05 ..................... United States 12,500,000 62,500
Pueblo Xtra International, senior note, 9.50%, 8/01/03 .............. United States 9,500,000 4,512,500
Pueblo Xtra International, senior note, C, 9.50%, 8/01/03 ........... United States 5,000,000 2,375,000
-------------
6,950,000
-------------
TECHNOLOGY SERVICES 1.8%
Anacomp Inc., senior sub. note, D, 10.875%, 4/01/04 ................. United States 28,200,000 17,061,000
PSINet Inc., senior note, 10.50%, 12/01/06 .......................... United States 11,500,000 10,292,500
PSINet Inc., senior note, 11.00%, 8/01/09 ........................... United States 27,250,000 24,661,250
-------------
52,014,750
-------------
TELECOMMUNICATIONS 24.2%
Allegiance Telecom Inc., senior disc. note, B, zero cpn. to 2/15/03,
11.75%, thereafter, 2/15/08 ........................................ United States 22,000,000 15,510,000
Allegiance Telecom Inc., senior note, 12.875%, 5/15/08 .............. United States 20,500,000 21,832,500
Arch Escrow Corp., senior note, 13.75%, 4/15/08 ..................... United States 14,500,000 11,962,500
Call-Net Enterprises Inc., senior disc. note, zero cpn. to 5/15/04,
10.80% thereafter, 5/15/09 ......................................... Canada 29,500,000 10,620,000
Clearnet Communications Inc., senior disc. note, zero cpn. to
5/01/04, 10.125% thereafter, 5/01/09 ............................... Canada 48,250,000 27,623,125
Crown Castle International Corp., senior disc. note, zero cpn. to
8/01/04, 11.25% thereafter, 8/01/11 ................................ United States 51,000,000 30,090,000
Dobson/Sygnet Communications Co., senior note, 12.25%, 12/15/08 ..... United States 34,250,000 36,561,875
Global Crossing Holdings Ltd., senior note, 144A, 9.50%, 11/15/09 ... Bermuda 40,000,000 37,817,320
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS (CONT.)
TELECOMMUNICATIONS (CONT.)
c ICO Global Communications Holdings Ltd., senior note, 15.00%, 8/01/05 Bermuda $35,000,000 $ 19,250,000
IntelCom Group Inc., senior secured disc. note, zero cpn. to 5/01/01,
12.50% thereafter, 5/01/06 ......................................... United States 32,500,000 26,325,000
Intermedia Communications Inc., senior disc. note, B, zero cpn. to
7/15/02, 11.25% thereafter, 7/15/07 ................................ United States 37,500,000 27,843,750
Intermedia Communications Inc., senior note, 9.50%, 3/01/09 ......... United States 10,000,000 9,225,000
c Iridium LLC/CAP, senior note, D, 10.875%, 7/15/05 ................... Bermuda 17,000,000 488,750
Level 3 Communications Inc., senior disc. note, zero cpn. to 12/01/03,
10.50% thereafter, 12/01/08 ........................................ United States 38,000,000 21,850,000
Loral Space and Communications Ltd., senior disc. note, zero cpn. to
1/15/02, 12.50% thereafter, 1/15/07 ................................ United States 35,300,000 14,296,500
McCaw International Ltd., senior disc. note, zero cpn. to 4/15/02,
13.00% thereafter, 4/15/07 ......................................... United States 28,500,000 20,377,500
McLeod USA Inc., senior disc. note, zero cpn. to 3/01/02, 10.50%
thereafter, 3/01/07 ................................................ United States 10,000,000 7,900,000
McLeod USA Inc., senior note, 9.50%, 11/01/08 ....................... United States 16,000,000 15,400,000
Metrocall Inc., senior sub. note, 9.75%, 11/01/07 ................... United States 31,000,000 21,390,000
Metrocall Inc., senior sub. note, 11.00%, 9/15/08 ................... United States 10,000,000 7,300,000
Microcell Telecommunications Inc., senior disc. note, B, zero cpn
to 12/01/01, 14.00% thereafter, 6/01/06 ............................ Canada 17,550,000 16,146,000
Millicom International Cellular SA, senior disc. note, zero cpn. to
