HIGH YIELD BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS--93.7%
AEROSPACE & DEFENSE--0.3%
$1,850,000 Anteon Corp., Sr. Sub. Note, 12.00%, 5/15/2009 $1,729,750
500,000 (1) Condor Systems, Inc., Sr. Sub. Note, 377,500
11.875%, 5/1/2009
Total 2,107,250
AUTOMOBILE--3.6%
2,175,000 Accuride Corp., Sr. Sub. Note, Series B, 9.25%, 2,011,875
2/1/2008
1,701,000 Aftermarket Technology Co., Sr. Sub. Note, 1,713,757
12.00%, 8/1/2004
380,000 Aftermarket Technology Co., Sr. Sub. Note,
Series D, 12.00%, 8/1/2004 382,850
3,000,000 American Axle & Manufacturing, Inc., Company
Guarantee, 9.75%, 3/1/2009 3,037,500
4,650,000 Collins & Aikman Products Co., Sr. Sub. Note,
11.50%, 4/15/2006 4,626,750
1,700,000 HDA Parts System, Inc., Sr. Sub. Note, 12.00%, 1,555,500
8/1/2005
2,200,000 (1) J.L. French Automotive Castings, Inc., Sr.
Sub. Note, Series B, 11.50%, 6/1/2009 2,260,500
5,075,000 (1) Lear Corp., Sr. Note, 8.11%, 5/15/2009 4,811,760
600,000 Lear Corp., Sub. Note, 9.50%, 7/15/2006 609,000
2,500,000 Motor Coach Industries International, Inc.,
Company Guarantee, 11.25%, 5/1/2009 2,575,000
1,975,000 Oxford Automotive, Inc., Company Guarantee,
10.125%, 6/15/2007 1,836,750
Total 25,421,242
BANKING--0.8%
6,500,000 GS Escrow Corp., Sr. Note, 7.125%, 8/1/2005 5,899,985
BEVERAGE & TOBACCO--0.4%
750,000 Canandaigua Brands, Inc., Sr. Sub. Note, 8.50%, 716,250
3/1/2009
1,350,000 Dimon, Inc., Sr. Note, 8.875%, 6/1/2006 1,181,250
850,000 National Wine & Spirits, Inc., Company
Guarantee, 10.125%, 1/15/2009 867,000
Total 2,764,500
BROADCAST RADIO & TV--6.1%
4,175,000 (2) ACME Television, LLC, Sr. Disc. Note, 3,778,375
0/10.875%, 9/30/2004
239,300 AMFM, Inc., Deb., 12.625%, 10/31/2006 287,758
3,150,000 (2) Big City Radio, Inc., Company Guarantee,
0/11.25%, 3/15/2005 2,047,500
1,150,000 Capstar Broadcasting Partners, Inc., Sr. Sub.
Note, 9.25%, 7/1/2007 1,190,250
1,850,000 Chancellor Media Corp., Company Guarantee,
10.50%, 1/15/2007 2,025,750
2,000,000 Chancellor Media Corp., Company Guarantee, 2,010,000
8.00%, 11/1/2008
2,375,000 Chancellor Media Corp., Company Guarantee, 2,481,875
9.00%, 10/1/2008
6,550,000 Chancellor Media Corp., Sr. Sub. Note, 8.125%, 6,590,937
12/15/2007
1,675,000 Chancellor Media Corp., Sr. Sub. Note, 8.75%, 1,700,125
6/15/2007
1,250,000 Chancellor Media Corp., Sr. Sub. Note, 9.375%, 1,287,500
10/1/2004
$2,150,000 Cumulus Media, Inc., Sr. Sub. Note, 10.375%, $2,257,500
7/1/2008
6,550,000 (2) Fox/Liberty Networks, LLC, Sr. Disc. Note,
0/9.75%, 8/15/2007 5,305,500
1,300,000 Fox/Liberty Networks, LLC, Sr. Note, 8.875%, 1,335,750
8/15/2007
550,000 Lamar Media Corp., Sr. Sub. Note, 8.625%, 541,750
9/15/2007
1,300,000 Lamar Media Corp., Sr. Sub. Note, 9.625%, 1,348,750
12/1/2006
2,900,000 Orion Network Systems, Sr. Note, 11.25%, 2,189,500
1/15/2007
1,575,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 1,575,000
10.00%, 9/30/2005
5,250,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 4,908,750
8.75%, 12/15/2007
Total 42,862,570
BUILDING & DEVELOPMENT--1.4%
1,375,000 American Builders & Contractors Supply Co.,
Inc., Sr. Sub. Note, 10.625%, 5/15/2007 1,271,875
500,000 Building Materials Corp. of America, Sr. Note,
8.00%, 10/15/2007 453,750
1,350,000 Building Materials Corp. of America, Sr. Note,
8.625%, 12/15/2006 1,289,250
3,225,000 (2) Falcon Building Products, Inc., Sr. Sub.
Disc. Note, 0/10.50%, 6/15/2007 2,434,875
375,000 Falcon Building Products, Inc., Sr. Sub. Note, 365,625
9.50%, 6/15/2007
2,425,000 Formica Corp., Sr. Sub. Note, Series B, 10.875%, 2,231,000
3/1/2009
925,000 Juno Lighting, Inc., Company Guarantee, 11.875%, 864,875
7/1/2009
1,000,000 NCI Building System, Inc., Sr. Sub. Note, Series
B, 9.25%, 5/1/2009 960,000
Total 9,871,250
BUSINESS EQUIPMENT & SERVICES--2.4%
1,800,000 Avis Rent A Car, Inc., Company Guarantee, 1,899,000
11.00%, 5/1/2009
2,750,000 (1) Buhrmann US, Inc., Sr. Sub. Note, 12.25%, 2,873,750
11/1/2009
2,375,000 Dialog Corp., Sr. Sub. Note, 11.00%, 11/15/2007 1,151,875
750,000 (2) Electronic Retailing Systems International,
Inc., Sr. Disc. Note, 0/13.25%, 2/1/2004 168,750
2,225,000 Fisher Scientific International, Inc., Sr. Sub.
Note, 9.00%, 2/1/2008 2,141,562
4,675,000 Fisher Scientific International, Inc., Sr. Sub.
Note, 9.00%, 2/1/2008 4,499,687
5,325,000 U.S. Office Products Co., Sr. Sub. Note, 9.75%, 2,795,625
6/15/2008
951,000 United Stationers Supply Co., Sr. Sub. Note, 1,029,458
12.75%, 5/1/2005
Total
CABLE TELEVISION--11.4%
8,979 (3) Australis Media Ltd., Sr. Disc. Note, 90
5/15/2003
525,000 (2)(3) Australis Media Ltd., Unit, 0/15.75%, 5,250
5/15/2003
900,000 CSC Holdings, Inc., Sr. Note, 7.875%, 12/15/2007 887,895
3,350,000 CSC Holdings, Inc., Sr. Sub. Deb., 9.875%, 3,542,625
2/15/2013
2,300,000 CSC Holdings, Inc., Sr. Sub. Note, 9.25%, 2,363,250
11/1/2005
475,000 CSC Holdings, Inc., Sr. Sub. Note, 9.875%, 502,312
5/15/2006
7,050,000 (2) Charter Communications Holdings Capital
Corp., Sr. Disc. Note, 0/9.92%, 4/1/2011 4,168,312
4,675,000 (2) Diamond Cable Communications PLC, Sr. Disc.
Note, 0/10.75%, 2/15/2007 3,856,875
1,925,000 (2) Diamond Cable Communications PLC, Sr. Disc.
Note, 0/11.75%, 12/15/2005 1,828,750
1,425,000 (2) Diva Systems Corp., Sr. Disc. Note, 548,625
0/12.625%, 3/1/2008
7,525,000 Echostar DBS Corp., Sr. Note, 9.375%, 2/1/2009 7,619,062
$4,250,000 (2) International Cabletel, Inc., Sr. Defd. Cpn.
