HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1998
PRINCIPAL
AMOUNT VALUE
<S> <C>
CORPORATE BONDS--87.9%
- ----------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.1%
- -----------------
$500,000 Aviation Sales Co., Sr. Sub. Note, 8.125%, 3/15/2008 $497,500
- -----------------
AUTO/TRUCK--0.2%
- -----------------
1,000,000 (2) HAD Parts System, Inc., Sr. Sub. Note, 12.00%, 905,000
8/1/2005
- -----------------
AUTOMOBILE--2.0%
- -----------------
2,025,000 Accuride Corp., Sr. Sub. Note, 9.25%, 2/1/2008 1,994,625
- -----------------
976,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 1,029,680
8/1/2004
- -----------------
155,000 Aftermarket Technology Co., Sr. Sub. Note, Series D,
12.00%, 8/1/2004 163,525
- -----------------
4,575,000 Collins & Aikman Products Co., Sr. Sub. Note, 11.50%,
4/15/2006 4,758,000
- -----------------
600,000 Lear Corp., Sub. Note, 9.50%, 7/15/2006 666,000
- -----------------
750,000 Lear Seating Corp., Sub. Note, 8.25%, 2/1/2002 754,687
- -----------------
550,000 OshKosh Truck Corp., Sr. Sub., 8.75%, 3/1/2008 552,750
- -----------------
1,375,000 Oxford Automotive, Inc., Sr. Sub. Note, 10.125%, 1,423,125
6/15/2007
- -----------------
Total 11,342,392
- -----------------
BANKING--1.1%
- -----------------
6,000,000 GS Escrow Corp., Sr. Note, 7.125%, 8/1/2005 5,947,860
- -----------------
BEVERAGE & TOBACCO--0.3%
- -----------------
1,800,000 Dimon, Inc., Sr. Note, 8.875%, 6/1/2006 1,791,000
- -----------------
BROADCAST RADIO & TV--7.9%
- -----------------
1,775,000 (7) ACME Television, LLC, Sr. Disc. Note, 0/10.875%, 1,424,437
9/30/2004
- -----------------
3,150,000 (7) Big City Radio, Inc., Company Guarantee, 0/11.25%, 2,094,750
3/15/2005
- -----------------
1,573,500 CBS Radio, Inc., Sub. Deb., 11.375%, 1/15/2009 1,880,332
- -----------------
1,150,000 Capstar Broadcasting Partners, Inc., Sr. Sub. Note,
9.25%, 7/1/2007 1,201,750
- -----------------
1,850,000 Chancellor Media Corp., Company Guarantee, 10.50%,
1/15/2007 2,062,750
- -----------------
4,975,000 Chancellor Media Corp., Sr. Sub. Note, 8.125%, 12/15/2007 4,962,562
- -----------------
1,675,000 Chancellor Media Corp., Sr. Sub. Note, 8.75%, 6/15/2007 1,725,250
- -----------------
1,000,000 (2) Chancellor Media Corp., Sr. Sub. Note, 9.00%, 1,055,000
10/1/2008
- -----------------
PRINCIPAL
- ---------------- --------------------------------------------------------- ----------------
AMOUNT VALUE
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------
BROADCAST RADIO & TV - CONTINUED
- -----------------
$1,250,000 Chancellor Media Corp., Sr. Sub. Note, 9.375%, 10/1/2004 $1,303,125
- -----------------
2,000,000 (2) Chancellor Media Corp., Sr. Unsecd. Note, 8.00%, 2,050,000
11/1/2008
- -----------------
1,750,000 Cumulus Media, Inc., Sr. Sub. Note, 10.375%, 7/1/2008 1,863,750
- -----------------
6,325,000 (7) Fox/Liberty Networks, LLC, Sr. Disc. Note, 0/9.75%, 4,395,875
8/15/2007
- -----------------
1,300,000 Fox/Liberty Networks, LLC, Sr. Note, 8.875%, 8/15/2007 1,326,000
- -----------------
550,000 Lamar Advertising Co., Sr. Sub. Note, 8.625%, 9/15/2007 580,250
- -----------------
1,300,000 Lamar Advertising Co., Sr. Sub. Note, 9.625%, 12/1/2006 1,413,750
- -----------------
4,450,000 Outdoor Systems, Inc., Sr. Sub. Note, 8.875%, 6/15/2007 4,783,750
- -----------------
822,000 SFX Broadcasting, Inc., Sr. Sub. Note, 10.75%, 5/15/2006 908,310
- -----------------
2,000,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 10.00%, 2,110,000
9/30/2005
- -----------------
4,250,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 8.75%, 4,324,375
12/15/2007
- -----------------
1,750,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 9.00%, 1,789,375
7/15/2007
- -----------------
1,050,000 Young Broadcasting, Inc., Sr. Sub. Note, 9.00%, 1/15/2006 1,068,375
- -----------------
Total 44,323,766
- -----------------
BUILDING & DEVELOPMENT--0.7%
- -----------------
800,000 American Architectural Products Corp., Sr. Note, 11.75%,
12/1/2007 692,000
- -----------------
1,250,000 American Builders & Contractors Supply Co., Inc., Sr.
Sub. Note, 10.625%, 5/15/2007 1,168,750
- -----------------
500,000 Building Materials Corp. of America, Sr. Note, 8.00%,
10/15/2007 504,375
- -----------------
1,350,000 Building Materials Corp. of America, Sr. Note, 8.625%,
12/15/2006 1,380,375
- -----------------
Total 3,745,500
- -----------------
BUSINESS EQUIPMENT & SERVICES--2.0%
- -----------------
500,000 (2) American Business Information, Sr. Sub. Note, 9.50%,
6/15/2008 402,500
- -----------------
2,375,000 Dialog Corp. PLC, Sr. Sub. Note, 11.00%, 11/15/2007 2,375,000
- -----------------
750,000 (7) Electronic Retailing Systems International, Inc.,
Sr. Disc. Note, 0/13.25%, 2/1/2004 273,750
- -----------------
3,075,000 (2) Fisher Scientific International, Inc., Sr. Sub.
Note, 9.00%, 2/1/2008 3,075,000
- -----------------
Fisher Scientific International, Inc., Sr. Sub. Note, 1,350,000
9.00%, 2/1/2008 1,350,000
- -----------------
PRINCIPAL
- ---------------- --------------------------------------------------------- ----------------
AMOUNT VALUE
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------
BUSINESS EQUIPMENT & SERVICES - CONTINUED
- -----------------
$3,000,000 U.S. Office Products Co., Sr. Sub. Note, 9.75%, 6/15/2008 $1,965,000
- -----------------
951,000 United Stationers Supply Co., Sr. Sub. Note, 12.75%, 1,065,120
5/1/2005
- -----------------
1,000,000 United Stationers Supply Co., Sr. Sub. Note, 8.375%, 1,002,500
4/15/2008
- -----------------
Total 11,508,870
- -----------------
CABLE TELEVISION--10.2%
- -----------------
8,979 (5)(7) Australis Media Ltd., Sr. Disc. Note, 0/15.75%, 135
5/15/2003
- -----------------
525,000 (5)(7)Australis Media Ltd., Unit, 0/14.00%, 5/15/2003 7,875
- -----------------
900,000 CSC Holdings, Inc., Sr. Note, 7.875%, 12/15/2007 949,320
- -----------------
1,350,000 CSC Holdings, Inc., Sr. Sub. Deb., 9.875%, 2/15/2013 1,508,625
- -----------------
2,300,000 CSC Holdings, Inc., Sr. Sub. Note, 9.25%, 11/1/2005 2,461,000
- -----------------
325,000 CSC Holdings, Inc., Sr. Sub. Note, 9.875%, 5/15/2006 359,125
- -----------------
575,000 (7) Charter Communications Holdings, Inc., Sr. Disc.
