-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gbg0ICUh8rXox/tILWhalqrh0x6OL+0iXuTfWwc1Aj+a8A1JrprY09LLD92nsbzX RBtvNzIAsmTd1xpVGcdXMA== 0001034106-01-000001.txt : 20010226 0001034106-01-000001.hdr.sgml : 20010226 ACCESSION NUMBER: 0001034106-01-000001 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010223 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERATED CORE TRUST/PA CENTRAL INDEX KEY: 0001034106 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232934777 STATE OF INCORPORATION: MA FISCAL YEAR END: 1212 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08519 FILM NUMBER: 1552679 BUSINESS ADDRESS: STREET 1: FEDERATED INVESTORS TOWER CITY: PITTSBURGH STATE: PA ZIP: 15222-3779 BUSINESS PHONE: 8003417400 MAIL ADDRESS: STREET 1: FEDERATED INVESTORS TOWER CITY: PITTSBURGH STATE: PA ZIP: 15222-3779 N-30D 1 0001.txt PRINCIPAL - ------------- AMOUNT VALUE OR SHARES HIGH YIELD BOND PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2000 PRINCIPAL ------------- VALUE AMOUNT CORPORATE BONDS--91.3% AEROSPACE & DEFENSE--0.4% $1,850,000 Anteon Corp., Sr. Sub. Note, 12.00%, 5/15/2009 $1,637,250 500,000 Condor Systems, Inc., Sr. Sub. Note, (Series B), 332,500 11.875%, 5/1/2009 Total 1,969,750 AUTOMOTIVE--3.0% 2,175,000 Accuride Corp., Sr. Sub. Note, (Series B), 1,359,375 9.25%, 2/1/2008 1,701,000 Aftermarket Technology Co., Sr. Sub. Note, 1,624,455 12.00%, 8/1/2004 380,000 Aftermarket Technology Co., Sr. Sub. Note, (Series D), 12.00%, 8/1/2004 362,900 4,000,000 American Axle & Manufacturing, Inc., Company Guarantee, 9.75%, 3/1/2009 3,400,000 2,200,000 J.L. French Automotive Castings, Inc., Sr. Sub. Note, (Series B), 11.50%, 6/1/2009 1,221,000 5,575,000 Lear Corp., Sr. Note, 8.11%, 5/15/2009 5,083,564 600,000 Lear Corp., Sub. Note, 9.50%, 7/15/2006 582,000 2,500,000 Motor Coach Industries International, Inc., Company Guarantee, 11.25%, 5/1/2009 762,500 1,975,000 Oxford Automotive, Inc., Company Guarantee, 10.125%, 6/15/2007 1,352,875 Total 15,748,669 BANKING--1.6% 8,925,000 GS Escrow Corp., Sr. Note, 7.125%, 8/1/2005 8,436,356 BROADCAST RADIO & TV--3.2% 2,525,000 ACME Television, LLC, Sr. Disc. Note, 0/10.875%, 2,196,750 9/30/2004 239,300 AMFM, Inc., Deb., 12.625%, 10/31/2006 278,784 3,150,000 (1) Big City Radio, Inc., Company Guarantee, 0/11.25%, 3/15/2005 1,118,250 6,550,000 (1) Fox/Liberty Networks, LLC, Sr. Disc. Note, 0/9.75%, 8/15/2007 5,583,875 3,150,000 Orion Network Systems, Sr. Note, 11.25%, 1,118,250 1/15/2007 1,175,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 1,139,750 10.00%, 9/30/2005 5,250,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 4,672,500 8.75%, 12/15/2007 1,800,000 XM Satellite Radio, Inc., Sr. Note, 14.00%, 963,000 3/15/2010 Total BUILDING & DEVELOPMENT--0.7% 1,375,000 American Builders & Contractors Supply Co., Inc., Sr. Sub. Note, 10.625%, 5/15/2007 1,120,625 2,175,000 Formica Corp., Sr. Sub. Note, (Series B), 815,625 10.875%, 3/1/2009 925,000 Juno Lighting, Inc., Company Guarantee, 11.875%, 707,625 7/1/2009 1,000,000 NCI Building System, Inc., Sr. Sub. Note, Series B, 9.25%, 5/1/2009 915,000 Total 3,558,875 BUSINESS EQUIPMENT & SERVICES--1.9% 2,750,000 Buhrmann US, Inc., Company Guarantee, 12.25%, 2,763,750 11/1/2009 50,242 Electronic Retailing Systems International, Inc., Sr. Disc. Note, 10.00%, 8/1/2001 19,092 50,008 Electronic Retailing Systems International, Inc., Sr. Disc. Note, 8.00%, 8/1/2004 3,500 2,725,000 Fisher Scientific International, Inc., Sr. Sub. Note, 9.00%, 2/1/2008 2,507,000 4,675,000 Fisher Scientific International, Inc., Sr. Sub. Note, 9.00%, 2/1/2008 4,301,000 5,325,000 (2)(4) U.S. Office Products Co., Sr. Sub. Note, 399,375 9.75%, 6/15/2008 Total 9,993,717 CABLE TELEVISION--11.3% 8,979 (1)(4) Australis Media Ltd., Sr. Disc. Note, 135 0/15.75%, 5/15/2003 525,000 (1)(4) Australis Media Ltd., Unit, 0/15.75%, 6,562 5/15/2003 900,000 CSC Holdings, Inc., Sr. Note, 7.875%, 12/15/2007 909,837 3,350,000 CSC Holdings, Inc., Sr. Sub. Deb., 9.875%, 3,433,750 2/15/2013 2,300,000 CSC Holdings, Inc., Sr. Sub. Note, 9.25%, 2,340,250 11/1/2005 475,000 CSC Holdings, Inc., Sr. Sub. Note, 9.875%, 486,875 5/15/2006 15,200,000 (1) Charter Communications Holdings Capital Corp., Sr. Disc. Note, 0/9.92%, 4/1/2011 9,006,000 4,675,000 (1) Diamond Cable Communications PLC, Sr. Disc. Note, 0/10.75%, 2/15/2007 3,155,625 1,925,000 (1) Diamond Cable Communications PLC, Sr. Disc. Note, 0/11.75%, 12/15/2005 1,703,625 2,300,000 (2)(3) Echostar Broadband Corp., Sr. Note, 2,277,000 10.375%, 10/1/2007 7,075,000 Echostar DBS Corp., Sr. Note, 9.375%, 2/1/2009 6,933,500 4,250,000 (1) International Cabletel, Inc., Sr. Defd. Cpn. Note, 0/11.50%, 2/1/2006 3,718,750 2,350,000 Lenfest Communications, Inc., Sr. Sub. Note, 2,449,193 8.25%, 2/15/2008 3,850,000 (1) NTL, Inc., Sr. Defd. Cpn. Note, 0/12.375%, 2,175,250 10/1/2008 5,000,000 (1) NTL, Inc., Sr. Defd. Cpn. Note, 0/9.75%, 2,775,000 4/1/2008 2,475,000 NTL, Inc., Sr. Note, 11.50%, 10/1/2008 2,215,125 2,150,000 Pegasus Communications Corp., Sr. Note, 9.625%, 2,010,250 10/15/2005 2,250,000 Pegasus Communications Corp., Sr. Note, 9.75%, 2,103,750 12/1/2006 825,000 Pegasus Media, Note, 12.50%, 7/1/2005 849,750 1,600,000 (1) RCN Corp., Sr. Disc. Note, 0/11.125%, 584,000 10/15/2007 2,750,000 (1) RCN Corp., Sr. Disc. Note, 0/11.00%, 7/1/2008 866,250 1,400,000 Rogers Cablesystems Ltd., Sr. Sub. Gtd. Note, 1,554,000 11.00%, 12/1/2015 1,000,000 (1) TeleWest PLC, Sr. Disc. Note, 0/9.25%, 475,000 4/15/2009 750,000 TeleWest PLC, Sr. Note, 11.25%, 11/1/2008 667,500 2,700,000 (1) UIH Australia/Pacific, Sr. Disc. Note, 1,768,500 0/14.00%, 5/15/2006 3,900,000 (1) United International Holdings, Inc., Sr. Secd. Disc. Note, 0/10.75%, 2/15/2008 1,696,500 8,900,000 (1) United Pan-Europe Communications NV, Sr. Disc. Note, Series B, 0/12.50%, 8/1/2009 2,803,500 4,700,000 (1) United Pan-Europe Communications NV, Sr. Disc. Note, Series B, 0/13.375%, 11/1/2009 