UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number_811-01608
Franklin High Income Trust
(Exact name of registrant as specified in charter)
One Franklin Parkway, San Mateo, CA 94403-1906
(Address of principal executive offices) (Zip code)
_Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
Date of fiscal year end: 5/31
Date of reporting period: 11/30/16
Item 1. Reports to Stockholders.
Contents | |
Semiannual Report | |
Franklin High Income Fund | 3 |
Performance Summary | 6 |
Your Fund’s Expenses | 8 |
Financial Highlights and Statement of Investments | 9 |
FinancialStatements | 24 |
Notes to Financial Statements | 28 |
Shareholder Information | 39 |
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.
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Franklin High Income Fund
We are pleased to bring you Franklin High Income Fund’s semiannual report for the period ended November 30, 2016.
Your Fund’s Goals and Main Investments
The Fund seeks a high level of current income, with a secondary goal of capital appreciation, by investing predominantly in high yield, lower rated debt securities and preferred stocks.
Performance Overview
The Fund’s Class A shares had a +9.00% cumulative total return for the six months under review. In comparison, the benchmark Credit Suisse (CS) High Yield Index, which tracks the high yield debt market, returned +7.38%.1 The Fund’s peers had a +5.22% total return, as measured by the Lipper High Yield Funds Classification Average, which consists of funds chosen by Lipper that aim at high relative current yield from fixed income securities.2 You can find more of the Fund’s performance data in the Performance Summary beginning on page 6.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
Economic and Market Overview
The U.S. economy strengthened during the six months under review. The economy grew at a faster pace in 2016’s third quarter than in the second quarter, mainly due to personal consumption expenditures, exports, private inventory investment, federal government spending and nonresidential fixed investment. Manufacturing conditions remained volatile but generally expanded, and the services sector continued to grow. The unemployment rate declined from 4.7% in May to
*Includes common, convertible preferred stocks, escrows and litigation trusts as well as other equity investments.
4.6% at period-end.3 Monthly retail sales were volatile, but grew during most of the review period. Inflation, as measured by the Consumer Price Index, remained relatively subdued for most of the period, but rose during the second half.
The U.S. Federal Reserve (Fed) kept its target interest rate at 0.25–0.50% at its November meeting, while setting the stage for an interest rate hike in December. The Fed members generally agreed that it would be appropriate to raise the federal funds rate in the near term, as long as data continue to provide evidence of economic resilience.
The 10-year Treasury yield, which moves inversely to price, shifted throughout the period. It rose from 1.84% on May 31, 2016, to a period high of 2.37% on Nov 30, 2016. However, negative interest rates in Japan and Europe and central banks’ purchases of government bonds pushed down the Treasury yield during certain periods. The U.K.’s historic referendum to leave the European Union in June 2016 (also known as “Brexit”) also boosted safe haven buying by investors. The Treasury yield reached a period low of 1.37% in early July. The yield rose in October, due to positive economic data and signals from the Fed on the possibility of an increase in interest rates in the near term. Additionally, in November, the U.S. Treasury
1. Source: Credit Suisse Group.
2. Source: Lipper, a Thomson Reuters Company. For the six-month period ended 11/30/16, this category consisted of 692 funds. Lipper calculations do not include sales
charges or expense subsidization by a fund’s manager. Fund performance relative to the average may have differed if these or other factors had been considered.
The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an
index, and an index is not representative of the Fund’s portfolio.
3. Source: Bureau of Labor Statistics.
The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 14.
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FRANKLIN HIGH INCOME FUND
yield further increased, amid a bond market selloff, based on investor expectations that possible expansionary fiscal policies under the new U.S. President Donald Trump could lead to a stronger economy and higher inflation.
Dividend Distributions* | |||||
6/1/16–11/30/16 | |||||
Dividend per Share (cents) | |||||
Advisor | |||||
Month | Class A | Class C | Class R | Class R6 | Class |
June | 0.93 | 0.85 | 0.87 | 0.99 | 0.95 |
July | 0.93 | 0.85 | 0.87 | 0.99 | 0.95 |
August | 0.93 | 0.85 | 0.87 | 0.99 | 0.95 |
September | 0.93 | 0.85 | 0.87 | 0.97 | 0.95 |
October | 0.83 | 0.75 | 0.77 | 0.87 | 0.85 |
November | 0.83 | 0.75 | 0.77 | 0.87 | 0.85 |
Total | 5.38 | 4.90 | 5.02 | 5.68 | 5.50 |
*The distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
Top 10 Holdings by Issuer* | ||
11/30/16 | ||
Company | % of Total | |
Sector/Industry | Net Assets | |
Sprint Communications Inc. | 2.5 | % |
Telecommunication Services | ||
CIT Group Inc. | 2.3 | % |
Banks | ||
HCA Inc. | 2.0 | % |
Health Care Equipment & Services | ||
Navient Corp. | 1.5 | % |
Diversified Financials | ||
Valeant Pharmaceuticals International Inc. | 1.5 | % |
Pharmaceuticals, Biotechnology & Life Sciences | ||
First Data Corp. | 1.4 | % |
Software & Services | ||
T-Mobile USA Inc. | 1.3 | % |
Telecommunication Services | ||
CenturyLink Inc. | 1.2 | % |
Telecommunication Services | ||
CSC Holdings LLC | 1.2 | % |
Media | ||
Sabine Pass Liquefaction LLC | 1.2 | % |
Energy | ||
*Securities are listed by issuer, which may appear by another name in the SOI. |
Investment Strategy
We are disciplined, fundamental investors who mainly rely on our analysts’ in-depth industry expertise to evaluate companies. We examine sectors and individual securities in detail. When evaluating an issuer’s creditworthiness, we consider the issuer’s experience, managerial strength, sensitivity to economic conditions, credit rating, and current and prospective financial condition.
Manager’s Discussion
Over the past six months, market volatility was largely driven by uncertainty surrounding potential U.S. Fed action, commodity prices, Britain’s vote to exit the European Union and the U.S. presidential election. In this environment, both fixed income and equity markets were significantly affected by the prevailing investor sentiment.
Focusing on the high yield corporate bond market, over the period we saw a reversal of the negative trend in commodity prices that was a significant headwind for performance for most of 2015 and the early months of 2016. Despite periods of global uncertainty surrounding Brexit and the U.S. election, high yield mutual fund flows ended the period flat. Overall, yield spreads to comparable Treasuries contracted from 6.5% to 5.2% by period-end.
Fundamentally, with the improvement in commodity prices over the period, earnings and credit quality trends for the energy and metals and mining sectors vastly improved from February levels. As we expected, with many commodity companies seeking to reduce debt on their balance sheets and strengthen liquidity in the face of lower cash flow and earnings prospects, energy and metals and mining sector defaults drove overall default rates to a peak high in August before reversing for the remainder of the period. The rebound in many commodity prices that occurred in late February created a positive trend that generally continued over the period and resulted in strong performance for the commodity sectors and the high yield market overall.
In other areas, the fundamental outlook for the remainder of the high yield corporate market continued to be supportive. Although spreads tightened over the last year for many non-commodity related issuers, given the prospect for more stable credit fundamentals, we still saw what we considered attractive relative value across many of these industries.
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Outside of energy, our largest industry weightings at period-end were in the health care, telecommunication services and information technology sectors.4 However, given the Fund’s positioning in energy-related issuers, the Fund held a higher risk stance at period-end.
Looking at sectors that drove the Fund’s relative performance, the Fund’s heavier exposure to metals and mining was a significant contributor.5 Within our metals and mining exposure, we generally sought issuers that we assessed could weather a prolonged period of lower commodity price volatility. Many of the companies we owned implemented cost-cutting measures and refocused their efforts on core businesses. These efforts were successful, and commodity prices rebounded based on renewed investor optimism about global growth. The Fund’s allocation to the wireless industry also aided relative performance, as the market rewarded certain companies that were able to grow their subscription bases.6
Some of the Fund’s industry allocations marginally hurt relative performance during the period. For example, the Fund held overweighted exposures in the food, beverage, and tobacco and containers and packaging industries.7 As these industries are considered relatively defensive, the Fund’s heavier weighting in these industries detracted from relative performance as more speculative exposures generally outperformed over the period.
Thank you for your continued participation in Franklin High Income Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of November 30, 2016, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.
4. The health care sector comprises health care equipment and services and pharmaceuticals, biotechnology and life sciences in the SOI. The information technology sector
comprises semiconductors and semiconductor equipment, software and services, technology hardware and equipment in the SOI.
5. Metals and mining is part of materials in the SOI.
6. Wireless is in telecommunication services in the SOI.
7. Containers and packaging is part of materials in the SOI.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN HIGH INCOME FUND
Performance Summary as of November 30, 2016
The performance tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities.
Performance as of 11/30/161
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
Cumulative | Average Annual | |||||
Share Class | Total Return2 | Total Return3 | ||||
A | ||||||
6-Month | +9.00% | +4.18% | ||||
1-Year | +12.08% | +7.16% | ||||
5-Year | +32.63% | +4.95% | ||||
10-Year | +78.07% | +5.50% | ||||
Advisor | ||||||
6-Month | +8.44% | +8.44% | ||||
1-Year | +12.25% | +12.25% | ||||
5-Year | +33.54% | +5.96% | ||||
10-Year | +80.47% | +6.08% | ||||
30-Day Standardized Yield5 | ||||||
Distribution | ||||||
Share Class | Rate4 | (with waiver) | (without waiver) | |||
A | 5.21% | 5.48% | 5.48% | |||
Advisor | 5.57% | 5.89% | 5.89% |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 7 for Performance Summary footnotes.
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PERFORMANCE SUMMARY
Net Asset Value | |||||||
Share Class (Symbol) | 11/30/16 | 5/31/16 | Change | ||||
A (FHAIX) | $ | 1.83 | $ | 1.73 | +$0.10 | ||
C (FCHIX) | $ | 1.85 | $ | 1.75 | +$0.10 | ||
R (FHIRX) | $ | 1.86 | $ | 1.76 | +$0.10 | ||
R6 (FHRRX) | $ | 1.82 | $ | 1.73 | +$0.09 | ||
Advisor (FVHIX) | $ | 1.83 | $ | 1.74 | +$0.09 | ||
Distributions6 (6/1/16–11/30/16) | |||||||
Dividend | |||||||
Share Class | Income | ||||||
A | $ | 0.0538 | |||||
C | $ | 0.0490 | |||||
R | $ | 0.0502 | |||||
R6 | $ | 0.0568 | |||||
Advisor | $ | 0.0550 | |||||
Total Annual Operating Expenses7 | |||||||
Share Class | With Waiver | Without Waiver | |||||
A | 0.78 | % | 0.79 | % | |||
Advisor | 0.63 | % | 0.64 | % |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. The risks associated with higher yielding, lower rated securities include higher risk of default
and loss of principal. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. In addition, interest rate movements will
affect the Fund’s share price and yield. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise
in interest rates, the Fund’s share price may decline. Investment in foreign securities also involves special risks, including currency fluctuations, and political and
economic uncertainty. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The
Fund’s prospectus also includes a description of the main investment risks.
1. The Fund has a fee waiver associated with any investment in a Franklin Templeton money fund and/or other Franklin Templeton fund, as applicable, contractually guaranteed
through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waiver, to the extent applicable; without this reduction, the results would have been
lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, ifany,hasnotbeen
annualized.
4. Distribution rate is based on an annualization of the respective class’s November dividend and the maximum offering price (NAV for Advisor class) per share on 11/30/16.
5. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal
the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
6. The distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income.
7. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this
report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
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Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
Actual | Hypothetical | |||||||||||
(actual return after expenses) | (5% annual return before expenses) | |||||||||||
Expenses | Expenses | Net | ||||||||||
Beginning | Ending | Paid During | Ending | Paid During | Annualized | |||||||
Share | Account | Account | Period | Account | Period | Expense | ||||||
Class | Value 6/1/16 | Value 11/30/16 | 6/1/16–11/30/161,2 | Value 11/30/16 | 6/1/16–11/30/161,2 | Ratio2 | ||||||
A | $ | 1,000 | $ | 1,090.00 | $ | 4.14 | $ | 1,021.11 | $ | 4.00 | 0.79 | % |
C | $ | 1,000 | $ | 1,086.10 | $ | 6.75 | $ | 1,018.60 | $ | 6.53 | 1.29 | % |
R | $ | 1,000 | $ | 1,086.30 | $ | 5.96 | $ | 1,019.35 | $ | 5.77 | 1.14 | % |
R6 | $ | 1,000 | $ | 1,086.00 | $ | 2.51 | $ | 1,022.66 | $ | 2.43 | 0.48 | % |
Advisor | $ | 1,000 | $ | 1,084.40 | $ | 3.34 | $ | 1,021.86 | $ | 3.24 | 0.64 | % |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above–in the far right column–multiplied by the simple average account value
over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.
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Financial Highlights | ||||||||||||||||||
Franklin High Income Fund | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
November 30, 2016 | Year Ended May 31, | |||||||||||||||||
(unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||
Class A | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the | ||||||||||||||||||
period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 1.73 | $ | 2.01 | $ | 2.15 | $ | 2.12 | $ | 1.97 | $ | 2.05 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.05 | 0.11 | 0.12 | 0.13 | 0.13 | 0.14 | ||||||||||||
Net realized and unrealized gains (losses) | 0.10 | (0.27 | ) | (0.14 | ) | 0.03 | 0.16 | (0.07 | ) | |||||||||
Total from investment operations | 0.15 | (0.16 | ) | (0.02 | ) | 0.16 | 0.29 | 0.07 | ||||||||||
Less distributions from net investment income. | (0.05 | ) | (0.12 | ) | (0.12 | ) | (0.13 | ) | (0.14 | ) | (0.15 | ) | ||||||
Net asset value, end of period | $ | 1.83 | $ | 1.73 | $ | 2.01 | $ | 2.15 | $ | 2.12 | $ | 1.97 | ||||||
Total returnc | 9.00 | % | (8.08 | )% | (0.83 | )% | 8.01 | % | 15.24 | % | 3.64 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses before waiver and payments by | ||||||||||||||||||
affiliates | 0.80 | % | 0.78 | % | 0.76 | % | 0.76 | % | 0.76 | % | 0.76 | % | ||||||
Expenses net of waiver and payments by | ||||||||||||||||||
affiliatese | 0.79 | % | 0.77 | % | 0.76 | %f | 0.76 | %f | 0.76 | % | 0.76 | % | ||||||
Net investment income | 5.31 | % | 6.15 | % | 5.76 | % | 6.10 | % | 6.49 | % | 7.16 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 2,775,161 | $ | 2,745,474 | $ | 3,611,985 | $ | 4,058,942 | $ | 3,920,619 | $ | 2,979,160 | ||||||
Portfolio turnover rate. | 18.39 | % | 18.58 | % | 34.67 | % | 29.33 | % | 28.89 | % | 22.52 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
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FRANKLIN HIGH INCOME TRUST | ||||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||
Franklin High Income Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
November 30, 2016 | Year Ended May 31, | |||||||||||||||||
(unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||
Class C | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the | ||||||||||||||||||
period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 1.75 | $ | 2.03 | $ | 2.17 | $ | 2.13 | $ | 1.99 | $ | 2.07 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.04 | 0.10 | 0.11 | 0.12 | 0.13 | 0.13 | ||||||||||||
Net realized and unrealized gains (losses) | 0.11 | (0.27 | ) | (0.14 | ) | 0.04 | 0.14 | (0.07 | ) | |||||||||
Total from investment operations | 0.15 | (0.17 | ) | (0.03 | ) | 0.16 | 0.27 | 0.06 | ||||||||||
Less distributions from net investment income. | (0.05 | ) | (0.11 | ) | (0.11 | ) | (0.12 | ) | (0.13 | ) | (0.14 | ) | ||||||
Net asset value, end of period | $ | 1.85 | $ | 1.75 | $ | 2.03 | $ | 2.17 | $ | 2.13 | $ | 1.99 | ||||||
Total returnc | 8.61 | % | (8.46 | )% | (1.32 | )% | 7.90 | % | 13.99 | % | 3.09 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses before waiver and payments by | ||||||||||||||||||
affiliates | 1.30 | % | 1.28 | % | 1.26 | % | 1.26 | % | 1.26 | % | 1.26 | % | ||||||
Expenses net of waiver and payments by | ||||||||||||||||||
affiliatese | 1.29 | % | 1.27 | % | 1.26 | %f | 1.26 | %f | 1.26 | % | 1.26 | % | ||||||
Net investment income | 4.81 | % | 5.65 | % | 5.26 | % | 5.60 | % | 5.99 | % | 6.66 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 569,062 | $ | 563,218 | $ | 784,613 | $ | 907,458 | $ | 814,757 | $ | 580,850 | ||||||
Portfolio turnover rate. | 18.39 | % | 18.58 | % | 34.67 | % | 29.33 | % | 28.89 | % | 22.52 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
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FRANKLIN HIGH INCOME TRUST | ||||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||
Franklin High Income Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
November 30, 2016 | Year Ended May 31, | |||||||||||||||||
(unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||
Class R | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the | ||||||||||||||||||
period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 1.76 | $ | 2.04 | $ | 2.18 | $ | 2.14 | $ | 2.00 | $ | 2.08 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.05 | 0.10 | 0.11 | 0.12 | 0.13 | 0.14 | ||||||||||||
Net realized and unrealized gains (losses) | 0.10 | (0.27 | ) | (0.14 | ) | 0.04 | 0.14 | (0.08 | ) | |||||||||
Total from investment operations | 0.15 | (0.17 | ) | (0.03 | ) | 0.16 | 0.27 | 0.06 | ||||||||||
Less distributions from net investment income. | (0.05 | ) | (0.11 | ) | (0.11 | ) | (0.12 | ) | (0.13 | ) | (0.14 | ) | ||||||
Net asset value, end of period | $ | 1.86 | $ | 1.76 | $ | 2.04 | $ | 2.18 | $ | 2.14 | $ | 2.00 | ||||||
Total returnc | 8.63 | % | (8.27 | )% | (1.16 | )% | 8.02 | % | 14.05 | % | 3.25 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses before waiver and payments by | ||||||||||||||||||
affiliates | 1.15 | % | 1.13 | % | 1.11 | % | 1.11 | % | 1.11 | % | 1.11 | % | ||||||
Expenses net of waiver and payments by | ||||||||||||||||||
affiliatese | 1.14 | % | 1.12 | % | 1.11 | %f | 1.11 | %f | 1.11 | % | 1.11 | % | ||||||
Net investment income | 4.96 | % | 5.80 | % | 5.41 | % | 5.75 | % | 6.14 | % | 6.81 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 202,480 | $ | 227,440 | $ | 323,397 | $ | 363,756 | $ | 335,335 | $ | 263,425 | ||||||
Portfolio turnover rate. | 18.39 | % | 18.58 | % | 34.67 | % | 29.33 | % | 28.89 | % | 22.52 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report 11
FRANKLIN HIGH INCOME TRUST | |||||||||||||||
FINANCIAL HIGHLIGHTS | |||||||||||||||
Franklin High Income Fund (continued) | |||||||||||||||
Six Months Ended | |||||||||||||||
November 30, 2016 | Year Ended May 31, | ||||||||||||||
(unaudited) | 2016 | 2015 | 2014 | 2013 | a | ||||||||||
Class R6 | |||||||||||||||
Per share operating performance | |||||||||||||||
(for a share outstanding throughout the period) | |||||||||||||||
Net asset value, beginning of period | $ | 1.73 | $ | 2.01 | $ | 2.15 | $ | 2.12 | $ | 2.14 | |||||
Income from investment operationsb: | |||||||||||||||
Net investment incomec | 0.05 | 0.11 | 0.12 | 0.13 | 0.01 | ||||||||||
Net realized and unrealized gains (losses) | 0.10 | (0.27 | ) | (0.13 | ) | 0.04 | (0.03 | ) | |||||||
Total from investment operations | 0.15 | (0.16 | ) | (0.01 | ) | 0.17 | (0.02 | ) | |||||||
Less distributions from net investment income | (0.06 | ) | (0.12 | ) | (0.13 | ) | (0.14 | ) | — | ||||||
Net asset value, end of period | $ | 1.82 | $ | 1.73 | $ | 2.01 | $ | 2.15 | $ | 2.12 | |||||
Total returnd | 8.60 | % | (7.78 | )% | (0.57 | )% | 8.27 | % | (0.93 | )% | |||||
Ratios to average net assetse | |||||||||||||||
Expenses before waiver and payments by affiliates | 0.49 | % | 0.47 | % | 0.47 | % | 0.49 | % | 0.48 | % | |||||
Expenses net of waiver and payments by affiliatesf | 0.48 | % | 0.46 | % | 0.47 | %g | 0.49 | %g | 0.48 | % | |||||
Net investment income | 5.62 | % | 6.46 | % | 6.05 | % | 6.37 | % | 6.78 | % | |||||
Supplemental data | |||||||||||||||
Net assets, end of period (000’s) | $ | 28,503 | $ | 37,872 | $ | 81,133 | $ | 35,633 | $ | 298 | |||||
Portfolio turnover rate | 18.39 | % | 18.58 | % | 34.67 | % | 29.33 | % | 28.89 | % |
aFor the period May 1, 2013 (effective date) to May 31, 2013.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
fBenefit of expense reduction rounds to less than 0.01%.
gBenefit of waiver and payments by affiliates rounds to less than 0.01%.
