<PAGE>
PACHOLDER FUND, INC.
- -------------------------------------------------------------------------------
DEAR STOCKHOLDERS:
In the third quarter of 1998, the high yield bond market experienced its
worst performance since the third quarter of 1990. The Pacholder Fund, Inc.
(the "Fund") was not immune to this pressure and it directly affected our per-
formance in the quarter. For the three months ended September 30, 1998, the
Fund recorded a total return of -10.91% compared to the CS First Boston High
Yield Index(TM) (the "Index") total return of -6.15%. On a year-to-date basis
through September 30, 1998, the Fund recorded a total return of -6.61% com-
pared to the Index total return of -2.10%. Across the rating spectrum, issues
of higher credit quality outperformed in this period. The Fund's higher
weighting versus the Index in the single-B and non-rated segments of the high
yield market, combined with the leverage employed by the Fund, negatively im-
pacted our relative performance.
OVERVIEW OF THIRD QUARTER 1998
Since our last communication with our stockholders in the beginning of Au-
gust, the market has become very illiquid as external pressures from weakening
stock markets around the globe, and economic turmoil in Asia, South America,
and Russia put severe pressure on all credit-related markets in the United
States. The Index closed the quarter with an average price of 90.83 compared
to 99.56 at the beginning of the quarter. The average yield-to-worst on the
Index increased to 11.30% from 9.66%, a 164 basis point rise. In addition, the
tremendous flight to quality experienced by the securities markets during the
last few months caused Treasury rates to fall dramatically. The combination of
declining market values for high yield bonds and falling interest rates for
comparable Treasuries resulted in the spread on the Index widening to 691 ba-
sis points from 417 basis points, a 274 basis point move.
The Federal Reserve's [or Fed's] Open Market Committee lowered the Federal
Funds Rate by 25 basis points twice during the last 30 days to the current
rate of 5.00%. The Federal Funds Rate is the rate at which banks lend money to
each other on an overnight basis and is the most sensitive indicator of the
direction of interest rates. This was the first move by the Fed to lower in-
terest rates since 1996 and had been expected by most market participants. We
believe these Fed actions were driven by concerns of bond market illiquidity
and the fact that the yield premiums for virtually all credit-related products
have increased dramatically in recent months. It doesn't appear that the Fed
lowered the rate to stimulate the domestic economy, since most of the economic
data coming out of Washington, DC still indicate growth, albeit at a slower
rate.
Operating in the current market environment has been challenging. The high
yield market became extremely illiquid with most market participants becoming
very risk averse, particularly the high yield trading desks that provide li-
quidity in the secondary market. It appears that most high yield desks have
been reducing their inventory during the last few months, putting further
pressure on the markets. As a result, there has been no significant two-way
flow of bond trading, which has forced bid/ask spreads to widen significantly,
even for the most well-recognized, larger issues in the market. During the
quarter there were seven consecutive weeks in which high yield bond mutual
funds experienced negative cash flows. In this difficult environment, we have
been moving to upgrade the credit quality of the Fund's portfolio and to re-
duce the exposure to credits that are either reliant on the capital markets
for growth or commodity oriented. We believe that these are the appropriate
strategies in light of the current market conditions.
OUTLOOK
The negative momentum of the third quarter carried over into October. Howev-
er, as of the date of this letter, there have been signs of improved liquidity
in the market. Significant attention is being given to the fact that the
spread over Treasuries attainable in the high yield market is near historic
high levels, even with a fundamentally sound economic backdrop. As a result,
many market strategists have increased the allocation to high yield in their
model portfolios. Buyers have slowly crept back into the market, first in the
more liquid, large issues, and more recently in the smaller, less traded is-
sues. For the first time since August, there has been a resurgence of new is-
sues sold in the market. Nearly all of the issues sold thus far have been by
companies with existing high yield issues that are well known in the high
yield marketplace. Although we are encouraged by the fact that new issue ac-
tivity has resumed, it remains to be seen whether the market will finance
first time issuers.