1,457,000 Total CHEMICALS & PLASTICS--4.0% 1,600,000 Buckeye Cellulose Corp., Sr. Sub. Note, 9.25%, 1,592,000 9/15/2008 1,850,000 Foamex LP, Sr. Sub. Note, 13.50%, 8/15/2005 1,100,750 100,000 Foamex LP, Sr. Sub. Note, 9.875%, 6/15/2007 55,500 1,200,000 General Chemical Industrial Products, Inc., Sr. Sub. Note, 10.625%, 5/1/2009 402,000 2,000,000 (2)(3) Huntsman Corp., Sr. Sub. Note, 9.50%, 1,210,000 7/1/2007 2,200,000 Huntsman ICI Chemicals LLC, Sr. Sub. Note, 2,123,000 10.125%, 7/1/2009 575,000 ISP Holding, Inc., Sr. Note, 9.00%, 10/15/2003 462,875 1,108,000 ISP Holding, Inc., Sr. Note, 9.75%, 2/15/2002 936,260 6,775,000 Lyondell Chemical Co., Sr. Sub. Note, (Series B), 10.875%, 5/1/2009 6,436,250 3,650,000 Polymer Group, Inc., Sr. Sub. Note, 8.75%, 2,354,250 3/1/2008 2,750,000 Polymer Group, Inc., Sr. Sub. Note, 9.00%, 1,828,750 7/1/2007 1,700,000 (1) Sterling Chemicals Holdings, Inc., Sr. Disc. Note, 0/13.50%, 8/15/2008 263,500 1,500,000 Sterling Chemicals, Inc., Sr. Sub. Note, 11.75%, 742,500 8/15/2006 2,500,000 Texas Petrochemicals Corp., Sr. Sub. Note, 1,887,500 11.125%, 7/1/2006 Total 21,395,135 CLOTHING & TEXTILES--0.7% 1,000,000 Collins & Aikman Floorcoverings, Inc., Sr. Sub. Note, 10.00%, 1/15/2007 985,000 675,000 (2)(4) Dyersburg Corp., Sr. Sub. Note, 9.75%, 27,000 9/1/2007 2,900,000 GFSI, Inc., Sr. Sub. Note, 9.625%, 3/1/2007 2,189,500 1,625,000 (2)(4) Glenoit Corp., Sr. Sub. Note, 11.00%, 203,125 4/15/2007 1,875,000 (4) Pillowtex Corp., Sr. Sub. Note, 10.00%, 65,625 11/15/2006 2,150,000 (4) Pillowtex Corp., Sr. Sub. Note, 9.00%, 75,250 12/15/2007 Total 3,545,500 CONGLOMERATES--0.4% 3,350,000 Eagle Picher Industries, Inc., Sr. Sub. Note, 2,328,250 9.375%, 3/1/2008 CONSUMER PRODUCTS--4.4% 3,350,000 Albecca, Inc., Company Guarantee, 10.75%, 2,939,625 8/15/2008 975,000 American Safety Razor Co., Sr. Note, 9.875%, 943,312 8/1/2005 1,850,000 Amscan Holdings, Inc., Sr. Sub. Note, 9.875%, 1,489,250 12/15/2007 1,300,000 Boyds Collection, Ltd., Sr. Sub. Note, (Series B), 9.00%, 5/15/2008 ------------- 1,244,750 3,200,000 Chattem, Inc., Sr. Sub. Note, 8.875%, 4/1/2008 2,256,000 325,000 Diamond Brands Operating Corp., Sr. Sub. Note, 10.125%, 4/15/2008 66,625 925,000 (1) Diamond Brands, Inc., Sr. Disc. Deb., 105,219 0/12.875%, 4/15/2009 2,000,000 Jostens, Inc., Sr. Sub. Note, 12.75%, 5/1/2010 1,830,000 950,000 NBTY, Inc., Sr. Sub. Note, 8.625%, 9/15/2007 793,250 7,450,000 Revlon Consumer Products Corp., Sr. Sub. Note, 8.625%, 2/1/2008 3,985,750 1,900,000 (1) Sealy Mattress Co., Company Guarantee, 0/10.875%, 12/15/2007 1,434,500 925,000 Sealy Mattress Co., Sr. Sub. Note, 9.875%, 892,625 12/15/2007 1,250,000 Sleepmaster LLC, Company Guarantee, (Series B), 11.00%, 5/15/2009 981,250 1,725,000 True Temper Sports, Inc., Sr. Sub. Note, (Series B), 10.875%, 12/1/2008 1,673,250 1,875,000 United Industries Corp., Sr. Sub. Note, (Series B), 9.875%, 4/1/2009 965,625 2,100,000 Volume Services America, Inc., Sr. Sub. Note, 1,837,500 11.25%, 3/1/2009 Total CONTAINER & GLASS PRODUCTS--1.0% 1,000,000 Huntsman Packaging Corp., Company Guarantee, 13.00%, 6/1/2010 585,000 4,000,000 Owens-Illinois, Inc., Sr. Note, 7.35%, 5/15/2008 2,140,000 2,850,000 Russell Stanley Holdings, Inc., Sr. Sub. Note, 726,750 10.875%, 2/15/2009 1,950,000 Tekni-Plex, Inc., Company Guarantee, 12.75%, 6/15/2010 1,569,750 150,000 (2)(3) U.S. Can Co., Sr. Sub. Note, 12.375%, 149,250 10/1/2010 Total 5,170,750 ECOLOGICAL SERVICES & EQUIPMENT--3.1% 10,500,000 Allied Waste North America, Inc., Company Guarantee, 7.875%, 1/1/2009 9,870,000 7,125,000 Allied Waste North America, Inc., Sr. Sub. Note, 10.00%, 8/1/2009 6,733,125 Total 16,603,125 ELECTRONICS--2.2% 2,100,000 (2)(3) Exodus Communications, Inc., Sr. Note, 1,879,500 11.625%, 7/15/2010 1,600,000 Fairchild Semiconductor Corp., Sr. Sub. Note, 10.375%, 10/1/2007 1,496,000 1,100,000 (2)(3) Flextronics International Ltd., Sr. Sub. Note, 9.875%, 7/1/2010 1,083,500 1,300,000 SCG Holding Corp. / Semiconductor Components Industries, LLC, Sr. Sub. Note, 12.00%, 8/1/2009 1,114,750 6,875,000 Telecommunications Techniques Co., LLC, Sr. Sub. Note, 9.75%, 5/15/2008 6,084,375 Total 11,658,125 FARMING & AGRICULTURE--0.1% 1,175,000 Royster-Clark, Inc., 1st Mtg. Note, 10.25%, 828,375 4/1/2009 FOOD & DRUG RETAILERS--0.1% 825,000 Community Distributors, Inc., Sr. Note, 10.25%, 647,625 10/15/2004 2,125,000 (4) Jitney-Jungle Stores of America, Inc., Sr. Sub. Note, 10.375%, 9/15/2007 26,562 Total FOOD PRODUCTS--1.0% 3,400,000 Agrilink Foods, Inc., Company Guarantee, 2,261,000 11.875%, 11/1/2008 2,100,000 (1) Del Monte Foods Co., Sr. Disc. Note, 1,564,500 0/12.50%, 12/15/2007 2,550,000 Eagle Family Foods, Inc., Sr. Sub. Note, 8.75%, 1,287,750 1/15/2008 Total 5,113,250 FOOD SERVICES--0.9% 1,750,000 Advantica Restaurant Group, Sr. Note, 11.25%, 831,250 1/15/2008 1,500,000 CKE Restaurants, Inc., Sr. Sub. Note, 9.125%, 870,000 5/1/2009 2,100,000 Carrols Corp., Company Guarantee, 9.50%, 1,375,500 12/1/2008 2,150,000 Domino's, Inc., Company Guarantee, 10.375%, 1,816,750 1/15/2009 100,000 (1)(4) Nebco Evans Holding Co., Sr. Disc. Note, 0/12.375%, 7/15/2007 0 Total 4,893,500 FOREST PRODUCTS--0.6% 600,000 Container Corp. of America, Sr. Note, 11.25%, 609,000 5/1/2004 1,175,000 Stone Container Corp., Sr. Note, 11.50%, 1,219,062 10/1/2004 1,100,000 Stone Container Corp., Sr. Note, 12.58%, 8/1/2016 1,127,500 101,000 Stone Container Corp., Unit, 12.25%, 4/1/2002 102,515 Total HEALTH CARE--6.7% 3,000,000 CONMED Corp., Sr. Sub. Note, 9.00%, 3/15/2008 2,415,000 1,650,000 Columbia/HCA Healthcare Corp., Sr. Note, 6.91%, 1,611,968 6/15/2005 1,400,000 Everest Healthcare Services Corp., Sr. Sub. Note, 9.75%, 5/1/2008 1,421,000 650,000 (4) Genesis Health Ventures, Inc., Sr. Sub. 61,750 Note, 9.25%, 10/1/2006 1,850,000 (4) Genesis Health Ventures, Inc., Sr. Sub. 173,438 Note, 9.875%, 1/15/2009 4,000,000 HCA - The Healthcare Corp., Note, 8.75%, 9/1/2010 4,230,000 