6/01/01, 13.50% thereafter, 6/01/06 ................................ Luxembourg 22,300,000 18,620,500
Netia Holdings BV, senior disc. note, B, zero cpn. to 11/01/01,
11.25% thereafter, 11/01/07 ........................................ Poland 15,000,000 10,350,000
Netia Holdings BV, senior note, B, 10.25%, 11/01/07 ................. Poland 9,000,000 7,605,000
Nextel Communications Inc., senior disc. note, zero cpn. to 10/31/02,
9.75% thereafter, 10/31/07 ......................................... United States 35,500,000 25,471,250
Nextel International Inc., senior disc. note, zero cpn. to 4/15/03,
12.125% thereafter, 4/15/08 ........................................ United States 20,000,000 12,250,000
Nextel Partners Inc., senior disc. note, zero cpn. to 2/01/04,
14.00% thereafter, 2/01/09 ......................................... United States 15,600,000 10,062,000
Nextel Partners Inc., senior sub. note, 144A, 11.00%, 3/15/10 ....... United States 7,300,000 7,026,250
NEXTLINK Communications Inc., senior disc. note, zero cpn. to
4/15/03, 9.45% thereafter, 4/15/08 ................................. United States 20,250,000 12,048,750
NEXTLINK Communications Inc., senior note, 9.625%, 10/01/07 ......... United States 17,350,000 15,918,625
NEXTLINK Communications Inc., senior note, 9.00%, 3/15/08 ........... United States 18,150,000 16,244,250
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 21,944,875
c,d Poland Telecom Finance, senior note, B, 14.00%, 12/01/07 ........... Poland 30,000,000 7,650,000
Rogers Cantel Mobile Inc., senior secured deb., 9.75%, 6/01/16 ...... Canada 13,250,000 13,962,188
RSL Communications PLC, senior disc. note, zero cpn. to 3/01/03,
10.125% thereafter, 3/01/08 ........................................ United Kingdom 44,500,000 18,022,500
RSL Communications PLC, senior note, 12.00%, 11/01/08 United Kingdom 6,250,000 4,656,250
Spectrasite Holdings Inc., senior disc. note, 144A, zero cpn. to
3/15/05, 12.875% thereafter, 3/15/10 ............................... United States 35,000,000 18,200,000
Spectrasite Holdings Inc., senior disc. note, zero cpn. to 4/15/04,
11.25% thereafter, 4/15/09 ......................................... United States 20,500,000 11,172,500
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT* VALUE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS (CONT.)
TELECOMMUNICATIONS (CONT.)
Triton PCS Inc., sub. disc. note, zero cpn. to 5/01/03, 11.00%
thereafter, 5/01/08 ................................................... United States $25,000,000 $ 18,125,000
VoiceStream Wireless Corp., senior disc. note, 144A, zero cpn. to
11/15/04, 11.875% thereafter, 11/15/09 ................................ United States 29,750,000 19,151,563
Williams Communications Group Inc., senior note, 10.875%, 10/01/09 ..... United States 32,500,000 32,743,750
-------------
701,035,071
-------------
TRANSPORTATION 4.5%
American Commercial Lines LLC, senior note, 10.25%, 6/30/08 ............ United States 22,700,000 18,273,500
Gearbulk Holding Ltd., senior note, 11.25%, 12/01/04 ................... Bermuda 19,000,000 19,047,500
GS Superhighway (Holdings) Ltd., senior note, 10.25%, 8/15/07 .......... China 35,000,000 23,800,000
Sea Containers Ltd., senior note, 10.50%, 7/01/03 ...................... United States 10,000,000 7,650,000
Sea Containers Ltd., senior note, 10.75%, 10/15/06 ..................... United States 19,700,000 13,100,500
Ultrapetrol Ltd., first mortgage, 10.50%, 4/01/08 ...................... United States 34,000,000 28,050,000
United Air Lines Inc., S.F., pass-through equipment trust, B-2,
9.06%, 9/26/14 ........................................................ United States 20,422,000 21,443,508
-------------
131,365,008
-------------
UTILITIES 1.2%
AES China Generating Co., 10.125%, 12/15/06 ............................ China 4,400,000 2,728,000