As we move through the last quarter of 1998, we remain focused on the credit
quality of each of our investments. While the Fund has underperformed in the
midst of this unusual market volatility, we are confident that we are making
good decisions and that the Fund will continue to perform well over the long
run.
<PAGE>
PACHOLDER FUND, INC.
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY
The performance of the Fund as compared to the Index is illustrated in the
following table.
<TABLE>
<CAPTION>
- -------------------------------------------------------------
PERFORMANCE COMPARISON*
(FOR NINE MONTHS ENDED SEPTEMBER 30, 1998)
- -------------------------------------------------------------
SINCE
NINE INCEPTION
MONTHS (ANNUALIZED)**
- -------------------------------------------------------------
<S> <C> <C>
Pacholder Fund, Inc.\***\ (6.61)% 11.22%
- -------------------------------------------------------------
CS First Boston High Yield Index \TM\ (2.10)% 10.70%
- -------------------------------------------------------------
</TABLE>
\*\ The CS First Boston High Yield\TM\ is an unmanaged index that is widely
used as a measurement of high yield market performance. These figures
assume reinvestment of interest, dividends and capital gains distributions
and participation in rights offerings as applicable. Past performance is
no guarantee of future results.
\**\ Inception date -- November 11, 1998.
\***\ Return based on Net Asset Value.
We appreciate your interest in the Fund and look forward to your continued
support.
Sincerely,
[LOGO APPEARS HERE]
Anthony L. Longi, Jr.
President
November 2, 1998
- ---------------------------------------
DIVIDEND REINVESTMENT PLAN
The Dividend Reinvestment Plan offers you an automatic way to reinvest your
dividends and capital gains distributions in shares of the Fund. For an enroll-
ment form and detailed information about the Plan, please contact Star Bank,
N.A. Corporate Trust Services, 425 Walnut Street, ML 5125, P.O. Box 1118, Cin-
cinnati, Ohio 45201-1118, (800) 727-1919 ext. 5788.
This report is sent to the shareholders of Pacholder Fund, Inc. for their in-
formation. It is not a prospectus, offering circular or other representation
intended for use in connection with the purchase or sale of shares of the Fund
or any securities mentioned in this report.
2
<PAGE>
PACHOLDER FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
PAR OF NET
DESCRIPTION (000) VALUE ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE DEBT SECURITIES -- 92.1%
AUTO PARTS & EQUIPMENT -- 4.2%
Cambridge Industries, Inc., Sr Sub Nt, 10.25%,
7/15/07 $1,000 $ 920,000 0.6%
Harvard Industries, Inc., Bank Debt, 13%,
5/8/99/3/ 2,000 2,000,000 1.3
Harvard Industries, Inc., Sr Nt, 11.125%,
8/1/05/4/ 1,500 270,000 0.2
JPS Automotive Products Corp., Sr Nt, 11.125%,
