BATTERY PARK(SM) HIGH YIELD FUND
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the semi-annual report for Battery Park High Yield Fund,
covering the six-month period from October 1, 1998 to March 31, 1999. This
report begins with a commentary by the Fund's portfolio manager, followed by a
complete listing of the Fund's high yielding corporate bond holdings and the
financial statements.
The Fund is managed by Nomura Corporate Research and Asset Management Inc.,
which seeks to provide you with a high total return--consisting of current
income and capital appreciation--from a diversified portfolio of high yield
bonds.
In a moderately favorable economic environment for high yield bonds, Battery
Park High Yield Fund's performance for the six-month reporting period is shown
below.* The Fund's assets reached $28.2 million at the end of the reporting
period.
SIX MONTH TOTAL RETURN FOR PERIOD 10/1/98-3/31/99
<TABLE>
<CAPTION>
RETURN ON RETURN ON
TOTAL RETURN INCOME EARNED CAPITAL APPRECIATION
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Class A Shares 4.16% 4.21% -0.05%
- -----------------------------------------------------------------------------------------------
Class Y Shares 4.29% 4.34% -0.05%
- -----------------------------------------------------------------------------------------------
</TABLE>
Thank you for pursuing your financial goals in the high yield bond market
through the diversification and professional management of Battery Park High
Yield Fund. We look forward to keeping you up-to-date on your progress.
Sincerely,
/s/ Robert Levine
- -----------------------
Robert Levine, CFA
Chairman and President
April 15, 1999
*Performance quoted is based on net asset value, reflects past performance and
is not indicative of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Performance quoted for Class A Shares does not
reflect the deduction of the maximum 4.50% sales charge. Total return for the
reporting period for Class A Shares reflecting the sales charge was -0.56%.
<PAGE>
BATTERY PARK(SM) HIGH YIELD FUND
FUND PERFORMANCE AND OUTLOOK
WE BELIEVE DIVERSIFICATION, INTENSIVE CREDIT RESEARCH AND PROACTIVE MANAGEMENT
ARE KEY TO ACHIEVING CONSISTENT LONG-TERM TOTAL RETURNS.
Battery Park High Yield Fund's objective is to provide shareholders with high
total return consisting of current income and capital appreciation. The Fund
seeks to achieve its objective by investing principally in fixed income
securities of U.S. companies which are rated in the lower rating categories of
the established rating services or are unrated securities of comparable quality.
PERFORMANCE
For the six months ended March 31, 1999, the Battery Park High Yield Fund posted
a total return of 4.16% for Class A shares at NAV (-0.56% net of maximum sales
charge of 4.50%) and 4.29% for Class Y shares.(1)
(1) Total return measures change in the value of an investment in the Fund,
assuming reinvestment of all dividends and capital gains. The Investment
Adviser of the Battery Park High Yield Fund waived management fees of 0.65%
and absorbed expenses of 0.73% in order to cap expenses at 1.25% for A
shares and 1.00% for Y shares. Absent the waiver and absorption of fees,
returns would have been lower.
<PAGE>
FUND PERFORMANCE AS OF 3/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR ENDING OCTOBER 28, 1996-
MARCH 31, 1999 MARCH 31, 1999
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
Battery Park -1.16% 30.97%
- Class Y Shares
- ------------------------------------------------------------------------------------------------
Battery Park -1.40% 30.19%
- Class A Shares
- ------------------------------------------------------------------------------------------------
Battery Park -5.80% 24.34%
- Class A Shares net of max sales charge (4.5%)
- ------------------------------------------------------------------------------------------------
Merrill Lynch High Yield 1.81% 22.86%
Master II Index (1)
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) The Merrill Lynch High Yield Master II Index is a publicly reported
unmanaged composite benchmark of the hypothetical return on investment on
approximately 900 high yield debt securities of at least $100 million
ranging in rating from Ba1 to C by Moody's Investors Service Inc., and BB+
to C by Standard & Poor's. The Index has no cash component or transaction
costs and is trader priced. Approximately 10% of the Index is comprised of
deferred interest bonds and pay-in-kind bonds in addition to cash pay bonds.
Certain of the information contained in the following has been provided by
Merrill Lynch. Any information sourced to Merrill Lynch & Co. has been
reprinted by permission, all rights reserved. Copyright(C) 1999 Merrill
Lynch, Pierce, Fenner & Smith Incorporated. The Indices may not be copied,
used or distributed without Merrill Lynch's prior written approval. Merrill
Lynch makes no representation or warranty, express or implied, to any
person, including without limitation, any recipient of this presentation or
any member of the public regarding the advisability of investing in
securities generally or in the ability of the Indices (represented in this
literature) to track market performance. This presentation is not sponsored,
endorsed, sold or promoted by Merrill Lynch.
<PAGE>
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
[Graphic representation "A1" omitted. See Appendix.]
This graph compares a $10,000 investment in the Fund, made at its inception,
with a similar hypothetical investment in the Merrill Lynch High Yield Master II
Index. Results include the reinvestment of all dividends and capital gains
distributions. Past performance is not predicative of future performance.
Investment returns and principal value may vary, and you may have a gain or loss
when you sell shares. The Fund's portfolio may differ significantly from the
securities in the Index. The Index is unmanaged and therefore does not reflect
the cost of portfolio management or trading. It is not possible to invest in an
index.