Note, 0/14.00%, 3/15/2007 514,625
- -----------------
1,450,000 Charter Communications Southeast, L.P., Sr. Note,
11.25%, 3/15/2006 1,627,625
- -----------------
250,000 Comcast Corp., Sr. Sub. Deb., 10.625%, 7/15/2012 323,750
- -----------------
1,850,000 Comcast Corp., Sr. Sub. Deb., 9.375%, 5/15/2005 1,974,875
- -----------------
825,000 (7) Comcast UK Cable, Deb., 0/11.20%, 11/15/2007 705,375
- -----------------
4,675,000 (7) Diamond Cable Communications PLC, Sr. Disc. Note,
0/10.75%, 2/15/2007 3,389,375
- -----------------
1,925,000 (7) Diamond Cable Communications PLC, Sr. Disc. Note,
0/11.75%, 12/15/2005 1,602,562
- -----------------
1,425,000 (2)(7) Diva Systems Corp., Sr. Note, 0/12.625%, 3/1/2008 537,937
- -----------------
4,975,000 (7) EchoStar Satellite Broadcasting Corp., Sr. Disc.
Note, 0/13.125%, 3/15/2004 4,987,437
- -----------------
800,000 Echostar DBS Corp., Company Guarantee, 12.50%, 7/1/2002 928,000
- -----------------
4,250,000 (7) International Cabletel, Inc., Sr. Defd. Cpn. Note,
0/11.50%, 2/1/2006 3,548,750
- -----------------
400,000 International Cabletel, Inc., Sr. Disc. Note, 12.75%, 362,000
4/15/2005
- -----------------
1,400,000 Lenfest Communications Inc., Sr. Note, 8.375%, 11/1/2005 1,522,500
- -----------------
2,350,000 Lenfest Communications Inc., Sr. Sub. Note, 8.25%, 2,461,625
2/15/2008
- -----------------
3,450,000 (2)(7) NTL, Inc., Sr. Defd. Cpn. Note, 0/12.375%, 2,173,500
10/1/2008
- -----------------
6,875,000 (7) NTL, Inc., Sr. Defd. Cpn. Note, 0/9.75%, 4/1/2008 4,271,094
- -----------------
1,200,000 (2) NTL, Inc., Sr. Note, 11.50%, 10/1/2008 1,314,000
- -----------------
2,200,000 Pegasus Communications Corp., Sr. Note, 9.625%, 2,211,000
10/15/2005
- -----------------
PRINCIPAL
- ---------------- VALUE
AMOUNT
- -----------------
CORPORATE BONDS--CONTINUED
CABLE TELEVISION - CONTINUED
- -----------------
$1,300,000 (2) Pegasus Communications Corp., Sr. Note, 9.75%, $1,309,750
12/1/2006
- -----------------
825,000 Pegasus Media, Note, 12.50%, 7/1/2005 911,625
- -----------------
675,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note,
10.00%, 12/1/2007 759,375
- -----------------
1,525,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note,
10.00%, 3/15/2005 1,715,625
- -----------------
1,400,000 Rogers Cablesystems Ltd., Sr. Sub. Gtd. Note, 11.00%, 1,645,000
12/1/2015
- -----------------
8,475,000 (7)TeleWest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 7,119,000
- -----------------
750,000 (2) TeleWest PLC, Sr. Note, 11.25%, 11/1/2008 841,875
- -----------------
2,400,000 (7) UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 1,224,000
5/15/2006
- -----------------
3,900,000 (7) United International Holdings, Inc., Sr. Secd. Disc.
Note, 0/10.75%, 2/15/2008 2,125,500
- -----------------
Total 57,393,860
- -----------------
CHEMICALS & PLASTICS--2.7%
- -----------------
600,000 Buckeye Cellulose Corp., Sr. Sub. Note, 8.50%, 12/15/2005 627,000
- -----------------
1,600,000 Buckeye Cellulose Corp., Sr. Sub. Note, 9.25%, 9/15/2008 1,684,000
- -----------------
400,000 Foamex L.P., Sr. Sub. Note, 13.50%, 8/15/2005 424,000
- -----------------
2,100,000 (2) Huntsman Corp., Sr. Sub. Note, 9.50%, 7/1/2007 2,100,000
- -----------------
1,825,000 ISP Holding, Inc., Sr. Note, 9.00%, 10/15/2003 1,939,062
- -----------------
1,108,000 ISP Holding, Inc., Sr. Note, 9.75%, 2/15/2002 1,182,790
- -----------------
2,950,000 Polymer Group, Inc., Sr. Sub. Note, 8.75%, 3/1/2008 2,913,125
- -----------------
3,550,000 Polymer Group, Inc., Sr. Sub. Note, 9.00%, 7/1/2007 3,532,250
- -----------------
1,700,000 (7) Sterling Chemicals Holdings, Inc., Sr. Disc. Note,
0/13.50%, 8/15/2008 654,500
- -----------------
Total 15,056,727
- -----------------
CLOTHING & TEXTILES--1.4%
- -----------------
1,000,000 Collins & Aikman Floorcoverings, Inc., Sr. Sub. Note,
10.00%, 1/15/2007 1,050,000
- -----------------
675,000 Dyersburg Corp., Sr. Sub. Note, 9.75%, 9/1/2007 607,500
- -----------------
1,250,000 GFSI, Inc., Sr. Sub. Note, 9.625%, 3/1/2007 1,193,750
- -----------------
1,625,000 Glenoit Corp., Sr. Sub. Note, 11.00%, 4/15/2007 1,519,375
- -----------------
1,575,000 Pillowtex Corp., Sr. Sub. Note, 10.00%, 11/15/2006 1,693,125
- -----------------
1,900,000 Pillowtex Corp., Sr. Sub. Note, 9.00%, 12/15/2007 1,966,500
- -----------------
Total 8,030,250
- -----------------
CONGLOMERATE--0.4%
- -----------------
2,650,000 Eagle Picher Industries, Inc., Sr. Sub. Note, 9.375%, 2,517,500
3/1/2008
- -----------------
PRINCIPAL
- ---------------- --------------------------------------------------------- ----------------
AMOUNT VALUE
- -----------------
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------
CONSUMER PRODUCTS--4.2%
- -----------------
$3,350,000 (2) Albecca, Inc., Sr. Sub. Note, 10.75%, 8/15/2008 $3,375,125
- -----------------
1,150,000 American Safety Razor Co., Sr. Note, 9.875%, 8/1/2005 1,155,750
- -----------------
1,250,000 Amscan Holdings, Inc., Sr. Sub. Note, 9.875%, 12/15/2007 1,171,875
- -----------------
1,900,000 Chattem, Inc., Sr. Sub. Note, 8.875%, 4/1/2008 1,957,000
- -----------------
325,000 (7) Diamond Brands Operating Corp., Sr. Sub. Note,
0/10.125%, 4/15/2008 300,625
- -----------------
925,000 Diamond Brands, Inc., Sr. Disc. Deb., 12.875%, 4/15/2009 356,125
- -----------------
375,000 Hosiery Corp. of America, Inc., Sr. Sub. Note, 13.75%, 386,250
8/1/2002
- -----------------
625,000 (7) ICON Fitness Corp., Sr. Disc. Note, 14.00%, 9,375
0/11/15/2006
- -----------------
950,000 NBTY, Inc., Sr. Sub. Note, 8.625%, 9/15/2007 931,000
- -----------------
2,920,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 3,066,000
12/15/2003
- -----------------