1,400,000 Hanger Orthopedic Group, Inc., Sr. Sub. Note, 11.25%, 6/15/2009 427,000 1,975,000 Hudson Respiratory Care, Inc., Sr. Sub. Note, 1,194,875 9.125%, 4/15/2008 4,450,000 Kinetic Concepts, Inc., Company Guarantee, 3,671,250 9.625%, 11/1/2007 500,000 Tenet Healthcare Corp., Sr. Note, 7.625%, 495,000 6/1/2008 1,800,000 Tenet Healthcare Corp., Sr. Note, 8.00%, 1,831,500 1/15/2005 6,250,000 Tenet Healthcare Corp., Sr. Note, (Series B), 6,656,250 9.25%, 9/1/2010 8,850,000 Tenet Healthcare Corp., Sr. Sub. Note, 8.125%, 8,982,750 12/1/2008 2,400,000 Tenet Healthcare Corp., Sr. Sub. Note, 8.625%, 2,478,000 1/15/2007 Total 35,649,781 HOTELS, MOTELS, INNS & CASINOS--2.7% 975,000 Courtyard by Marriott II LP, Sr. Note, 10.75%, 984,750 2/1/2008 4,400,000 Florida Panthers Holdings, Inc., Company Guarantee, 9.875%, 4/15/2009 4,070,000 6,600,000 HMH Properties, Inc., Sr. Note, (Series B), 6,303,000 7.875%, 8/1/2008 3,175,000 HMH Properties, Inc., Sr. Note, (Series C), 3,111,500 8.45%, 12/1/2008 Total 14,469,250 INDUSTRIAL PRODUCTS & EQUIPMENT--3.6% 1,305,000 Amphenol Corp., Sr. Sub. Note, 9.875%, 5/15/2007 1,331,100 1,500,000 Blount, Inc., Company Guarantee, 13.00%, 8/1/2009 1,170,000 1,600,000 Cabot Safety Acquisition Corp., Sr. Sub. Note, 12.50%, 7/15/2005 1,594,000 1,650,000 Continental Global Group, Inc., Sr. Note, 552,750 11.00%, 4/1/2007 2,775,000 Euramax International PLC, Sr. Sub. Note, 1,789,875 11.25%, 10/1/2006 1,375,000 Hexcel Corporation, Sr. Sub. Note, (Series B), 1,216,875 9.75%, 1/15/2009 1,100,000 ISG Resources, Inc., Sr. Sub. Note, 10.00%, 335,500 4/15/2008 750,000 International Utility Structures, Inc., Sr. Sub. Note, 10.75%, 2/1/2008 453,750 3,000,000 MMI Products, Inc., Sr. Sub. Note, 11.25%, 2,940,000 4/15/2007 650,000 Neenah Corp., Company Guarantee, 11.125%, 481,000 5/1/2007 1,975,000 Neenah Corp., Sr. Sub. Note, 11.125%, 5/1/2007 1,461,500 2,250,000 Unifrax Investment Corp., Sr. Note, 10.50%, 1,946,250 11/1/2003 4,750,000 WESCO Distribution, Inc., Sr. Sub. Note, 9.125%, 4,203,750 6/1/2008 Total 19,476,350 LEISURE & ENTERTAINMENT--1.9% 3,392,000 (1)(2)(4) AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 ------------- 491,840 8,975,000 (1) 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 550,563 2,600,000 Premier Parks, Inc., Sr. Note, 9.75%, 6/15/2007 2,522,000 5,450,000 (4) Regal Cinemas, Inc., Sr. Sub. Note, 9.50%, 408,750 6/1/2008 Total 10,210,778 MACHINERY & EQUIPMENT--2.0% 1,775,000 (2)(4) Clark Material Handling Corp., Sr. Note, 10.75%, 11/15/2006 ------------- 44,375 1,825,000 Columbus McKinnon Corp., Sr. Sub. Note, 8.50%, 1,450,875 4/1/2008 2,075,000 Fairchild Corp., Sr. Sub. Note, 10.75%, 4/15/2009 1,545,875 2,200,000 NationsRent, Inc., Company Guarantee, 10.375%, 847,000 12/15/2008 1,000,000 Simonds Industries, Inc., Sr. Sub. Note, 10.25%, 685,000 7/1/2008 3,600,000 United Rentals, Inc., Company Guarantee, 9.25%, 2,754,000 1/15/2009 3,525,000 United Rentals, Inc., Company Guarantee, (Series B), 9.00%, 4/1/2009 2,661,375 1,525,000 WEC Co., Sr. Note, 12.00%, 7/15/2009 449,875 Total 10,438,375 METALS & MINING--0.2% 3,250,000 (2)(4) AEI Holding Co., Inc., Sr. Note, 10.50%, 243,750 12/15/2005 3,300,000 (2)(4) AEI Resources, Inc., Sr. Sub. Note, 82,500 11.50%, 12/15/2006 650,000 Murrin Murrin Holdings Property Ltd., Sr. Secd. Note, 9.375%, 8/31/2007 503,750 Total 830,000 OIL & GAS--3.1% 675,000 Comstock Resources, Inc., Sr. Note, 11.25%, 707,063 5/1/2007 4,000,000 Continental Resources, Inc., Sr. Sub. Note, 3,500,000 10.25%, 8/1/2008 475,000 DI Industries, Inc., Sr. Note, 8.875%, 7/1/2007 463,125 1,500,000 Pogo Producing Co., Sr. Sub. Note, (Series B), 10.375%, 2/15/2009 ------------- 1,567,500 1,500,000 Pride Petroleum Services, Inc., Sr. Note, 1,552,500 9.375%, 5/1/2007 4,450,000 R&B Falcon Corp., Sr. Note, 12.25%, 3/15/2006 5,362,250 1,050,000 RBF Finance Co., Company Guarantee, 11.375%, 1,218,000 3/15/2009 2,000,000 Triton Energy Ltd., Sr. Note, 8.875%, 10/1/2007 2,030,000 Total 16,400,438 PRINTING & PUBLISHING--0.8% 1,875,000 Garden State Newspapers, Inc., Sr. Sub. Note, 1,687,500 8.75%, 10/1/2009 900,000 Hollinger International Publishing, Inc., Sr. Sub. Note, 9.25%, 3/15/2007 900,000 900,000 K-III Communications Corp., Company Guarantee, (Series B), 8.50%, 2/1/2006 877,500 1,350,000 (2)(3) Ziff Davis Media, Inc., Sr. Sub. Note, 1,059,750 12.00%, 7/15/2010 Total 4,524,750 REAL ESTATE--0.2% 1,156,000 Trizec Finance Ltd., Sr. Note, 10.875%, 1,156,000 10/15/2005 SERVICES--3.0% 7,700,000 (1) Crown Castle International Corp., Sr. Disc. Note, 0/10.375%, 5/15/2011 5,178,250 2,950,000 (1) Crown Castle International Corp., Sr. Disc. Note, 0/11.25%, 8/1/2011 1,998,625 825,000 Crown Castle International Corp., Sr. Note, 860,063 10.75%, 8/1/2011 700,000 Metricom, Inc., Company Guarantee, 13.00%, 318,500 2/15/2010 2,150,000 Orius Capital Corp., Company Guarantee, (Series B), 12.75%, 2/1/2010 1,816,750 2,750,000 SITEL Corp., Sr. Sub. Note, 9.25%, 3/15/2006 2,351,250 2,500,000 (1) SpectraSite Holdings, Inc., Sr. Disc. Note, 0/12.875%, 3/15/2010 1,262,500 2,250,000 URS Corp., Sr. Sub. Note, (Series B), 12.25%, 2,261,250 5/1/2009 Total 16,047,188 STEEL--0.5% 2,400,000 Metals USA, Inc., Company Guarantee, 8.625%, 1,380,000 2/15/2008 2,000,000 Republic Technologies International, Inc., Company Guarantee, 13.75%, 7/15/2009 210,000 1,350,000 Ryerson Tull, Inc., Sr. Note, 9.125%, 7/15/2006 1,046,250 Total 2,636,250 SURFACE TRANSPORTATION--1.4% 1,850,000 Allied Holdings, Inc., Sr. Note, 8.625%, 1,415,250 10/1/2007 1,025,000 (2)(4) AmeriTruck Distribution Corp., Sr. Sub. Note, 12.25%, 11/15/2005 2,563 1,050,000 (2)(4) Holt Group, Inc., Company Guarantee, 47,250 9.75%, 1/15/2006 1,400,000 Railworks Corp., Company Guarantee, 11.50%, 497,000 4/15/2009 4,375,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 3,959,375 2,275,000 Stena AB, Sr. Note, 8.75%, 6/15/2007 1,831,375 Total 7,752,813 TELECOMMUNICATIONS & CELLULAR--22.8% 3,650,000 (1) AirGate PCS, Inc., Sr. Sub. Note, 0/13.50%, 2,117,000 10/1/2009 4,850,000 (1) Alamosa PCS Holdings, Inc., Sr. Disc. Note, 0/12.875%, 2/15/2010 2,352,250 2,250,000 (2)(3) Asia Global Crossing, Sr. Note, 13.375%, 1,946,250 10/15/2010 4,000,000 (1) Call-Net Enterprises, Inc., Sr. Disc. Note, 0/10.80%, 5/15/2009 1,100,000 6,250,000 (1) Call-Net Enterprises, Inc., Sr. Disc. Note, 1,906,250 0/8.94%, 8/15/2008 3,025,000 (1) Call-Net Enterprises, Inc., Sr. Disc. Note, 839,438 0/9.27%, 8/15/2007 3,500,000 (1) Dolphin Telecom PLC, Sr. Disc. Note, 402,500 0/14.00%, 5/15/2009 10,175,000 Global Crossing Holdings Ltd., Company Guarantee, 9.50%, 11/15/2009 9,717,125 2,800,000 Hermes Europe Railtel B.V., Sr. Note, 10.375%, 1,134,000 1/15/2009 3,675,000 Hermes Europe Railtel B.V., Sr. Note, 11.50%, 1,488,375 8/15/2007 1,400,000 (1) Intermedia Communications, Inc., Sr. Disc. Note, 0/11.25%, 7/15/2007 847,000 3,575,000 (1) Intermedia Communications, Inc., Sr. Disc. Note, 0/12.50%, 5/15/2006 2,520,375 3,400,000 (1) Intermedia Communications, Inc., Sr. Disc. Note, Series B, 0/12.25%, 3/1/2009 1,717,000 3,100,000 Intermedia Communications, Inc., Sr. Note, 2,185,500 8.60%, 6/1/2008 575,000 Intermedia Communications, Inc., Sr. Note, 405,375 8.875%, 11/1/2007 10,500,000 (1) Level 3 Communications, Inc., Sr. Disc. Note, 0/10.50%, 12/1/2008 5,460,000 11,150,000 Level 3 Communications, Inc., Sr. Note, 9.125%, 9,087,250 5/1/2008 4,100,000 (1) McLeodUSA, Inc., Sr. Disc. Note, 0/10.50%, 3,444,000 3/1/2007 1,900,000 McLeodUSA, Inc., Sr. Note, 8.125%, 2/15/2009 1,643,500 350,000 McLeodUSA, Inc., Sr. Note, 8.375%, 3/15/2008 308,000 1,050,000 McLeodUSA, Inc., Sr. Note, 9.25%, 7/15/2007 966,000 2,300,000 McLeodUSA, Inc., Sr. Note, 9.50%, 11/1/2008 2,081,500 2,925,000 Metromedia Fiber Network, Inc., Sr. Note, 2,500,875 10.00%, 12/15/2009 5,675,000 (1) Millicom International Cellular S. A., Sr. Disc. Note, 0/13.50%, 6/1/2006 4,454,875 2,500,000 (1) NEXTEL Communications, Inc., Sr. Disc. Note, 0/10.65%, 9/15/2007 1,975,000 7,775,000 (1) NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.95%, 2/15/2008 5,656,313 8,950,000 NEXTEL Communications, Inc., Sr. Note, 9.375%, 8,435,375 11/15/2009 14,300,000 (1) NEXTLINK Communications, Inc., Sr. Disc. Note, 0/12.25%, 6/1/2009 7,221,500 4,100,000 (1) NEXTLINK Communications, Inc., Sr. Disc. Note, 0/9.45%, 4/15/2008 2,142,250 1,450,000 NEXTLINK Communications, Inc., Sr. Note, 10.75%, 1,203,500 6/1/2009 2,200,000 NEXTLINK Communications, Inc., Sr. Note, 9.00%, 1,699,500 3/15/2008 1,400,000 (1) Nextel International, Inc., Sr. Disc. Note, 0/12.125%, 4/15/2008 763,000 1,121,000 (1) Nextel Partners, Inc., Sr. Disc. Note, 756,675 0/14.00%, 2/1/2009 3,000,000 PsiNet, Inc., Sr. Note, 10.00%, 2/15/2005 855,000 3,000,000 PsiNet, Inc., Sr. Note, 11.00%, 8/1/2009 855,000 1,125,000 PsiNet, Inc., Sr. Note, 11.50%, 11/1/2008 343,125 175,000 (1) Qwest Communications International, Inc., Sr. Disc. Note, 0/8.29%, 2/1/2008 149,441 3,300,000 (1) Qwest Communications International, Inc., Sr. Disc. Note, 0/9.47%, 10/15/2007 3,004,353 1,750,000 Rhythms NetConnections, Inc., Sr. Note, 14.00%, 463,750 2/15/2010 5,125,000 Rogers Cantel Mobile, Inc., Sr. Sub. Note, 5,150,625 8.80%, 10/1/2007 575,000 (1) Telesystem International Wireless, Inc., Sr. Disc. Note, 0/10.50%, 11/1/2007 238,625 5,525,000 (1) Telesystem International Wireless, Inc., Sr. Disc. Note, 0/13.25%, 6/30/2007 2,569,125 3,700,000 (1) Teligent AB, Sr. Disc. Note, 0/11.50%, 240,500 3/1/2008 2,350,000 Teligent AB, Sr. Note, 11.50%, 12/1/2007 317,250 4,350,000 (1) Triton PCS, Inc., Sr. Disc. Note, 0/11.00%, 3,458,250 5/1/2008 700,000 USA Mobile Communications, Inc., Sr. Note, 353,500 9.50%, 2/1/2004 750,000 Viatel, Inc., Sr. Note, 11.50%, 3/15/2009 236,250 4,100,000 (1) Viatel, Inc., Sr. Disc. Note, 0/12.50%, 840,500 4/15/2008 1,825,000 Viatel, Inc., Sr. Note, 11.25%, 4/15/2008 574,875 8,000,000 (1) VoiceStream Wireless Corp., Sr. Disc. Note, 0/11.875%, 11/15/2009 5,880,000 1,375,000 VoiceStream Wireless Corp., Sr. Note, 10.375%, 1,485,000 11/15/2009 700,000 Williams Communications Group, Inc., Sr. Note, 10.875%, 10/1/2009 521,500 6,317,000 (1) WinStar Communications, Inc., Sr. Sub. Defd. Cpn. Note, 0/14.75%, 4/15/2010 1,989,855 1,909,000 WinStar Communications, Inc., Sr. Note, 12.75%, 4/15/2010 1,345,845 Total 121,349,920 UTILITIES--1.8% 450,000 (2)(3) AES Drax Energy Ltd., Sr. Secd. Note, 474,624 11.50%, 8/30/2010 1,000,000 CMS Energy Corp., Sr. Note, 7.50%, 1/15/2009 919,860 4,500,000 Caithness Coso Funding Corp., Sr. Secd. Note, (Series B), 9.05%, 12/15/2009 4,500,000 1,700,000 El Paso Electric Co., 1st Mtg. Note, 9.40%, 1,846,931 5/1/2011 2,200,000 (1) Niagara Mohawk Power Corp., Sr. Disc. Note, (Series H), 0/8.50%, 7/1/2010 1,904,056 Total 9,645,471 TOTAL CORPORATE BONDS (IDENTIFIED COST 486,495,172 $639,327,696) COMMON STOCK--0.0% CABLE TELEVISION--0.0% 27 (2)(3)(4) CS Wireless Systems, Inc. 4 METALS & MINING--0.0% 57,533 (2)(4) Royal Oak Mines, Inc. 115 PRINTING & PUBLISHING--0.0% 500 (2)(3)(4) Medianews Group, Inc. 57,500 TOTAL COMMON STOCK (IDENTIFIED COST $16,023) 57,619 PREFERRED STOCK--2.6% BANKING--0.1% 27,000 California Federal Preferred Capital Corp., REIT Perpetual Pfd. Stock, Series A, $2.28 626,062 BROADCAST RADIO & TV--0.4% 1,250 Benedek Communications Corp., Sr. Exchangeable 568,750 PIK 17,550 Sinclair Broadcast Group, Inc., Cumulative Pfd., 1,553,175 $11.63 Total 2,121,925 BUSINESS EQUIPMENT & SERVICES--0.0% 392 Electronic Retailing Systems International, 4 Inc., Conv. Pfd. CABLE TELEVISION--0.3% 1,940 Pegasus Communications Corp., Cumulative PIK Pfd., (Series A), 12.75% 1,826,289 FOOD SERVICES--0.0% 6,362 (4) Nebco Evans Holding Co., Exchangeable Pfd. 3,976 Stock HEALTH CARE--0.1% 4,640 River Holding Corp., Sr. Exchangeable PIK 301,600 INDUSTRIAL PRODUCTS & EQUIPMENT--0.2% 1,050 Fairfield Manufacturing Co., Inc., Cumulative