<PAGE>
PORTFOLIO HIGHLIGHTS
The Fund benefited from strong performance in individual bond investments and a
healthy domestic economic environment with low inflation. The Fund continued to
overweight its exposure to the broadcasting, cable, and telecommunications
sectors, which were among the better performing sectors over the last six
months. In addition, we have increased our exposure to the hotels/casinos
sector.
In the broadcasting sector, radio operators have continued to post substantial
revenue and cash flow growth. Our investment in CUMULUS MEDIA, INC. benefited
from this rapid growth.
In the cable sector, bond prices have benefited from the accelerating pace of
consolidation activity, as well as a heightened focus on the cable companies'
unique ability to provide high speed internet access. TELEWEST PLC, RCN CORP.
and KNOLOGY HOLDINGS bonds have all participated in this rally. We continue to
like select companies in the sector that have stable cash flows from their core
product, and are poised to grow rapidly as they sell local, long distance and
high speed internet service to their existing subscriber base. Moreover, we
believe there is upside potential from continued merger and acquisition
activity.
The telecommunications sector has rebounded sharply from its lows in early
October 1998. Concerns over the sector's access to capital have faded with the
return to normalcy in the U.S. financial markets. Furthermore, merger and
acquisition related activity has heated up again in the sector. Our investment
in METRONET COMMUNICATIONS CORP., which was acquired by AT&T, performed well
during the last six months, as did CALL-NET ENTERPRISES, INC. We continue to
invest cautiously in the sector, preferring those companies with strong
management teams and proven track records, fully-financed business plans, and
low-cost, strategically attractive networks.
The strong performance of the hotels/casinos sector has been driven by positive
trends in the local Las Vegas market, and continued revenue growth in emerging
gaming jurisdictions. We believe that emerging jurisdictions will benefit from
limited capacity increases due to high barriers to entry. In addition, we
believe that selected gaming companies will benefit from industry consolidation,
lower costs of capital resulting from debt refinancings, and as many markets
mature, a stability of cash flows. However, investing in this sector requires
careful consideration of various risks, including regulatory changes, potential
capacity increases and exposure to new projects. The Fund's investments in
HOLLYWOOD PARK, INC. and HARRAH'S OPERATIONS, INC. are based upon each company's
diversification of properties across numerous gaming jurisdictions, and strong,
effective management teams. STATION CASINOS, INC. has benefitted from Las Vegas'
dramatic population growth, and the company's plan to reduce debt with free cash
flow.
The Fund has also benefited by successfully avoiding exposure to emerging market
corporate bonds, as well as to selected commodities, such as chemicals and
forest products. Performance was adversely affected by its investment in
WILSHIRE FINANCIAL SERVICES GROUP, in the financial services sector, during the
liquidity crisis last fall, and MARINER POST-ACUTE NETWORK, INC., in the
healthcare sector, which has been subject to significant regulatory changes to
the government's reimbursement system.
<PAGE>
We believe that our research driven, company-specific investment philosophy,
which focuses on total return and relative value, has allowed us to take
advantage of this attractive market while avoiding many of the problem credits.
It is our opinion that these qualities are essential for consistent long-term
investment performance.
BATTERY PARK FUND'S DIVERSE PORTFOLIO
Top ten industries [%] as of March 31, 1999:
[Graphic representation "A2" omitted. See Appendix.]
PORTFOLIO CHARACTERISTICS* AS OF 3/31/99
Modified Duration 4.8 yrs.
Average Maturity 6.7 yrs.
Average Rating B
30-Day SEC Yield**
Class A Shares 7.83%
Class A Shares net of sales charge 7.47%
Class Y Shares 8.07%
*Portfolio characteristics include cash & cash equivalents which represent
3.03% of the Fund's net assets as of March 31, 1999.
**The Investment Adviser temporarily waived management fees of 0.65% and
absorbed expenses of 0.73% in order to cap expenses at 1.25% for A Shares and
1.00% for Y Shares. The annualized 30-day SEC Yield would have been 6.17% for
Class A Shares (at NAV) and 5.81% for Class A Shares (net of maximum sales
charge of 4.50%) and 6.41% for Class Y Shares.
<PAGE>
MARKET ENVIRONMENT
During this reporting period, weakening foreign markets contributed instability
to global credit markets, including the domestic high yield market. The high
yield market reacted to concerns that the economic weakness in foreign markets
would impair U.S. economic growth, thus increasing the likelihood of corporate
defaults. This was compounded by a period of net mutual fund outflows in early
October 1998, which caused forced selling to meet redemptions. By mid-October
1998, the high yield market began to stabilize with investors displaying a
preference for large and liquid names well into the first quarter of 1999.
Several fundamental and technical developments have helped support the high
yield market during this reporting period. In particular, the U.S. economy has
remained strong with low interest rates and low inflation. This strong economy
helped keep default rates for high yield issuers low at 1.78% for the 12 months
ended March 31, 1999, well below the historical average of 2.31% (from 1977-98),
according to Donaldson, Lufkin & Jenrette. The high yield market also
experienced an increase in net mutual fund inflows during the latter part of the
fourth quarter of 1998, while at the same time, new issuance slowed. In
addition, the characteristics of new issues coming to the market have improved
somewhat when compared to new issuance for the prior three years, according to
Credit Suisse First Boston. New issuance has been seen across many diverse
sectors. In addition, the larger new deals have been used to refinance existing
issues at a premium. Finally, strong equity valuations have lent support to the
high yield market as merger and acquisitions and related financing activity
continues to increase.