Note, 0/11.50%, 2/1/2006 $3,910,000
1,000,000 Lenfest Communications, Inc., Sr. Note, 8.375%, 1,025,000
11/1/2005
2,350,000 Lenfest Communications, Inc., Sr. Sub. Note, 2,361,750
8.25%, 2/15/2008
2,475,000 NTL Communications Corp., Sr. Notes, 11.50%, 2,697,750
10/1/2008
5,600,000 (2) NTL Communications Corp., Sr. Notes, 3,962,000
0/12.375%, 10/1/2008
9,800,000 (2) NTL, Inc., Sr. Notes, 0/9.75%, 4/1/2008 6,909,000
2,500,000 Pegasus Communications Corp., Sr. Note, 9.625%, 2,537,500
10/15/2005
2,250,000 Pegasus Communications Corp., Sr. Note, 9.75%, 2,300,625
12/1/2006
825,000 Pegasus Media, Note, 12.50%, 7/1/2005 895,125
1,600,000 (2) RCN Corp., Sr. Disc. Note, 0/11.125%, 1,144,000
10/15/2007
2,750,000 (2) RCN Corp., Sr. Note, 0/11.00%, 7/1/2008 1,808,125
1,400,000 Rogers Cablesystems Ltd., Sr. Sub. Gtd. Note, 1,582,000
11.00%, 12/1/2015
8,475,000 (2) TeleWest PLC, Sr. Disc. Deb., 0/11.00%, 7,966,500
10/1/2007
1,000,000 (1)(2) TeleWest PLC, Sr. Disc. Note, 0/9.25%, 655,000
4/15/2009
750,000 TeleWest PLC, Sr. Note, 11.25%, 11/1/2008 823,125
3,350,000 (2) UIH Australia/Pacific, Sr. Disc. Note, 2,847,500
0/14.00%, 5/15/2006
3,900,000 (2) United International Holdings, Inc., Sr.
Secd. Disc. Note, 0/10.75%, 2/15/2008 2,515,500
10,225,000 (2) United Pan-Europe Communications NV, Sr.
Disc. Note, 0/12.50%, 8/1/2009 5,802,688
4,700,000 (1)(2) United Pan-Europe Communications NV, Sr.
Disc. Note, 0/13.375%, 11/1/2009 2,655,500
Total
CHEMICALS & PLASTICS--4.7%
600,000 Buckeye Cellulose Corp., Sr. Sub. Note, 8.50%, 589,500
12/15/2005
1,600,000 Buckeye Cellulose Corp., Sr. Sub. Note, 9.25%, 1,624,000
9/15/2008
400,000 Foamex L.P., Sr. Sub. Note, 13.50%, 8/15/2005 378,000
150,000 Foamex L.P., Sr. Sub. Note, 9.875%, 6/15/2007 126,750
950,000 General Chemical Industrial Products, Inc., Sr.
Sub. Note, 10.625%, 5/1/2009 945,250
825,000 (1) Georgia Gulf Corp., Sr. Sub. Note, 10.375%, 865,219
11/1/2007
4,425,000 (1) Huntsman Corp., Sr. Sub. Note, 9.50%, 4,225,875
7/1/2007
2,200,000 (1) Huntsman ICI Chemicals LLC, Sr. Sub. Note,
10.125%, 7/1/2009 2,266,000
1,825,000 ISP Holding, Inc., Sr. Note, 9.00%, 10/15/2003 1,802,187
1,108,000 ISP Holding, Inc., Sr. Note, 9.75%, 2/15/2002 1,116,310
6,775,000 Lyondell Chemical Co., Sr. Sub. Note, Series B,
10.875%, 5/1/2009 7,181,500
3,650,000 Polymer Group, Inc., Sr. Sub. Note, 8.75%, 3,522,250
3/1/2008
3,550,000 Polymer Group, Inc., Sr. Sub. Note, 9.00%, 3,461,250
7/1/2007
1,700,000 (2) Sterling Chemicals Holdings, Inc., Sr. Disc.
Note, 0/13.50%, 8/15/2008 501,500
2,575,000 Sterling Chemicals, Inc., Sr. Sub. Note, 11.75%, 1,944,125
8/15/2006
2,500,000 Texas Petrochemicals Corp., Sr. Sub. Note, 2,187,500
11.125%, 7/1/2006
Total 32,737,216
CLOTHING & TEXTILES--0.7%
1,000,000 Collins & Aikman Floorcoverings, Inc., Sr. Sub.
Note, 10.00%, 1/15/2007 985,000
675,000 Dyersburg Corp., Sr. Sub. Note, 9.75%, 9/1/2007 273,375
2,350,000 GFSI, Inc., Sr. Sub. Note, 9.625%, 3/1/2007 1,468,750
$1,625,000 Glenoit Corp., Sr. Sub. Note, 11.00%, 4/15/2007 $414,375
2,075,000 Pillowtex Corp., Sr. Sub. Note, 10.00%, 964,875
11/15/2006
2,150,000 Pillowtex Corp., Sr. Sub. Note, 9.00%, 12/15/2007 935,250
Total 5,041,625
CONGLOMERATES--0.4%
3,350,000 Eagle Picher Industries, Inc., Sr. Sub. Note, 2,948,000
9.375%, 3/1/2008
CONSUMER PRODUCTS--3.9%
3,350,000 Albecca, Inc., Company Guarantee, 10.75%, 2,294,750
8/15/2008
975,000 American Safety Razor Co., Sr. Note, 9.875%, 956,719
8/1/2005
1,850,000 Amscan Holdings, Inc., Sr. Sub. Note, 9.875%, 1,572,500
12/15/2007
1,300,000 Boyds Collection, Ltd., Sr. Sub. Note, Series B, 1,222,000
9.00%, 5/15/2008
3,200,000 Chattem, Inc., Sr. Sub. Note, 8.875%, 4/1/2008 3,008,000
325,000 Diamond Brands Operating Corp., Sr. Sub. Note,
10.125%, 4/15/2008 251,875
925,000 (2) Diamond Brands, Inc., Sr. Disc. Deb., 189,625
0/12.875%, 4/15/2009
950,000 NBTY, Inc., Sr. Sub. Note, 8.625%, 9/15/2007 888,250
2,920,000 Playtex Family Products Corp., Sr. Sub. Note, 2,912,700
9.00%, 12/15/2003
1,000,000 Revlon Consumer Products Corp., Sr. Note, 740,000
8.125%, 2/1/2006
7,750,000 Revlon Consumer Products Corp., Sr. Sub. Note,
8.625%, 2/1/2008 3,991,250
1,100,000 (1) Scotts Co., Sr. Sub. Note, 8.625%, 1/15/2009 1,078,000
1,400,000 (2) Sealy Mattress Co., Company Guarantee,
0/10.875%, 12/15/2007 987,000
425,000 Sealy Mattress Co., Sr. Sub. Note, 9.875%, 422,875
12/15/2007
775,000 Simmons Co., Sr. Sub. Note, 10.25%, 3/15/2009 738,188
1,000,000 (1) Sleepmaster L.L.C., Sr. Sub. Note, 11.00%, 1,006,250
5/15/2009
1,725,000 True Temper Sports, Inc., Sr. Sub. Note, Series
B, 10.875%, 12/1/2008 1,656,000
1,675,000 United Industries Corp., Sr. Sub. Note, Series
B, 9.875%, 4/1/2009 1,541,000
2,100,000 Volume Services America, Inc., Sr. Sub. Note, 2,079,000
11.25%, 3/1/2009
Total 27,535,982
CONTAINER & GLASS PRODUCTS--0.7%
2,850,000 Russell Stanley Holdings, Inc., Sr. Sub. Note, 2,493,750
10.875%, 2/15/2009
2,100,000 Tekni-Plex, Inc., Sr. Sub. Note, 9.25%, 3/1/2008 2,142,000
Total 4,635,750
ECOLOGICAL SERVICES & EQUIPMENT--2.2%
10,500,000 Allied Waste North America, Inc., Company
Guarantee, 7.875%, 1/1/2009 9,292,500
7,000,000 (1) Allied Waste North America, Inc., Sr. Sub.