Exchangeable Pfd. Stock 813,750 PRINTING & PUBLISHING--1.2% 22,750 Primedia, Inc., Cumulative Pfd., Series D, $10.00 1,945,125 39,650 Primedia, Inc., Exchangeable Pfd. Stock, (Series 3,191,825 H), $2.16 17,450 Primedia, Inc., Pfd., $9.20 1,422,175 Total 6,559,125 TELECOMMUNICATIONS & CELLULAR--0.3% 599 NEXTEL Communications, Inc., Cumulative PIK Pfd., (Series D), 13.00% 584,025 979 NEXTEL Communications, Inc., Exchangeable Pfd. Stock, (Series E) 846,835 Total 1,430,860 TOTAL PREFERRED STOCK (IDENTIFIED COST 13,683,591 $17,229,320) WARRANTS--0.2% BROADCAST RADIO & TV--0.0% 1,800 (4) XM Satellite Radio, Inc., Warrants 63,225 BUSINESS EQUIPMENT & SERVICES--0.0% 750 (2)(3)(4) Electronic Retailing Systems International, Inc., Warrants ------------- 750 CABLE TELEVISION--0.0% 600 (2)(3)(4) Australis Holdings Property Ltd., 0 Warrants 2,400 (4) UIH Australia/Pacific, Warrants 7,800 Total 7,800 CHEMICALS & PLASTICS--0.0% 875 (4) Sterling Chemicals Holdings, Inc., Warrants 1,476 CONSUMER PRODUCTS--0.0% 2,000 (4) Jostens, Inc., Warrants 40,500 CONTAINER & GLASS PRODUCTS--0.0% 1,000 (2)(3)(4) Pliant Corp., Warrants 10,125 OIL & GAS--0.2% 1,400 (2)(3)(4) R&B Falcon Corp., Warrants 655,375 SERVICES--0.0% SHARES OR PRINCIPAL - ------------- VALUE AMOUNT 1,500 (4) Metricom, Inc., Warrants 1,875 STEEL--0.0% 250 (2)(4) Bar Technologies, Inc., Warrants 2 2,000 (4) Republic Technologies International, Inc., 20 Warrants Total 22 TELECOMMUNICATIONS & CELLULAR--0.0% 1,025 (2)(3)(4) MetroNet Communications Corp., Warrants 71,750 TOTAL WARRANTS (IDENTIFIED COST $1,074,256) 852,898 REPURCHASE AGREEMENT (5)--3.6% $19,385,000 Bank of America, 6.55%, dated 12/29/2000, due 1/2/2001 19,385,000 (AT AMORTIZED COST) TOTAL INVESTMENTS (IDENTIFIED COST $520,474,280 $677,032,295)(6) (1) Denotes a Zero Coupon bond with effective rate at time of purchase. (2) Denotes a restricted security which is subject to restrictions on resale under federal securities laws. At December 31, 2000, these securities amounted to $12,417,273 which represents 2.3% of total net assets. Included in these amounts, securities which have been deemed liquid amounted to $10,875,378 which represents 2.0% of net assets. (3) Denotes a restricted security that has been deemed liquid by criteria approved by the fund's board of directors. (4) Non-income producing security. (5) The repurchase agreements is 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 agreement are through participation in a joint accounts with other Federated Funds. (6) The cost of investments for federal tax purposes amounts to $677,036,192. The net unrealized depreciation of investments on a federal tax basis amounts to $156,561,912 which is comprised of $4,470,151 appreciation and $161,032,063 depreciation at December 31, 2000. =============================================================================== Note: The categories of investments are shown as a percentage of net assets ($532,820,158) at December 31, 2000. The following acronyms are used throughout this portfolio: GTD --Guaranteed PIK --Payment in Kind 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, 2000 - ------------------------------------------------------------------------------- ASSETS: Total investments in securities, at value (identified 520,474,280 cost $677,032,295) Cash 1,382 Income receivable 12,254,431 Receivable for shares sold 131,500 Total assets 532,861,593 LIABILITIES: Payable for investments purchased $ 19,731 Accrued expenses 21,704 Total Liabilities 41,435 Net Assets for 74,621,849 shares outstanding 532,820,158 NET ASSETS CONSIST OF: Paid in capital 710,457,351 Net unrealized depreciation of investments (156,558,)15 Accumulated net realized loss on investments (20,787,0)3 Distributions in excess of net investment income (292,135 ) Total Net Assets 532,820,158 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE: $532,820,158 / 74,621,849 shares outstanding $7.14 See Notes which are an integral part of the Financial Statements ============================================================================== HIGH YIELD BOND PORTFOLIO STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2000 - ---------------------------------------------------------------------------- Investment Income: Dividends 2,053,852 Interest 67,485,492 Total income 69,539,344 EXPENSES: Administrative personnel and services fee $458,462 Custodian fees 57,654 Transfer and dividend disbursing agent fees and 16,655 expenses Directors'/Trustees' fees 16,318 Auditing fees 14,348 Legal fees 7,928 Portfolio accounting fees 112,024 Printing and postage 338 Insurance premiums 1,278 Miscellaneous 9,724 Total expenses 694,729 WAIVER: Waiver of administrative personnel and $(458,4)2 services fee Net expenses 236,267 Net investment income 69,303,077 REALIZED AND UNREALIZED GAIN (LOSS) ON Investments: Net realized loss on investments (18,237,3)8 Net change in unrealized depreciation of (100,796,)13 investments Net realized and unrealized loss on investments (119,033,)91 Change in net assets resulting from operations (49,730,7)4 See Notes which are an integral part of the Financial Statements =============================================================================== HIGH YIELD BOND PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS - ------------------------------------------------------------------------------ Year Ended Year Ended December December 31, 31, 2000 1999 INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income 69,303,077 66,559,238 Net realized loss on investments (18,237,378 ) (2,548,935 ) Net change in unrealized depreciation (100,796,413 ) (41,732,682 ) Change in net assets resulting from (49,730,714 ) 22,277,621 operations DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income (69,910,231 ) (66,396,829 ) Distributions from net realized gains --- (1,290,889 ) Change in net assets resulting from distributions to (69,910,231 ) (67,687,718 ) shareholders SHARE TRANSACTIONS: Proceeds from sale of shares 76,533,597 213,964,955 Net asset value of shares issued to shareholders in payment of distributions 69,894,492 67,702,178 declared Cost of shares redeemed (193,055,136 ) (98,974,796 ) Change in net assets resulting from (46,627,047 ) 182,692,337 share transactions Change in net assets (166,267,992 ) 137,282,240 NET ASSETS: Beginning of period 699,088,150 561,805,910 End of period (including undistributed net investment income of $315,019 for the year 532,820,158 699,088,150 ended December 31, 1999) See Notes which are an integral part of the Financial Statements ============================================================================== HIGH YIELD BOND PORTFOLIO FINANCIAL HIGHLIGHTS - ----------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD) YEAR PERIOD ENDED ENDED DECEMBER 31, DECEMBER 31, --------------------- --------------------- 2000 1999 1998 (1) NET ASSET VALUE, BEGINNING OF $8.72 $9.30 $10.00 PERIOD INCOME FROM INVESTMENT OPERATIONS Net investment income 0.91 0.91 0.84 Net realized and unrealized (1.57 ) (0.56 ) (0.65 ) loss on investments Total from investment (0.66 ) 0.35 0.19 operations LESS DISTRIBUTIONS Distributions from net (0.92 ) (0.91 ) (0.84 ) investment income Distributions from net realized gain on investments ------ ----- ) ------ ) -- (0.02 (0.05 Total distributions (0.92 ) (0.93 ) (0.89 ) NET ASSET VALUE, END OF PERIOD $7.14 $8.72 $9.30 TOTAL RETURN (2) (8.04 %) 3.83 % 1.96 % RATIOS TO AVERAGE NET ASSETS Expenses 0.04 % 0.03 % 0.04 %(4) Net investment income 11.38 % 10.07 % 9.60 %(4) Expense waiver/reimbursement 0.08 % 0.08 % 0.08 %(4) (3) SUPPLEMENTAL DATA Net assets, end of period $532,820 $699,088 $561,806 (000 omitted) Portfolio turnover 16 % 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 the 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, 2000 - ------------------------------------------------------------------------------- 1. 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 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 VALUATION - 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 60 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. The Fund will adopt the provisions of the AICPA Audit and Accounting Guide for Investment Companies, as revised, effective for fiscal years beginning after December 15, 2000. As required, the Fund will begin amortizing premiums and discounts on debt securities effective January 1, 2001. Prior to this date, the Fund did not amortize premiums or discounts on debt securities. The cumulative effect of this accounting change will have no impact on the total net assets of the Fund. The impact of this accounting change has not been determined but will result in a decrease to cost of securities and a corresponding decrease in net unrealized appreciation/depreciation, based on securities held as of December 31, 2000. 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, 2000, the Fund, for federal tax purposes, had a capital loss carryforward of $15,577,544 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 as follows: ---------------------------------------------- Expiration Year Expiration Amount ---------------------------------------------- ---------------------------------------------- 2007 $1,148,442 ---------------------------------------------- ---------------------------------------------- 2008 $14,429,102 ---------------------------------------------- - ------------------------------------------------------------------------------- Additionally, the Fund's net capital losses of $5,206,709 attributable to security transaction s incurred after October 31, 2000, were treated as arising on January 1, 2001, 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 contract. 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. Additional information on each restricted security held at December 31, 2000 is as follows: SECURITY ACQUISITION DATE ACQUISITION COST - -------- ---------------- ---------------- AEI HOLDING CO., INC. 12/14/1998 - 3/10/1999 $3,203,141 AEI RESOURCES, INC. 12/7/1998 $3,300,000 AMF GROUP, INC. 3/7/1996 - 4/6/1999 $2,530,755 AMERITRUCK DISTRIBUTION 11/10/1995 - $1,080,586 CORP. 10/22/1997 BAR TECHNOLOGIES, INC. 8/27/1996 - 8/28/1996 $5,588 CLARK MATERIAL HANDLING 11/22/1996 - $1,845,420 CORP. 11/12/1997 DYERSBURG CORP. 9/3/1997 - 9/15/1997 $711,591 GLENOIT CORP. 3/26/1997 - 5/20/1998 $1,685,113 HOLT GROUP, INC. 11/14/1998 - 3/13/1998 $1,076,128 ROYAL OAK MINES 2/24/1999 $6,392 U.S. OFFICE PRODUCTS CO. 6/5/1998 - 10/27/1999 $4,624,629 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 DECEMBER 31, ----------------------------------- ----------------------------------- 2000 1999 ---- ---- Shares sold 9,883,085 23,276,427 Shares issued to shareholders in 8,845,388 7,494,091 payment of distributions declared Shares redeemed (24,290,098) (10,972,164) ------------ ------------ Net change resulting from share (5,561,625) 19,798,354 =========== ========== transactions 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 average aggregate daily net assets of all funds advise by affiliates of Federated Investors. Fserv may voluntarily choose to waive any portion of its fee. Fserv may terminate this voluntary waiver at any time at its sole discretion. 