12 Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN HIGH INCOME TRUST | ||||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||
Franklin High Income Fund (continued) | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||
November 30, 2016 | Year Ended May 31, | |||||||||||||||||
(unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||
Advisor Class | ||||||||||||||||||
Per share operating performance | ||||||||||||||||||
(for a share outstanding throughout the | ||||||||||||||||||
period) | ||||||||||||||||||
Net asset value, beginning of period | $ | 1.74 | $ | 2.01 | $ | 2.15 | $ | 2.12 | $ | 1.98 | $ | 2.06 | ||||||
Income from investment operationsa: | ||||||||||||||||||
Net investment incomeb | 0.05 | 0.11 | 0.12 | 0.13 | 0.14 | 0.14 | ||||||||||||
Net realized and unrealized gains (losses) | 0.10 | (0.26 | ) | (0.14 | ) | 0.04 | 0.14 | (0.07 | ) | |||||||||
Total from investment operations | 0.15 | (0.15 | ) | (0.02 | ) | 0.17 | 0.28 | 0.07 | ||||||||||
Less distributions from net investment income. | (0.06 | ) | (0.12 | ) | (0.12 | ) | (0.14 | ) | (0.14 | ) | (0.15 | ) | ||||||
Net asset value, end of period | $ | 1.83 | $ | 1.74 | $ | 2.01 | $ | 2.15 | $ | 2.12 | $ | 1.98 | ||||||
Total returnc | 8.44 | % | (7.39 | )% | (0.69 | )% | 8.15 | % | 14.81 | % | 3.79 | % | ||||||
Ratios to average net assetsd | ||||||||||||||||||
Expenses before waiver and payments by | ||||||||||||||||||
affiliates | 0.65 | % | 0.63 | % | 0.61 | % | 0.61 | % | 0.61 | % | 0.61 | % | ||||||
Expenses net of waiver and payments by | ||||||||||||||||||
affiliatese | 0.64 | % | 0.62 | % | 0.61 | %f | 0.61 | %f | 0.61 | % | 0.61 | % | ||||||
Net investment income | 5.46 | % | 6.30 | % | 5.91 | % | 6.25 | % | 6.64 | % | 7.31 | % | ||||||
Supplemental data | ||||||||||||||||||
Net assets, end of period (000’s) | $ | 412,173 | $ | 526,634 | $ | 1,443,439 | $ | 1,720,196 | $ | 1,275,166 | $ | 857,927 | ||||||
Portfolio turnover rate. | 18.39 | % | 18.58 | % | 34.67 | % | 29.33 | % | 28.89 | % | 22.52 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
eBenefit of expense reduction rounds to less than 0.01%.
fBenefit of waiver and payments by affiliates rounds to less than 0.01%.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report 13
FRANKLIN HIGH INCOME TRUST | |||||
Statement of Investments, November 30, 2016 (unaudited) | |||||
Franklin High Income Fund | |||||
Shares/ | |||||
Country | Warrants | Value | |||
Common Stocks and Other Equity Interests 1.7% | |||||
Consumer Services 0.0%† | |||||
Red Rock Resorts Inc., A | United States | 5,447 | $ | 124,845 | |
Energy 1.4% | |||||
a,b,c Goodrich Petroleum Corp | United States | 1,069,250 | 9,455,356 | ||
a,b,c Goodrich Petroleum Corp., wts., 10/12/26. | United States | 515,625 | 4,554,505 | ||
a,d Halcon Resources Corp | United States | 1,889,580 | 15,755,713 | ||
a Halcon Resources Corp., wts., 9/09/20. | United States | 145,844 | 363,152 | ||
a Midstates Petroleum Co. Inc | United States | 11,378 | 229,267 | ||
a,c Midstates Petroleum Co. Inc., wts., 4/21/20 | United States | 80,604 | — | ||
a Penn Virginia Corp | United States | 138,170 | 5,941,310 | ||
a,e Penn Virginia Corp., 144A | United States | 172,624 | 7,422,832 | ||
a,b Titan Energy LLC | United States | 289,137 | 6,650,151 | ||
a W&T Offshore Inc | United States | 3,404,000 | 5,752,760 | ||
56,125,046 | |||||
Materials 0.0%† | |||||
a Verso Corp., A | United States | 83,362 | 445,987 | ||
a Verso Corp., wts., 7/25/23 | United States | 8,775 | — | ||
445,987 | |||||
Transportation 0.0%† | |||||
a,c CEVA Holdings LLC. | United States | 3,364 | 420,527 | ||
Utilities 0.3% | |||||
a Vistra Energy Corp | United States | 856,299 | 11,945,371 | ||
Total Common Stocks and Other Equity Interests | |||||
(Cost $178,207,813) | 69,061,776 | ||||
Convertible Preferred Stocks 0.0%† | |||||
Transportation 0.0%† | |||||
a,c CEVA Holdings LLC, cvt. pfd., A-1 | United States | 134 | 45,560 | ||
a,c CEVA Holdings LLC, cvt. pfd., A-2 | United States | 7,283 | 1,638,589 | ||
Total Convertible Preferred Stocks (Cost $11,036,794) | 1,684,149 | ||||
Principal | |||||
Amount* | |||||
Convertible Bonds (Cost $5,425,783) 0.2% | |||||
Energy 0.2% | |||||
b,c,f Goodrich Petroleum Corp., senior secured note, second lien, PIK, cvt., 13.50%, | |||||
8/30/19 | United States | $ | 8,250,000 | 8,104,126 | |
Corporate Bonds 92.7% | |||||
Automobiles & Components 1.4% | |||||
Fiat Chrysler Automobiles NV, senior note, 5.25%, 4/15/23. | United Kingdom | 17,500,000 | 17,424,225 | ||
The Goodyear Tire & Rubber Co., | |||||
senior bond, 5.00%, 5/31/26 | United States | 9,400,000 | 9,353,000 | ||
senior note, 5.125%, 11/15/23 | United States | 15,000,000 | 15,393,750 | ||
e International Automotive Components Group SA, senior secured note, 144A, | |||||
9.125%, 6/01/18 | United States | 14,000,000 | 12,705,000 | ||
54,875,975 |
14 Semiannual Report
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FRANKLIN HIGH INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin High Income Fund (continued) | |||||
Principal | |||||
Country | Amount* | Value | |||
Corporate Bonds (continued) | |||||
Banks 4.1% | |||||
g Bank of America Corp., junior sub. bond, M, 8.125% to 5/15/18, FRN thereafter, | |||||
Perpetual | United States | $ | 42,500,000 | $ | 43,350,000 |
CIT Group Inc., | |||||
senior note, 5.375%, 5/15/20 | United States | 12,000,000 | 12,720,000 | ||
senior note, 5.00%, 8/15/22 | United States | 33,650,000 | 35,122,188 | ||
g Citigroup Inc., junior sub. bond, M, 6.30% to 5/15/24, FRN thereafter, Perpetual | United States | 45,000,000 | 44,550,000 | ||
g JPMorgan Chase & Co., | |||||
junior sub. bond, R, 6.00% to 8/01/23, FRN thereafter, Perpetual | United States | 5,000,000 | 4,987,500 | ||
junior sub. bond, V, 5.00% to 7/30/19, FRN thereafter, Perpetual | United States | 9,900,000 | 9,649,530 | ||
Royal Bank of Scotland Group PLC, | |||||
sub. note, 6.125%, 12/15/22 | United Kingdom | 4,000,000 | 4,144,960 | ||
sub. note, 5.125%, 5/28/24 | United Kingdom | 10,000,000 | 9,721,850 | ||
164,246,028 | |||||
Capital Goods 3.8% | |||||
e CBC Ammo LLC/CBC FinCo Inc., senior note, 144A, 7.25%, 11/15/21. | Brazil | 24,000,000 | 23,640,000 | ||
e Cloud Crane LLC, secured note, second lien, 144A, 10.125%, 8/01/24 | United States | 6,100,000 | 6,481,250 | ||
CNH Industrial Capital LLC, senior note, 3.875%, 10/15/21 | United States | 30,000,000 | 29,475,000 | ||
e Cortes NP Acquisition Corp., senior note, 144A, 9.25%, 10/15/24 | United States | 36,500,000 | 37,138,750 | ||
e HD Supply Inc., senior note, 144A, 5.75%, 4/15/24 | United States | 9,500,000 | 9,737,500 | ||
Navistar International Corp., senior bond, 8.25%, 11/01/21. | United States | 13,500,000 | 13,567,500 | ||
TransDigm Inc., | |||||
senior sub. bond, 6.50%, 7/15/24 | United States | 8,000,000 | 8,330,000 | ||
senior sub. bond, 6.50%, 5/15/25 | United States | 4,200,000 | 4,341,750 | ||
e senior sub. bond, 144A, 6.375%, 6/15/26 | United States | 8,200,000 | 8,384,500 | ||
senior sub. note, 6.00%, 7/15/22 | United States | 9,400,000 | 9,711,610 | ||
150,807,860 | |||||
Commercial & Professional Services 1.4% | |||||
e Acosta Inc., senior note, 144A, 7.75%, 10/01/22 | United States | 29,000,000 | 24,142,500 | ||
c,h Goss Graphic Systems Inc., senior sub. note, 12.25%, 11/19/05 | United States | 9,053,899 | 905 | ||
United Rentals North America Inc., | |||||
senior bond, 5.75%, 11/15/24 | United States | 14,000,000 | 14,560,000 | ||
senior bond, 5.875%, 9/15/26 | United States | 9,600,000 | 9,864,000 | ||
senior bond, 5.50%, 5/15/27 | United States | 7,100,000 | 7,082,250 | ||
55,649,655 | |||||
Consumer Durables & Apparel 3.6% | |||||
e Hanesbrands Inc., senior note, 144A, 4.625%, 5/15/24 | United States | 26,300,000 | 26,431,500 | ||
KB Home, | |||||
senior bond, 7.50%, 9/15/22 | United States | 23,000,000 | 24,610,000 | ||
senior note, 7.00%, 12/15/21 | United States | 10,000,000 | 10,637,500 | ||
PulteGroup Inc., senior bond, 5.00%, 1/15/27 | United States | 33,600,000 | 31,752,000 | ||
e Taylor Morrison Communities Inc./Monarch Communities Inc., | |||||
senior note, 144A, 5.875%, 4/15/23 | United States | 12,500,000 | 12,656,250 | ||
senior note, 144A, 5.625%, 3/01/24 | United States | 25,000,000 | 25,312,500 | ||
Toll Brothers Finance Corp., senior bond, 5.625%, 1/15/24 | United States | 12,000,000 | 12,420,000 | ||
143,819,750 | |||||
Consumer Services 5.0% | |||||
e 1011778 BC ULC/New Red Finance Inc., secured note, second lien, 144A, 6.00%, | |||||
4/01/22 | Canada | 23,500,000 | 24,557,500 | ||
e 24 Hour Holdings III LLC, senior note, 144A, 8.00%, 6/01/22 | United States | 30,000,000 | 25,200,000 | ||
e,h Fontainebleau Las Vegas, senior secured bond, first lien, 144A, 11.00%, 6/15/15 | United States | 20,000,000 | 3,000 |
franklintempleton.com
Semiannual Report 15
FRANKLIN HIGH INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin High Income Fund (continued) | |||||
Principal | |||||
Country | Amount* | Value | |||