Note, 10.00%, 8/1/2009 6,265,000
Total 15,557,500
ELECTRONICS--1.5%
975,000 (1) Fairchild Semiconductor Corp., Sr. Sub.
Note, 10.375%, 10/1/2007 999,375
2,000,000 (1) SCG Holding Corp. / Semiconductor
Components Industries, LLC, Sr. Sub. Note, 2,135,000
12.00%, 8/1/2009
6,875,000 Telecommunications Techniques Co., LLC, Sr. Sub.
Note, 9.75%, 5/15/2008 6,290,625
1,300,000 Viasystems, Inc., Sr. Sub. Note, 9.75%, 6/1/2007 721,500
Total 10,146,500
FARMING & AGRICULTURE--0.1%
600,000 (1) Royster-Clark, Inc., 1st Mtg. Note, 10.25%, 549,000
4/1/2009
FOOD & DRUG RETAILERS--0.1%
$825,000 Community Distributors, Inc., Sr. Note, 10.25%, $705,375
10/15/2004
2,125,000 Jitney-Jungle Stores of America, Inc., Sr. Sub.
Note, 10.375%, 9/15/2007 26,563
Total 731,938
FOOD PRODUCTS--1.7%
3,150,000 Agrilink Foods, Inc., Company Guarantee, 3,181,500
11.875%, 11/1/2008
1,325,000 Aurora Foods, Inc., Sr. Sub. Note, 9.875%, 1,348,187
2/15/2007
2,550,000 Eagle Family Foods, Inc., Sr. Sub. Note, 8.75%, 1,950,750
1/15/2008
2,725,000 International Home Foods, Inc., Sr. Sub. Note,
10.375%, 11/1/2006 2,840,812
2,975,000 (1) Triarc Consumer Products Group, LLC, Sr.
Sub. Note, 10.25%, 2/15/2009 2,863,438
Total 12,184,687
FOOD SERVICES--1.2%
1,750,000 Advantica Restaurant Group, Sr. Note, 11.25%, 1,330,000
1/15/2008
1,100,000 AmeriServe Food Distribution, Inc., Sr. Note,
8.875%, 10/15/2006 643,500
5,875,000 AmeriServe Food Distribution, Inc., Sr. Sub.
Note, 10.125%, 7/15/2007 2,026,875
2,000,000 Carrols Corp., Company Guarantee, 9.50%, 1,830,000
12/1/2008
2,700,000 Domino's, Inc., Company Guarantee, 10.375%, 2,612,250
1/15/2009
100,000 (2) Nebco Evans Holding Co., Sr. Disc. Note,
0/12.375%, 7/15/2007 11,500
Total 8,454,125
FOREST PRODUCTS--0.8%
600,000 Container Corp. of America, Sr. Note, 11.25%, 628,500
5/1/2004
1,200,000 Packaging Corp. of America, Sr. Sub. Note, 1,236,000
9.625%, 4/1/2009
1,250,000 S. D. Warren Co., Sr. Sub. Note, 12.00%, 1,314,063
12/15/2004
1,175,000 Stone Container Corp., Sr. Note, 11.50%, 1,220,531
10/1/2004
1,100,000 Stone Container Corp., Sr. Note, 12.58%, 8/1/2016 1,177,000
250,000 Stone Container Corp., Unit, 12.25%, 4/1/2002 251,875
Total 5,827,969
HEALTH CARE--4.0%
3,000,000 CONMED Corp., Sr. Sub. Note, 9.00%, 3/15/2008 2,820,000
1,650,000 Columbia/HCA Healthcare Corp., Sr. Note, 6.91%, 1,501,962
6/15/2005
2,925,000 Dade International, Inc., Sr. Sub. Note, 2,881,125
11.125%, 5/1/2006
1,200,000 Everest Healthcare Services Corp., Sr. Sub.
Note, 9.75%, 5/1/2008 1,122,000
650,000 Genesis Health Ventures, Inc., Sr. Sub. Note, 269,750
9.25%, 10/1/2006
1,850,000 Genesis Health Ventures, Inc., Sr. Sub. Note, 749,250
9.875%, 1/15/2009
1,350,000 Hanger Orthopedic Group, Inc., Sr. Sub. Note,
11.25%, 6/15/2009 1,393,875
650,000 Hudson Respiratory Care, Inc., Sr. Sub. Note, 523,250
9.125%, 4/15/2008
3,550,000 Kinetic Concepts, Inc., Company Guarantee, 2,644,750
9.625%, 11/1/2007
500,000 Tenet Healthcare Corp., Sr. Note, 7.625%, 466,250
6/1/2008
1,800,000 Tenet Healthcare Corp., Sr. Note, 8.00%, 1,741,500
1/15/2005
8,850,000 Tenet Healthcare Corp., Sr. Sub. Note, 8.125%, 8,429,625
12/1/2008
2,400,000 Tenet Healthcare Corp., Sr. Sub. Note, 8.625%, 2,322,000
1/15/2007
700,000 (1) Unilab Corp., Sr. Sub. Note, 12.75%, 731,500
10/1/2009
Total 27,596,837
HOTELS, MOTELS, INNS & CASINOS--1.9%
$975,000 Courtyard by Marriott II LP, Sr. Note, 10.75%, $962,812
2/1/2008
4,400,000 Florida Panthers Holdings, Inc., Company
Guarantee, 9.875%, 4/15/2009 4,290,000
6,600,000 HMH Properties, Inc., Sr. Note, Series B, 5,973,000
7.875%, 8/1/2008
2,175,000 HMH Properties, Inc., Sr. Note, Series C, 8.45%, 2,033,625
12/1/2008
Total 13,259,437
INDUSTRIAL PRODUCTS & EQUIPMENT--3.6%
2,175,000 Amphenol Corp., Sr. Sub. Note, 9.875%, 5/15/2007 2,272,875
1,500,000 (1) Blount, Inc., Sr. Sub. Note, 13.00%, 8/1/2009 1,590,000
1,600,000 Cabot Safety Acquisition Corp., Sr. Sub. Note,
12.50%, 7/15/2005 1,640,000
1,650,000 Continental Global Group, Inc., Sr. Note, 866,250
11.00%, 4/1/2007
2,175,000 Euramax International Plc, Sr. Sub. Note, 2,240,250
11.25%, 10/1/2006
1,375,000 Hexcel Corporation, Sr. Sub. Note, Series B, 1,175,625
9.75%, 1/15/2009
1,600,000 ISG Resources, Inc., Sr. Sub. Note, 10.00%, 1,368,000
4/15/2008
750,000 International Utility Structures, Inc., Sr. Sub.
Note, 10.75%, 2/1/2008 618,750
575,000 Johnstown America Industries, Inc., Sr. Sub.
Note, 11.75%, 8/15/2005 587,937
1,600,000 Johnstown America Industries, Inc., Sr. Sub.
Note, 11.75%, 8/15/2005 1,636,000
3,000,000 MMI Products, Inc., Sr. Sub. Note, 11.25%, 3,105,000
4/15/2007
1,975,000 Neenah Corp., Sr. Sub. Note, 11.125%, 5/1/2007 1,836,750
650,000 Neenah Corp., Sr. Sub. Note, 11.125%, 5/1/2007 604,500
1,200,000 Unifrax Investment Corp., Sr. Note, 10.50%, 1,212,000
11/1/2003
4,900,000 WESCO Distribution, Inc., Sr. Sub. Note, 9.125%, 4,630,500
6/1/2008
Total 25,384,437
LEISURE & ENTERTAINMENT--2.2%
3,392,000 (2) AMF Group, Inc., Sr. Sub. Disc. Note, 1,136,320
0/12.25%, 3/15/2006
8,975,000 (2) Premier Parks, Inc., Sr. Disc. Note, 6,237,625
0/10.00%, 4/1/2008
575,000 Premier Parks, Inc., Sr. Note, 9.25%, 4/1/2006 567,813
2,600,000 Premier Parks, Inc., Sr. Note, 9.75%, 6/15/2007 2,616,250
6,450,000 Regal Cinemas, Inc., Sr. Sub. Note, 9.50%, 5,031,000
6/1/2008
Total
MACHINERY & EQUIPMENT--2.8%
1,147,000 Alvey Systems, Inc., Sr. Sub. Note, 11.375%, 1,198,615
1/31/2003
1,775,000 Clark Material Handling Corp., Sr. Note, 10.75%, 559,125
11/15/2006
1,425,000 Columbus McKinnon Corp., Sr. Sub. Note, 8.50%, 1,232,625
4/1/2008
2,075,000 Fairchild Corp., Sr. Sub. Note, 10.75%, 4/15/2009 1,774,125
1,050,000 National Equipment Services, Inc., Sr. Sub.