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 (and in-kind contributions) for the year ended December 31, 2000, were as follows: PURCHASES $96,211,060 ------------------------------------------------- SALES $171,343,577 ------------------------------------------------- Report of Ernst & Young LLP, Independent Auditors To the Board of Trustees 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"), as of December 31, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented 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, 2000, 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 at December 31, 2000, and the results of its operations for the year then ended, changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented therein, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP Boston, Massachusetts February 20, 2001 FEDERATED MORTGAGE CORE PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2000 - ----------------------------------------------------------------------------- PRINCIPAL - ------------- VALUE AMOUNT MORTGAGE BACKED SECURITIES--99.3% FEDERAL HOME LOAN MORTGAGE CORPORATION--21.7% $9,338,719 6.000%, 5/1/2014 - 7/1/2029 $9,096,814 26,858,271 6.500%, 7/1/2014 - 7/1/2030 26,502,404 12,801,089 7.000%, 12/1/2011 - 11/1/2030 12,841,775 23,209,858 (1) 7.500%, 12/1/2022 - 8/1/2029 23,540,817 8,062,205 8.000%, 5/1/2006 - 9/1/2030 8,255,126 205,244 8.500%, 9/1/2025 - 1/1/2026 212,030 242,212 9.000%, 5/1/2017 248,873 36,314 9.500%, 4/1/2021 37,914 Total 80,735,753 FEDERAL NATIONAL MORTGAGE ASSOCIATION--55.3% 46,700,665 6.000%, 7/1/2006 - 6/1/2029 45,638,034 62,954,634 6.500%, 5/1/2006 - 8/1/2029 62,358,179 60,329,910 7.000%, 7/1/2010 - 11/1/2030 60,514,198 29,588,822 (1) 7.500%, 6/1/2011 - 10/1/2029 30,041,548 6,167,769 (1) 8.000%, 7/1/2023 - 2/1/2029 6,315,286 228,647 8.500%, 3/1/2030 235,006 326,272 9.000%, 11/1/2021 - 6/1/2025 336,059 Total GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--22.3% 6,093,961 6.000%, 10/15/2028 - 6/15/2029 5,914,903 14,819,105 6.500%, 10/15/2028 - 3/15/2029 14,668,819 19,557,819 7.000%, 11/15/2027 - 9/15/2030 19,647,768 18,252,576 7.500%, 6/20/2007 - 10/15/2030 18,555,137 14,567,328 8.000%, 2/15/2010 - 11/15/2030 14,935,788 7,025,472 8.500%, 11/15/2021 - 11/15/2030 7,238,165 200,309 9.000%, 10/15/2016 - 6/15/2025 208,690 196,071 9.500%, 1/15/2019 - 12/15/2025 205,314 1,521,143 12.000%, 4/15/2015 - 6/15/2015 1,667,169 Total 83,041,753 TOTAL MORTGAGE BACKED SECURITIES (IDENTIFIED COST $361,203,333) 369,215,816 REPURCHASE AGREEMENTS (2)--11.7% 335,000 Bank of America, 6.550%, dated 12/29/2000, due 335,000 1/2/2001 22,390,000 (3) Goldman Sachs Group, LP, 6.490%, dated 12/11/2000, due 1/16/2001 22,390,000 20,905,000 (3) Goldman Sachs Group, LP, 6.500%, dated 12/8/2000, due 1/16/2001 20,905,000 TOTAL REPURCHASE AGREEMENTS 43,630,000 TOTAL INVESTMENTS (IDENTIFIED COST $412,845,816 $404,833,333)(4) (1) All or a portion of these securities may be subject to dollar roll transactions. (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) 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. (4) The cost of investments for federal tax purposes amounts to $404,870,833. The net unrealized appreciation of investments on a federal tax basis amounts to $8,012,483 which is comprised of $8,583,932 appreciation and $608,949 depreciation at December 31, 2000. ============================================================================== Note: The categories of investments are shown as a percentage of net assets ($371,658,999) at December 31, 2000. See Notes which are an integral part of the Financial Statements FEDERATED MORTGAGE CORE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2000 - ------------------------------------------------------------------------------- ASSETS: Investments in repurchase agreements $ 43,630,000 Investments in securities 369,215,816 Total investments in securities, at value (identified 412,845,816 cost $404,833,333) Income receivable 2,020,362 Receivable for shares sold 48 Total assets 414,866,226 LIABILITIES: Payable for investments purchased 2,420,553 Payable for dollar roll transactions 40,757,627 Accrued expenses 29,047 Total Liabilities 43,207,227 Net Assets for 37,571,653 shares outstanding 371,658,999 NET ASSETS CONSIST OF: Paid in capital 370,200,876 Net unrealized appreciation of investments 8,012,483 Accumulated net realized loss on investments (6,556,29) Undistributed net investment income 1,938 Total Net Assets 371,658,999 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE: $371,658,999 / 37,571,653 shares outstanding $9.89 See Notes which are an integral part of the Financial Statements ============================================================================== FEDERATED MORTGAGE CORE PORTFOLIO STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2000 - ------------------------------------------------------------------------------ INVESTMENT INCOME: Interest (net of dollar roll expense of $935,428) 22,390,012 EXPENSES: Administrative personnel and services fee $236,054 Custodian fees 27,358 Transfer and dividend disbursing agent fees and 14,832 expenses Directors'/Trustees' fees 7,221 Auditing fees 13,212 Legal fees 7,212 Portfolio accounting fees 77,431 Printing and postage 477 Insurance premiums 1,660 Miscellaneous 1,066 Total expenses WAIVER: Waiver of administrative personnel and $(236,0)4 services fee Net expenses 150,469 Net investment income 22,239,543 REALIZED AND UNREALIZED GAIN (LOSS) ON Investments: Net realized loss on investments (2,278,81) Net change in unrealized depreciation of 14,436,707 investments Net realized and unrealized loss on investments 12,157,888 Change in net assets resulting from operations 34,397,431 See Notes which are an integral part of the Financial Statements =============================================================================== FEDERATED MORTGAGE CORE PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS - ------------------------------------------------------------------------------- Year Ended Period Ended December December 31, 31, 2000 1999 (1) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income 22,239,543 14,412,206 Net realized loss on investments (2,278,819 ) (4,277,479 ) Net change in unrealized 14,436,707 (6,424,224 ) appreciation/depreciation Change in net assets resulting from 34,397,431 3,710,503 operations DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income (22,280,312 ) (14,369,499 ) SHARE TRANSACTIONS: Proceeds from sale of shares 