250,000 Playtex Products, Inc., Sr. Note, 8.875%, 7/15/2004 262,500
- -----------------
1,000,000 Revlon Consumer Products Corp., Sr. Note, 8.125%, 955,000
2/1/2006
- -----------------
6,200,000 Revlon Consumer Products Corp., Sr. Sub. Note, 8.625%,
2/1/2008 5,735,000
- -----------------
1,100,000 (7) Sealy Mattress Co., Company Guarantee, 0/10.875%,
12/15/2007 665,500
- -----------------
425,000 Sealy Mattress Co., Sr. Sub. Note, 9.875%, 12/15/2007 412,250
- -----------------
2,175,000 (2) The Boyds Collection, Ltd., Sr. Sub. Note, 9.00%, 2,338,125
5/15/2008
- -----------------
775,000 (2) True Temper Sports, Inc., Sr. Sub. Note, 10.875%, 778,875
12/1/2008
- -----------------
Total 23,856,375
- -----------------
CONTAINER & GLASS PRODUCTS--0.7%
- -----------------
450,000 (2) Ball Corp., Sr. Sub. Note, 8.25%, 8/1/2008 473,062
- -----------------
1,000,000 Plastic Containers, Inc., Sr. Secd. Note, 10.00%, 1,055,000
12/15/2006
- -----------------
2,100,000 Tekni-Plex, Inc., Sr. Sub. Note, 9.25%, 3/1/2008 2,205,000
- -----------------
Total 3,733,062
- -----------------
ECOLOGICAL SERVICES & EQUIPMENT--1.9%
- -----------------
10,500,000 (2) Allied Waste North America, Inc., Sr. Note, 7.875%, 10,657,500
1/1/2009
- -----------------
ELECTRONICS--0.8%
- -----------------
775,000 (7) PX Escrow Corp., Sr. Sub. Note, 0/9.625%, 2/1/2006 430,125
- -----------------
2,900,000 Telecommunications Techniques Co., LLC, Sr. Sub. Note,
9.75%, 5/15/2008 2,827,500
- -----------------
1,300,000 Viasystems, Inc., Sr. Sub. Note, 9.75%, 6/1/2007 1,215,500
- -----------------
Total 4,473,125
- -----------------
FARMING & AGRICULTURE--0.2%
- -----------------
850,000 Purina Mills, Inc., Sr. Sub. Note, 9.00%, 3/15/2010 850,000
- -----------------
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------
FINANCIAL INTERMEDIARIES--0.1%
- -----------------
$1,100,000 ContiFinancial Corp., Sr. Note, 8.125%, 4/1/2008 $786,500
- -----------------
FOOD & DRUG RETAILERS--1.1%
- -----------------
1,125,000 Carr-Gottstein Foods Co., Sr. Sub. Note, 12.00%, 1,305,000
11/15/2005
- -----------------
525,000 Community Distributors, Inc., Sr. Note, 10.25%, 485,625
10/15/2004
- -----------------
1,450,000 DiGiorgio Corp., Sr. Note, 10.00%, 6/15/2007 1,355,750
- -----------------
2,125,000 Jitney-Jungle Stores of America, Inc., Sr. Sub. Note,
10.375%, 9/15/2007 2,167,500
- -----------------
850,000 Stater Brothers Holdings, Inc., Sr. Sub. Note, 9.00%, 833,000
7/1/2004
- -----------------
Total 6,146,875
- -----------------
FOOD PRODUCTS--1.7%
- -----------------
2,600,000 (2) Agrilink Foods, Inc., Sr. Sub. Note, 11.875%, 2,652,000
11/1/2008
- -----------------
1,325,000 Aurora Foods, Inc., Sr. Sub. Note, 9.875%, 2/15/2007 1,450,875
- -----------------
1,500,000 Aurora Foods, Inc., Sr. Sub. Note, Series E, 8.75%, 1,567,500
7/1/2008
- -----------------
1,350,000 Eagle Family Foods, Inc., Sr. Sub. Note, 8.75%, 1/15/2008 1,279,125
- -----------------
2,375,000 International Home Foods, Inc., Sr. Sub. Note, 10.375%,
11/1/2006 2,582,812
- -----------------
Total 9,532,312
- -----------------
FOOD SERVICES--1.3%
- -----------------
1,100,000 AmeriServe Food Distribution, Inc., Sr. Note, 8.875%,
10/15/2006 1,023,000
- -----------------
3,900,000 AmeriServe Food Distribution, Inc., Sr. Sub. Note,
10.125%, 7/15/2007 3,412,500
- -----------------
1,300,000 (2) Carrols Corp., Sr. Sub. Note, 9.50%, 12/1/2008 1,316,250
- -----------------
1,600,000 (2) Domino's, Inc., Sr. Sub. Note, 10.375%, 1/15/2009 1,600,000
- -----------------
100,000 (7) Nebco Evans Holding Co., Sr. Disc. Note, 0/12.375%, 48,500
7/15/2007
- -----------------
Total 7,400,250
- -----------------
FOREST PRODUCTS--1.0%
- -----------------
600,000 Container Corp. of America, Sr. Note, 11.25%, 5/1/2004 627,000
- -----------------
1,500,000 Four M Corp., Sr. Note, 12.00%, 6/1/2006 1,132,500
- -----------------
1,250,000 S. D. Warren Co., Sr. Sub. Note, 12.00%, 12/15/2004 1,368,750
- -----------------
1,175,000 Stone Container Corp., Sr. Note, 11.50%, 10/1/2004 1,227,875
- -----------------
1,100,000 Stone Container Corp., Sr. Note, 12.58%, 8/1/2016 1,122,000
- -----------------
250,000 Stone Container Corp., Unit, 12.25%, 4/1/2002 256,250
- -----------------
Total 5,734,375
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------
HEALTHCARE--3.3%
- -----------------
$500,000 Alliance Imaging, Inc., Sr. Sub. Note, 9.625%, 12/15/2005 $497,500
- -----------------
3,000,000 CONMED Corp., Sr. Sub. Note, 9.00%, 3/15/2008 3,022,500
- -----------------
2,325,000 Dade International, Inc., Sr. Sub. Note, 11.125%, 2,586,562
5/1/2006
- -----------------
1,200,000 Everest Healthcare Services Corp., Sr. Sub. Note, 9.75%,
5/1/2008 1,200,000
- -----------------
650,000 Hudson Respiratory Care, Inc., Sr. Sub. Note, 9.125%, 529,750
4/15/2008
- -----------------
500,000 (2) Tenet Healthcare Corp., Sr. Note, 7.625%, 6/1/2008 508,190
- -----------------
1,800,000 Tenet Healthcare Corp., Sr. Note, 8.00%, 1/15/2005 1,847,862
- -----------------
1,650,000 Tenet Healthcare Corp., Sr. Sub. Note, 8.625%, 1/15/2007 1,724,250
- -----------------
6,100,000 (2) Tenet Healthcare Corp., Sr. Sub., 8.125%, 12/1/2008 6,328,750
- -----------------
Total 18,245,364
- -----------------
HOME PRODUCTS & FURNISHINGS--0.3%
- -----------------
1,825,000 (7) Falcon Building Products, Inc., Sr. Sub. Disc. Note,
0/10.50%, 6/15/2007 1,085,875
- -----------------
375,000 Falcon Building Products, Inc., Sr. Sub. Note, 9.50%, 335,625
6/15/2007
- -----------------
200,000 Werner Enterprises, Inc., Sr. Sub. Note, 10.00%, 199,000
11/15/2007
- -----------------
Total 1,620,500
- -----------------
HOTELS, MOTELS, INNS & CASINOS--1.4%
- -----------------