6/15/01 1,350 1,424,250 0.9
Newcor, Inc., Sr Sub Nt,
9.875%, 3/1/08 1,000 885,000 0.6
Safety Components International, Inc., Sr Sub Nt,
10.125%, 7/15/07 1,000 980,000 0.6
------------ ---
6,479,250 4.2
BROADCAST RADIO & TV -- 9.8%
Citadel Broadcasting Company, Sr Sub Nt, 10.25%,
7/1/07 1,500 1,612,500 1.0
Cumulus Media, Inc., Sr Sub Nt, 10.375%, 7/1/08 2,250 2,272,500 1.5
Heritage Media Services, Sr Sub Nt, 11%, 10/1/02 1,000 1,030,000 0.7
LIN Holdings Corp., Sr Disc Nt,
0/10%, 3/1/08/2/ 1,750 1,141,875 0.7
LIN Television Corp., Sr Sub Nt, 8.375%, 3/1/08/2/ 1,000 965,000 0.6
Outdoor Communications, Inc., Sr Sub Nt, 9.25%,
8/15/07 1,000 1,020,000 0.7
Radio One, Inc., Sr Sub Nt,
7/12%, 5/15/04 2,220 2,086,800 1.3
Salem Communications, Sr Sub Nt, 9.5%, 10/1/07 1,000 1,005,000 0.6
Spanish Broadcasting System, Sr Nt, 7.5/12.5%,
6/15/02 500 545,000 0.3
Spanish Broadcasting System, Sr Nt, 11%, 3/15/04 1,625 1,625,000 1.0
Tri-State Outdoor Media, Sr Nt,
11%, 5/15/08/2/ 1,250 1,218,750 0.8
Young Broadcasting Inc., Sr Sub Nt, 8.75%, 6/15/07 1,000 992,500 0.6
------------ ---
15,514,925 9.8
</TABLE>
<TABLE>
<CAPTION>
PERCENT
PAR OF NET
DESCRIPTION (000) VALUE ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
BUILDING -- 1.5%
Associated Materials, Inc., Sr Sub Nt, 9.25%,
3/1/08 $1,000 $ 965,000 0.6%
MMI Products, Inc., Sr Sub Nt,
11.25%, 4/15/07 1,250 1,337,500 0.9
------------ ---
2,302,500 1.5
BUSINESS SERVICES & EQUIPMENT -- 3.7%
Autotote Corp., Sr Nt, 10.875%, 8/1/04 1,000 1,005,000 0.6
CEX Holdings, Inc., Sr Sub Nt,
9.625%, 6/1/08/2/ 1,000 950,000 0.6
Knoll Inc., Sr Sub Nt,
10.875%, 3/15/06 1,525 1,662,250 1.1
US Office Products Co., Sr Sub Nt, 9.75%,
6/15/08/2/ 1,500 1,290,000 0.8
United Stationers Supply Co., Sr Sub Nt, 12.75%,
5/1/05 833 928,795 0.6
------------ ---
5,836,045 3.7
CABLE TELEVISION -- 3.4%
Classic Communications, Inc., Sr Nt w/ warrant,
0/13.25%, 8/01/09/2/ 1,750 971,250 0.6
Fundy Cable Ltd., Sr Nt,
11%, 11/15/05 1,500 1,571,250 1.0
James Cable Partners L.P., Sr Nt, 10.75%, 8/15/04 1,250 1,306,250 0.8
Mediacom LLC/Capital Corp., Sr Nt, 8.5%,
4/15/08/2/ 1,500 1,501,875 1.0
------------ ---
5,350,625 3.4
</TABLE>
- -------------------------------------------------------------------------------
3
<PAGE>
PACHOLDER FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED)
SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
PAR OF NET
DESCRIPTION (000) VALUE ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CHEMICALS/PLASTIC -- 7.4%
AEP Industries, Inc., Sr Sub Nt,
9.875%, 11/15/07 $1,000 $ 965,000 0.6%
Applied Extrusion Technologies Inc., Sr Unsecd Nt,
11.5%, 4/1/02 1,500 1,507,500 1.0
Berry Plastics Corp., Sr Sub Nt,
12.25%, 4/15/04 1,605 1,671,206 1.1
Envirodyne Industries, Inc., Sr Nt,
12%, 6/15/00 517 522,170 0.3
Indesco International, Inc., Sr Sub Nt, 9.75%,