Corporate Bonds (continued) | |||||
Consumer Services (continued) | |||||
GLP Capital LP/GLP Financing II Inc., senior note, 5.375%, 4/15/26 | United States | $ | 11,500,000 | $ | 11,787,500 |
e International Game Technology PLC, | |||||
senior secured bond, 144A, 6.50%, 2/15/25 | United States | 24,000,000 | 25,500,000 | ||
senior secured note, 144A, 6.25%, 2/15/22 | United States | 17,000,000 | 18,126,250 | ||
e KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC, | |||||
senior note, 144A, 5.00%, 6/01/24 | United States | 15,600,000 | 15,795,000 | ||
senior note, 144A, 5.25%, 6/01/26 | United States | 17,700,000 | 17,832,750 | ||
e ROC Finance LLC/ROC Finance 1 Corp., senior secured note, first lien, 144A, | |||||
6.75%, 11/15/21 | United States | 20,100,000 | 20,200,500 | ||
e Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, | |||||
3/01/25 | United States | 20,000,000 | 19,775,000 | ||
e Wynn Macau Ltd., senior note, 144A, 5.25%, 10/15/21 | Macau | 21,500,000 | 21,688,125 | ||
200,465,625 | |||||
Diversified Financials 2.9% | |||||
AerCap Ireland Capital Ltd./AerCap Global Aviation Trust, | |||||
senior note, 4.625%, 10/30/20 | Netherlands | 5,800,000 | 6,046,877 | ||
senior note, 5.00%, 10/01/21 | Netherlands | 15,000,000 | 15,834,750 | ||
senior note, 4.625%, 7/01/22 | Netherlands | 13,400,000 | 13,861,161 | ||
E*TRADE Financial Corp., senior note, 4.625%, 9/15/23 | United States | 10,000,000 | 10,165,170 | ||
e MSCI Inc., senior note, 144A, 4.75%, 8/01/26 | United States | 9,700,000 | 9,506,000 | ||
Navient Corp., | |||||
senior note, 4.875%, 6/17/19 | United States | 4,000,000 | 4,120,000 | ||
senior note, 5.00%, 10/26/20 | United States | 12,500,000 | 12,640,625 | ||
senior note, 5.875%, 3/25/21 | United States | 5,000,000 | 5,162,500 | ||
senior note, 6.625%, 7/26/21 | United States | 9,500,000 | 9,939,375 | ||
senior note, 7.25%, 9/25/23 | United States | 27,780,000 | 28,196,700 | ||
115,473,158 | |||||
Energy 12.1% | |||||
e,h Alpha Natural Resources Inc., second lien, 144A, 7.50%, 8/01/20 | United States | 25,000,000 | 1,312,500 | ||
h BreitBurn Energy Partners LP/BreitBurn Finance Corp., senior bond, 7.875%, | |||||
4/15/22 | United States | 33,800,000 | 22,899,500 | ||
California Resources Corp., | |||||
e secured note, second lien, 144A, 8.00%, 12/15/22 | United States | 19,782,000 | 16,023,420 | ||
senior bond, 6.00%, 11/15/24 | United States | 850,000 | 527,000 | ||
senior note, 5.50%, 9/15/21 | United States | 411,000 | 267,150 | ||
Calumet Specialty Products Partners LP/Calumet Finance Corp., | |||||
senior note, 7.75%, 4/15/23 | United States | 30,100,000 | 24,230,500 | ||
e senior note, 144A, 11.50%, 1/15/21 | United States | 6,800,000 | 7,769,000 | ||
CGG SA, | |||||
senior note, 6.50%, 6/01/21 | France | 17,100,000 | 7,182,000 | ||
senior note, 6.875%, 1/15/22 | France | 12,700,000 | 5,397,500 | ||
h,i Chaparral Energy Inc., | |||||
senior bond, 8.25%, 9/01/21 | United States | 10,000,000 | 8,350,000 | ||
senior bond, 7.625%, 11/15/22 | United States | 6,700,000 | 5,577,750 | ||
senior note, 9.875%, 10/01/20 | United States | 4,500,000 | 3,735,000 | ||
h,i CHC Helicopter SA, | |||||
senior note, 9.375%, 6/01/21 | Canada | 10,000,000 | 3,000,000 | ||
senior secured note, first lien, 9.25%, 10/15/20 | Canada | 37,800,000 | 17,907,750 |
16 Semiannual Report
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FRANKLIN HIGH INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin High Income Fund (continued) | |||||
Principal | |||||
Country | Amount* | Value | |||
Corporate Bonds (continued) | |||||
Energy (continued) | |||||
e Cheniere Corpus Christi Holdings LLC, senior secured note, 144A, 7.00%, 6/30/24 | United States | $ | 15,600,000 | $ | 16,779,672 |
CONSOL Energy Inc., senior note, 8.00%, 4/01/23 | United States | 25,000,000 | 25,625,000 | ||
Crestwood Midstream Partners LP/Crestwood Midstrean Finance Corp., senior note, | |||||
6.25%, 4/01/23 | United States | 17,000,000 | 17,340,000 | ||
CSI Compressco LP/CSI Compressco Finance Inc., senior note, 7.25%, 8/15/22 | United States | 12,900,000 | 11,932,500 | ||
Energy Transfer Equity LP, | |||||
senior note, first lien, 7.50%, 10/15/20 | United States | 6,500,000 | 7,296,250 | ||
senior secured bond, first lien, 5.875%, 1/15/24 | United States | 15,000,000 | 15,562,500 | ||
senior secured bond, first lien, 5.50%, 6/01/27. | United States | 17,900,000 | 17,620,402 | ||
h Energy XXI Gulf Coast Inc., | |||||
senior note, 9.25%, 12/15/17 | United States | 26,000,000 | 3,510,000 | ||
e senior secured note, second lien, 144A, 11.00%, 3/15/20 | United States | 10,000,000 | 5,237,500 | ||
e,f,i EnQuest PLC, 144A, PIK, 7.00%, 4/15/22 | United Kingdom | 20,845,600 | 13,341,184 | ||
h EPL Oil & Gas Inc., senior note, 8.25%, 2/15/18 | United States | 20,000,000 | 3,300,000 | ||
Ferrellgas LP/Ferrellgas Finance Corp., senior note, 6.75%, 6/15/23 | United States | 32,000,000 | 29,920,000 | ||
e,h Linn Energy LLC/Finance Corp., senior secured note, second lien, 144A, 12.00%, | |||||
12/15/20 | United States | 11,845,000 | 8,024,987 | ||
Martin Midstream Partners LP/Martin Midstream Finance Corp., senior note, 7.25%, | |||||
2/15/21 | United States | 17,000,000 | 16,575,000 | ||
Memorial Production Partners LP/Memorial Production Finance Corp., | |||||
senior note, 7.625%, 5/01/21 | United States | 12,400,000 | 4,557,000 | ||
senior note, 6.875%, 8/01/22 | United States | 8,000,000 | 2,870,000 | ||
e Murray Energy Corp., secured note, second lien, 144A, 11.25%, 4/15/21 | United States | 24,500,000 | 17,517,500 | ||
QEP Resources Inc., senior bond, 5.375%, 10/01/22 | United States | 14,000,000 | 13,720,000 | ||
Sabine Pass Liquefaction LLC, | |||||
first lien, 5.625%, 2/01/21 | United States | 22,000,000 | 23,485,000 | ||
first lien, 5.625%, 4/15/23 | United States | 13,300,000 | 14,031,500 | ||
senior secured note, first lien, 5.625%, 3/01/25 | United States | 10,000,000 | 10,462,500 | ||
Sanchez Energy Corp., | |||||
senior note, 7.75%, 6/15/21 | United States | 7,000,000 | 6,685,000 | ||
senior note, 6.125%, 1/15/23 | United States | 8,000,000 | 7,040,000 | ||
e,h Triangle USA Petroleum Corp., senior note, 144A, 6.75%, 7/15/22 | United States | 20,000,000 | 5,000,000 | ||
e,f W&T Offshore Inc., | |||||
second lien, 144A, PIK, 10.75%, 5/15/20 | United States | 9,182,750 | 6,307,844 | ||
senior secured note, third lien, 144A, PIK, 8.50%, 6/15/21 | United States | 8,000,000 | 3,831,659 | ||
Weatherford International Ltd., | |||||
senior note, 5.125%, 9/15/20 | United States | 5,300,000 | 4,862,750 | ||
senior note, 7.75%, 6/15/21 | United States | 10,000,000 | 9,812,500 | ||
senior note, 4.50%, 4/15/22 | United States | 8,500,000 | 7,437,500 | ||
senior note, 8.25%, 6/15/23 | United States | 19,600,000 | 19,232,500 | ||
WPX Energy Inc., senior note, 6.00%, 1/15/22 | United States | 10,000,000 | 10,296,900 | ||
483,394,218 | |||||
Food, Beverage & Tobacco 3.1% | |||||
e Dole Food Co. Inc., senior secured note, 144A, 7.25%, 5/01/19 | United States | 7,900,000 | 7,998,750 | ||
e JBS USA LLC/Finance Inc., | |||||
senior bond, 144A, 5.875%, 7/15/24 | United States | 17,100,000 | 17,100,000 | ||
senior note, 144A, 8.25%, 2/01/20 | United States | 15,000,000 | 15,450,000 | ||
senior note, 144A, 7.25%, 6/01/21 | United States | 10,000,000 | 10,375,000 | ||
e Lamb Weston Holdings Inc., | |||||
senior note, 144A, 4.625%, 11/01/24 | United States | 13,900,000 | 13,900,000 | ||
senior note, 144A, 4.875%, 11/01/26 | United States | 13,800,000 | 13,765,500 |
franklintempleton.com
Semiannual Report 17
FRANKLIN HIGH INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin High Income Fund (continued) | |||||
Principal | |||||
Country | Amount* | Value | |||
Corporate Bonds (continued) | |||||
Food, Beverage & Tobacco (continued) | |||||
e Post Holdings Inc., | |||||
senior bond, 144A, 5.00%, 8/15/26. | United States | $ | 33,000,000 | $ | 31,383,000 |
senior note, 144A, 6.75%, 12/01/21 | United States | 14,000,000 | 14,945,000 | ||
124,917,250 | |||||
Health Care Equipment & Services 5.3% | |||||
Alere Inc., senior sub. note, 6.50%, 6/15/20 | United States | 6,300,000 | 6,300,000 | ||
CHS/Community Health Systems Inc., | |||||
senior note, 8.00%, 11/15/19 | United States | 20,000,000 | 15,850,000 | ||
senior note, 7.125%, 7/15/20 | United States | 13,300,000 | 9,443,000 | ||
senior note, 6.875%, 2/01/22 | United States | 4,600,000 | 3,093,500 | ||
senior secured note, 5.125%, 8/01/21. | United States | 4,100,000 | 3,718,188 | ||
senior secured note, first lien, 5.125%, 8/15/18 | United States | 502,000 | 489,500 | ||
HCA Inc., | |||||
senior bond, 5.875%, 5/01/23 | United States | 40,000,000 | 41,200,000 | ||
senior bond, 5.375%, 2/01/25 | United States | 7,000,000 | 6,860,000 | ||
senior secured bond, first lien, 5.25%, 4/15/25. | United States | 11,000,000 | 11,110,000 | ||
senior secured note, first lien, 5.00%, 3/15/24 | United States | 20,000,000 | 20,100,000 | ||