975,000 Courtyard by Marriott II LP, Sr. Note, 10.75%, 2/1/2008 1,009,125
- -----------------
5,000,000 HMH Properties, Inc., Sr. Note, Series B, 7.875%, 4,875,000
8/1/2008
- -----------------
2,175,000 HMH Properties, Inc., Sr. Note, Series C, 8.45%, 2,185,875
12/1/2008
- -----------------
Total 8,070,000
- -----------------
INDUSTRIAL PRODUCTS & EQUIPMENT--3.8%
- -----------------
1,450,000 Amphenol Corp., Sr. Sub. Note, 9.875%, 5/15/2007 1,508,000
- -----------------
850,000 Anchor Lamina, Inc., Sr. Sub. Note, 9.875%, 2/1/2008 769,250
- -----------------
1,450,000 Cabot Safety Acquisition Corp., Sr. Sub. Note, 12.50%,
7/15/2005 1,587,750
- -----------------
1,650,000 Continental Global Group, Inc., Sr. Note, 11.00%, 1,427,250
4/1/2007
- -----------------
1,500,000 Euramax International PLC, Sr. Sub. Note, 11.25%, 1,500,000
10/1/2006
- -----------------
600,000 Grove Worldwide, LLC, Sr. Sub. Note, 9.25%, 5/1/2008 549,000
- -----------------
520,000 Hawk Corp., Sr. Note, 10.25%, 12/1/2003 548,600
- -----------------
1,600,000 ISG Resources, Inc., Sr. Sub. Note, 10.00%, 4/15/2008 1,592,000
- -----------------
750,000 International Utility Structures, Inc., Sr. Sub. Note,
10.75%, 2/1/2008 701,250
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------
INDUSTRIAL PRODUCTS & EQUIPMENT--CONTINUEd
- -----------------
$575,000 Johnstown America Industries, Inc., Sr. Sub. Note,
11.75%, 8/15/2005 $609,500
- -----------------
650,000 Johnstown America Industries, Inc., Sr. Sub. Note,
11.75%, 8/15/2005 689,000
- -----------------
1,200,000 MMI Products, Inc., Sr. Sub. Note, 11.25%, 4/15/2007 1,302,000
- -----------------
275,000 (2) Neenah Corp., Sr. Sub. Note, 11.125%, 5/1/2007 283,937
- -----------------
1,975,000 Neenah Corp., Sr. Sub. Note, 11.125%, 5/1/2007 2,039,188
- -----------------
1,200,000 Unifrax Investment Corp., Sr. Note, 10.50%, 11/1/2003 1,218,000
- -----------------
3,800,000 WESCO Distribution, Inc., Sr. Sub. Note, 9.125%, 6/1/2008 3,819,000
- -----------------
1,975,000 (7) WESCO International, Inc., Sr. Disc. Note,
0/11.125%, 6/1/2008 ----------------
1,219,563
- -----------------
Total 21,363,288
- -----------------
LEISURE & ENTERTAINMENT--3.1%
- -----------------
3,042,000 (7)AMF Bowling Worldwide, Sr. Sub. Disc. Note, 0/12.25%, 1,756,755
3/15/2006
- -----------------
1,700,000 Loews Cineplex Entertainment, Inc., Sr. Sub. Note,
8.875%, 8/1/2008 1,763,750
- -----------------
5,100,000 (7) Premier Parks, Inc., Sr. Disc. Note, 0/10.00%, 3,480,750
4/1/2008
- -----------------
1,325,000 Premier Parks, Inc., Sr. Note, 12.00%, 8/15/2003 1,440,938
- -----------------
575,000 Premier Parks, Inc., Sr. Note, 9.25%, 4/1/2006 598,000
- -----------------
325,000 Premier Parks, Inc., Sr. Note, 9.75%, 1/15/2007 354,250
- -----------------
2,850,000 Regal Cinemas, Inc., 9.50%, 6/1/2008 2,949,750
- -----------------
1,850,000 (2) Regal Cinemas, Inc., Sr. Sub. Note, 9.50%, 6/1/2008 1,914,750
- -----------------
2,925,000 (7) Six Flags Theme Parks, Sr. Sub. Disc. Note
0/12.25%, 6/15/2005 ----------------
3,261,375
- -----------------
Total 17,520,318
- -----------------
MACHINERY & EQUIPMENT--2.5%
- -----------------
1,147,000 Alvey Systems, Inc., Sr. Sub. Note, 11.375%, 1/31/2003 1,152,735
- -----------------
1,775,000 Clark Material Handling Corp., Sr. Note, 10.75%, 1,814,938
11/15/2006
- -----------------
1,425,000 Columbus McKinnon Corp., Sr. Sub. Note, 8.50%, 4/1/2008 1,339,500
- -----------------
1,050,000 National Equipment Services, Inc., Sr. Sub. Note,
10.00%, 11/30/2004 1,044,750
- -----------------
2,425,000 (2) National Equipment Services, Inc., Sr. Sub. Note,
Series C, 10.00%, 11/30/2004 2,412,875
- -----------------
2,800,000 (2) NationsRent, Inc., Sr. Sub. Note, 10.375%, 12/15/2008 2,786,000
- -----------------
3,300,000 (2) United Rentals, Inc., Sr. Sub. Note, 9.25%, 1/15/2009 3,324,750
- -----------------
PRINCIPAL
- ---------------- --------------------------------------------------------- ----------------
AMOUNT VALUE
- -----------------
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------
Total $13,875,548
- -----------------
METALS & MINING--0.9%
- -----------------
$1,700,000 (2) AEI Holding Co., Inc., Sr. Note, 10.50%, 12/15/2005 1,674,500
- -----------------
3,300,000 (2) AEI Resources, Inc., Sr. Sub. Note, 11.50%, 3,283,500
12/15/2006
- -----------------
Total 4,958,000
- -----------------
OIL & GAS--3.3%
- -----------------
1,500,000 Chiles Offshore, LLC, Sr. Note, 10.00%, 5/1/2008 1,207,500
- -----------------
4,000,000 Continental Resources, Inc., Sr. Sub. Note, 10.25%, 3,340,000
8/1/2008
- -----------------
475,000 DI Industries, Inc., Sr. Note, 8.875%, 7/1/2007 358,625
- -----------------
3,250,000 Dailey Petroleum Services Corp., Company Guarantee,
9.50%, 2/15/2008 1,527,500
- -----------------
2,050,000 Forcenergy Gas Exploration, Inc., Sr. Sub. Note, 8.50%,
2/15/2007 1,527,250
- -----------------
1,675,000 Forcenergy Gas Exploration, Inc., Sr. Sub. Note, 9.50%,
11/1/2006 1,298,125
- -----------------
1,700,000 KCS Energy, Inc., Sr. Sub. Note, 8.875%, 1/15/2008 977,500
- -----------------
875,000 Nuevo Energy Co., Sr. Sub. Note, 8.875%, 6/1/2008 853,125
- -----------------
2,000,000 Ocean Energy, Inc., Sr. Sub. Note, 10.375%, 10/15/2005 2,070,000
- -----------------
300,000 Ocean Rig Norway AS, Company Guarantee, 10.25%, 6/1/2008 241,500
- -----------------
850,000 Pacalta Resources Ltd., Sr. Note, 10.75%, 6/15/2004 684,250
- -----------------
1,825,000 Pride Petroleum Services, Inc., Sr. Note, 9.375%, 1,706,375
5/1/2007
- -----------------
900,000 The Houston Exploration Co., Sr. Sub. Note, 8.625%, 886,500
1/1/2008
- -----------------
600,000 (7) Universal Compression Holdings, Inc., Sr. Disc.