4/15/08 1,500 1,395,000 0.9
Philipp Brothers Chemical, Sr Sub Nt, 9.875%,
6/1/08/2/ 1,000 945,000 0.6
Polymer Group, Inc., Sr Sub Nt,
9%, 7/1/07 1,500 1,432,500 0.9
Portola Packaging Inc., Sr Nt,
10.75%, 10/1/05 1,250 1,253,125 0.8
Printpack Inc., Sr Sub Nt,
10.625%, 8/15/06 1,000 995,000 0.6
Tekni-Plex Inc., Sr Sub Nt,
9.25%, 3/1/08 1,000 962,500 0.6
----------- ---
11,649,001 7.4
CLOTHING & TEXTILE -- 0.9%
Coyne International Enterprises Corp., Sr Sub Nt,
11.25%, 6/1/08/2/ 1,500 1,365,000 0.9
----------- ---
CONGLOMERATE -- 0.3%
Siebe Inc., Sr Sec Nt, 11.22%, 1/29/01/2/ 417 416,862 0.3
----------- ---
CONTAINERS & GLASS PRODUCTS -- 0.6%
Graham Packaging Co./GPC Capital Corp., Sr Sub Nt,
Floating Rate, 1/15/08 1,000 945,000 0.6
----------- ---
COSMETICS/TOILETRIES -- 0.6%
JB Williams Holdings Inc., Sr Nt,
12%, 3/1/04 1,000 990,000 0.6
----------- ---
DRUGS -- 1.0%
NBTY, Inc., Sr Sub Nt, 8.625%, 9/15/07 1,000 970,000 0.6
Twin Laboratories, Inc., Sr Sub,
10.25%, 5/15/06 650 695,500 0.4
----------- ---
1,665,500 1.0
</TABLE>
<TABLE>
<CAPTION>
PERCENT
PAR OF NET
DESCRIPTION (000) VALUE ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
ECOLOGICAL SERVICES & EQUIPMENT -- 1.5%
American Eco Corp., Sr Nt,
9.625%, 5/15/08 $1,000 $ 805,000 0.5%
ICF Kaiser International Inc., Sr Sub Nt
13%, 12/31/03 1,500 712,500 0.5
Norcal Waste Systems, Sr Nt,
13.5%, 11/15/05 750 847,500 0.5
----------- ---
2,365,000 1.5
ELECTRONICS/ELECTRIC -- 5.7%
Airxcel, Inc., Sr Sub Nt, 11%, 11/15/07 1,175 1,110,375 0.7
Communications Instruments, Inc., Sr Sub Nt, 10%,
9/15/04 1,250 1,187,500 0.8
Dynatech, Sr Sub Nt, 9.75%, 5/15/08/2/ 1,000 920,000 0.6
Elgar Holdings, Inc., Sr Nt,
9.875%, 2/1/08 1,750 1,487,500 1.0
Jordan Telecommunication Products, Inc., Sr Nt,
9.875%, 8/1/07 1,750 1,636,250 1.0
Plantronics Inc., Sr Nt, 10%, 1/15/01 800 788,000 0.5
Wesco Distribution, Inc., Sr Sub Nt,
9.125%, 6/1/08 1,250 1,184,375 0.8
Windmere-Durable Holdings, Inc., Sr Sub Nt, 10%,
7/31/08 500 430,000 0.3
----------- ---
8,744,000 5.7
EQUIPMENT LEASING -- 2.0%
Coinmach Corp., Ser D Sr Nt,
11.75%, 11/15/05 1,700 1,785,000 1.1
United Rentals, Inc., Sr Sub Nt,
9.5%, 6/1/08/2/ 1,000 997,500 0.6
United Rentals, Inc., Sr Sub Nt,
8.8%, 8/15/08/2/ 500 467,500 0.3
----------- ---
3,250,000 2.0
FARMING/AGRICULTURE -- 0.6%
GSI Group, Inc., Sr Sub Nt,
10.25%, 11/1/07 1,000 860,000 0.6
----------- ---
FINANCIAL INTERMEDIARIES -- 0.6%
Amresco, Inc., Sr Nt, 8.75%, 7/1/99 1,000 960,000 0.6
----------- ---
FOOD/DRUG RETAILERS -- 0.6%
Mrs. Fields Original Cookies, Inc., Sr Nt, 10.125%,
12/1/04/2/ 1,000 940,000 0.6
----------- ---
</TABLE>
- -------------------------------------------------------------------------------
4
<PAGE>
PACHOLDER FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED)
SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
PAR OF NET