Note, 10.00%, 11/30/2004 1,057,875
2,575,000 National Equipment Services, Inc., Sr. Sub.
Note, Series C, 10.00%, 11/30/2004 2,594,313
2,800,000 NationsRent, Inc., Company Guarantee, 10.375%, 2,751,000
12/15/2008
3,600,000 United Rentals, Inc., Company Guarantee, 9.25%, 3,465,000
1/15/2009
3,525,000 United Rentals, Inc., Company Guarantee, Series
B, 9.00%, 4/1/2009 3,331,125
1,525,000 WEC Co., Sr. Note, 12.00%, 7/15/2009 1,425,875
Total 19,389,678
METALS & MINING--0.7%
$3,250,000 (1) AEI Holding Co., Inc., Sr. Note, 10.50%, $2,453,750
12/15/2005
3,300,000 (1) AEI Resources, Inc., Sr. Sub. Note, 11.50%, 2,161,500
12/15/2006
650,000 Murrin Murrin Holdings Pty Ltd., Sr. Secd. Note,
9.375%, 8/31/2007 591,500
Total 5,206,750
OIL & GAS--2.6%
675,000 Comstock Resources, Inc., Sr. Note, 11.25%, 695,250
5/1/2007
4,000,000 Continental Resources, Inc., Sr. Sub. Note, 3,540,000
10.25%, 8/1/2008
475,000 DI Industries, Inc., Sr. Note, 8.875%, 7/1/2007 439,375
900,000 Houston Exploration Co., Sr. Sub. Note, 8.625%, 864,000
1/1/2008
1,500,000 Pogo Producing Co., Sr. Sub. Note, Series B, 1,552,500
10.375%, 2/15/2009
2,225,000 Pride Petroleum Services, Inc., Sr. Note, 2,236,125
9.375%, 5/1/2007
4,450,000 R&B Falcon Corp., Sr. Note, 12.25%, 3/15/2006 4,939,500
1,050,000 RBF Finance Co., Company Guarantee, 11.375%, 1,134,000
3/15/2009
875,000 Triton Energy Corp., Sr. Note, 8.75%, 4/15/2002 881,563
600,000 (2) Universal Compression Holdings, Inc., Sr.
Disc. Note, 0/11.375%, 2/15/2009 342,000
1,950,000 (2) Universal Compression Holdings, Inc., Sr.
Disc. Note, 0/9.875%, 2/15/2008 1,211,438
Total 17,835,751
PRINTING & PUBLISHING--0.7%
1,875,000 Garden State Newspapers, Inc., Sr. Sub. Note, 1,771,875
8.75%, 10/1/2009
1,000,000 Hollinger International Publishing, Inc., Sr.
Sub. Note, 9.25%, 2/1/2006 987,500
900,000 Hollinger International Publishing, Inc., Sr.
Sub. Note, 9.25%, 3/15/2007 895,500
900,000 K-III Communications Corp., Company Guarantee,
Series B, 8.50%, 2/1/2006 882,000
Total 4,536,875
REAL ESTATE--0.2%
1,156,000 Trizec Finance Ltd., Sr. Note, 10.875%, 1,213,800
10/15/2005
RETAILERS--0.1%
975,000 Leslie's Poolmart, Inc., Sr. Note, 10.375%, 833,625
7/15/2004
SERVICES--1.9%
1,300,000 Coinmach Corp., Sr. Note, 11.75%, 11/15/2005 1,345,500
7,700,000 (2) Crown Castle International Corp., Sr. Disc.
Note, 0/10.375%, 5/15/2011 4,851,000
2,950,000 (2) Crown Castle International Corp., Sr. Disc.
Note, 0/11.25%, 8/1/2011 1,858,500
2,750,000 SITEL Corp., Sr. Sub. Note, 9.25%, 3/15/2006 2,602,188
2,250,000 (1) URS Corp., Sr. Sub. Note, Series B, 12.25%, 2,368,125
5/1/2009
Total 13,025,313
STEEL--1.0%
2,900,000 Metals USA, Inc., Sr. Sub. Note, 8.625%, 2,740,500
2/15/2008
1,700,000 National Steel Corp., 1st Mtg. Bond, 9.875%, 1,755,250
3/1/2009
2,000,000 (1) Republic Technologies International, Inc.,
Unit, 13.75%, 7/15/2009 1,330,000
1,350,000 Ryerson Tull, Inc., Sr. Note, 9.125%, 7/15/2006 1,345,059
Total 7,170,809
SURFACE TRANSPORTATION--1.8%
$1,850,000 Allied Holdings, Inc., Sr. Note, 8.625%, $1,646,500
10/1/2007
1,025,000 (3) AmeriTruck Distribution Corp., Sr. Sub.
Note, 12.25%, 11/15/2005 56,375
2,075,000 Gearbulk Holding Ltd., Sr. Note, 11.25%, 2,142,437
12/1/2004
1,050,000 Holt Group, Inc., Company Guarantee, 9.75%, 687,750
1/15/2006
1,400,000 Railworks Corp., Company Guarantee, 11.50%, 1,424,500
4/15/2009
4,375,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 4,025,000
2,275,000 Stena AB, Sr. Note, 8.75%, 6/15/2007 1,876,875
1,000,000 Stena Line AB, Sr. Note, 10.625%, 6/1/2008 605,000
Total 12,464,437
TELECOMMUNICATIONS & CELLULAR--24.8%
3,350,000 American Cellular Corp., Sr. Note, 10.50%, 3,710,125
5/15/2008
1,200,000 Arch Communications, Inc., Sr. Note, Series B, 954,000
12.75%, 7/1/2007
4,000,000 (2) Call-Net Enterprises, Inc., Sr. Disc. Note,
0/10.80%, 5/15/2009 1,940,000
6,250,000 (2) Call-Net Enterprises, Inc., Sr. Disc. Note, 3,109,375
0/8.94%, 8/15/2008
3,025,000 (2) Call-Net Enterprises, Inc., Sr. Disc. Note, 1,686,437
0/9.27%, 8/15/2007
2,550,000 Centennial Cellular Corp., Sr. Sub. Note, 2,747,625
10.75%, 12/15/2008
3,500,000 (2) Dolphin Telecom PLC, Sr. Disc. Note, 1,627,500
0/14.00%, 5/15/2009
1,550,000 (2) E.Spire Communications, Inc., Sr. Disc.
Note, 0/12.75%, 4/1/2006 751,750
575,000 (2) E.Spire Communications, Inc., Sr. Disc.
Note, 0/13.00%, 11/1/2005 313,375
12,200,000 (1) Global Crossing Holdings Ltd., Sr. Note, 12,123,750
9.50%, 11/15/2009
2,800,000 Hermes Europe Railtel B.V., Sr. Note, 10.375%, 2,779,000
1/15/2009
4,275,000 Hermes Europe Railtel B.V., Sr. Note, 11.50%, 4,413,937
8/15/2007
1,325,000 (2) ICG Holdings, Inc., Sr. Disc. Note, 1,027,975
0/12.50%, 5/1/2006
5,325,000 (2) Intermedia Communications, Inc., Sr. Disc.