Note, 0/11.375%, 2/15/2009 333,000
- -----------------
3,100,000 (7) Universal Compression Holdings, Inc., Sr. Disc.
Note, 0/9.875%, 2/15/2008 1,782,500
- -----------------
Total 18,793,750
- -----------------
PRINTING & PUBLISHING--1.6%
- -----------------
1,450,000 (7)Affiliated Newspaper Investments, Inc., Sr. Disc.
Note, 0/13.25%, 7/1/2006 1,497,125
- -----------------
850,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 930,750
7/1/2004
- -----------------
1,625,000 Garden State Newspapers, Inc., Sr. Sub. Note, 8.75%, 1,633,125
10/1/2009
- -----------------
1,000,000 Hollinger International Publishing, Inc., Sr. Sub. Note,
9.25%, 2/1/2006 1,055,000
- -----------------
1,900,000 Hollinger International Publishing, Inc., Sr. Sub. Note,
9.25%, 3/15/2007 2,014,000
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------
PRINTING & PUBLISHING--CONTINUEd
- -----------------
$900,000 K-III Communications Corp., Company Guarantee, Series B,
8.50%, 2/1/2006 $931,500
- -----------------
1,200,000 Ziff-Davis, Inc., Sr. Sub. Note, 8.50%, 5/1/2008 1,164,000
- -----------------
Total 9,225,500
- -----------------
REAL ESTATE--0.2%
- -----------------
1,156,000 Trizec Finance Ltd., Sr. Note, 10.875%, 10/15/2005 1,268,710
- -----------------
RETAILERS--0.2%
- -----------------
975,000 Leslie's Poolmart, Inc., Sr. Note, 10.375%, 7/15/2004 1,009,125
- -----------------
SERVICES--0.7%
- -----------------
1,300,000 Coinmach Corp., Sr. Note, 11.75%, 11/15/2005 1,439,750
- -----------------
2,750,000 SITEL Corp., Sr. Sub. Note, 9.25%, 3/15/2006 2,488,750
- -----------------
Total 3,928,500
- -----------------
STEEL--0.6%
- -----------------
2,100,000 Metals USA, Inc., Sr. Sub. Note, 8.625%, 2/15/2008 1,984,500
- -----------------
1,350,000 Ryerson Tull, Inc., Sr. Note, 9.125%, 7/15/2006 1,519,128
- -----------------
Total 3,503,628
- -----------------
SURFACE TRANSPORTATION--2.2%
- -----------------
1,350,000 Allied Holdings, Inc., Sr. Note, 8.625%, 10/1/2007 1,377,000
- -----------------
1,025,000 (6)AmeriTruck Distribution Corp., Sr. Sub. Note, 12.25%,
11/15/2005 66,625
- -----------------
2,075,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 2,199,500
- -----------------
1,625,000 Statia Terminals International N.V., 1st Mtg. Note,
11.75%, 11/15/2003 1,633,125
- -----------------
3,750,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 3,890,625
- -----------------
1,500,000 Stena AB, Sr. Note, 8.75%, 6/15/2007 1,436,250
- -----------------
1,000,000 Stena Line AB, Sr. Note, 10.625%, 6/1/2008 905,000
- -----------------
1,050,000 (2) The Holt Group, Inc., Sr. Note, 9.75%, 1/15/2006 740,250
- -----------------
Total 12,248,375
- -----------------
TELECOMMUNICATIONS & CELLULAR--21.0%
- -----------------
2,700,000 (2) American Cellular Corp., Sr. Note, 10.50%, 5/15/2008 2,686,500
- -----------------
1,200,000 (2) Arch Communications, Inc., Sr. Note, 12.75%, 7/1/2007 1,206,000
- -----------------
6,250,000 (7) Call-Net Enterprises, Inc., Sr. Disc. Note, 0/8.94%, 3,703,125
8/15/2008
- -----------------
2,725,000 (7) Call-Net Enterprises, Inc., Sr. Disc. Note, 0/9.27%, 1,757,625
8/15/2007
- -----------------
1,700,000 (2) Centennial Cellular Corp., Sr. Sub. Note, 10.75%, 1,717,000
12/15/2008
- -----------------
1,850,000 Comcast Cellular Holdings, Inc., Sr. Note, 9.50%, 1,984,125
5/1/2007
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR - CONTINUED
- -----------------
$1,550,000 (7) E.Spire Communications, Inc., Sr. Disc. Note,
0/12.75%, 4/1/2006 $968,750
- -----------------
1,575,000 (7) E.Spire Communications, Inc., Sr. Disc. Note,
0/13.00%, 11/1/2005 1,063,125
- -----------------
400,000 E.Spire Communications, Inc., Sr. Note, 13.75%, 7/15/2007 394,000
- -----------------
500,000 Esprit Telecom Group PLC, Sr. Note, 11.50%, 12/15/2007 520,000
- -----------------
2,000,000 (2) Hermes Europe Railtel B.V., Sr. Note, 10.375%, 2,040,000
1/15/2009
- -----------------
2,925,000 Hermes Europe Railtel B.V., Sr. Note, 11.50%, 8/15/2007 3,115,125
- -----------------
500,000 (7) ICG Holdings, Inc., Sr. Disc. Note, 0/11.625%, 322,560
3/15/2007
- -----------------
2,950,000 (7) ICG Holdings, Inc., Sr. Disc. Note, 0/12.50%, 2,188,546
5/1/2006
- -----------------
3,300,000 IXC Communications, Inc., Sr. Sub. Note, 9.00%, 4/15/2008 3,320,625
- -----------------
3,725,000 (7) Intermedia Communications, Inc., Sr. Disc. Note,
0/11.25%, 7/15/2007 2,588,875
- -----------------
3,575,000 (7) Intermedia Communications, Inc., Sr. Disc. Note,
0/12.50%, 5/15/2006 2,815,313
- -----------------
1,350,000 Intermedia Communications, Inc., Sr. Note, 8.60%, 1,289,250
6/1/2008
- -----------------
575,000 Intermedia Communications, Inc., Sr. Note, 8.875%, 557,750
11/1/2007
- -----------------
7,675,000 (2)(7) Level 3 Communications, Inc., Sr. Disc. Note,
0/10.50%, 12/1/2008 4,509,062
- -----------------
9,450,000 Level 3 Communications, Inc., Sr. Note, 9.125%, 5/1/2008 9,426,375
- -----------------
3,100,000 (7) McLeod, Inc., Sr. Disc. Note, 0/10.50%, 3/1/2007 2,356,000
- -----------------
350,000 McLeod, Inc., Sr. Note, 8.375%, 3/15/2008 353,500
- -----------------
1,050,000 McLeod, Inc., Sr. Note, 9.25%, 7/15/2007 1,078,875
- -----------------
2,300,000 (2) McLeod, Inc., Sr. Note, 9.50%, 11/1/2008 2,461,000
- -----------------
2,450,000 (7) MetroNet Communications Corp., Sr. Disc. Note,
0/10.75%, 11/1/2007 1,604,750
- -----------------
1,025,000 MetroNet Communications Corp., Sr. Note, 12.00%, 1,119,813
8/15/2007
- -----------------
6,050,000 (7) MetroNet Escrow Corp., Sr. Disc. Note, 0/9.95%, 3,735,875
6/15/2008
- -----------------
1,375,000 (2) MetroNet Escrow Corp., Sr. Note, 10.625%, 11/1/2008 1,464,375
- -----------------
1,025,000 (2) Metromedia Fiber Network, Inc., Sr. Note, 10.00%,
11/15/2008 ----------------
1,058,313
- -----------------
3,750,000 (7) Millicom International Cellular S. A., Sr. Disc.