DESCRIPTION (000) VALUE ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
FOOD SERVICE -- 5.7%
Advantica Restaurant Group, Inc., Sr Nt, 11.25%,
1/15/08 $1,087 $ 1,046,712 0.7%
American Restaurant Group, Inc., Sr Nt, 11.5%,
2/15/03 1,250 1,181,250 0.8
American Rice, Inc., Bank Debt,
11%, 5/31/99 818 572,261 0.4
Foodmaker Corp., Sr Nt,
9.75%, 11/1/03 1,000 1,012,500 0.6
Fresh Foods, Inc., Sr Nt,
10.75%, 6/1/06/2/ 1,250 1,125,000 0.7
Host Marriott Travel Plaza, Sr Nt,
9.5%, 5/15/05 1,250 1,275,000 0.8
Richmont Marketing, Sr Sub Nt,
10.125%, 12/15/07/2/ 750 667,500 0.4
Specialty Foods Corp., Sr Nt,
11.125%, 10/1/02 900 756,000 0.5
TPI Enterprises, Sub Deb,
8.25%, 7/15/02 1,440 1,216,800 0.8
------------ ---
8,853,023 5.7
FOREST PRODUCTS -- 1.8%
Ainsworth Lumber Co. Ltd., Sr Nt,
12.5%, 7/15/07 1,500 1,395,000 0.9
Crown Packaging, Ltd., Ser B Sr Nt, 10.75%,
11/1/00 2,000 1,440,000 0.9
------------ ---
2,835,000 1.8
HEALTH CARE -- 2.0%
Fisher Scientific International, Inc., Sr Sub Nt,
9%, 2/1/08 1,250 1,193,750 0.8
Rural/Metro Corp., Sr Nt,
7.875%, 3/15/08 2,250 1,935,000 1.2
------------ ---
3,128,750 2.0
HOME FURNISHINGS -- 0.7%
Decorative Home Accents, Inc., Sr Nt,
13%, 6/30/02/4/ 1,000 150,000 0.1
Home Products Intl, Inc., Sr Sub Nt, 9.625%,
5/15/08 1,000 885,000 0.6
------------ ---
1,035,000 0.7
</TABLE>
<TABLE>
<CAPTION>
PERCENT
PAR OF NET
DESCRIPTION (000) VALUE ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
HOTEL & CASINOS -- 3.3%
Aladdin Gaming, Sr Disc Nt,
0/13.5%, 3/1/10 $2,750 $ 797,500 0.5%
Hollywood Park, Inc., Sr Sub Nt,
9.5%, 8/1/07 1,250 1,200,000 0.8
Majestic Star Casino LLC, Sr Nt,
12.75%, 5/15/03 500 512,500 0.3
Prime Hospitality Corp., Sr Sub Nt,
9.75%, 4/1/07 1,000 950,000 0.6
Showboat Marina Casino, 1st Mtg,
13.5%, 3/15/03 500 562,500 0.4
Station Casinos, Inc., Sr Sub Nt,
9.625%, 6/1/03 1,097 1,080,545 0.7
------------ ---
5,103,045 3.3
INDUSTRIAL EQUIPMENT -- 5.6%
Anchor Lamina, Inc., Sr Sub Nt,
9.875%, 2/1/08 1,000 820,000 0.5
Elgin National Industries, Sr Nt,
11%, 11/1/07 1,000 1,035,000 0.7
International Knife & Saw, Sr Sub Nt, 11.375%,
11/15/06 2,250 2,306,250 1.5
Jackson Products, Inc., Sr Sub Nt,
9.5%, 4/15/05/2/ 1,500 1,432,500 0.9
Specialty Equipment Co., Sr Sub Nt, 11.375%,
12/1/03 2,500 2,662,500 1.7
Spin Cycle, Inc., Sr Disc Nt w/warrants, 0/12.75%,
5/1/05/2/ 750 393,750 0.3
------------ ---
8,650,000 5.6
LEISURE -- 1.9%
Bally Total Fitness Holding Corp., Sr Sub Nt,
9.875%, 10/15/07 1,500 1,395,000 0.9
Guitar Center Mgmt., Sr Nt, 11%, 7/1/06 1,520 1,596,000 1.0
------------ ---
2,991,000 1.9
NON-FERROUS METALS -- 1.7%
Easco Corp., Sr Nt, 10%, 3/15/01 1,000 985,000 0.6
Echo Bay Mines Ltd., Jr Sub Debs,
11%, 4/1/27 1,000 660,000 0.4
Renco Metals Inc., Sr Nt, 11.5%, 7/1/03 1,000 1,030,000 0.7
------------ ---
2,675,000 1.7
</TABLE>