Note, 0/11.25%, 7/15/2007 3,967,125
3,575,000 (2) Intermedia Communications, Inc., Sr. Disc.
Note, 0/12.50%, 5/15/2006 3,146,000
3,400,000 (2) Intermedia Communications, Inc., Sr. Disc.
Note, Series B, 0/12.25%, 3/1/2009 2,057,000
3,100,000 Intermedia Communications, Inc., Sr. Note, 2,875,250
8.60%, 6/1/2008
575,000 Intermedia Communications, Inc., Sr. Note, 540,500
8.875%, 11/1/2007
10,500,000 (2) Level 3 Communications, Inc., Sr. Disc.
Note, 0/10.50%, 12/1/2008 6,431,250
11,150,000 Level 3 Communications, Inc., Sr. Note, 9.125%, 10,606,437
5/1/2008
4,100,000 McLeod, Inc., Sr. Disc. Note, 0/10.50%, 3/1/2007 3,382,500
1,900,000 McLeod, Inc., Sr. Note, 8.125%, 2/15/2009 1,771,750
350,000 McLeod, Inc., Sr. Note, 8.375%, 3/15/2008 330,750
1,050,000 McLeod, Inc., Sr. Note, 9.25%, 7/15/2007 1,055,250
2,300,000 McLeod, Inc., Sr. Note, 9.50%, 11/1/2008 2,328,750
2,925,000 Metromedia Fiber Network, Inc., Sr. Note, 2,998,125
10.00%, 12/15/2009
5,675,000 (2) Millicom International Cellular S. A., Sr.
Disc. Note, 0/13.50%, 6/1/2006 4,710,250
4,375,000 (2) NEXTEL Communications, Inc., Sr. Disc. Note,
0/10.65%, 9/15/2007 3,325,000
7,775,000 (2) NEXTEL Communications, Inc., Sr. Disc. Note,
0/9.95%, 2/15/2008 5,559,125
8,500,000 (1) NEXTEL Communications, Inc., Sr. Note, 8,393,750
9.375%, 11/15/2009
$5,400,000 (1)(2) NEXTLINK Communications, Inc., Sr. Disc.
Note, 0/12.125%, 12/1/2009 $3,172,500
7,900,000 (2) NEXTLINK Communications, Inc., Sr. Disc.
Note, 0/12.25%, 6/1/2009 4,898,000
4,100,000 (2) NEXTLINK Communications, Inc., Sr. Disc.
Note, 0/9.45%, 4/15/2008 2,603,500
1,950,000 NEXTLINK Communications, Inc., Sr. Note, 10.75%, 2,032,875
6/1/2009
2,200,000 NEXTLINK Communications, Inc., Sr. Note, 9.00%, 2,106,500
3/15/2008
1,400,000 (2) Nextel International, Inc., Sr. Disc. Note,
0/12.125%, 4/15/2008 832,454
1,725,000 (2) Nextel Partners, Inc., Sr. Disc. Note, 1,164,375
0/14.00%, 2/1/2009
2,900,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 913,500
10/15/2008
500,000 Paging Network, Inc., Sr. Sub. Note, 10.125%, 157,500
8/1/2007
1,000,000 Pathnet, Inc., Unit, 12.25%, 4/15/2008 625,000
3,000,000 PsiNet, Inc., Sr. Note, 10.00%, 2/15/2005 2,985,000
3,000,000 PsiNet, Inc., Sr. Note, 11.00%, 8/1/2009 3,090,000
1,725,000 PsiNet, Inc., Sr. Note, 11.50%, 11/1/2008 1,811,250
175,000 (2) Qwest Communications International, Inc.,
Sr. Disc. Note, 0/8.29%, 2/1/2008 134,750
3,525,000 (2) Qwest Communications International, Inc.,
Sr. Disc. Note, 0/9.47%, 10/15/2007 2,855,250
5,125,000 Rogers Cantel Mobile, Inc., Sr. Sub. Note, 5,201,875
8.80%, 10/1/2007
575,000 (2) Telesystem International Wireless, Inc., Sr.
Disc. Note, 0/10.50%, 11/1/2007 319,125
5,525,000 (2) Telesystem International Wireless, Inc., Sr.
Disc. Note, 0/13.25%, 6/30/2007 3,563,625
3,700,000 (2) Teligent AB, Sr. Disc. Note, 0/11.50%, 2,238,500
3/1/2008
3,575,000 Teligent AB, Sr. Note, 11.50%, 12/1/2007 3,521,375
4,350,000 (2) Triton PCS, Inc., Sr. Disc. Note, 0/11.00%, 3,110,250
5/1/2008
3,100,000 (1)(2) US Unwired, Inc., Sr. Disc. Note, 1,813,500
0/13.375%, 11/1/2009
1,750,000 US Xchange, L.L.C., Sr. Note, 15.00%, 7/1/2008 1,684,375
1,000,000 USA Mobile Communications, Inc., Sr. Note, 821,250
9.50%, 2/1/2004
1,700,000 (1) Verio, Inc., Sr. Note, 10.625%, 11/15/2009 1,742,500
1,675,000 Verio, Inc., Sr. Note, 11.25%, 12/1/2008 1,767,125
750,000 Viatel, Inc., Sr. Note, 11.50%, 3/15/2009 765,000
4,100,000 (2) Viatel, Inc., Unit, 0/12.50%, 4/15/2008 2,603,500
1,825,000 Viatel, Inc., Unit, 11.25%, 4/15/2008 1,843,250
8,000,000 (1)(2) Voicestream Wireless Holding Corp., Sr.
Disc. Note, 0/11.875%, 11/15/2009 4,860,000
625,000 (1) Voicestream Wireless Holding Corp., Sr.
Note, 10.375%, 11/15/2009 646,875
2,750,000 Williams Communications Group, Inc., Sr. Note,
10.875%, 10/1/2009 2,894,375
3,750,000 (2) WinStar Communications, Inc., Sr. Sub. Defd.
Deb., 0/11.00%, 3/15/2008 3,843,750
Total
UTILITIES--1.0%
$1,000,000 CMS Energy Corp., Sr. Note, 7.50%, 1/15/2009 $925,450
2,250,000 Caithness Coso Funding Corp., Sr. Secd. Note,
Series B, 9.05%, 12/15/2009 2,250,000
1,700,000 El Paso Electric Co., 1st Mtg. Note, 9.40%, 1,801,031
5/1/2011
2,200,000 (2) Niagara Mohawk Power Corp., Sr. Disc. Note,
Series H, 0/8.50%, 7/1/2010 1,648,064
Total 6,624,545
TOTAL CORPORATE BONDS (IDENTIFIED COST 654,976,197
$710,280,336)
SHARES
COMMON STOCKS--0.0%
CABLE TELEVISION--0.0%
27 (1)(3) CS Wireless Systems, Inc. 4
METALS & MINING--0.0%
57,533 (3) Royal Oak Mines, Inc. 0
PRINTING & PUBLISHING--0.0%
500 (3) Affiliated Newspaper Investments, Inc. 80,000
TOTAL COMMON STOCKS (IDENTIFIED COST $16,023) 80,004
PREFERRED STOCKS--3.1%
BANKING--0.1%
27,000 California Federal Preferred Capital Corp., REIT
Perpetual Pfd. Stock, Series A, $2.28 609,188
BROADCAST RADIO & TV--0.8%
1,250 Benedek Communications Corp., Sr. Exchangeable 1,006,250
PIK
12,360 Capstar Broadcasting Partners, Inc., Sr. Pfd., 1,449,210
$12.00
1,060 Cumulus Media, Inc., Cumulative Sr. Red. Pfd.