Note, 0/13.50%, 6/1/2006 2,653,125
- -----------------
2,400,000 (7) NEXTEL Communications, Inc., Sr. Disc. Note,
0/10.65%, 9/15/2007 1,560,000
- -----------------
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR - CONTINUED
- -----------------
$11,800,000 (7) NEXTEL Communications, Inc., Sr. Disc. Note,
0/9.95%, 2/15/2008 $7,139,000
- -----------------
2,500,000 (7) NEXTLINK Communications, Inc., Sr. Disc. Note,
0/9.45%, 4/15/2008 1,450,000
- -----------------
2,200,000 (7) NEXTLINK Communications, Inc., Sr. Note, 0/9.00%, 2,051,500
3/15/2008
- -----------------
50,000 NEXTLINK Communications, Inc., Sr. Note, 9.625%, 48,875
10/1/2007
- -----------------
1,400,000 Nextel International, Inc., Sr. Disc. Note, 12.125%, 656,432
4/15/2008
- -----------------
2,450,000 Orange PLC, Sr. Note, 8.00%, 8/1/2008 2,462,250
- -----------------
3,750,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 10/15/2008 3,637,500
- -----------------
500,000 Paging Network, Inc., Sr. Sub. Note, 10.125%, 8/1/2007 490,000
- -----------------
1,750,000 Pathnet, Inc., Unit, 12.25%, 4/15/2008 1,330,000
- -----------------
3,000,000 PsiNet, Inc., Sr. Note, 10.00%, 2/15/2005 2,985,000
- -----------------
1,725,000 (2) PsiNet, Inc., Sr. Note, 11.50%, 11/1/2008 1,794,000
- -----------------
175,000 (7) Qwest Communications International, Inc., Sr. Disc.
Note, 0/8.29%, 2/1/2008 133,000
- -----------------
3,525,000 (7) Qwest Communications International, Inc., Sr. Disc.
Note, 0/9.47%, 10/15/2007 2,767,125
- -----------------
1,625,000 Qwest Communications International, Inc., Sr. Note,
10.875%, 4/1/2007 1,876,875
- -----------------
3,500,000 (2) Qwest Communications International, Inc., Sr. Note,
7.50%, 11/1/2008 3,675,000
- -----------------
5,125,000 Rogers Cantel Mobile, Inc., Sr. Sub. Note, 8.80%, 5,195,469
10/1/2007
- -----------------
575,000 (7) Telesystem International Wireless, Inc., Sr. Disc.
Note, 0/10.50%, 11/1/2007 212,750
- -----------------
4,125,000 (7) Telesystem International Wireless, Inc., Sr. Disc.
Note, 0/13.25%, 6/30/2007 1,773,750
- -----------------
1,700,000 (7) Teligent, Inc., Sr. Disc. Note, 0/11.50%, 3/1/2008 841,500
- -----------------
2,700,000 Teligent, Inc., Sr. Note, 11.50%, 12/1/2007 2,497,500
- -----------------
3,975,000 (7) Triton PCS, Inc., Sr. Disc. Note, 0/11.00%, 5/1/2008 1,878,188
- -----------------
1,100,000 US Xchange, L.L.C., Sr. Note, 15.00%, 7/1/2008 1,157,750
- -----------------
1,000,000 USA Mobile Communications, Inc., Sr. Note, 9.50%, 910,000
2/1/2004
- -----------------
1,150,000 (2) Verio, Inc., Sr. Note, 11.25%, 12/1/2008 1,167,250
- -----------------
600,000 (7) Viatel, Inc., Unit, 0/12.50%, 4/15/2008 342,000
- -----------------
PRINCIPAL
AMOUNT OR
- ---------------- VALUE
SHARES
CORPORATE BONDS--CONTINUED
- ----------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR - CONTINUED
- -----------------
$1,825,000 Viatel, Inc., Unit, 11.25%, 4/15/2008 $1,834,125
- -----------------
Total 117,926,196
- -----------------
UTILITIES--0.8%
- -----------------
600,000 CalEnergy Co., Inc., Sr. Note, 9.50%, 9/15/2006 669,000
- -----------------
1,700,000 El Paso Electric Co., 1st Mtg. Note, 9.40%, 5/1/2011 1,930,469
- -----------------
2,200,000 (7) Niagara Mohawk Power Corp., Sr. Disc. Note, Series
H, 0/8.50%, 7/1/2010 1,710,786
- -----------------
Total 4,310,255
- -----------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $508,666,827) 494,097,656
- -----------------
COMMON STOCKS--0.0%
- ----------------------------------------------------------------------------
CABLE TELEVISION--0.0%
- -----------------
27 (1)(2) CS Wireless Systems, Inc. 0
- -----------------
676 (1) Pegasus Communications Corp., Class A 16,942
- ----------------- -----------------
Total 16,942
- -----------------
CONSUMER PRODUCTS--0.0%
- -----------------
25 (1) Hosiery Corp. of America, Inc., Class A 181
- ----------------- -----------------
PRINTING & PUBLISHING--0.0%
- -----------------
500 (1) Affiliated Newspaper Investments, Inc. 75,000
- -----------------
TOTAL COMMON STOCKS (IDENTIFIED COST $11,006) 92,123
- -----------------
PREFERRED STOCKS--3.6%
- ----------------------------------------------------------------------------
BANKING--0.1%
- -----------------
27,000 California Federal Preferred Capital Corp., REIT
Perpetual Pfd. Stock, Series A, $2.28 683,438
- -----------------
BROADCAST RADIO & TV--1.0%
- -----------------
1,250 Benedek Communications Corp., Sr. Exchangeable PIK 1,006,250
- -----------------
11,662 Capstar Broadcasting Partners, Inc., Sr. Pfd., $12.00 1,402,337
- -----------------
1,336 Cumulus Media, Inc., Cumulative Sr. Red. Pfd. Stk.,
Series A, $3.44 1,443,329
- -----------------
2,118 SFX Broadcasting, Inc., Cumulative Exchangeable Pfd.