We believe the high yield market remains attractive relative to other securities
markets. While most other markets have recovered to "pre-crisis" levels, the
high yield market still has not fully recovered.
For the six months ended March 31, 1999, 10-Year U.S. Treasuries returned
- -4.11%, while the high yield market returned 4.64% (according to the Merrill
Lynch High Yield Master II Index). The C-rated sector outperformed the B-rated
and BB-rated sectors, returning 8.10%, 5.18% and 3.00%, respectively (according
to Merrill Lynch).
<PAGE>
The Fund's average rating over the past six months has been "B" and the ratings
breakdown as of March 31, 1999, is illustrated in the chart below.
[Graphic representation "A3" omitted. See Appendix.]
OUTLOOK AND STRATEGY
We believe the high yield market continues to be an attractive asset class with
favorable risk/return characteristics, and a low correlation to other asset
classes. In addition, recent economic data suggests that the U.S. economy is
strong and stable with low interest rates and low inflation. We anticipate 2.5%
to 3.0% GDP growth during calendar year 1999, after 3.8% growth in 1997, and
4.3% growth in 1998. In light of these positive fundamentals, we believe a U.S.
recession is now a remote possibility and view current market conditions as an
opportunity to invest in quality companies at attractive prices.
We fully anticipate continued strength in the telecommunications, broadcasting
and cable sectors. Most recently we have seen a rebound in some of the cyclical
and commodity sectors, particularly the paper and forest products, steel and
energy sectors. Consistent with our research intensive investment approach, we
will continue to carefully select those companies and sectors that we believe
offer the best opportunities to maximize total returns.
<PAGE>
We believe our consistent investment approach, which emphasizes intensive credit
research and proactive portfolio management, is the key to achieving consistent
long-term total returns. We believe that the dramatic increase in new issuance
during the past few years serves to heighten the importance of our investment
management approach. We will continue to carefully evaluate and select
investments consistent with our investment philosophy, taking careful
consideration of the changing global economy.
Investors should continue to maintain a long-term outlook for their high yield
investments. The Fund invests primarily in non-investment grade bonds which
involve greater risk of price volatility and default in payment of interest and
principal than higher rated bonds. Please see the prospectus for a more detailed
discussion of risk. While past performance is no guarantee of future results, we
remain confident in our investment strategy that has produced competitive
returns.
Thank you for investing in the Battery Park High Yield Fund. We look forward to
continuing to serve your investment needs.
/s/ Robert Levine
- -------------------
Robert Levine, CFA
President, Battery Park Funds, Inc.
/s/ Richard Buch
- -------------------
Richard Buch, CFA
Portfolio Manager
<PAGE>
ABOUT THE PORTFOLIO MANAGER
Picture - Richard A. Buch
Richard A. Buch, CFA, is a Managing Director and Senior
Portfolio Manager of NCRAM. He is the portfolio manager of
Battery Park High Yield Fund since the Fund's inception and
other high yield accounts. He supervises NCRAM's team of credit
analysts/portfolio managers. Mr. Buch was previously Senior VP
and High Yield Portfolio Manager for Kidder, Peabody Asset
Management, Assistant VP at Reliance Insurance, and a Senior
Securities Analyst at Teachers Insurance Annuity Association.
Richard received his MBA from Cornell University in 1985 and is
a member of the Financial Analyst Federation.
RISK FACTORS. High yield bonds, while offering greater total
return potential, also possess greater risks than lower yielding
higher rated bonds. Please see the Fund's Prospectus.
CLASS A SHARES incur a maximum initial sales charge (front-end
load) of 4.50% and bear annual 12b-1 fees of 25 basis points.
Class A shares are available only through financial planners and
securities dealers that have entered into selected dealer
agreements with the Distributor. Class A shares are available to
certain qualified investors and other entities without a sales
charge. Please see the Fund's prospectus for more details
regarding the purchase of Class A shares at NAV.
CLASS Y SHARES are offered at net asset value without a sales
charge to an investor that invests at least $1 million in the
Fund or purchases through a fee-based financial planner whose
clients have a current investment in the Fund aggregating at
least $1 million. Class Y shares also are offered for purchases
of less than $1 million to Directors of the Fund and to
retirement plans administered by the Investment Adviser or its
affiliates for the benefit of employees of the Investment
Adviser and/or its affiliates.