Stk., Series A, $3.44 1,192,763
16,550 Sinclair Broadcast Group, Inc., Cumulative Pfd., 1,688,100
$11.63
Total 5,336,323
CABLE TELEVISION--0.3%
1,825 Pegasus Communications Corp., Cumulative PIK
Pfd., Series A, 12.75% 2,016,625
FOOD SERVICES--0.0%
6,362 Nebco Evans Holding Co., Exchangeable Pfd. Stock 34,991
FOREST PRODUCTS--0.1%
5,554 Packaging Corp. of America, Sr. Exchangeable PIK 610,940
HEALTH CARE--0.0%
4,148 River Holding Corp., Sr. Exchangeable PIK 259,972
INDUSTRIAL PRODUCTS & EQUIPMENT--0.1%
1,050 Fairfield Manufacturing Co., Inc., Cumulative
Exchangeable Pfd. Stock 1,044,750
OIL & GAS--0.4%
2,903 R&B Falcon Corp., PIK Pfd., 13.875% 3,077,180
PRINTING & PUBLISHING--1.1%
22,750 Primedia, Inc., Cumulative Pfd., Series D, $10.00 2,246,563
39,650 Primedia, Inc., Exchangeable Pfd. Stock, Series 3,469,375
G, $2.16
17,450 Primedia, Inc., Pfd., $9.20 1,635,938
Total 6
TELECOMMUNICATIONS & CELLULAR--0.2%
527 NEXTEL Communications, Inc., Cumulative PIK
Pfd., Series D, 13.00% $571,795
876 NEXTEL Communications, Inc., Exchangeable Pfd.
Stock, Series E 890,235
Total 1,462,030
TOTAL PREFERRED STOCKS (IDENTIFIED COST 21,803,875
$22,462,506)
WARRANTS--0.0%
BUSINESS EQUIPMENT & SERVICES--0.0%
750 (3) Electronic Retailing Systems International, 750
Inc., Warrants
CABLE TELEVISION--0.0%
600 (1)(3) Australis Holdings Property Ltd., Warrants 0
4,275 (3) Diva Systems Corp., Warrants 34,200
2,400 (3) UIH Australia/Pacific, Warrants 72,000
900 (3) Wireless One, Inc., Warrants 0
Total 106,200
CHEMICALS & PLASTICS--0.0%
875 (3) Sterling Chemicals Holdings, Inc., Warrants 14,000
OIL & GAS--0.0%
1,400 (1)(3) R&B Falcon Corp., Warrants 174,902
STEEL--0.0%
250 (3) Bar Technologies, Inc., Warrants 5,000
TELECOMMUNICATIONS & CELLULAR--0.0%
1,025 (1)(3) MetroNet Communications Corp., Warrants 87,125
1,000 (1)(3) Pathnet, Inc., Warrants 10,125
Total 97,250
TOTAL WARRANTS (IDENTIFIED COST $260,915) 398,102
PRINCIPAL
AMOUNT
- --------------
REPURCHASE AGREEMENT (4) --1.3%
$8,835,000 Bank of America, 3.15%, dated 12/31/1999, due
1/3/2000 (AT AMORTIZED COST) 8,835,000
TOTAL INVESTMENTS (IDENTIFIED COST $686,093,178
$741,854,780)(5)
(1) 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, 1999, these securities amounted to $79,547,072 which
represents 11.4% of total net assets.
(2) Denotes a Zero Coupon bond with effective rate at time of purchase.
(3) Non-income producing security.
(4) 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.
(5) The cost of investments for federal tax purposes amounts to $741,858,126.
The net unrealized depreciation of investments on a federal tax basis
amounts to $(55,764,948) which is comprised of $8,861,709 appreciation
and $64,626,657 depreciation at December 31, 1999.
Note: The categories of investments are shown as a percentage of net
assets ($699,088,150) at December 31, 1999.
The following acronyms are used throughout this portfolio:
BIG --Bond Investors Guaranty
GTD --Guaranty
HDA --Hospital Development Authority
LLC --Limited Liability Corporation
LP --Limited Partnership
PCs --Participation Certificates
PIK --Payment in Kind
PLC --Public Limited Company
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
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ASSETS:
Total Investments in securities, at value (identified
cost $741,854,780 and tax cost of $741,858,126) 686,093,178 $
Cash 3,107
Income receivable 13,140,278
Prepaid expense 21,900
Total assets
LIABILITIES:
Payable for investments purchased $ 159,495
Accrued expenses 10,818
Total liabilities 170,313
Net Assets for 80,183,474 shares outstanding 699,088,150 $
NET ASSETS CONSIST OF:
Paid in capital 757,084,398 $
Net unrealized depreciation of investments (55,761,6)2
Accumulated net realized loss on investments (2,549,66)
Undistributed net investment income 315,019
Total Net Assets 699,088,150 $
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$699,088,150 /80,183,474 shares outstanding $8.72
See Notes which are an integral part of the Financial Statements
HIGH YIELD BOND PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME:
Dividends 2,056,261 $
Interest 64,696,537
Total income
EXPENSES:
Administrative personnel and services fee $497,914
Custodian fees 22,624
Transfer and dividend disbursing agent fees and 14,769
expenses
Directors'/Trustees' fees 9,400
Auditing fees 11,005
Legal fees 16,572
Portfolio accounting fees 113,017
Share registration costs 750
Printing and postage 1,829
Miscellaneous 3,594
Total expenses 691,474
Waivers
Waiver of administrative personnel and (497,914) $
services fee
Net expenses 193,560
Net investment income 66,559,238
REALIZED AND UNREALIZED GAIN (LOSS) ON
Investments:
Net realized loss on investments (2,548,935)
Net change in unrealized depreciation of (41,732,)82
investments
Net realized and unrealized loss on investments (44,281,617)
Change in net assets resulting from operations $
22,277,621
See Notes which are an integral part of the Financial Statements
HIGH YIELD BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Period Ended
December December 31, (1)
31, 1999 1998
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income 66,559,238 38,806,486 $ $
Net realized gain (loss) on investments
($(1,148,442) and $4,105,121, as computed (2,548,935 ) 4,134,201
for federal tax purposes, respectively)
Net change in unrealized depreciation (41,732,682 ) (14,028,920)
Change in net assets resulting from 22,277,621 28,911,767
operations
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (66,396,829 ) (38,806,486)
Distributions from net realized gains (1,290,889 ) (2,691,432)
Change in net assets resulting from
distributions to (67,687,718 ) (41,497,918)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 213,964,955 736,754,432
Net asset value of shares issued to
shareholders in payment of distributions 67,702,178 41,468,846
declared
Cost of shares redeemed (98,974,796 ) (203,831,217)
Change in net assets resulting from 182,692,337 574,392,061
share transactions
Change in net assets 137,282,240 561,805,910
NET ASSETS:
Beginning of period 561,805,910 0
End of period (including undistributed net
investment income of $315,019 and $29,810, 699,088,150 561,805,910 $ $
respectively)
(1) Reflects operations 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
</TABLE>
HIGH YIELD BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR PERIOD
ENDED ENDED
DECEMBER DECEMBER
31, 31,
1999 1998(1)
NET ASSET VALUE, BEGINNING OF $9.30 $10.00
PERIOD INCOME
FROM
INVESTMENT
OPERATIONS
Net investment income 0.91 0.84
Net realized and unrealized (0.56 ) (0.65 )
loss on investments
Total from investment 0.35 0.19
operations
LESS DISTRIBUTIONS
Distributions from net (0.91 ) (0.84 )
investment income
Distributions from net
realized gain on investments (0.02 ) (0.05 )
------- ------
------- ------
Total distributions (0.93 ) (0.89 )
NET ASSET VALUE, END OF PERIOD $8.72 $9.30
TOTAL RETURN (2) 3.83 % 1.96 %
RATIOS TO AVERAGE NET ASSETS
Expenses 0.03 % 0.04 % (4)
Net investment income 10.07 % 9.60 % (4)
Expense waivers (3) 0.08 % 0.08 % (4)
SUPPLEMENTAL DATA
Net assets, end of period $699,088 $561,806
(000 omitted)
Portfolio turnover 49 % 55 %
(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.