AES Corp., senior note, 9.50%, 6/01/09 ................................. United States 7,500,000 7,125,000
ESI Tractebel Acq. Corp., secured note, 7.99%, 12/30/11 ................ United States 8,000,000 6,880,000
Midland Cogeneration Venture, S.F., senior lease obligation, A,
11.75%, 7/23/05 ....................................................... United States 4,500,000 4,781,259
Midland Cogeneration Venture, S.F., senior lease obligation, B,
13.25%, 7/23/06 ....................................................... United States 11,500,000 13,543,987
-------------
35,058,246
-------------
TOTAL BONDS (COST $3,340,599,487) ...................................... 2,638,498,169
-------------
CONVERTIBLE BONDS .5%
TELECOMMUNICATIONS .5%
Level 3 Communications Inc., cvt., 6.00%, 3/15/10 (COST $13,894,102) ... United States 17,500,000 14,916,125
-------------
</TABLE>
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
STATEMENT OF INVESTMENTS, MAY 31, 2000 (CONT.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(b) REPURCHASE AGREEMENT 2.0%
Joint Repurchase Agreement, 6.396%, 6/01/00, (Maturity Value $58,737,135)
(COST $58,726,701) ..................................................... $58,726,701 $ 58,726,701
Barclays Capital Inc.
Bear Stearns & Co. Inc.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America LLC
Nesbitt Burns Securities Inc.
Paine Webber Inc.
Paribas Corp.
Societe Generale
Warburg Dillion Read LLC
Collateralized by U.S. Treasury Bills and Notes
--------------
TOTAL INVESTMENTS (COST $3,600,148,087) 97.8% ........................... 2,833,497,364
OTHER ASSETS, LESS LIABILITIES 2.2% ..................................... 62,884,331
--------------
NET ASSETS 100.0% ....................................................... $2,896,381,695
--------------
</TABLE>
CURRENCY ABBREVIATIONS
ZAR - South African Rand
* The principal amount is stated 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 31, 2000, all repurchase
agreements held by the Fund had been entered into on that date.
(c) See Note 6 regarding defaulted securities.
(d) See Note 7 regarding restricted 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 affiliated companies at May
31, 2000, were $3,572,847.
See notes to financial statements.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2000
Assets:
Investments in securities:
Cost .................................................... $ 3,600,148,087
===============
Value ................................................... 2,833,497,364
Receivables:
Capital shares sold ..................................... 10,812,813
Dividends and interest .................................. 64,095,680
---------------
Total assets ........................................ 2,908,405,857
---------------
Liabilities:
Payables:
Capital shares redeemed ................................. 6,193,263
Affiliates .............................................. 2,224,181
Shareholders ............................................ 3,482,574
Other liabilities ........................................ 124,144
---------------
Total liabilities ................................... 12,024,162
---------------
Net assets, at value ................................ $ 2,896,381,695
===============
Net assets consist of:
Undistributed net investment income ...................... $ 8,211,460
Net unrealized depreciation .............................. (766,650,903)
Accumulated net realized loss ............................ (125,461,984)
Capital shares ........................................... 3,780,283,122
---------------
Net assets, at value ...................................... $ 2,896,381,695
===============
See notes to financial statements.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Financial Statements (continued)
STATEMENT OF ASSETS AND LIABILITIES (CONT.)