- -------------------------------------------------------------------------------
5
<PAGE>
PACHOLDER FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED)
SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
PAR OF NET
DESCRIPTION (000) VALUE ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
OIL & GAS -- 1.1%
Giant Industries Inc., Sr Sub Nt,
9%, 9/1/07 $1,000 $ 940,000 0.6%
Northern Offshore ASA, Sr Nt,
10%, 5/15/05/2/ 1,000 740,000 0.5
----------- ---
1,680,000 1.1
PUBLISHING -- 4.8%
The Learning Co., Inc., Sr Nt,
5.5%, 11/1/00 1,500 1,380,000 0.9
Liberty Group Publishing, Inc., Sr Sub Nt, 9.375%,
2/1/08 1,500 1,432,500 0.9
Perry-Judd, Sr Sub Nt,
10.625%, 12/15/07 1,500 1,485,000 1.0
RH Donnelley, Inc., Sr Sub Nt,
9.125%, 6/1/08/2/ 1,000 1,005,000 0.6
Sun Media Corp., Sr Sub Nt,
9.5%, 2/15/07 1,750 1,741,250 1.1
Young America Corp., Sr Sub Nt,
11.625%, 2/15/06 1,250 525,000 0.3
----------- ---
7,568,750 4.8
RETAILERS -- 4.7%
Braun's Fashions Corp., Sr Nt,
12%, 1/1/05 2,468 2,307,113 1.5
Central Tractor Farm & Country, Sr Nt, 10.625%,
4/1/07 1,500 1,455,000 0.9
Frank's Nursery & Crafts, Sr Sub Nt, 10.25%, 3/1/08 1,000 975,000 0.6
Herff Jones Inc., Sr Sub Nt,
11%, 8/15/05 1,250 1,293,750 0.8
Travelcenters of America, Sr Sub Nt, 10.25%, 4/1/07 1,500 1,455,000 0.9
----------- ---
7,485,863 4.7
STEEL -- 0.3%
NS Group, Inc., Sr Nt, 13.5%, 7/15/03 368 399,280 0.3
----------- ---
TELECOMMUNICATIONS/CELLULAR
COMMUNICATION -- 11.6%
Allegiance Telecom, Inc., Sr Disc Nt, 0/11.75%,
2/15/08 1,000 440,000 0.3
American Mobile Satellite Corp., Sr Nt, 12.25%,
4/1/08 1,000 575,000 0.4
Arch Communications Group, Inc., Sr Nt, 0/10.875%,
3/15/08 3,250 1,560,000 1.0
</TABLE>
<TABLE>
<CAPTION>
PERCENT
PAR OF NET
DESCRIPTION (000) VALUE ASSETS
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Centennial Cellular, Sr Nt,
8.875%, 11/1/01 $1,000 $ 1,060,000 0.7%
DTI Holdings, Inc., Sr Disc Nt,
0/12.5%, 3/1/08 2,750 935,000 0.6
FaciliCom International, Sr Nt,
10.5%, 1/15/08 1,500 1,305,000 0.8
GCI, Inc., Sr Nt, 9.75%, 8/1/07 1,000 940,000 0.6
IXC Communications, Inc., Sr Sub Nt,
9%, 4/15/08/2/ 1,500 1,481,250 0.9
Metrocall Inc., Sr Sub Nt,
10.375%, 10/1/07 2,000 1,860,000 1.2
MobileMedia Communications, Inc., Bank Debt,
10.25%, 11/1/07 1,477 1,388,075 0.9
MobileMedia Communications, Inc., Sr Sub Nt,
9.375%, 11/1/07/4/ 1,725 310,500 0.2
MobileMedia Communications, Inc., Sr Sub Nt,
0/10.5%, 12/1/03/4/ 1,000 140,000 0.1
Paging Network do Brasil Holding Co. LLC, Sr Nt,
13.5%, 6/6/05 500 352,500 0.2
Pathnet, Inc., Sr Nt, 12.25%, 4/15/08/2/ 1,000 830,000 0.5
Phonetel Technologies, Inc., Sr Nt,
12%, 12/15/06 2,300 1,150,000 0.7
PSINet, Inc., Sr Nt, 10%, 2/15/05 1,000 1,002,500 0.6
Rural Cellular Corp., Sr Sub Nt,
9.625%, 5/15/08/2/ 2,050 1,957,750 1.3
Winstar Equipment Corp., Co Gtd Sr Sec, 12.5%,