<PAGE>
BATTERY PARK(SM) HIGH YIELD FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS--95.4%
- ----------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.8%
- ----------------------------------------------------------------------------------------------
$ 500,000 United Defense Industries, Inc., Sr. Sub. Note, 8.75%, $ 505,000
11/15/2007
- ----------------------------------------------------------------------------------------------
BEVERAGES--2.7%
- ----------------------------------------------------------------------------------------------
750,000 Canandaigua Brands, Inc., Sr. Sub. Note, 8.50%, 3/1/2009 768,750
- ----------------------------------------------------------------------------------------------
BROADCASTING RADIO & TV--13.7%
- ----------------------------------------------------------------------------------------------
750,000 Allbritton Communication Co., Sr. Sub. Note, Series B, 772,500
8.875%, 2/1/2008
- ----------------------------------------------------------------------------------------------
600,000 Cumulus Media, Inc., Sr. Sub. Note, 10.375%, 7/1/2008 651,000
- ----------------------------------------------------------------------------------------------
600,000 Gray Communications, Sr. Sub. Note, 10.625%, 10/1/2006 639,000
- ----------------------------------------------------------------------------------------------
750,000 STC Broadcasting, Inc., Sr. Sub. Note, 11.00%, 3/15/2007 795,000
- ----------------------------------------------------------------------------------------------
1,000,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 9.00%, 1,022,500
7/15/2007
- ----------------------------------------------------------------------------------------------
Total 3,880,000
- ----------------------------------------------------------------------------------------------
CABLE TV--11.9%
- ----------------------------------------------------------------------------------------------
300,000 Century Communications Corp., Sr. Note, 8.875%, 1/15/2007 317,250
- ----------------------------------------------------------------------------------------------
1,000,000 Knology Holdings, Sr. Disc. Note, 0/11.875%, 10/15/2007 545,000
- ----------------------------------------------------------------------------------------------
750,000 Mediacom LLC, Sr. Note, Series B, 8.50%, 4/15/2008 766,875
- ----------------------------------------------------------------------------------------------
1,500,000 RCN Corp., Sr. Disc. Note, Series B, 0/11.125%, 10/15/2007 1,012,500
- ----------------------------------------------------------------------------------------------
800,000 TeleWest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 708,000
- ----------------------------------------------------------------------------------------------
Total 3,349,625
- ----------------------------------------------------------------------------------------------
ECOLOGICAL SERVICES--3.5%
- ----------------------------------------------------------------------------------------------
1,000,000 Allied Waste North America, Inc., Company Guarantee, Series 983,750
B, 7.875%, 1/1/2009
- ----------------------------------------------------------------------------------------------
ELECTRIC--1.2%
- ----------------------------------------------------------------------------------------------
330,000 Applied Power, Inc., Sr. Sub. Note, 8.75%, 4/1/2009 336,188
- ----------------------------------------------------------------------------------------------
FOOD PRODUCTS--1.4%
- ----------------------------------------------------------------------------------------------
435,000 Eagle Family Foods, Inc., Sr. Sub. Note, Series B, 8.75%, 409,988
1/15/2008
- ----------------------------------------------------------------------------------------------
FOOD/DRUG RETAILERS--2.2%
- ----------------------------------------------------------------------------------------------
600,000 Duane Reade, Inc., Sr. Sub. Note, 9.25%, 2/15/2008 627,000
- ----------------------------------------------------------------------------------------------
FOREST PRODUCTS--1.8%
- ----------------------------------------------------------------------------------------------
500,000 Tembec Industries, Inc., Guaranteed Sr. Note, 8.625%, 510,625
6/30/2009
- ----------------------------------------------------------------------------------------------
HOTELS/CASINOS--10.2%
- ----------------------------------------------------------------------------------------------
500,000 HMH Properties, Inc., Sr. Note, Series B, 7.875%, 8/1/2008 483,750
- ----------------------------------------------------------------------------------------------
800,000 Harrah's Operations, Inc., Company Guarantee, 7.875%, 809,400
12/15/2005
- ----------------------------------------------------------------------------------------------
725,000 Hollywood Park, Inc., Sr. Sub. Note, Series B, 9.50%, 746,750
8/1/2007
- ----------------------------------------------------------------------------------------------
800,000 Station Casinos, Inc., Sr. Sub. Note, 10.125%, 3/15/2006 852,000
- ----------------------------------------------------------------------------------------------
Total 2,891,900
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------------------------
LEISURE--7.0%
- ----------------------------------------------------------------------------------------------
$ 500,000 Bally Total Fitness Holding Corp., Sr. Sub. Note, Series B, $ 497,500
9.875%, 10/15/2007
- ----------------------------------------------------------------------------------------------
750,000 Loews Cineplex Entertainment Corp., Sr. Sub. Note, 8.875%, 750,938
8/1/2008
- ----------------------------------------------------------------------------------------------
750,000 (1) The Sports Club Co., Inc., Company Guarantee, Series AI, 741,127
11.375%, 3/15/2006
- ----------------------------------------------------------------------------------------------
Total 1,989,565
- ----------------------------------------------------------------------------------------------
NON-FERROUS METALS--2.8%
- ----------------------------------------------------------------------------------------------
750,000 P & L Coal Holdings Corp., Company Guarantee, Series B, 786,563
9.625%, 5/15/2008
- ----------------------------------------------------------------------------------------------
PUBLISHING--2.9%
- ----------------------------------------------------------------------------------------------
800,000 Ziff-Davis, Inc., Sr. Sub. Note, 8.50%, 5/1/2008 808,000
- ----------------------------------------------------------------------------------------------
RETAILER--5.9%
- ----------------------------------------------------------------------------------------------
750,000 Advance Stores Co., Inc., Company Guarantee, Series B, 765,000
10.25%, 4/15/2008
- ----------------------------------------------------------------------------------------------
1,300,000 Amazon.com, Inc., Sr. Disc. Note, 0/10.00%, 5/1/2008 890,500
- ----------------------------------------------------------------------------------------------