MAY 31, 2000
<TABLE>
<S> <C>
CLASS A:
Net assets, at value ................................................ $2,442,432,361
==============
Shares outstanding .................................................. 1,061,216,647
==============
Net asset value per share* .......................................... $ 2.30
==============
Maximum offering price per share (net asset value per share / 95.75%) $ 2.40
==============
CLASS B:
Net assets, at value ................................................ $ 69,564,593
==============
Shares outstanding .................................................. 30,275,213
==============
Net asset value and maximum offering price per share* ............... $ 2.30
==============
CLASS C:
Net assets, at value ................................................ $ 367,150,637
==============
Shares outstanding .................................................. 159,085,789
==============
Net asset value per share* .......................................... $ 2.31
==============
Maximum offering price per share (net asset value per share / 99.00%) $ 2.33
==============
ADVISOR CLASS:
Net assets, at value ................................................ $ 17,234,104
==============
Shares outstanding .................................................. 7,477,574
==============
Net asset value and maximum offering price per share ................ $ 2.30
==============
</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, 2000
<TABLE>
<S> <C>
Investment income:
Dividends .............................................................. $ 9,634,285
Interest ............................................................... 359,823,380
-------------
Total investment income ........................................... 369,457,665
-------------
Expenses:
Management fees (Note 3) ............................................... 15,209,681
Distribution fees (Note 3)
Class A ............................................................... 3,849,821
Class B ............................................................... 348,336
Class C ............................................................... 2,834,501
Transfer agent fees (Note 3) ........................................... 3,826,266
Custodian fees ......................................................... 43,383
Reports to shareholders ................................................ 581,200
Registration and filing fees ........................................... 256,199
Professional fees ...................................................... 114,520
Trustees' fees and expenses ............................................ 69,694
Other .................................................................. 96,101
-------------
Total expenses .................................................... 27,229,702
-------------
Net investment income ............................................. 342,227,963
-------------
Realized and unrealized gains (losses):
Net realized loss from:
Investments ........................................................... (84,981,160)
Foreign currency transactions ......................................... (27,186)
-------------
Net realized loss ................................................. (85,008,346)
Net unrealized appreciation (depreciation) on:
Investments ........................................................... (420,292,368)
Translation of assets and liabilities denominated in foreign currencies 24,708
-------------
Net unrealized depreciation ....................................... (420,267,660)
-------------
Net realized and unrealized loss ........................................ (505,276,006)
-------------
Net decrease in net assets resulting from operations .................... $(163,048,043)
=============
</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, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
--------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .............................................................. $ 342,227,963 $ 339,921,053
Net realized gain (loss) from investments and foreign currency transactions ........ (85,008,346) 73,264,684
Net unrealized depreciation on investments and translation of assets and liabilities
denominated in foreign currencies ................................................. (420,267,660) (437,470,931)
--------------------------------------
Net decrease in net assets resulting from operations ........................... (163,048,043) (24,285,194)
Distributions to shareholders from:
Net investment income:
Class A ........................................................................... (297,771,870) (299,008,521)
Class B ........................................................................... (5,227,817) (367,466)
Class C ........................................................................... (43,745,502) (40,073,283)
Advisor Class ..................................................................... (4,338,546) (2,875,463)
--------------------------------------
Total distributions to shareholders ................................................. (351,083,735) (342,324,733)
Capital share transactions: (Note 2)
Class A ............................................................................ (233,459,046) 191,216,722
Class B ............................................................................ 51,873,634 26,621,191
Class C ............................................................................ (53,256,052) 136,698,940
Advisor Class ...................................................................... (16,099,369) 14,754,823
--------------------------------------
Total capital share transactions .................................................... (250,940,833) 369,291,676
Net increase (decrease) in net assets .......................................... (765,072,611) 2,681,749
Net assets
Beginning of year ................................................................... 3,661,454,306 3,658,772,557
--------------------------------------
End of year ......................................................................... $ 2,896,381,695 $ 3,661,454,306
--------------------------------------
Undistributed net investment income included in net assets:
End of year ......................................................................... $ 8,211,460 $ 17,094,418
======================================
</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 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. Restricted securities and securities for
which market quotations are not readily available are valued at fair value as
determined by management in accordance with procedures established by the Board
of Trustees.