3/15/04 1,000 910,000 0.6
------------ ----
18,197,575 11.6
TRANSPORTATION -- 2.5%
Greyhound Lines, Inc., Sr Nt,
11.5%, 4/15/07 1,500 1,590,000 1.0
Holt Group, Sr Nt, 9.75%, 1/15/06/2/ 1,000 780,000 0.5
Moran Transport Co., 1st Mtg,
11.75%, 7/15/04 1,500 1,605,000 1.0
------------ ----
3,975,000 2.5
TOTAL CORPORATE DEBT SECURITIES
(amortized cost $155,440,617) 144,210,994 92.1
------------ ----
</TABLE>
- -------------------------------------------------------------------------------
6
<PAGE>
PACHOLDER FUND, INC.
- -------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONCLUDED)
SEPTEMBER 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/ PERCENT
PAR OF NET
DESCRIPTION (000) VALUE ASSETS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
EQUITY INVESTMENTS -- 3.0%
Aladdin Gaming/Capital Corp.,
Warrants, 3/1/10/1/ 27,500 $ 1,500 0.0%
Allegiance Telecom, Inc., Warrants, 2/3/08/1/ 1,000 1,500 0.0
American Mobile Satellite Corp.,Warrants,/1/ 1,000 4,710 0.0
Arch Communications Group, Inc., Common Stock/1/ 39,795 67,154 0.1
Concentric Network Corp., Pfd,
13.5% PIK, 6/1/10 1,031 907,280 0.6
DTI Holdings, Inc., Warrants, 3/1/08/1/ 13,750 0 0.0
Glasstech, Inc., Warrants, 6/30/04/1/ 1,000 1,250 0.0
Gulf States Steel, Warrants, 4/15/03/1/ 500 5 0.0
ICF Kaiser International,
Warrants, 12/31/98/1/ 7,200 72 0.0
International Wireless Communications, Warrants/1/ 1,000 10 0.0
Iridium LLC and Iridium Capital Corp., Warrants,
7/15/05/1/ 1,000 120,000 0.1
Optel, Inc., Class C Common Stock/1/ 750 3,000 0.0
Orion Network Systems, Warrants, 1/15/07/1/ 1,250 1,438 0.0
Pathnet Inc., Warrants, 4/15/08/1/ 1,000 0 0.0
Paging Network do Brasil Holding Co. LLC,
Warrants/1/ 500 0 0.0
Paxson Communications, Pfd,
12.5% PIK, 10/31/06 2,391 2,271,094 1.5
Rural Cellular Corp., Pfd,
11.375% PIK, 5/15/10 1,028 930,738 0.6
Sabreliner Corp., Warrants, 4/15/03/1/ 500 5,000 0.0
San Jacinto Holdings, Common Stock/1/ 2,246 2,246 0.0
US Leather Corp., Common Stock/1/ 93,269 209,856 0.1
----------- ---
TOTAL EQUITY INVESTMENTS
(cost $4,422,813) 4,451,988 3.0
----------- ---
SECURITIES LENDING PROGRAM ASSETS -- 6.1%
Morgan Stanley Corp. 6.015%, dated 9/30/98,
matures 10/1/98, repurchase price $8,542,119 8,542 8,542,119 5.5
Lehman Brothers Holdings, Inc. MTN Tranche
#TR00291, dated 3/3/98, daily resettable floating
rate due 3/3/00 1,000 999,890 0.6
----------- ---
(at amortized cost) 9,542,009 6.1
----------- ---
</TABLE>
<TABLE>
<CAPTION>
SHARES/ PERCENT
PAR OF NET
DESCRIPTION (000) VALUE ASSETS
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER -- 4.2%
American General Finance Corp., 5.51%, 10/5/98 1,000 $ 995,255 0.6%
American General Finance Corp., 5.51%, 10/9/98 400 398,163 0.3
American General Finance Corp., 5.48%, 10/9/98 250 249,429 0.2
Fountain Square Commercial Funding, 5.53%,
10/5/98 2,039 2,030,856 1.3