(3)This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(4) Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ORGANIZATION
Federated Core Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The Trust consists of two diversified portfolios, the High Yield Bond
Portfolio (the "Fund") and the Federated Mortgage Core Portfolio. The financial
statements included herein are only those for the Fund. The financial statements
of the other portfolio are presented separately. 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 only
available for purchase by other Federated Funds and their affiliates.
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 - 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.
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. The Fund,
along with other affiliated investment companies, may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
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. Non-cash dividends included in dividend income, if any, are recorded at
fair value.
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 differing treatments for
market discount reclasses. The following reclassifications have been made to
the financial statements.
---------------------------------------------------
Increase (Decrease)
---------------------------------------------------
---------------------------------------------------
Accumulated
Net Realized Undistributed Net
INVESTMENT
GAIN/LOSS INCOME
---
---
$(122,800) $122,800
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
provision for federal tax is necessary.
At December 31, 1999, the Fund, for federal tax purposes, had a capital loss
carryforward of $1,148,442, which will reduce taxable income arising from
future net realized gain on investments, if any, to the extent permitted by
the Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 2007.
Additionally, the Fund's net capital losses of $1,397,877 attributable to
security transactions incurred after October 31, 1999, were treated as
arising on January 1, 2000, the first day of the Fund's next taxable year.
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 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 Trustees. 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 a trade date basis.
3. 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:
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
1999 1998(1)
---- -------
Shares sold 23,276,427 76,779,274
Shares issued to
shareholders in 7,494,091 4,340,172
payment of
distributions declared
Shares redeemed (10,972,164) (20,734,326)
------------ ------------
Net change
resulting from share 19,798,354 60,385,120
========== ==========
transactions
I. Reflects operations for the period from February 2, 1998 (date of initial
investment) to December 31, 1998.
4. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER FEE - Federated Investment Management Company, is the
Fund's investment adviser (the "Adviser"), subject to direction of the
Trustees. The Adviser provides investment adviser 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 Fund. FServ, provides these services at an annual rate that
ranges from 0.15% to 0.075% of the average aggregate daily net assets of all
funds advised by affiliates of Federated Investors, Inc. Fserv also provides
certain accounting and recordkeeping services with respect to the Fund's
portfolio of investments for a fee based on Fund assets plus out-of-pocket
expenses. Fserv may voluntarily waive all or a portion of the administrative
fee paid by the Fund. Fserv may terminate this voluntary waiver at any time.
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.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities for the year
ended December 31, 1999, were as follows:
PURCHASES $ 498,637,174
-------------
-------------------------------------------------
SALES $ 307,549,041
-------------
-------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors
To the Board of Trustees of Federated Core Trust and Shareholders of High Yield
Bond Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the High Yield Bond Portfolio, ("the Fund")
(one of the portfolios constituting Federated Core Trust), as of December 31,
1999, and the related statement of operations for the year then ended, the
statement of changes in net assets and the financial highlights for each of the
periods indicated therein. 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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, 1999, 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 audits provide 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 the
High Yield Bond Portfolio of Federated Core Trust at December 31, 1999, the
results of its operations for the year then ended, and the changes in its net
assets and the financial highlights for the periods indicated therein, in
conformity with accounting principles generally accepted in the United States.
[GRAPHIC OMITTED]
Boston, Massachusetts
February 16, 2000
FEDERATED MORTGAGE CORE PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
PRINCIPAL
AMOUNT VALUE
AGENCY DEBENTURE--2.4%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.4%
$6,200,000 5.700%, 1/25/2000 $6,182,578
MORTGAGE BACKED SECURITIES--99.6%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 11.1%
20,167,225 6.500%, 4/1/2029 - 6/1/2029 19,048,447
4,241,580 7.000%, 12/1/2011 - 9/1/2029 4,125,336
2,923,125 7.500%, 12/1/2022 - 11/1/2029 2,900,075
2,104,455 8.000%, 5/1/2006 - 12/1/2029 2,130,599
253,766 8.500%, 9/1/2025 - 1/1/2026 260,809
259,590 9.000%, 5/1/2017 271,272
46,370 9.500%, 4/1/2021 49,065
Total 28,785,603
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 61.9%
35,616,337 6.000%, 7/1/2006 - 6/1/2029 33,355,596
43,751,355 6.500%, 5/1/2006 - 10/1/2029 41,344,178
8,430,000 (3) 6.500%, 1/1/2014 8,185,024
39,563,778 7.000%, 7/1/2010 - 12/1/2029 38,330,458
10,770,000 (3) 7.000%, 1/1/2014 10,655,623
6,580,860 7.500%, 6/1/2011 - 10/1/2029 6,563,862
14,000,000 (3) 7.500%, 2/1/2029 13,846,840
4,511,225 8.000%, 7/1/2023 - 8/1/2027 4,554,443
2,500,000 (3) 8.000%, 1/1/2029 2,520,300
240,841 8.500%, 8/1/2023 - 2/1/2025 247,827
385,535 9.000%, 11/1/2021 - 6/1/2025 402,670
Total 160,006,821
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 26.6%
8,558,917 6.000%, 6/15/2028 - 6/15/2029 7,802,990
13,128,290 6.500%, 10/15/2028 - 5/15/2029 12,344,077
14,158,884 7.000%, 11/15/2027 - 12/15/2028 13,689,942
2,937,000 (3) 7.000%, 2/1/2029 2,836,966
10,116,849 7.500%, 6/20/2007 - 10/15/2029 10,009,091
5,702,941 8.000%, 2/15/2010 - 11/15/2029 5,781,727
6,457,500 (3) 8.000%, 2/1/2029 6,522,075
6,680,024 8.500%, 11/15/2021 - 11/15/2029 6,870,002
217,749 9.000%, 10/15/2016 - 6/15/2025 228,213
301,018 9.500%, 1/15/2019 - 12/15/2025 321,861
1,914,986 12.000%, 4/15/2015 - 6/15/2015 2,165,364
Total 68,572,308
TOTAL MORTGAGE BACKED SECURITIES
(IDENTIFIED COST 263,547,310
$269,971,535)
PRINCIPAL
AMOUNT VALUE
REPURCHASE AGREEMENTS (1)--15.4%
$1,535,000 First Union Capital Markets, 3.250%, dated
12/31/1999, due 1/3/2000 $1,535,000
16,500,000 (2) Goldman Sachs Group, LP, 5.740%, dated
12/8/1999, due 1/19/2000 16,500,000
5,200,000 (2) Goldman Sachs Group, LP, 5.740%, dated
12/8/1999, due 1/24/2000 5,200,000
8,300,000 (2) Goldman Sachs Group, LP, 5.750%, dated
11/30/1999, due 1/24/2000 8,300,000
5,500,000 (2) Morgan Stanley Group, Inc., 5.650%, dated
11/26/1999, due 1/24/2000 5,500,000
2,850,000 (2) Morgan Stanley Group, Inc., 5.650%, dated
12/16/1999, due 1/25/2000 2,850,000
TOTAL REPURCHASE AGREEMENTS 39,885,000
TOTAL INVESTMENTS (IDENTIFIED COST $303,432,310
$309,856,534)(4)
(1) Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days.
(2) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investments in the repurchase agreements are through
participation in joint accounts with other Federated Funds.
(3) This represents a TBA security. All or a portion of these securities
maybe subject to dollar roll transactions.
(4) The cost of investments for federal tax purposes amounts to $309,889,878.
The net unrealized depreciation of investments on a federal tax basis
amounts to $6,457,568 which is comprised of $199,875 appreciation and
$6,657,443 depreciation at December 31, 1999.
Note: The categories of investments are shown as a percentage of net
assets ($258,303,999) at December 31, 1999.