b. FOREIGN CURRENCY TRANSLATION:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. 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, 2000, there were an unlimited number of shares authorized (no par
value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31, 2000 YEAR ENDED MAY 31, 1999*
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold .................................. 331,634,709 $ 828,749,061 414,087,089 $ 1,147,083,301
Shares issued in reinvestment of distributions 51,595,884 129,033,053 48,411,868 134,052,298
Shares redeemed .............................. (478,461,066) (1,191,241,160) (393,225,617) (1,089,918,877)
---------------------------------------------------------------------------
Net increase (decrease) ...................... (95,230,473) $ (233,459,046) 69,273,340 $ 191,216,722
===========================================================================
CLASS B
Shares sold .................................. 24,687,653 $ 61,971,524 10,082,048 $ 27,600,679
Shares issued in reinvestment of distributions 934,613 2,307,752 67,548 184,499
Shares redeemed .............................. (5,068,871) (12,405,642) (427,778) (1,163,987)
---------------------------------------------------------------------------
Net increase ................................. 20,553,395 $ 51,873,634 9,721,818 $ 26,621,191
===========================================================================
CLASS C
Shares sold .................................. 45,033,235 $ 113,693,172 92,143,685 $ 257,265,284
Shares issued in reinvestment of distributions 9,310,496 23,372,653 8,220,312 22,770,924
Shares redeemed .............................. (76,051,198) (190,321,877) (51,874,088) (143,337,268)
---------------------------------------------------------------------------
Net increase (decrease) ...................... (21,707,467) $ (53,256,052) 48,489,909 $ 136,698,940
===========================================================================
ADVISOR CLASS
Shares sold .................................. 18,904,229 $ 48,575,190 17,315,590 $ 47,913,887
Shares issued in reinvestment of distributions 1,517,475 3,824,741 985,497 2,728,550
Shares redeemed (27,568,659) (68,499,300) (13,089,579) (35,887,614)
---------------------------------------------------------------------------
Net increase (decrease) (7,146,955) $ (16,099,369) 5,211,508 $ 14,754,823
===========================================================================
</TABLE>
* Class B shares for the period January 1, 1999 (effective date) to May 31,
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 year of $2,349,062 and $519,135
respectively.
The Fund paid transfer agent fees of $3,826,266 of which $3,162,474 was paid to
Investor Services.
Included in professional fees are legal fees of $19,092 that were paid to a law
firm in which a partner of the law firm is an officer of the Fund.
4. INCOME TAXES
At May 31, 2000, 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:
2001 ....................................... $14,304,993
2002 ....................................... 12,243,104
2003 ....................................... 4,606,276
-----------
$31,154,373
===========
At May 31, 2000, the Fund has deferred capital losses occurring subsequent to
October 31, 2000 of $94,317,351. For tax purposes, such losses will be reflected
in the year ending 2001.
On May 31, 2000, the Fund had expired capital loss carryovers of $54,426,655
which were reclassified to paid-in-capital.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Notes to Financial Statements (continued)
4. INCOME TAXES (CONT.)
At May 31, 2000, the net unrealized depreciation based on the cost of
investments for income tax purposes of $3,600,148,087 was as follows:
Unrealized appreciation .................. $ 39,155,386
Unrealized depreciation .................. (805,806,109)
-------------
Net unrealized depreciation .............. $(766,650,723)
=============
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 May 31, 2000 aggregated $609,757,883 and $987,434,624,
respectively.
6. CREDIT RISK AND DEFAULTED SECURITIES
The Fund has 91.7% 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, 2000, the Fund
held defaulted securities with a value aggregating $49,588,150 representing 1.7%
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.
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Notes to Financial Statements (continued)
7. RESTRICTED SECURITIES
The Fund may purchase securities through a private offering that generally
cannot be resold to the public without prior registration under the Securities
Act of 1933. The costs of registering such securities are paid by the issuer.
Restricted securities held at May 31, 2000 are as follows:
<TABLE>
<CAPTION>
SHARES ISSUER ACQUISITION DATE COST VALUE
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FRANKLIN AGE HIGH INCOME FUND
30,000 Poland Telecom Finance, wts., 12/01/07 11/24/1997 $ 180,000 $ 375
30,000,000 Poland Telecom Finance, senior note, B, 14.00%, 12/01/07 11/24/1997 29,820,000 7,650,000
----------
TOTAL RESTRICTED SECURITIES (.26% of Net Assets) $7,650,375
==========
</TABLE>
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 statements of investments, and the related statement 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, 2000, 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 accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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, 2000 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
July 10, 2000
FRANKLIN HIGH INCOME TRUST
AGE HIGH INCOME FUND
Tax Designation
Under Section 854(b)(2) of the Internal Revenue Code, the Fund hereby designates
2.78% of the ordinary income dividends as income qualifying for the dividends
received deduction for the fiscal year ended May 31, 2000.
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