General Electric Capital Corp.,
5.51%, 10/5/98 1,000 995,255 0.6
Household Finance Corp.,
5.51%, 10/9/98 400 398,163 0.3
John Deer Capital Corp.,
5.51%, 10/9/98 400 398,163 0.3
Prudential Funding, 5.51%, 10/5/98 1,000 995,255 0.6
------------ -----
TOTAL COMMERCIAL PAPER
(at amortized cost) 6,460,541 4.2
------------ -----
TOTAL INVESTMENTS
(amortized cost $175,866,070) $164,665,532 105.4
PAYABLE UPON RETURN OF SECURITIES LOANED (9,542,009) (6.1)
OTHER ASSETS IN EXCESS OF LIABILITIES 1,098,372 0.7
------------ -----
NET ASSETS $156,221,894 100.0%
LESS: OUTSTANDING PREFERRED STOCK (49,000,000)
------------
NET ASSETS APPLICABLE TO 7,113,166 SHARES OF
COMMON STOCK OUTSTANDING $107,221,894
============
NET ASSET VALUE PER COMMON SHARE
($107,221,894/7,113,166) $15.07
============
- -----------------------------------------------------------------------------
</TABLE>
/1/Non-income producing security.
/2/Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. These securities
amounted to $24,086,500 or 15.4% of net assets.
/3/Board valued security. These securities amounted to $2,416,862 or 1.6% of
net assets.
/4/Security is in default.
- -------------------------------------------------------------------------------
7
<PAGE>
<TABLE>
<CAPTION>
----------------------
<S> <C>
PACHOLDER FUND, INC.
- ----------------------------------------------------------
PACHOLDER FUND, INC.
|
DIRECTORS AND OFFICERS |
|
William J. Morgan John F. Williamson |
Chairman and Treasurer Director |
|
Anthony L. Longi, Jr. George D. Woodard |
President Director |
|
James P. Shanahan, Jr. James E. Gibson |
Director and Secretary Senior Vice President |
|
Daniel A. Grant Mark H. Prenger |
Director Assistant Treasurer |
|
|
INVESTMENT OBJECTIVE |
A closed-end fund seeking a high level of total |
return through current income and capital appreciation |
by investing primarily in high yield, lower rated |
fixed-income securities of domestic companies. |
|
INVESTMENT ADVISOR |
Pacholder & Company, LLC |
|
ADMINISTRATOR |
Kenwood Administrative Management, L.P. |
|
CUSTODIAN |
Star Bank, N.A. |
|
TRANSFER AGENT |
Star Bank, N.A. |
|
LEGAL COUNSEL |
Piper & Marbury L.L.P. |
|
INDEPENDENT AUDITORS |
Deloitte & Touche LLP |
|
EXECUTIVE OFFICES |
Pacholder Fund, Inc. |
8044 Montgomery Road |
Suite 382 |
Cincinnati, Ohio 45236 |
(513) 985-3200 |
|
- -----------------------------------------------------------
| This report is sent to the shareholders of Pacholder |
|Fund, Inc. for their information. It is not a prospectus,| THIRD QUARTER REPORT
|offering circular or other representation intended for | SEPTEMBER 30, 1998
|use in connection with the purchase or sale of shares of |
|the Fund or any securities mentioned in this report. |
- --------------------------------------------------------------------------------
</TABLE>