Total 1,655,500
- ----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--23.2%
- ----------------------------------------------------------------------------------------------
500,000 Call-Net Enterprises, Inc., Sr. Disc. Note, 0/8.94%, 335,000
8/15/2008
- ----------------------------------------------------------------------------------------------
650,000 Call-Net Enterprises, Inc., Sr. Disc. Note, 0/9.27%, 479,375
8/15/2007
- ----------------------------------------------------------------------------------------------
700,000 IXC Communications, Inc., Sr. Sub. Note, 9.00%, 4/15/2008 733,250
- ----------------------------------------------------------------------------------------------
750,000 Level 3 Communications, Inc., Sr. Note, 9.125%, 5/1/2008 759,374
- ----------------------------------------------------------------------------------------------
600,000 McLeod, Inc., Sr. Note, 9.25%, 7/15/2007 633,000
- ----------------------------------------------------------------------------------------------
800,000 PSINet, Inc., Sr. Sub. Note, 10.00%, 2/15/2005 850,000
- ----------------------------------------------------------------------------------------------
600,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 10/15/2008 513,000
- ----------------------------------------------------------------------------------------------
900,000 Rogers Cantel Mobile, Inc., Sr. Sub. Note, 8.80%, 10/1/2007 945,000
- ----------------------------------------------------------------------------------------------
500,000 Time Warner Telecom LLC, Sr. Note, 9.75%, 7/15/2008 542,500
- ----------------------------------------------------------------------------------------------
1,250,000 Triton PCS, Inc., Sr. Disc. Note, 0/11.00%, 5/1/2008 743,750
- ----------------------------------------------------------------------------------------------
Total 6,534,249
- ----------------------------------------------------------------------------------------------
TEXTILES--2.1%
- ----------------------------------------------------------------------------------------------
550,000 William Carter Co., Sr. Sub. Note, Series A, 10.375%, 591,250
12/1/2006
- ----------------------------------------------------------------------------------------------
UTILITIES--1.1%
- ----------------------------------------------------------------------------------------------
300,000 Calpine Corp., Sr. Note, 7.75%, 4/15/2009 301,125
- ----------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $26,610,043) 26,929,078
- ----------------------------------------------------------------------------------------------
COMMERCIAL PAPER--7.3%
- ----------------------------------------------------------------------------------------------
FINANCE--7.3%
- ----------------------------------------------------------------------------------------------
2,059,000 General Electric Capital Corp., Discount Note, 4.70%, 2,059,000
4/1/1999 (at amortized cost)
- ----------------------------------------------------------------------------------------------
COMMON STOCKS--0.0%
- ----------------------------------------------------------------------------------------------
CABLE TV--0.0%
- ----------------------------------------------------------------------------------------------
500 (1)(2) Optel, Inc. (identified cost $2) 10,062
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST $28,669,045)(3) $ 28,998,140
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. These securities have been deemed liquid
based upon criteria approved by the Fund's Board of Directors. At March 31,
1999, these securities amounted to $751,189 which represents 2.7% of net
assets.
(2) Non-income producing security.
(3) The cost of investments for federal tax purposes amounts to $28,669,045. The
net unrealized appreciation of investments on a federal tax basis amounts to
$329,095 which is comprised of $633,350 appreciation and $304,255
depreciation at March 31, 1999.
Note: The categories of investments are shown as a percentage of net assets
($28,223,174) at March 31, 1999.
See Notes which are an integral part of the Financial Statements
<PAGE>
BATTERY PARK(SM) HIGH YIELD FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------
Total investments in securities, at value (identified and
tax cost $28,669,045) $28,998,140
- -------------------------------------------------------------------------------------
Cash 856,070
- -------------------------------------------------------------------------------------
Income receivable 460,389
- -------------------------------------------------------------------------------------
Receivable for investments sold 272,063
- -------------------------------------------------------------------------------------
Deferred organizational costs 140,097
- -------------------------------------------------------------------------------------
Prepaid Expenses 9,626
- -------------------------------------------------------------------------------------
Total assets 30,736,385
- -------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------
Payable for investments purchased $2,330,947
- -------------------------------------------------------------------------------------
Income distribution payable 182,264
- -------------------------------------------------------------------------------------
Total liabilities 2,513,211
- -------------------------------------------------------------------------------------
Net Assets for 2,909,431 shares outstanding $28,223,174
- -------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------
Paid in capital $29,688,461
- -------------------------------------------------------------------------------------
Net unrealized appreciation of investments 329,095
- -------------------------------------------------------------------------------------
Accumulated net realized loss on investments (1,892,426)
- -------------------------------------------------------------------------------------
Undistributed net investment income 98,044
- -------------------------------------------------------------------------------------
Total Net Assets $28,223,174
- -------------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------------
CLASS A SHARES:
- -------------------------------------------------------------------------------------
Net Asset Value Per Share ($6,541,226 / 674,332 shares
outstanding) $9.70
- -------------------------------------------------------------------------------------
Offering Price Per Share (100/95.50 of $9.70)(1) $10.16
- -------------------------------------------------------------------------------------
Redemption Proceeds Per Share ($6,541,226 / 674,332 shares
outstanding) $9.70
- -------------------------------------------------------------------------------------
CLASS Y SHARES:
- -------------------------------------------------------------------------------------
Net Asset Value Per Share ($21,681,948 / 2,235,099 shares
outstanding) $9.70
- -------------------------------------------------------------------------------------
</TABLE>
(1) See "Purchase of Shares--Class A Shares" in the Prospectus.