The following acronym is used throughout this portfolio:
LP --Limited Partnership
TBA --To Be Announced
See Notes which are an integral part of the Financial Statements
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FEDERATED MORTGAGE CORE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS:
Investments in repurchase agreements $ 39,885,000
Investments in securities 263,547,310
Total investments in securities, at value (identified
cost $309,856,534 and tax cost of $309,889,878) $ 303,432,310
Cash 4,372
Income receivable 1,401,539
Receivable for investments sold 5,478,250
Total assets 310,316,471
LIABILITIES:
Payable for investments purchased $ 15,440,321
Payable for dollar roll transactions 36,545,159
Accrued expenses 26,992
Total liabilities 52,012,472
Net Assets for 27,041,359 shares outstanding $ 258,303,999
NET ASSETS CONSIST OF:
Paid in capital $ 268,962,995
Net unrealized depreciation of investments (6,424,22)
Accumulated net realized loss on investments (4,277,47)
Undistributed net investment income 42,707
Total Net Assets $ 258,303,999
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS
PER SHARE:
$258,303,999 / 27,041,359 shares outstanding $9.55
See Notes which are an integral part of the Financial Statements
FEDERATED MORTGAGE CORE PORTFOLIO
STATEMENT OF OPERATIONS
PERIOD ENDED DECEMBER 31, 1999 (1)
INVESTMENT INCOME:
Interest (net of dollar roll expense of $1,082,576) 14,518,228 $
EXPENSES:
Administrative personnel and services fee $162,590
Custodian fees 22,152
Transfer and dividend disbursing agent fees and 13,801
expenses
Auditing fees 13,047
Legal fees 6,246
Portfolio accounting fees 57,790
Insurance premiums 1,618
Miscellaneous 736
Total expenses 278,340
Waivers and reimbursements:
Waiver of administrative personnel and services (162,950) $
fee
Reimbursement of other operating expenses (9,368 )
Total Waivers and reimbursements (172,318)
Net expenses 106,022
Net investment income 14,412,206
REALIZED AND UNREALIZED GAIN (LOSS) ON
Investments:
Net realized loss on investments (4,277,4)9
Net change in unrealized depreciation of (6,424,2)4
investments
Net realized and unrealized loss on investments (10,701,)03
Change in net assets resulting from operations 3,710,503 $
I. Reflects operations for the period from February 22, 1999 (date of initial
investment) to December 31, 1999.
See Notes which are an integral part of the Financial Statements
FEDERATED MORTGAGE CORE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
Period
Ended
December
31,
1999 (1)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income 14,412,206 $
Net realized loss on investments
($(4,071,741) as computed for federal tax (4,277,479 )
purposes)
Net change in unrealized depreciation (6,424,224 )
Change in net assets resulting from 3,710,503
operations
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (14,369,499)
SHARE TRANSACTIONS:
Proceeds from sale of shares 372,841,840
Net asset value of shares issued to
shareholders in payment of distributions 14,361,250
declared
Cost of shares redeemed (118,240,09)
Change in net assets resulting from 268,962,995
share transactions
Change in net assets 258,303,999
NET ASSETS:
Beginning of period --
End of period (including undistributed net
investment income of $42,707 at December 258,303,999 $
31, 1999)
</TABLE>
(1) Reflects operations for the period from February 22, 1999 (date of initial
investment) to December 31, 1999.
See Notes which are an integral part of the Financial Statements
FEDERATED MORTGAGE CORE PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD
ENDED
DECEMBER 31,
1999 (1)
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.55
Net realized and unrealized loss on (0.45 )
investments
Total from investment operations 0.10
LESS DISTRIBUTIONS
Distributions from net investment (0.55 )
income
NET ASSET VALUE, END OF PERIOD $9.55
TOTAL RETURN (2) 1.07 %
RATIOS TO AVERAGE NET ASSETS
Expenses 0.05 %(4)
Net investment income 6.66 %(4)
Expense waiver/reimbursement (3) 0.08 %(4)
SUPPLEMENTAL DATA
Net assets, end of period (000 $258,304
omitted)
Portfolio turnover 153 %
(1)Reflects operations for the period from February 22, 1999 (date of initial
investment) to December 31, 1999.
(2)Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(3)This voluntary expense decrease is reflected in both the expense and the net
investment income ratios shown above.
(4) Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
FEDERATED MORTGAGE CORE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
ORGANIZATION
6. Federated Core Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The Trust consists of two diversified portfolios, the Federated
Mortgage Core Portfolio (the "Fund") and the Federated High Yield Bond
Portfolio. The financial statements included herein are only for the Fund. The
financial statements of the other portfolio are presented separately. The Fund
was created through the purchases of securities from other Federated Funds. The
Fund's investment objective is to provide total return by investing in U.S.
Treasury Bills, Notes, Bonds, Discount Notes and Mortgage Backed Securities
issued or guaranteed by the U.S. Government. The Fund is an investment vehicle
used by other Federated Funds that invest some portion of their assets in
mortgage backed securities. Currently, the Fund is only available for purchase
by other Federated Funds and their affiliates.
SIGNIFICANT ACCOUNTING POLICIES
7. 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.
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. The Fund,
along with other affiliated investment companies, may utilize a joint trading
account for the purpose of entering into one or more repurchase agreement.
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.
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
is necessary.
At December 31, 1999, the Fund, for federal tax purposes, had a capital loss
carryforward of $4,071,741, which will reduce taxable income arising from
future net realized gain on investment, if any, to the extent permitted by
the Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Fund in 2007
of any liability for federal tax. Pursuant to the Code, such capital loss
carry forward will expire in 2007.
Additionally, the Fund's net capital losses of $172,394 attributable to
security transactions incurred after October, 31, 1999 were treated as
arising on January 1, 2000, the first day of the Fund's next taxable year.
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. Losses may occur on these transactions due
to changes in market conditions or the failure of counterparties to perform
under the contact.
DOLLAR ROLL TRANSACTIONS
The Fund may engage in dollar roll transactions, with respect to mortgage
securities issued by GNMA, FNMA, and FHLMC, in which the Fund sells the
mortgage securities to financial institutions and simultaneously agrees to
accept substantially similar (same type, coupon and maturity) securities at a
later date at an agreed upon price. Dollar roll transactions involve "to be
announced" securities and are treated as short -term financing arrangements
which will not exceed twelve months. The Fund will use the proceeds generated
from the transactions to invest in short-term investments, which may enhance
the current yield and total return.
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 a trade date basis.
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, 1999 (1)
Shares sold 37,597,363
Shares issued to shareholders in 1,475,968
payment of distribution declared
Shares redeemed (12,031,972)
------------
Net change resulting from share 27,041,359
==========
transactions
(1)Reflects operations for the period from February 22, 1999 (date of
initial investment) to December 31, 1999.
INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER FEE
Federated Investment Management Company is the Fund's investment adviser (the
"Adviser"). Subject to direction of the Trustees. The Adviser provides
investment adviser services at no fee.
The Adviser may voluntarily choose to reimburse certain operating expenses of
the Fund. The Adviser can modify or terminate this voluntary reimbursement at
any time at its sole discretion.
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 Fund. FServ,
provides these services at an annual rate that ranges from 0.15% to 0.075% of
the average aggregate daily net assets of all funds advised by affiliates of
Federated Investors, Inc. FServ also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio of investments
for a fee based on Fund assets plus out-of-pocket expenses. FServ will
voluntarily waive all or a portion of the administrative fee paid by the
Fund. FServ may terminate this voluntary waiver at any time.
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 Trust. 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, 1999, were as follows:
PURCHASES $397,077,687
-------------------------------------------------
SALES $387,320,715
-------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors
To the Board of Trustees of Federated Core Trust and Shareholders of Federated
Mortgage Core Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Federated Mortgage Core Portfolio (the
"Fund") (one of the portfolios constituting Federated Core Trust), as of
December 31, 1999, and the related statement of operations, statement of changes
in net assets, and financial highlights for the period from February 22, 1999 to
December 31, 1999. 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 auditing standards generally accepted
in the United States. 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, 1999, 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 the
Federated Mortgage Core Portfolio of Federated Core Trust at December 31, 1999,
and the results of its operations, the changes in its net assets, and the
financial highlights for the period from February 22, 1999 to December 31, 1999,
in conformity with accounting principles generally accepted in the United
States.
[GRAPHIC OMITTED]
Boston, Massachusetts
February 16, 2000