e MPH Acquisition Holdings LLC, senior note, 144A, 7.125%, 6/01/24 | United States | 17,400,000 | 18,335,250 | ||
e,j New Amethyst Corp., senior note, 144A, 6.25%, 12/01/24 | United States | 10,300,000 | 10,686,250 | ||
Tenet Healthcare Corp., | |||||
first lien, 6.00%, 10/01/20 | United States | 6,700,000 | 6,829,812 | ||
senior note, 5.00%, 3/01/19 | United States | 10,700,000 | 10,245,250 | ||
senior note, 8.125%, 4/01/22 | United States | 20,000,000 | 18,350,000 | ||
senior note, 6.75%, 6/15/23 | United States | 13,700,000 | 11,747,750 | ||
e Vizient Inc., senior note, 144A, 10.375%, 3/01/24 | United States | 16,800,000 | 18,186,000 | ||
212,544,500 | |||||
Materials 11.9% | |||||
e,f ARD Finance SA, senior secured note, 144A, PIK, 7.125%, 9/15/23 | Luxembourg | 14,000,000 | 13,947,500 | ||
e Ardagh Packaging Finance PLC/Ardagh MP Holdings USA Inc., | |||||
senior note, 144A, 6.00%, 6/30/21 | Luxembourg | 7,000,000 | 7,087,500 | ||
k senior secured note, 144A, FRN, 3.85%, 12/15/19 | Luxembourg | 4,700,000 | 4,794,000 | ||
e Axalta Coating Systems LLC, senior note, 144A, 4.875%, 8/15/24. | United States | 9,600,000 | 9,576,000 | ||
e Barminco Finance Pty. Ltd., senior note, 144A, 9.00%, 6/01/18 | Australia | 27,500,000 | 27,810,750 | ||
e Cemex Finance LLC, senior secured note, first lien, 144A, 6.00%, 4/01/24 | Mexico | 5,800,000 | 5,805,017 | ||
e Cemex SAB de CV, | |||||
first lien, 144A, 5.70%, 1/11/25 | Mexico | 30,000,000 | 29,240,400 | ||
senior secured bond, first lien, 144A, 6.125%, 5/05/25 | Mexico | 7,000,000 | 6,934,690 | ||
The Chemours Co., | |||||
senior bond, 7.00%, 5/15/25 | United States | 8,500,000 | 8,415,000 | ||
senior note, 6.625%, 5/15/23 | United States | 17,000,000 | 16,872,500 | ||
e CVR Partners LP/CVR Nitrogen Finance Corp., secured note, second lien, 144A, | |||||
9.25%, 6/15/23 | United States | 22,000,000 | 21,862,500 | ||
e Eldorado Gold Corp., senior note, 144A, 6.125%, 12/15/20 | Canada | 21,700,000 | 21,971,250 | ||
e First Quantum Minerals Ltd., | |||||
senior note, 144A, 6.75%, 2/15/20 | Canada | 20,000,000 | 19,875,000 | ||
senior note, 144A, 7.00%, 2/15/21 | Canada | 20,000,000 | 19,825,000 | ||
e FMG Resources (August 2006) Pty. Ltd., senior secured note, 144A, 9.75%, | |||||
3/01/22 | Australia | 18,000,000 | 20,807,100 | ||
e Novelis Corp., | |||||
senior bond, 144A, 5.875%, 9/30/26 | United States | 15,700,000 | 15,719,625 | ||
senior note, 144A, 6.25%, 8/15/24 | United States | 16,000,000 | 16,600,000 |
18 Semiannual Report
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FRANKLIN HIGH INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin High Income Fund (continued) | |||||
Principal | |||||
Country | Amount* | Value | |||
Corporate Bonds (continued) | |||||
Materials (continued) | |||||
e Owens-Brockway Glass Container Inc., | |||||
senior note, 144A, 5.00%, 1/15/22 | United States | $ | 13,000,000 | $ | 13,308,750 |
senior note, 144A, 5.875%, 8/15/23 | United States | 10,000,000 | 10,468,750 | ||
e Platform Specialty Products Corp., | |||||
senior note, 144A, 10.375%, 5/01/21 | United States | 7,400,000 | 8,103,000 | ||
senior note, 144A, 6.50%, 2/01/22 | United States | 25,000,000 | 24,812,500 | ||
e Rain CII Carbon LLC/CII Carbon Corp., second lien, 144A, 8.25%, 1/15/21 | United States | 18,700,000 | 18,139,000 | ||
Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer | |||||
Luxembourg SA, | |||||
first lien, 5.75%, 10/15/20 | United States | 16,000,000 | 16,480,000 | ||
e first lien, 144A, 5.125%, 7/15/23 | United States | 7,200,000 | 7,281,000 | ||
senior note, 8.25%, 2/15/21 | United States | 6,935,868 | 7,164,814 | ||
e,k senior secured note, first lien, 144A, FRN, 4.38%, 7/15/21 | United States | 5,300,000 | 5,425,875 | ||
e Sealed Air Corp., senior bond, 144A, 5.50%, 9/15/25. | United States | 18,000,000 | 18,630,000 | ||
Steel Dynamics Inc., | |||||
senior bond, 5.50%, 10/01/24 | United States | 15,000,000 | 15,900,000 | ||
e,j senior bond, 144A, 5.00%, 12/15/26 | United States | 10,000,000 | 10,075,000 | ||
senior note, 5.125%, 10/01/21 | United States | 8,500,000 | 8,903,750 | ||
Summit Materials LLC/Summit Materials Finance Corp., senior note, 8.50%, | |||||
4/15/22 | United States | 26,300,000 | 29,094,375 | ||
e Univar USA Inc., senior note, 144A, 6.75%, 7/15/23 | United States | 11,500,000 | 11,758,750 | ||
472,689,396 | |||||
Media 9.8% | |||||
e Altice U.S. Finance I Corp., senior secured bond, 144A, 5.50%, 5/15/26. | United States | 23,550,000 | 23,343,937 | ||
AMC Networks Inc., senior note, 5.00%, 4/01/24 | United States | 22,800,000 | 22,942,500 | ||
CCO Holdings LLC/CCO Holdings Capital Corp., | |||||
senior bond, 5.25%, 9/30/22 | United States | 5,000,000 | 5,200,000 | ||
senior bond, 5.125%, 2/15/23 | United States | 10,000,000 | 10,300,000 | ||
e senior bond, 144A, 5.375%, 5/01/25 | United States | 12,000,000 | 12,225,000 | ||
e senior bond, 144A, 5.75%, 2/15/26. | United States | 13,200,000 | 13,596,000 | ||
Clear Channel Worldwide Holdings Inc., | |||||
senior note, 6.50%, 11/15/22 | United States | 3,500,000 | 3,447,500 | ||
senior note, 6.50%, 11/15/22 | United States | 6,500,000 | 6,589,375 | ||
senior sub. note, 7.625%, 3/15/20 | United States | 1,650,000 | 1,551,000 | ||
senior sub. note, 7.625%, 3/15/20 | United States | 14,000,000 | 13,860,000 | ||
CSC Holdings LLC, | |||||
e senior bond, 144A, 10.875%, 10/15/25 | United States | 8,600,000 | 10,019,000 | ||
e senior bond, 144A, 5.50%, 4/15/27. | United States | 8,000,000 | 7,960,000 | ||
senior note, 6.75%, 11/15/21 | United States | 5,000,000 | 5,268,750 | ||
senior note, 5.25%, 6/01/24 | United States | 28,000,000 | 26,317,200 | ||
DISH DBS Corp., | |||||
senior bond, 5.00%, 3/15/23 | United States | 5,000,000 | 4,950,000 | ||
senior note, 5.875%, 7/15/22 | United States | 20,000,000 | 20,750,000 | ||
senior note, 5.875%, 11/15/24 | United States | 17,500,000 | 17,806,250 | ||
Gannett Co. Inc., senior bond, 6.375%, 10/15/23. | United States | 10,000,000 | 10,556,300 | ||
iHeartCommunications Inc., | |||||
senior secured bond, first lien, 9.00%, 3/01/21. | United States | 33,000,000 | 24,461,250 | ||
senior secured note, first lien, 9.00%, 9/15/22 | United States | 15,000,000 | 10,968,750 |
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Semiannual Report 19
FRANKLIN HIGH INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin High Income Fund (continued) | |||||
Principal | |||||
Country | Amount* | Value | |||
Corporate Bonds (continued) | |||||
Media (continued) | |||||
e Nextstar Escrow Corp., senior note, 144A, 5.625%, 8/01/24 | United States | $ | 11,600,000 | $ | 11,513,000 |
e Radio One Inc., senior sub. note, 144A, 9.25%, 2/15/20 | United States | 19,000,000 | 17,100,000 | ||
e Unitymedia KabelBW GmbH, senior bond, 144A, 6.125%, 1/15/25 | Germany | 23,500,000 | 23,940,625 | ||
e Univision Communications Inc., | |||||
senior secured note, first lien, 144A, 5.125%, 5/15/23. | United States | 5,000,000 | 4,837,500 | ||
senior secured note, first lien, 144A, 5.125%, 2/15/25. | United States | 16,000,000 | 15,220,000 | ||
e Virgin Media Secured Finance PLC, | |||||
senior secured bond, 144A, 5.25%, 1/15/26 | United Kingdom | 20,000,000 | 19,500,000 | ||
senior secured bond, first lien, 144A, 5.50%, 1/15/25 | United Kingdom | 17,000,000 | 17,148,750 | ||
senior secured bond, first lien, 144A, 5.50%, 8/15/26 | United Kingdom | 7,300,000 | 7,135,750 | ||
e WMG Acquisition Corp., | |||||
secured note, first lien, 144A, 5.00%, 8/01/23 | United States | 8,500,000 | 8,521,250 | ||
secured note, 144A, 4.875%, 11/01/24 | United States | 13,300,000 | 13,233,500 | ||
390,263,187 | |||||
Pharmaceuticals, Biotechnology & Life Sciences 4.4% | |||||
e AMAG Pharmaceuticals Inc., senior note, 144A, 7.875%, 9/01/23 | United States | 29,000,000 | 27,695,000 | ||
e Concordia International Corp., | |||||
senior note, 144A, 7.00%, 4/15/23 | Canada | 24,000,000 | 9,240,000 | ||
senior secured note, first lien, 144A, 9.00%, 4/01/22 | Canada | 11,000,000 | 10,161,250 | ||
e Endo Finance LLC/Endo Ltd./Endo Finco Inc., | |||||
senior bond, 144A, 6.00%, 2/01/25. | United States | 28,400,000 | 24,388,500 | ||
senior note, 144A, 6.00%, 7/15/23 | United States | 16,200,000 | 14,499,000 | ||
Horizon Pharma Inc., senior note, 6.625%, 5/01/23 | United States | 24,000,000 | 22,680,000 | ||
e Horizon Pharma Inc./Horizon Pharma USA Inc., senior note, 144A, 8.75%, | |||||
11/01/24 | United States | 7,300,000 | 7,437,240 | ||
e Valeant Pharmaceuticals International, senior note, 144A, 6.375%, 10/15/20 | United States | 36,000,000 | 30,600,000 | ||
e Valeant Pharmaceuticals International Inc., | |||||
senior bond, 144A, 6.125%, 4/15/25 | United States | 12,500,000 | 9,281,250 | ||
senior note, 144A, 7.50%, 7/15/21 | United States | 10,000,000 | 8,487,500 | ||
senior note, 144A, 5.625%, 12/01/21 | United States | 15,000,000 | 11,625,000 | ||
176,094,740 | |||||
Real Estate 0.9% | |||||
e Crescent Communities LLC/Crescent Ventures Inc., secured note, 144A, 8.875%, | |||||