See Notes which are an integral part of the Financial Statements
<PAGE>
BATTERY PARK(SM) HIGH YIELD FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------------
Interest $ 1,113,450
- ------------------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------------------
Investment advisory fee $ 76,411
- ------------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 39,000
- ------------------------------------------------------------------------------------------------
Portfolio accounting fees 25,840
- ------------------------------------------------------------------------------------------------
Administrative personnel and services fee 24,932
- ------------------------------------------------------------------------------------------------
Share registration costs 22,563
- ------------------------------------------------------------------------------------------------
Miscellaneous 21,594
- ------------------------------------------------------------------------------------------------
Legal fees 18,289
- ------------------------------------------------------------------------------------------------
Auditing fees 15,243
- ------------------------------------------------------------------------------------------------
Directors' fees 14,962
- ------------------------------------------------------------------------------------------------
Printing and postage 11,000
- ------------------------------------------------------------------------------------------------
Custodian fees 8,378
- ------------------------------------------------------------------------------------------------
Distribution services fee--Class A Shares 6,713
- ------------------------------------------------------------------------------------------------
Insurance premiums 1,627
- ------------------------------------------------------------------------------------------------
Taxes 371
- ------------------------------------------------------------------------------------------------
Total expenses 286,923
- ------------------------------------------------------------------------------------------------
Waivers and reimbursements--
- ------------------------------------------------------------------------------------------------
Waiver of investment advisory fee $ (76,411)
- ------------------------------------------------------------------------------------------------
Reimbursement of other operating expenses (86,245)
- ------------------------------------------------------------------------------------------------
Total waivers and reimbursements (162,656)
- ------------------------------------------------------------------------------------------------
Net expenses 124,267
- ------------------------------------------------------------------------------------------------
Net investment income 989,183
- ------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ------------------------------------------------------------------------------------------------
Net realized loss on investments (1,794,795)
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments 1,881,769
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 86,974
- ------------------------------------------------------------------------------------------------
Change in net assets resulting from operations $ 1,076,157
- ------------------------------------------------------------------------------------------------
</TABLE>
See Notes which are an integral part of the Financial Statements
<PAGE>
BATTERY PARK(SM) HIGH YIELD FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MARCH 31, SEPTEMBER 30,
1999 1998
<S> <C> <C>
- -----------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------------------
Net investment income $ 989,183 $ 1,534,144
- -----------------------------------------------------------------------------------------
Net realized gain (loss) on investments ($(1,794,795) and
$932,771, respectively, as computed for federal tax
purposes) (1,794,795) 932,771
- -----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 1,881,769 (2,450,720)
- -----------------------------------------------------------------------------------------
Change in net assets resulting from operations 1,076,157 16,195
- -----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------------------------------
Distributions from net investment income
- -----------------------------------------------------------------------------------------
Class A Shares (220,246) (247,673)
- -----------------------------------------------------------------------------------------
Class Y Shares (768,962) (1,277,127)
- -----------------------------------------------------------------------------------------
Distributions from net realized gains
- -----------------------------------------------------------------------------------------
Class A Shares (188,112) (99,753)
- -----------------------------------------------------------------------------------------
Class Y Shares (741,996) (703,403)
- -----------------------------------------------------------------------------------------
Change in net assets resulting from distributions to
shareholders (1,919,316) (2,327,956)
- -----------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------------------------------
Proceeds from sale of shares 9,605,606 5,596,793
- -----------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of distributions declared 1,618,860 2,213,982
- -----------------------------------------------------------------------------------------
Cost of shares redeemed (2,210,334) (636,250)
- -----------------------------------------------------------------------------------------
Change in net assets resulting from share transactions 9,014,132 7,174,525
- -----------------------------------------------------------------------------------------
Change in net assets 8,170,973 4,862,764
- -----------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------
Beginning of period 20,052,201 15,189,437
- -----------------------------------------------------------------------------------------
End of period (including undistributed net investment income
of $98,044
and $98,069, respectively) $28,223,174 $20,052,201
- -----------------------------------------------------------------------------------------
</TABLE>
See Notes which are an integral part of the Financial Statements
<PAGE>
BATTERY PARK(SM) HIGH YIELD FUND
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) SEPTEMBER 30,
MARCH 31, -------------------
1999 1998 1997(1)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 $11.40 $10.00
- ---------------------------------------------------------------------------------------------------
Income from investment operations
- ---------------------------------------------------------------------------------------------------
Net investment income 0.40 0.89 0.84
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.01) (0.70) 1.40
- ---------------------------------------------------------------------------------------------------
Total from investment operations 0.39 0.19 2.24
- ---------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------
Distributions from net investment income (0.40) (0.91) (0.84)
- ---------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments (0.39) (0.58) --
- ---------------------------------------------------------------------------------------------------
Total distributions (0.79) (1.49) (0.84)
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.70 $10.10 $11.40
- ---------------------------------------------------------------------------------------------------
Total Return (2) 4.16% 1.50% 23.13%
- ---------------------------------------------------------------------------------------------------
Ratios to average net assets
- ---------------------------------------------------------------------------------------------------
Expenses 1.25%(3) 1.25% 1.25%(3)
- ---------------------------------------------------------------------------------------------------
Net investment income 8.23%(3) 8.44% 8.66%(3)
- ---------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (4) 1.38%(3) 1.67% 2.79%(3)
- ---------------------------------------------------------------------------------------------------
Supplemental data
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 6,541 $3,894 $1,829
- ---------------------------------------------------------------------------------------------------
Portfolio turnover 77% 190% 236%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects operations for the period from October 28, 1996 (date of initial
public offering) to September 30, 1997.