Stock, Series E 255,219
- -----------------
13,050 Sinclair Broadcast Group, Inc., Cumulative Pfd., $11.63 1,383,300
- -----------------
Total 5,490,435
- -----------------
SHARES VALUE
CABLE TELEVISION--0.3%
- -----------------
287 Echostar Communications Corp., Sr. Red. Pfd. Stk., $12.13 $333,835
- -----------------
1,518 Pegasus Communications Corp., Cumulative PIK Pfd.,
Series A, 12.75% 1,464,842
- -----------------
Total 1,798,677
- -----------------
FOOD SERVICES--0.1%
- -----------------
5,696 Nebco Evans Holding Co., Exchangeable Pfd. Stock 287,686
- -----------------
HEALTHCARE--0.0%
- -----------------
3,710 River Holding Corp., Sr. Exchangeable PIK 164,168
- -----------------
INDUSTRIAL PRODUCTS & EQUIPMENT--0.2%
- -----------------
1,050 Fairfield Manufacturing Co., Inc., Cumulative
Exchangeable Pfd. Stock 1,013,250
- -----------------
PRINTING & PUBLISHING--1.1%
- -----------------
4,500 Primedia, Inc., Cumulative Pfd., Series D, $10.00 465,750
- -----------------
39,650 Primedia, Inc., Exchangeable Pfd. Stock, Series G, $2.16 3,826,225
- -----------------
17,450 Primedia, Inc., Pfd., $9.20 1,718,825
- -----------------
Total 6,010,800
- -----------------
TELECOMMUNICATIONS & CELLULAR--0.2%
- -----------------
466 NEXTEL Communications, Inc., Cumulative PIK Pfd., Series
D, 13.00% 483,337
- -----------------
787 NEXTEL Communications, Inc., Exchangeable Pfd. Stock,
--------------------------------------------------------- 680,880
Series E
- -----------------
1,237 Viatel, Inc., Conv. PIK Pfd., Series A, 10.00% 136,680
- -----------------
Total 1,300,897
- -----------------
UTILITIES--0.6%
- -----------------
3,385 El Paso Electric Co., Cumulative PIK Pfd., Series A, 363,865
11.40%
- -----------------
50,500 Texas Utilities Co., Cumulative PRIDES, $4.63 2,846,938
- -----------------
Total 3,210,803
- -----------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $19,709,035) 19,960,154
- -----------------
WARRANTS--0.0%
- ----------------------------------------------------------------------------
BUSINESS EQUIPMENT & SERVICES--0.0%
- -----------------
750 (1) Electronic Retailing Systems International, Inc., 3,750
Warrants
- -----------------
CABLE TELEVISION--0.0%
- -----------------
600 (1)(5) Australis Holdings Property Ltd., Warrants 0
- -----------------
4,275 (1) Diva Systems Corp., Warrants 68,400
- -----------------
1,000 (1) Pegasus Communications Corp., Warrants 20,500
- -----------------
2,400 (1) UIH Australia/Pacific, Warrants 7,200
- -----------------
- ---------------- --------------------------------------------------------- ----------------
SHARES OR
PRINCIPAL
AMOUNT VALUE
- -----------------
CABLE TELEVISION - CONTINUED
- -----------------
900 (1) Wireless One, Inc., Warrants $0
- -----------------
Total 96,100
- -----------------
CHEMICALS & PLASTICS--0.0%
- -----------------
875 (1) Sterling Chemicals Holdings, Inc., Warrants 13,125
- -----------------
CONSUMER PRODUCTS--0.0%
- -----------------
500 (1) IHF Capital, Inc., Warrants 250
- -----------------
STEEL--0.0%
- -----------------
250 (1) Bar Technologies, Inc., Warrants 13,750
- -----------------
TELECOMMUNICATIONS & CELLULAR--0.0%
- -----------------
1,600 (1) Cellular Communications International, Inc., Warrants 99,200
- -----------------
1,025 (1) MetroNet Communications Corp., Warrants 43,214
- -----------------
1,750 (1) Pathnet, Inc., Warrants 17,500
- -----------------
Total 159,914
- -----------------
TOTAL WARRANTS (IDENTIFIED COST $78,874) 286,889
- ----------------- -----------------
REPURCHASE AGREEMENT (3)--7.6%
- ----------------------------------------------------------------------------
$42,580,000 Westdeutsche Landesbank Girozentrale, 4.90%, dated
12/31/1998, due 1/4/1999 (AT AMORTIZED COST) 42,580,000
- -----------------
TOTAL INVESTMENTS (IDENTIFIED COST $571,045,742)(4) $557,016,822
- -----------------
</TABLE>
(1) Non-income producing security.
=========
(2) Denotes 144A securities which are exempt from registration under the
Securities Act of 1933, as amended and may only be sold to dealers and
other exempt investors. These securities have been determined to be
liquid according to guidelines established by the Board of Trustees.
At December 31, 1998, these securities amounted to $85,991,501 which
represents 15.3% of total net assets.
=========
(3) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.
=========
(4) The cost of investments for federal tax purposes amounts to
$571,046,472. The net unrealized depreciation of investments on a
federal tax basis amounts to
$14,029,650 which is comprised of $11,549,774 appreciation and
$25,579,424 depreciation at December 31, 1998.
=========
(5) Australis Holdings Pty Limited, a wholly owned subsidiary of Australis
Media
Limited, filed for reorganization relief under Chapter 11 of the
Federal Bankruptcy Code on April 8, 1998. Australis was a leading
provider of subscription television services in Australia and had been
negatively impacted by its failed merger with a rival pay TV operator.
The company has effectively ceased operations although litigation is
pending.
(6) AmeriTruck Distribution Corporation and subsidiaries filed for
reorganization relief under Chapter 11 of the Federal Bankruptcy Code on
November 11, 1998.
AmeriTruck operates in specialized segments of the trucking industry of the
United States. It purchased a large refrigerated trucking operation from ConAgra
with bond proceeds in hopes of establishing a major national presence in the
niche, but was unable to generate enough volume to bring capacity utilization in
that segment to a level adequate to service related debt. The company continues
to operate in Chapter 11 while liquidating most of the refrigerated operation
and retaining selected profitable portions of the business.
=========
(7) Denotes a Zero Coupon bond with an effective rate at time of purchase.
Note: The categories of investments are shown as a percentage of net assets
($561,805,910) at December 31, 1998.