10/15/21 | United States | 15,000,000 | 14,925,000 | ||
Equinix Inc., senior bond, 5.375%, 4/01/23 | United States | 14,000,000 | 14,437,500 | ||
MPT Operating Partnership LP/MPT Finance Corp., senior bond, 5.25%, 8/01/26 | United States | 7,700,000 | 7,238,000 | ||
36,600,500 | |||||
Retailing 1.4% | |||||
Netflix Inc., | |||||
senior bond, 5.875%, 2/15/25 | United States | 10,000,000 | 10,726,100 | ||
e senior bond, 144A, 4.375%, 11/15/26 | United States | 15,700,000 | 15,307,657 | ||
senior note, 5.50%, 2/15/22 | United States | 14,200,000 | 15,265,000 | ||
e PetSmart Inc., senior note, 144A, 7.125%, 3/15/23 | United States | 12,700,000 | 13,033,375 | ||
54,332,132 | |||||
Semiconductors & Semiconductor Equipment 0.4% | |||||
Qorvo Inc., senior note, 6.75%, 12/01/23 | United States | 15,800,000 | 17,103,500 |
20 Semiannual Report
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FRANKLIN HIGH INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin High Income Fund (continued) | |||||
Principal | |||||
Country | Amount* | Value | |||
Corporate Bonds (continued) | |||||
Software & Services 3.4% | |||||
e BMC Software Finance Inc., senior note, 144A, 8.125%, 7/15/21 | United States | $ | 45,000,000 | $ | 40,725,000 |
e First Data Corp., | |||||
second lien, 144A, 5.75%, 1/15/24 | United States | 30,000,000 | 30,487,500 | ||
secured note, first lien, 144A, 5.00%, 1/15/24 | United States | 10,000,000 | 10,125,000 | ||
senior note, 144A, 7.00%, 12/01/23 | United States | 14,000,000 | 14,691,320 | ||
Infor (U.S.) Inc., senior note, 6.50%, 5/15/22 | United States | 39,000,000 | 40,365,000 | ||
136,393,820 | |||||
Technology Hardware & Equipment 3.3% | |||||
e Blackboard Inc., second lien, 144A, 9.75%, 10/15/21. | United States | 24,410,000 | 24,043,850 | ||
e CommScope Inc., | |||||
senior bond, 144A, 5.50%, 6/15/24. | United States | 7,000,000 | 7,191,450 | ||
senior note, 144A, 5.00%, 6/15/21 | United States | 15,000,000 | 15,243,750 | ||
e CommScope Technologies Finance LLC, senior bond, 144A, 6.00%, 6/15/25 | United States | 10,200,000 | 10,671,750 | ||
e Diamond 1 Finance Corp./Diamond 2 Finance Corp., | |||||
senior note, 144A, 5.875%, 6/15/21 | United States | 4,500,000 | 4,744,121 | ||
senior note, 144A, 7.125%, 6/15/24 | United States | 4,900,000 | 5,353,956 | ||
senior secured bond, first lien, 144A, 5.45%, 6/15/23 | United States | 7,000,000 | 7,304,059 | ||
senior secured bond, first lien, 144A, 6.02%, 6/15/26 | United States | 5,400,000 | 5,664,335 | ||
e Plantronics Inc., senior note, 144A, 5.50%, 5/31/23 | United States | 11,000,000 | 11,055,000 | ||
e Western Digital Corp., senior note, 144A, 10.50%, 4/01/24 | United States | 33,250,000 | 38,570,000 | ||
129,842,271 | |||||
Telecommunication Services 9.2% | |||||
CenturyLink Inc., | |||||
senior bond, 6.75%, 12/01/23 | United States | 6,300,000 | 6,323,625 | ||
senior bond, 5.625%, 4/01/25 | United States | 17,800,000 | 16,643,000 | ||
senior note, 5.80%, 3/15/22 | United States | 27,000,000 | 26,763,750 | ||
e Digicel Group Ltd., senior note, 144A, 8.25%, 9/30/20 | Bermuda | 15,000,000 | 12,639,150 | ||
e Digicel Ltd., | |||||
senior note, 144A, 6.00%, 4/15/21 | Bermuda | 22,000,000 | 19,096,990 | ||
senior note, 144A, 6.75%, 3/01/23 | Bermuda | 8,100,000 | 7,013,790 | ||
e Hughes Satellite Systems Corp., senior bond, 144A, 6.625%, 8/01/26 | United States | 27,350,000 | 26,392,750 | ||
Intelsat Jackson Holdings SA, | |||||
senior bond, 5.50%, 8/01/23 | Luxembourg | 15,000,000 | 9,900,000 | ||
senior note, 7.25%, 10/15/20 | Luxembourg | 10,000,000 | 7,337,500 | ||
senior note, 7.50%, 4/01/21 | Luxembourg | 12,000,000 | 8,752,440 | ||
e senior secured note, first lien, 144A, 8.00%, 2/15/24 | Luxembourg | 8,400,000 | 8,526,000 | ||
e Millicom International Cellular SA, senior note, 144A, 6.625%, 10/15/21 | Luxembourg | 30,000,000 | 31,762,500 | ||
Sprint Communications Inc., | |||||
senior note, 6.00%, 11/15/22 | United States | 12,500,000 | 12,093,750 | ||
e senior note, 144A, 9.00%, 11/15/18 | United States | 10,700,000 | 11,770,000 | ||
e senior note, 144A, 7.00%, 3/01/20 | United States | 9,800,000 | 10,565,576 | ||
Sprint Corp., senior note, 7.625%, 2/15/25 | United States | 20,000,000 | 20,375,000 | ||
e Sprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC, 144A, 3.36%, 9/20/21 | United States | 46,300,000 | 46,531,500 | ||
T-Mobile USA Inc., | |||||
senior bond, 6.375%, 3/01/25 | United States | 22,400,000 | 23,996,000 | ||
senior note, 6.633%, 4/28/21 | United States | 9,000,000 | 9,416,250 | ||
senior note, 6.731%, 4/28/22 | United States | 9,000,000 | 9,426,150 | ||
senior note, 6.00%, 4/15/24 | United States | 8,500,000 | 8,946,250 |
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Semiannual Report 21
FRANKLIN HIGH INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin High Income Fund (continued) | |||||
Principal | |||||
Country | Amount* | Value | |||
Corporate Bonds (continued) | |||||
Telecommunication Services (continued) | |||||
e Wind Acquisition Finance SA, | |||||
secured note, second lien, 144A, 7.375%, 4/23/21 | Italy | $ | 17,000,000 | $ | 17,450,840 |
senior secured note, first lien, 144A, 4.75%, 7/15/20 | Italy | 15,000,000 | 15,075,000 | ||
366,797,811 | |||||
Transportation 1.0% | |||||
e Florida East Coast Holdings Corp., | |||||
secured note, first lien, 144A, 6.75%, 5/01/19 | United States | 15,000,000 | 15,525,000 | ||
senior note, 144A, 9.75%, 5/01/20 | United States | 9,300,000 | 9,509,250 | ||
e Stena International SA, senior secured bond, first lien, 144A, 5.75%, 3/01/24. | Sweden | 8,400,000 | 6,905,430 | ||
e XPO Logistics Inc., senior note, 144A, 6.125%, 9/01/23 | United States | 6,800,000 | 6,970,000 | ||
38,909,680 | |||||
Utilities 4.3% | |||||
Calpine Corp., | |||||
senior bond, 5.75%, 1/15/25 | United States | 15,400,000 | 14,764,750 | ||
senior note, 5.375%, 1/15/23 | United States | 18,300,000 | 17,758,503 | ||
e senior secured bond, first lien, 144A, 5.875%, 1/15/24 | United States | 5,000,000 | 5,256,250 | ||
Dynegy Inc., | |||||
senior bond, 7.625%, 11/01/24 | United States | 3,000,000 | 2,775,000 | ||
e senior note, 144A, 8.00%, 1/15/25 | United States | 38,700,000 | 35,700,750 | ||
e InterGen NV, secured bond, 144A, 7.00%, 6/30/23 | Netherlands | 43,000,000 | 37,195,000 | ||
NRG Yield Operating LLC, | |||||
senior bond, 5.375%, 8/15/24 | United States | 16,000,000 | 16,000,000 | ||
e senior bond, 144A, 5.00%, 9/15/26. | United States | 19,000,000 | 18,050,000 | ||
Talen Energy Supply LLC, senior bond, 6.50%, 6/01/25 | United States | 29,650,000 | 23,571,750 | ||
171,072,003 | |||||
Total Corporate Bonds (Cost $3,944,329,247) | 3,696,293,059 | ||||
Shares | |||||
Escrows and Litigation Trusts 0.1% | |||||
a,c Midstates Petroleum Co. Inc./Midstates Petroleum Co. LLC, Litigation Trust | United States | 25,000,000 | — | ||
a,c NewPage Corp., Litigation Trust | United States | 30,000,000 | — | ||
a Penn Virginia Corp., Litigation Trust | United States | 25,000,000 | 625,000 | ||
a,c Vistra Energy Corp., Litigation Trust | United States | 50,000,000 | 580,000 | ||
a Vistra Energy Corp., Litigation Trust, TRA. | United States | 856,299 | 1,584,154 | ||
Total Escrows and Litigation Trusts (Cost $4,425,428) | 2,789,154 | ||||
Total Investments before Short Term Investments | |||||
(Cost $4,143,425,065) | 3,777,932,264 | ||||
Short Term Investments (Cost $87,372,106) 2.2% | |||||
Money Market Funds 2.2% | |||||
a,l Institutional Fiduciary Trust Money Market Portfolio | United States | 87,372,106 | 87,372,106 | ||
Total Investments (Cost $4,230,797,171) 96.9% | 3,865,304,370 | ||||
Other Assets, less Liabilities 3.1% | 122,075,529 | ||||
Net Assets 100.0% | $ | 3,987,379,899 |
22 Semiannual Report
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FRANKLIN HIGH INCOME TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
Franklin High Income Fund (continued)
See Abbreviations on page 38.
†Rounds to less than 0.1% of net assets.
*The principal amount is stated in U.S. dollars unless otherwise indicated.
aNon-income producing.
bSee Note 9 regarding holdings of 5% voting securities.
cSecurity has been deemed illiquid because it may not be able to be sold within seven days. At November 30, 2016, the aggregate value of these securities was $24,799,568,
representing 0.6% of net assets.
dSee Note 8 regarding restricted securities.
eSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers
or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At
November 30, 2016, the aggregate value of these securities was $2,005,147,631, representing 50.3% of net assets.
fIncome may be received in additional securities and/or cash.
gPerpetual security with no stated maturity date.
hSee Note 7 regarding defaulted securities.
iAt November 30, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these securities at period end.
jSecurity purchased on a when-issued basis. See Note 1(c).
kThe coupon rate shown represents the rate at period end.