(2) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(3) Computed on an annualized basis.
(4) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
<PAGE>
BATTERY PARK(SM) HIGH YIELD FUND
FINANCIAL HIGHLIGHTS--CLASS Y SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
(UNAUDITED) SEPTEMBER 30,
MARCH 31, --------------------
1999 1998 1997(1)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.10 $ 11.40 $ 10.00
- ---------------------------------------------------------------------------------------------------
Income from investment operations
- ---------------------------------------------------------------------------------------------------
Net investment income 0.41 0.93 0.86
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.01) (0.71) 1.40
- ---------------------------------------------------------------------------------------------------
Total from investment operations 0.40 0.22 2.26
- ---------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------
Distributions from net investment income (0.41) (0.94) (0.86)
- ---------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments (0.39) (0.58) --
- ---------------------------------------------------------------------------------------------------
Total distributions (0.80) (1.52) (0.86)
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.70 $ 10.10 $ 11.40
- ---------------------------------------------------------------------------------------------------
Total return (2) 4.29% 1.76% 23.41%
- ---------------------------------------------------------------------------------------------------
Ratios to average net assets
- ---------------------------------------------------------------------------------------------------
Expenses 1.00%(3) 1.00% 1.00%(3)
- ---------------------------------------------------------------------------------------------------
Net investment income 8.47%(3) 8.63% 8.73%(3)
- ---------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (4) 1.38%(3) 1.67% 2.87%(3)
- ---------------------------------------------------------------------------------------------------
Supplemental data
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $21,682 $16,158 $13,361
- ---------------------------------------------------------------------------------------------------
Portfolio turnover 77% 190% 236%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects operations for the period from October 28, 1996 (date of initial
public offering) to September 30, 1997. For the period from September 19,
1996 (start of business) to October 27, 1996, the investment income was
distributed to the Fund's Adviser.
(2) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(3) Computed on an annualized basis.
(4) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
<PAGE>
BATTERY PARK(SM) HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED)
1. ORGANIZATION
Battery Park Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-ended management
investment company. The Company consists of one portfolio. The financial
statements included herein are only those of Battery Park High Yield Fund (the
"Fund"), a diversified portfolio. The Fund offers two classes of shares: Class A
Shares and Class Y Shares. The Fund's investment objective is to provide
shareholders with high total return, consisting of current income and capital
appreciation.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS. U.S. government securities, listed corporate bonds,
(other fixed income and asset-backed securities), and unlisted securities and
private placement securities are generally valued at the mean of the latest bid
and asked price as furnished by an independent pricing service. Short-term
securities are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days or less
at the time of purchase may be valued at amortized cost, which approximates fair
market value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS. Interest income and expenses are
accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Distributions to
shareholders are recorded on the ex-dividend date.
FEDERAL TAXES. It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to shareholders
each year substantially all of its income. Accordingly, no provisions for
federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
RESTRICTED SECURITIES. Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions exempt
from such registration. In some cases, the issuer of restricted securities has
agreed to register such securities for resale, at the issuer's expense either
upon demand by the Fund or in connection with another registered offering of the
securities. Many restricted securities
<PAGE>
may be resold in the secondary market in transactions exempt from registration.
Such restricted securities may be determined to be liquid under criteria
established by the Board of Directors. The Fund will not incur any registration
costs upon such resales. The Fund's restricted securities are valued at the
price provided by dealers in the secondary market or, if no market prices are
available, at the fair value as determined by the Fund's pricing committee.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ from
those estimated.
OTHER. Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998
- ------------------------------------------------------------------------------------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Shares sold 373,676 $3,620,183 247,220 $2,709,647
- ------------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 24,410 236,288 20,933 225,919
- ------------------------------------------------------------------------------------------------
Shares redeemed (109,324) (1,061,962) (42,955) (450,347)
- ------------------------------------------------------------------------------------------------
Net change resulting from Class A Share
transactions 288,762 $2,794,509 225,198 $2,485,219
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998
- ------------------------------------------------------------------------------------------------
CLASS Y SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Shares sold 609,976 $5,985,423 262,525 $2,887,146
- ------------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 142,745 1,382,572 183,323 1,988,063
- ------------------------------------------------------------------------------------------------
Shares redeemed (117,569) (1,148,372) (17,483) (185,903)
- ------------------------------------------------------------------------------------------------
Net change resulting from Class Y Share
transactions 635,152 $6,219,623 428,365 $4,689,306
- ------------------------------------------------------------------------------------------------
Net change resulting from Class A Shares and
Class Y Shares transactions 923,914 $9,014,132 653,563 $7,174,525
- ------------------------------------------------------------------------------------------------
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE. Nomura Corporate Research and Asset Management Inc.,
the Fund's investment adviser (the "Adviser"), is entitled to receive for its
services an annual investment advisory fee equal to 0.65% of the Fund's average
daily net assets. The Adviser may voluntarily choose to waive any portion of its
fee and reimburse certain operating expenses of the Fund. The Adviser can modify
or terminate this voluntary waiver and reimbursement at any time at its sole
discretion.