The following acronyms are used throughout this portfolio:
GTD --Guaranty
LLC --Limited Liability Corporation
LP --Limited Partnership
PIK --Payment in Kind
PLC --Public Limited Company
PRIDES --Preferred Redeemable Increased Dividend Equity Securities
REIT --Real Estate Investment Trust
(See Notes which are an integral part of the Financial Statements)
HIGH YIELD BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31, 1998
ASSETS:
<S> <C>
Total investments in securities, at value (identified cost
$571,045,742 557,016,822 $
- -----------------------------------------------------------------
and tax cost $571,046,472)
- ------------------------------------------------------------------
Cash 5,429
- ------------------------------------------------------------------
Income receivable 8,630,454
- ------------------------------------------------------------------
Receivable for shares sold 300,000
- ------------------------------------------------------------------
Total assets 565,952,705
- ------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------
Payable for investments purchased $ 4,087,340
- ------------------------------------------------------------------
Income distribution payable 13,018
- ------------------------------------------------------------------
Payable for taxes withheld 1,723
- ------------------------------------------------------------------
Accrued expenses 44,714
- ------------------------------------------------------------------
Total liabilities 4,146,795
- ------------------------------------------------------------------
Net Assets for 60,385,120 shares outstanding 561,805,910 $
- ------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------
Paid in capital 574,392,061 $
- ------------------------------------------------------------------
Net unrealized depreciation of investments (14,028,920 )
- ------------------------------------------------------------------
Accumulated net realized gain on investments 1,412,959
- ------------------------------------------------------------------
Undistributed net investment income 29,810
- ------------------------------------------------------------------
Total Net Assets 561,805,910 $
- ------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER
SHARE:
- ------------------------------------------------------------------
$561,805,910 / 60,385,120 shares outstanding $9.30
- ------------------------------------------------------------------
==================================================================
(See Notes which are an integral part of the Financial Statements) INVESTMENT
INCOME:
Dividends 1,483,719 $
- ---------------------------------------------------------------
Interest (net of foreign taxes withheld of $1,723) 37,475,642
- ---------------------------------------------------------------
Total income 38,959,361
- ---------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------
Custodian fees 14,247
- ---------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 16,063
- ---------------------------------------------------------------
Directors'/Trustees' fees 3,348
- ---------------------------------------------------------------
Auditing fees 23,000
- ---------------------------------------------------------------
Legal fees 744
- ---------------------------------------------------------------
Portfolio accounting fees 90,087
- ---------------------------------------------------------------
Share registration costs 506
- ---------------------------------------------------------------
Printing and postage 968
- ---------------------------------------------------------------
Insurance premiums 3,398
- ---------------------------------------------------------------
Miscellaneous 514
- ---------------------------------------------------------------
Total expenses 152,875
- ---------------------------------------------------------------
Net investment income 38,806,486
- ---------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------
Net realized gain on investments 4,134,201
- ---------------------------------------------------------------
Net change in unrealized depreciation of investments (14,028,92)
- ---------------------------------------------------------------
Net realized and unrealized gain on investments (9,894,719)
- ---------------------------------------------------------------
Change in net assets resulting from operations 28,911,767 $
- ---------------------------------------------------------------
</TABLE>
(1)For the period from February 2, 1998 (date of initial investment) to December
31, 1998.
(See Notes which are an integral part of the Financial Statements)
Period Ended
December 31,
---------------
1998(1)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income 38,806,486 $
Net realized gain on investments ($4,105,121 as
computed for federal tax purposes) 4,134,201
Net change in unrealized depreciation (14,028,920 )
Change in net assets resulting from operations 28,911,767
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (38,806,486 )
Distributions from net realized gains (2,691,432 )
Change in net assets resulting from
distributions to (41,497,918 )
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 736,754,432
Net asset value of shares issued to shareholders in
payment of distributions declared 41,468,846
Cost of shares redeemed (203,831,217 )
Change in net assets resulting from share 574,392,061
transactions
Change in net assets 561,805,910
NET ASSETS:
Beginning of period 0
End of period 561,805,910
$
=====================================================
(1) For the period from February 2, 1998 (date of initial investment) to
December 31, 1998. (See Notes which are an integral part of the Financial
Statements)
PERIOD ENDED
DECEMBER 31,
1998(1)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------
Net investment income 0.84
- -------------------------------------
Net realized and unrealized loss
on investments (0.65)
- -------------------------------------
Total from investment operations 0.19
- -------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------
Distributions from net investment (0.84)
income
- -------------------------------------
Distributions from net realized
gain on investments (0.05)
- -------------------------------------
Total distributions (0.89)
- -------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.30
- -------------------------------------
TOTAL RETURN(2) 1.96%
- -------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------
Expenses 0.04% *
- -------------------------------------
Net investment income 9.60% *
- -------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------
Net assets, end of period (000 $ 561,806
omitted)
- -------------------------------------
Portfolio turnover 55%
- -------------------------------------
* Computed on an annualized basis.
(1) Reflects operations for the period from February 2, 1998 (date of initial
investment) to December 31, 1998. (2) Based on net asset value, which does not
reflect the sales charge or contingent deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
ORGANIZATION
Federated Core Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as a diversified, open-end management
investment company. The Trust was created through the purchase of securities
from other Federated Funds and consists of one portfolio, the High Yield Bond
Portfolio (the "Fund"). The Fund's investment objective is to seek high current
income by investing primarily in a professionally managed, diversified portfolio
of fixed income securities. The Fund's portfolio of investments consists
primarily of lower rated corporate debt obligations. These lower rated debt
obligations may be more susceptible to real or perceived adverse economic
conditions than investment grade bonds. These lower rated debt obligations are
regarded as predominantly speculative with respect to each issuer's continuing
ability to make interest and principal payments (i.e., the obligations are
subject to the risk of default). Currently, the Fund is a only available for
purchase by other Federated Funds and their affiliates.
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 - 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. Investments in other open-ended regulated
investment companies are valued at net asset value.
REPURCHASE AGREEMENTS - It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System, or to have segregated within the custodian bank's
vault, all securities held as collateral under repurchase agreement
transactions. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals the
repurchase price to be paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.
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"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date. Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to market discount
reclasses. The following reclassifications have been made to the financial
statements.
INCREASE (DECREASE)
Accumulated Undistributed
Net Realized Net Investment
GAIN (LOSS) INCOME
$(29,810) $29,810
Net investment income, net realized gains/losses and net assets were not
affected by this reclassification.
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.
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.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
PERIOD
ENDED
DECEMBER
31,
1998(1)
Shares sold 76,779,274
Shares issued to shareholders in payment of 4,340,172
distributions declared
Shares redeemed (20,734,326)
Net change resulting from share 60,385,120
transactions
(1) For the period from February 2, 1998 (date of initial public investment) to
December 31, 1998.
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE - Federated Research Corp. is the Portfolio's
investment adviser ("the Adviser"), subject to direction of the Trustees.
The Adviser provides investment advisory services at no fee.
ADMINISTRATIVE FEE - Federated Services Company, ("Fserv"), a subsidiary of
Federated Investors, Inc. provides administrative personnel and services
(including certain legal and financial reporting services) necessary to
operate the Portfolio. FServ, provides these services at an annual rate
which relates to the average aggregate daily net assets of all funds advised
by affiliates of Federated Investors, Inc. For the year ended December 31,
1998, the Fund did not pay or accrue an Administrative fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES - FServ, through
its subsidiary, Federated Shareholder Services Company ("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.
GENERAL - Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended December 31, 1998, were as follows:
PURCHASES $ 742,567,198
-------------
---------------------------
SALES $ 226,835,604
-------------
---------------------------
YEAR 2000 (UNAUDITED)
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.
Report of Ernst & Young LLP,
Independent Auditors
TO THE TRUSTEES AND STOCKHOLDERS OF
HIGH YIELD BOND PORTFOLIO:
We have audited the accompanying statement of assets and liabilities of High
Yield Bond Portfolio, including the schedule of investments, as of December 31,
1998, and the related statement of operations, the statement of changes in net
assets, and the financial highlights for the period from February 2, 1998
(commencement of operations) to December 31, 1998. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1998 by
correspondence with the custodian and brokers or other appropriate auditing
procedures where replies from brokers were not received. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of High
Yield Bond Portfolio at December 31, 1998, and the results of operations, the
changes in its net assets, and its financial highlights for the period from
February 2, 1998 (commencement of operations) to December 31, 1998, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
February 12, 1999