lSee Note 3(f) regarding investments in affiliated management investment companies.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report 23
FRANKLIN HIGH INCOME TRUST
Financial Statements
Statement of Assets and Liabilities
November 30, 2016 (unaudited)
Franklin High Income Fund | |||
Assets: | |||
Investments in securities: | |||
Cost - Unaffiliated issuers | $ | 4,116,501,616 | |
Cost - Non-controlled affiliates (Note 3f and 9) | 114,295,555 | ||
Total cost of investments | $ | 4,230,797,171 | |
Value - Unaffiliated issuers | $ | 3,749,168,126 | |
Value - Non-controlled affiliates (Note 3f and 9) | 116,136,244 | ||
Total value of investments | 3,865,304,370 | ||
Receivables: | |||
Investment securities sold | 89,552,236 | ||
Capital shares sold | 3,782,195 | ||
Dividends and interest | 61,175,470 | ||
Other assets | 647 | ||
Total assets | 4,019,814,918 | ||
Liabilities: | |||
Payables: | |||
Investment securities purchased | 20,300,000 | ||
Capital shares redeemed | 8,191,679 | ||
Management fees | 1,496,990 | ||
Distribution fees | 728,950 | ||
Transfer agent fees | 1,596,955 | ||
Accrued expenses and other liabilities. | 120,445 | ||
Total liabilities | 32,435,019 | ||
Net assets, at value | $ | 3,987,379,899 | |
Net assets consist of: | |||
Paid-in capital | $ | 5,005,771,925 | |
Distributions in excess of net investment income | (42,491,219 | ) | |
Net unrealized appreciation (depreciation) | (365,492,801 | ) | |
Accumulated net realized gain (loss) | (610,408,006 | ) | |
Net assets, at value | $ | 3,987,379,899 |
24 Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN HIGH INCOME TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (continued) November 30, 2016 (unaudited)
Franklin High Income Fund | ||
Class A: | ||
Net assets, at value | $ | 2,775,161,174 |
Shares outstanding. | 1,519,257,784 | |
Net asset value per sharea | $ | 1.83 |
Maximum offering price per share (net asset value per share ÷ 95.75%) | $ | 1.91 |
Class C: | ||
Net assets, at value | $ | 569,061,709 |
Shares outstanding. | 308,147,196 | |
Net asset value and maximum offering price per sharea | $ | 1.85 |
Class R: | ||
Net assets, at value | $ | 202,480,370 |
Shares outstanding. | 109,039,649 | |
Net asset value and maximum offering price per share | $ | 1.86 |
Class R6: | ||
Net assets, at value | $ | 28,503,381 |
Shares outstanding. | 15,627,078 | |
Net asset value and maximum offering price per share | $ | 1.82 |
Advisor Class: | ||
Net assets, at value | $ | 412,173,265 |
Shares outstanding. | 225,324,646 | |
Net asset value and maximum offering price per share | $ | 1.83 |
aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report 25
FRANKLIN HIGH INCOME TRUST
FINANCIAL STATEMENTS
Statement of Operations | |||
for the six months ended November 30, 2016 (unaudited) | |||
Franklin High Income Fund | |||
Investment income: | |||
Dividends | $ | 1,090 | |
Interest | 126,307,586 | ||
Total investment income | 126,308,676 | ||
Expenses: | |||
Management fees (Note 3a) | 9,410,020 | ||
Distribution fees: (Note 3c) | |||
Class A | 2,127,767 | ||
Class C | 1,872,263 | ||
Class R | 551,438 | ||
Transfer agent fees: (Note 3e) | |||
Class A | 2,397,457 | ||
Class C | 486,834 | ||
Class R | 186,433 | ||
Class R6 | 904 | ||
Advisor Class | 394,104 | ||
Custodian fees (Note 4) | 16,341 | ||
Reports to shareholders | 253,840 | ||
Registration and filing fees. | 95,744 | ||
Professional fees | 42,254 | ||
Trustees’ fees and expenses | 57,173 | ||
Other | 54,697 | ||
Total expenses | 17,947,269 | ||
Expense reductions (Note 4) | (1,017 | ) | |
Expenses waived/paid by affiliates (Note 3f) | (202,210 | ) | |
Net expenses | 17,744,042 | ||
Net investment income. | 108,564,634 | ||
Realized and unrealized gains (losses): | |||
Net realized gain (loss) from investments. | (159,031,196 | ) | |
Net change in unrealized appreciation (depreciation) on investments | 386,090,835 | ||
Net realized and unrealized gain (loss) | 227,059,639 | ||
Net increase (decrease) in net assets resulting from operations | $ | 335,624,273 |
26 Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN HIGH INCOME TRUST
FINANCIAL STATEMENTS
Statements of Changes in Net Assets | ||||||
Franklin High Income Fund | ||||||
Six Months Ended | ||||||
November 30, 2016 | Year Ended | |||||
(unaudited) | May 31, 2016 | |||||
Increase (decrease) in net assets: | ||||||
Operations: | ||||||
Net investment income | $ | 108,564,634 | $ | 302,417,476 | ||
Net realized gain (loss) | (159,031,196 | ) | (260,352,334 | ) | ||
Net change in unrealized appreciation (depreciation) | 386,090,835 | (582,466,954 | ) | |||
Net increase (decrease) in net assets resulting from operations. | 335,624,273 | (540,401,812 | ) | |||
Distributions to shareholders from: | ||||||
Net investment income: | ||||||
Class A | (84,671,912 | ) | (196,387,440 | ) | ||
Class C | (15,496,207 | ) | (37,669,773 | ) | ||
Class R | (6,098,252 | ) | (15,883,866 | ) | ||
Class R6 | (1,008,177 | ) | (5,740,383 | ) | ||
Advisor Class | (14,693,596 | ) | (71,494,798 | ) | ||
Total distributions to shareholders | (121,968,144 | ) | (327,176,260 | ) | ||
Capital share transactions: (Note 2) | ||||||
Class A | (115,759,764 | ) | (371,973,419 | ) | ||
Class C | (23,985,075 | ) | (115,394,251 | ) | ||
Class R | (36,712,095 | ) | (52,516,497 | ) | ||
Class R6 | (11,131,311 | ) | (28,454,518 | ) | ||
Advisor Class | (139,325,970 | ) | (708,012,083 | ) | ||
Total capital share transactions | (326,914,215 | ) | (1,276,350,768 | ) | ||
Net increase (decrease) in net assets. | (113,258,086 | ) | (2,143,928,840 | ) | ||
Net assets: | ||||||
Beginning of period | 4,100,637,985 | 6,244,566,825 | ||||
End of period | $ | 3,987,379,899 | $ | 4,100,637,985 | ||
Distributions in excess of net investment income included in net assets: | ||||||
End of period | $ | (42,491,219 | ) | $ | (29,087,709 | ) |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report 27
FRANKLIN HIGH INCOME TRUST
Notes to Financial Statements (unaudited)
Franklin High Income Fund
1. Organization and Significant Accounting Policies
Franklin High Income Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of one fund, Franklin High Income Fund (Fund) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The Fund offers five classes of shares: Class A, Class C, Class R, Class R6 and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.
The following summarizes the Fund’s significant accounting policies.
a. Financial Instrument Valuation
The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices.
Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.
Investments in open-end mutual funds are valued at the closing NAV.
The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin High Income Fund (continued)
Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4.p.m Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at 4.p.m Eastern time. In order to minimize the potential for these differences, the VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.
When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Fund’s NAV is not calculated, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.
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. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.
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 in the Statement of Operations.
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. Securities Purchased on a When-Issued Basis
The Fund purchases securities on a when-issued basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.
d. Income and Deferred Taxes
It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.
The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined
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Semiannual Report 29
FRANKLIN HIGH INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin High Income Fund (continued)
1. Organization and Significant Accounting
Policies (continued)
d. Income and Deferred Taxes (continued)
to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.
The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of November 30, 2016, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.
e. 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. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income is recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.
f. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP 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 expenses during the reporting period. Actual results could differ from those estimates.
g. Guarantees and Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin High Income Fund (continued)
2. Shares of Beneficial Interest
At November 30, 2016, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:
Six Months Ended | Year Ended | |||||||||
November 30, 2016 | May 31, 2016 | |||||||||
Shares | Amount | Shares | Amount | |||||||
Class A Shares: | ||||||||||
Shares sold. | 130,372,642 | $ | 234,794,316 | 232,082,060 | $ | 407,227,817 | ||||
Shares issued in reinvestment of distributions | 41,288,757 | 73,852,229 | 96,519,961 | 169,759,447 | ||||||
Shares redeemed | (234,827,569 | ) | (424,406,309 | ) | (545,004,523 | ) | (948,960,683 | ) | ||
Net increase (decrease) | (63,166,170 | ) | $ | (115,759,764 | ) | (216,402,502 | ) | $ | (371,973,419 | ) |
Class C Shares: | ||||||||||
Shares sold. | 22,704,654 | $ | 41,421,271 | 47,124,945 | $ | 83,649,903 | ||||
Shares issued in reinvestment of distributions | 7,700,366 | 13,925,060 | 18,780,833 | 33,427,912 | ||||||
Shares redeemed | (43,530,743 | ) | (79,331,406 | ) | (131,612,385 | ) | (232,472,066 | ) | ||
Net increase (decrease) | (13,125,723 | ) | $ | (23,985,075 | ) | (65,706,607 | ) | $ | (115,394,251 | ) |
Class R Shares: | ||||||||||
Shares sold. | 9,600,999 | $ | 17,572,371 | 21,581,566 | $ | 38,340,205 | ||||
Shares issued in reinvestment of distributions | 3,290,548 | 5,978,937 | 8,701,004 | 15,562,381 | ||||||
Shares redeemed | (32,902,999 | ) | (60,263,403 | ) | (59,943,422 | ) | (106,419,083 | ) | ||
Net increase (decrease) | (20,011,452 | ) | $ | (36,712,095 | ) | (29,660,852 | ) | $ | (52,516,497 | ) |
Class R6 Shares: | ||||||||||
Shares sold. | 3,621,952 | $ | 6,479,182 | 24,911,032 | $ | 45,401,397 | ||||
Shares issued in reinvestment of distributions | 505,980 | 901,960 | 2,820,782 | 4,933,796 | ||||||
Shares redeemed | (10,361,888 | ) | (18,512,453 | ) | (46,285,536 | ) | (78,789,711 | ) | ||
Net increase (decrease) | (6,233,956 | ) | $ | (11,131,311 | ) | (18,553,722 | ) | $ | (28,454,518 | ) |
Advisor Class Shares: | ||||||||||
Shares sold. | 80,346,130 | $ | 145,684,409 | 166,577,476 | $ | 293,777,629 | ||||
Shares issued in reinvestment of distributions | 7,283,149 | 13,014,363 | 37,828,081 | 67,014,914 | ||||||
Shares redeemed | (165,460,836 | ) | (298,024,742 | ) | (619,178,033 | ) | (1,068,804,626 | ) | ||
Net increase (decrease) | (77,831,557 | ) | $ | (139,325,970 | ) | (414,772,476 | ) | $ | (708,012,083 | ) |
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Fund are also officers, and/or directors of the following subsidiaries:
Subsidiary | Affiliation |
Franklin Advisers, Inc. (Advisers) | Investment manager |
Franklin Templeton Services, LLC (FT Services) | Administrative manager |
Franklin Templeton Distributors, Inc. (Distributors) | Principal underwriter |
Franklin Templeton Investor Services, LLC (Investor Services) | Transfer agent |
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FRANKLIN HIGH INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin High Income Fund (continued)
3. Transactions with Affiliates (continued)
a. Management Fees
The Fund pays an investment management fee to Advisers based on the month-end net assets of the Fund as follows:
Annualized Fee Rate | Net Assets | |
0.625% | Up to and including $100 million | |
0.500% | Over $100 million, up to and including $250 million | |
0.450% | Over $250 million, up to and including $7.5 billion | |
0.440% | Over $7.5 billion, up to and including $10 billion | |
0.430% | Over $10 billion, up to and including $12.5 billion | |
0.420% | Over $12.5 billion, up to and including $15 billion | |
0.400% | Over $15 billion, up to and including $17.5 billion | |
0.380% | Over $17.5 billion, up to and including $20 billion | |
0.360% | Over $20 billion, up to and including $35 billion | |
0.355% | Over $35 billion, up to and including $50 billion | |
0.350% | In excess of $50 billion |
For the period ended November 30, 2016, the annualized effective investment management fee rate was 0.455% of the Fund’s average daily net assets.
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant Rule 12b-1 under the 1940 Act. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed subsequent periods. In addition, under the Fund’s Class C and R compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.
The maximum annual plan rates, based on the average daily net assets, for each class, are as follows:
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin High Income Fund (continued)
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. These charges are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Fund of the following commission transactions related to the sales and redemptions of the Fund’s shares for the period:
e. Transfer Agent Fees
Each class of shares, except for Class R6, pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.
For the period ended November 30, 2016, the Fund paid transfer agent fees of $3,465,732 of which $1,236,515 was retained by Investor Services.
f. Investments in Affiliated Management Investment Companies
The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. Prior to June 1, 2013, the waiver was accounted for as a reduction to management fees. During the period ended November 30, 2016, the Fund held investments in affiliated management investment companies as follows:
% of | |||||||||||
Affiliated | |||||||||||
Number of | Number of | Fund Shares | |||||||||
Shares Held | Shares | Value | Outstanding | ||||||||
at Beginning | Gross | Gross | Held at End | at End | Investment | Realized | Held at End | ||||
of Period | Additions | Reductions | of Period | of Period | Income | Gain (Loss) | of Period | ||||
Non-Controlled Affiliates | |||||||||||
Institutional Fiduciary Trust Money | |||||||||||
Market Portfolio | 142,510,253 | 720,303,959 | (775,442,106 | ) | 87,372,106 | $ | 87,372,106 | $- | $- | 0.6 | % |
g. Waiver and Expense Reimbursements
Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.01% until September 30, 2017. There were no Class R6 transfer agent fees waived during the period ended November 30, 2016.