ADMINISTRATIVE FEE. Federated Services Company ("FServ") provides the Fund with
certain administrative personnel and services. The fee paid to FServ is based on
the level of average aggregate net assets of the Company for the period.
<PAGE>
DISTRIBUTION SERVICES FEE. The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Nomura Securities International Inc., (the "Distributor"), of the
Fund's shares, from the net assets of the Fund's Class A shares to finance
activities intended to result in the sale of the Fund's Class A shares. The Plan
provides that the Fund may incur distribution expenses up to 0.25% of the
average daily net assets of Class A shares annually to compensate the
Distributor. The Distributor may voluntarily choose to waive any portion of its
fee. The Distributor can modify or terminate any such voluntary waiver at any
time at its sole discretion.
SHAREHOLDER SERVICES FEE. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services Company ("FSSC") under which the
Fund may make additional payments up to 0.25% of the average daily net asset
value of Class A shares to obtain certain personal services for certain
shareholders and the maintenance of certain shareholder accounts. Under this
Shareholder Services Agreement, FSSC would either perform shareholder service
directly or will select financial institutions to perform shareholder services,
and financial institutions would receive fees based upon Class A shares owned by
their clients or customers. The schedules of such fees and the basis upon which
such fees would be paid will be determined from time to time by the Fund and
FSSC. The Fund has not made any payments pursuant to the Shareholder Services
Agreement and has no current intention of making any such payments.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES. FServ, through its
subsidiary, FSSC serves as transfer and dividend disbursing agent for the Fund.
The fee paid to FSSC is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES. FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES. Organizational and/or start-up administrative service
expenses of $213,984 and $13,290 were borne initially by the Adviser and FServ,
respectively. The Fund has reimbursed the Adviser and FServ for these expenses.
These expenses have been deferred and are being amortized over the five year
period following the Fund's effective date.
GENERAL. Certain of the Officers of the Company are Officers of FServ and/or
FSSC.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended March 31, 1999, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------
PURCHASES $ 25,164,609
- --------------------------------------------------------------------------
SALES $ 16,921,861
- --------------------------------------------------------------------------
</TABLE>
<PAGE>
6. YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
DIRECTORS OFFICERS
- -------------------------------------------------------------------
Francis L. Fraenkel Robert Levine
Chairman and President
Robert Levine Richard A. Buch
Vice President
Frank K. Reilly Jennie Wong
Treasurer
Jennie Wong C. Christine Thomson
Assistant Treasurer
Gail Cagney
Assistant Secretary
</TABLE>
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus, which contains facts
concerning its investment objective and policies, management fees, expenses and
other information.
<PAGE>
[Battery Park Tree Logo]
BATTERY
PARK(SM)
HIGH YIELD FUND
SEMI-ANNUAL REPORT
NOMURA SECURITIES
INTERNATIONAL, INC.
Distributor
2 World Financial Center
Building B, 25th Floor
New York, NY 10281-1198
Cusip 07132Q108
Cusip 07132Q207
G02047-01 (5/99)
MARCH 31, 1999
NOMURA CORPORATE RESEARCH
AND ASSET MANAGEMENT INC.
Investment Adviser
2 World Financial Center
Building B, 25th Floor
New York, NY 10281-1198
Appendix
A1. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class Y
Shares of Battery Park High Yield Fund are represented by a solid line. The
Class A Shares are represented by a line with triangles. The Class A Shares with
a sales charge are represented by a dotted line. The Merrill Lynch High Yield
Master II Index is represented by a dashed line. The line graph is a visual
presentation of a comparison of change in value of a $10,000 hypothetical
investment in the Class Y Shares, Class A Shares, Class A Shares with sales
charge, of the Fund, and the Merrill Lynch High Yield Master II Index. The "x"
axis reflects computation periods from 10/96 to 3/99. The "y" axis reflects the
cost of investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class Y Shares, Class A Shares, and Class
A Shares with a sales charge, as compared to the Merrill Lynch High Yield Master
II Index.
The ending values were $13,095, $13,016, $12,428, and $12,319, respectively.
A2. The graphic presentation here displayed consists of a ten-column chart
entitled "Battery Park Fund's Diverse Portfolio - Top ten industries (%) as of
March 31, 1999." The information is as follows: Telecommunications., 23%;
Broadcasting Radio & TV, 14%; Cable TV, 12%; Hotels/Casinos, 10%; Leisure, 7%;
Retailer, 6%; Ecological Services, 4%; Publishing, 3%; Non-Ferrous Metals, 3%;
and Beverages, 3%.
A3. The graphic presentation here displayed consists of a pie chart. The
information is as follows: B, 61%; BB, 18%; CCC, 8%; Not Rated, 8%; Cash &
Equivalents, 3%; and Other, 2%.