161,233,755 372,841,840 Net asset value of shares issued to shareholders in payment of distributions 22,277,653 14,361,250 declared Cost of shares redeemed (82,273,527 ) (118,240,095 ) Change in net assets resulting from 101,237,881 268,962,995 share transactions Change in net assets 113,355,000 258,303,999 NET ASSETS: Beginning of period 258,303,999 --- End of period (including undistributed net investment income of $1,938 and $42,707, 371,658,999 258,303,999 respectively) (1) Reflects operation 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) YEAR PERIOD ENDED ENDED DECEMBER DECEMBER 31, 31, 2000 1999 (1) NET ASSET VALUE, BEGINNING OF $9.55 $10.00 PERIOD INCOME FROM INVESTMENT OPERATIONS Net investment income 0.68 0.55 Net realized and unrealized gain (loss) on investments ------ ------ ) 0.34 (0.45 Total from investment 1.02 0.10 operations LESS DISTRIBUTIONS Distributions from net (0.68 ) (0.55 ) investment income NET ASSET VALUE, END OF PERIOD $9.89 $9.55 TOTAL RETURN (2) 11.15 % 1.07 % RATIOS TO AVERAGE NET ASSETS Expenses 0.05 % 0.05 %(4) Net investment income 7.09 % 6.66 %(4) Expense waiver/reimbursement 0.08 % 0.08 %(4) (3) SUPPLEMENTAL DATA Net assets, end of period $371,659 $258,304 (000 omitted) Portfolio turnover 81 % 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, 2000 - ------------------------------------------------------------------------------ 6. ORGANIZATION Federated Core Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a 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'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. 7. 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 VALUATION 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 60 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. The Fund will adopt the provisions of the American Institute of Certified Public Accountants Audit and Accounting Guide for Investment Companies, as revised, effective for fiscal years beginning after December 15, 2000. As required, the Fund will begin amortizing premiums and discounts on debt securities effective January 1, 2001. Prior to this date, the Fund did not amortize premiums or discounts on debt securities. The cumulative effect of this accounting change will have no impact on the total net assets of the Fund. The impact of this accounting change has not been determined but will result in a decrease to cost of securities and a corresponding decrease in net unrealized appreciation/depreciation, based on securities held as of December 31, 2000. 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, 2000, the Fund, for federal tax purposes, had a capital loss carryforward of $ 6,306,544 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 carry forward will as follows: -------------------------------------------- EXPIRATION YEAR EXPIRATION AMOUNT -------------------------------------------- -------------------------------------------- 2007 $4,034,753 -------------------------------------------- -------------------------------------------- 2008 $2,271,791 -------------------------------------------- - ------------------------------------------------------------------------------- Additionally, the Fund's net capital losses of $181,034 attributable to security transactions incurred after October 31, 2000 were treated as arising on January 1, 2001, 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 contract. 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. 8. 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, 2000 DECEMBER 31, 1999 (1) Shares sold 16,787,336 37,597,363 Shares issued to shareholders in 2,320,094 1,475,968 payment of distributions declared Shares redeemed (8,577,136) (12,031,972) ----------- ------------ Net change resulting from share 10,530,294 27,041,359 ========== ========== transactions (1) Reflects operations for the period from February 22, 1999 (date of initial investment) to December 31, 1999. 9. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISER FEE Federated Investment Management Company is the Portfolio'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 advise by affiliates of Federated Investors, Inc. Fserv may voluntarily choose to waive any portion of its fee. Fserv may terminate this voluntary waiver at any time at its sole discretion. 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. INTERFUND TRANSACTIONS During the year ended December 31, 2000, engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and /or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Act and amounted to $22,804,740 and $8,471,087, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. 10. INVESTMENT TRANSACTIONS Purchases and sales of investments, excluding short-term securities (and in-kind contributions), for year ended December 31, 2000, were as follows: PURCHASES $355,143,232 ------------------------------------------------- ------------------------------------------------- SALES $254,372,841 ------------------------------------------------- ------------------------------------------------- These purchases and sales securities all represent long-term U.S. government securities. Report of Ernst & Young LLP, Independent Auditors To the Board of Trustees and Shareholders of Federated Mortgage Core Portfolio We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Federated Mortgage Core Portfolio (the "Fund") as of December 31, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets and financial highlights for the period from February 22, 1999 to December 31, 2000. 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, 2000, 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 at December 31, 2000, and the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the period from February 22, 1999 to December 31, 2000, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP Boston, Massachusetts February 20, 2001 -----END PRIVACY-ENHANCED MESSAGE-----