4. Expense Offset Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended November 30, 2016, the custodian fees were reduced as noted in the Statement of Operations.
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FRANKLIN HIGH INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin High Income Fund (continued)
5. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.
At May 31, 2016, capital loss carryforwards were as follows:
Capital loss carryforwards subject to expiration: | ||
2017 | $ | 15,010,359 |
2018 | 146,834,317 | |
Capital loss carryforwards not subject to expiration: | ||
Short term | 7,119,352 | |
Long term | 282,477,044 | |
Total capital loss carryforwards | $ | 451,441,072 |
At November 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Cost of investments. | $ | 4,241,443,975 | |
Unrealized appreciation | $ | 93,323,453 | |
Unrealized depreciation | (469,463,058 | ) | |
Net unrealized appreciation (depreciation) | $ | (376,139,605 | ) |
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of defaulted securities and bond discounts and premiums.
6. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the period ended November 30, 2016, aggregated $725,718,251 and $1,088,116,463, respectively.
7. Credit Risk and Defaulted Securities
At November 30, 2016, the Fund had 94.4% of its portfolio invested in high yield, or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.
The Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At November 30, 2016,the aggregate value of these securities was $87,858,892, representing 2.2% of the Fund’s net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The securities have been identified in the accompanying Statement of Investments.
8. Restricted Securities
The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin High Income Fund (continued)
At November 30, 2016, the Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:
Acquisition | ||||||
Shares | Issuer | Date | Cost | Value | ||
1,889,580 | a Halcon Resources Corp. (Value is 0.4% of Net Assets) | 6/29/12 - 11/24/15 | $ | 48,519,782 | $ | 15,755,713 |
aThe Fund also invests in unrestricted securities or other investments in the issuer, valued at $363,152 as of November 30, 2016.
9. Holdings of 5% Voting Securities of Portfolio Companies
The Investment Company Act of 1940/1940 Act defines "affiliated companies" to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. During the period ended November 30, 2016, the Fund held investments in “affiliated companies” as follows:
Number of | Number of | |||||||||
Shares/ | Shares/ | |||||||||
Principal | Principal | |||||||||
Amount Held | Amount | Value at | Realized | |||||||
at Beginning | Gross | Gross | Held at End | End of | Investment | Gain | ||||
Name of Issuer | of Period | Additions | Reductions | of Period | Period | Income | (Loss) | |||
Non-Controlled Affiliates | ||||||||||
Goodrich Petroleum Corp | — | 1,069,250 | — | 1,069,250 | $ | 9,455,356 | $ | — | $ | — |
Goodrich Petroleum Corp., senior | ||||||||||
secured note, second lien, PIK, cvt., | ||||||||||
13.50%, 8/30/19 | — | 8,250,000 | — | 8,250,000 | 8,104,126 | — | — | |||
Goodrich Petroleum Corp., wts., | ||||||||||
10/12/26 | — | 515,625 | — | 515,625 | 4,554,505 | — | — | |||
Titan Energy LLC | — | 289,137 | — | 289,137 | 6,650,151 | — | — | |||
Total Non-Controlled Affiliates (Value is 0.7% of Net Assets) | $ | 28,764,138 | $ | — | $ | — |
10. Credit Facility
The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 10, 2017. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended November 30, 2016, the Fund did not use the Global Credit Facility.
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Semiannual Report 35
FRANKLIN HIGH INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin High Income Fund (continued)
11. Fair Value Measurements
The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:
- Level 1 – quoted prices in active markets for identical financial instruments
- Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
- Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
A summary of inputs used as of November 30, 2016, in valuing the Fund’s assets carried at fair value, is as follows:
Level 1 | Level 2 | Level 3 | Total | ||||||
Assets: | |||||||||
Investments in Securities: | |||||||||
Equity Investments:a | |||||||||
Energy. | $ | 18,936,640 | $ | 7,422,832 | $ | 29,765,574 | b | $ | 56,125,046 |
Transportation | — | — | 2,104,676 | 2,104,676 | |||||
All Other Equity Investmentsc | 12,516,203 | —b | — | 12,516,203 | |||||
Convertible Bonds | — | — | 8,104,126 | 8,104,126 | |||||
Corporate Bonds | — | 3,696,289,154 | 3,905 | 3,696,293,059 | |||||
Escrows and Litigation Trusts | — | 1,584,154 | 1,205,000 | b | 2,789,154 | ||||
Short Term Investments | 87,372,106 | — | — | 87,372,106 | |||||
Total Investments in Securities | $ | 118,824,949 | $ | 3,705,296,140 | $ | 41,183,281 | $ | 3,865,304,370 |
aIncludes common and convertible preferred stocks as well as other equity investments.
bIncludes securities determined to have no value at November 30, 2016.
cFor detailed categories, see the accompanying Statement of Investments.
A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3
financial instruments at the end of the period. At November 30, 2016, the reconciliation of assets is as follows:
36 Semiannual Report
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FRANKLIN HIGH INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Franklin High Income Fund (continued) | ||||||||||||||||||||||||
Net Change in | ||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||
Appreciation | ||||||||||||||||||||||||
Net | Net | (Depreciation) | ||||||||||||||||||||||
Balance at | Transfers | Transfer | Realized | Unrealized | Balance | on Assets | ||||||||||||||||||
Beginning of | Into | Out of | Cost Basis | Gain | Appreciation | at End | Held at | |||||||||||||||||
Period | Purchases | Sales | Level 3a | Level 3b | Adjustments | (Loss) | (Depreciation) | of Period | Period End | |||||||||||||||
Assets: | ||||||||||||||||||||||||
Investments in Securities: | ||||||||||||||||||||||||
Equity Investments:c | ||||||||||||||||||||||||
Consumer Services | $ | 93,331 | $– | $ – $ | – | $ | (123,483 | ) | $– | $ – | $ | 30,152 | $ – | $ | – | |||||||||
Energy | – | – | – | 35,070,570 | – | – | – | (5,304,996 | ) | 29,765,574 | d | (5,304,996 | ) | |||||||||||
Transportation | 3,796,744 | – | – | – | – | – | – | (1,692,068 | ) | 2,104,676 | (1,692,068 | ) | ||||||||||||
Convertible Bonds | – | – | – | 8,250,000 | – | – | – | (145,874 | ) | 8,104,126 | (145,874 | ) | ||||||||||||
Corporate Bonds | 4,915,405 | d | – | (219,143 | ) | – | (7,545,341 | ) | – | (78,520,749 | ) | 81,373,733 | 3,905 | (36,500 | ) | |||||||||
Escrows and Litigation | ||||||||||||||||||||||||
Trusts | –d | – | – | 1,442,951 | – | – | – | (237,951 | ) | 1,205,000 | d | (237,951 | ) | |||||||||||
Total Investments in Securities | $ | 8,805,480 | $– | $ | (219,143) $44,763,521 | $ | (7,668,824 | ) | $– | $ | (78,520,749 | ) | $ | 74,022,996 | $ | 41,183,281 | $ | 7,417,389 |
aThe investments were transferred into Level 3 as a result of the unavailability of other significant observable valuation inputs. May include amounts related to a corporate
action.
bThe investments were transferred out of Level 3 as a result of the availability of other significant observable valuation inputs. May include amounts related to a corporate
action.
cIncludes common and convertible preferred stocks as well as other equity investments.
dIncludes securities determined to have no value.
Significant unobservable valuation inputs developed by the VC for material Level 3 financial instruments and impact to fair value as a result of changes in unobservable valuation inputs as of November 30, 2016, are as follows:
Fair Value at | Impact to Fair Value if | ||||||
Description | End of Period | Valuation Technique | Unobservable Input | Amount | Input Increasesa | ||
Assets: | |||||||
Investments in Securities: | |||||||
Equity Investments: | |||||||
Energy | $ | 15,755,713 | Market Comparables | Discount for lack of marketability | 12.3% | Decreaseb | |
All Other | 25,427,568 | ||||||
Investmentsc | |||||||
Total | $ | 41,183,281 |
aRepresents the directional change in the fair value of the Level 3 financial instruments that would result from a significant and reasonable increase in the corresponding
input. A significant and reasonable decrease in the input would have the opposite effect. Significant impacts, if any, to fair value and/or net assets have been indicated.
bRepresents a significant impact to fair value but not net assets.
cIncludes fair value of immaterial financial instruments developed using various valuation techniques and unobservable inputs. May also include financial instruments with
values derived using prior transaction prices or third party pricing information without adjustment for which such inputs are also unobservable.
12. Subsequent Events
The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
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Semiannual Report 37
FRANKLIN HIGH INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
38 Semiannual Report
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FRANKLIN HIGH INCOME TRUST
FRANKLIN HIGH INCOME FUND
Shareholder Information
Proxy Voting Policies and Procedures
The Trust’s investment manager has established Proxy Voting
Policies and Procedures (Policies) that the Trust uses to
determine how to vote proxies relating to portfolio securities.
Shareholders may view the Trust’s complete Policies online at
franklintempleton.com. Alternatively, shareholders may request
copies of the Policies free of charge by calling the Proxy Group
collect at (954) 527-7678 or by sending a written request
to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street,
Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of
the Trust’s proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and
Exchange Commission’s website at sec.gov and reflect the
most recent 12-month period ended June 30.
Quarterly Statement of Investments
The Trust, on behalf of the Fund, files a complete statement of
investments with the U.S. Securities and Exchange
Commission for the first and third quarters for each fiscal year
on Form N-Q. Shareholders may view the filed Form N-Q by
visiting the Commission’s website at sec.gov. The filed form
may also be viewed and copied at the Commission’s Public
Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by
calling (800) SEC-0330.
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Semiannual Report 39
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Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should
carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other
information; please read it carefully before investing.
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.
© 2016-2017 Franklin Templeton Investments. All rights reserved. | 105 S 01/17 |
Item 2. Code of Ethics.
(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.
Item 3. Audit Committee Financial Expert.
(a)(1) The Registrant has an audit committee financial expert serving on its audit committee.
(2) The audit committee financial expert is John B. Wilson and he is "independent" as defined under the relevant Securities and Exchange Commission Rules and Releases.
Item 4. Principal Accountant Fees and Services. N/A
Item 5. Audit Committee of Listed Registrants. N/A
Item 6. Schedule of Investments. N/A
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A
Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees that would require disclosure herein.
Item 11. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.
(b) Changes in Internal Controls. There have been no changes in the Registrant’s internal controls or in other factors that could materially affect the internal controls over financial reporting subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.
Item 12. Exhibits.
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FRANKLIN HIGH INCOME TRUST
By _/s/Laura F. Fergerson
Laura F. Fergerson
Chief Executive Officer –
Finance and Administration
Date January 26, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By _/s/Laura F. Fergerson
Laura F. Fergerson
Chief Executive Officer –
Finance and Administration
Date January 26, 2017
By _/s/Gaston Gardey
Gaston Gardey
Chief Financial Officer and
Chief Accounting Officer
Date January 26, 2017