[LOGO] Federated
Liberty
High Income
Bond Fund, Inc.
18th Semi-Annual Report
September 30, 1994
Established 1977
President's Message
Dear Shareholder:
I am pleased to present the Semi-Annual Report for Liberty High Income Bond
Fund, Inc. ("the Fund"). The Fund consists of three classes of shares: Class A
Shares; Class B Shares; and Class C Shares. Class B Shares went effective on
September 27, 1994. Consequently, there is no performance to report for the
period ended September 30, 1994. The report, which covers the six-month period
ending September 30, 1994, begins with an interview with the Fund's portfolio
manager, Mark Durbiano, Vice President, Federated Advisers. Following his
remarks are a series of performance charts, a complete listing of the Fund's
portfolio of investments, as well as the Fund's Financial Statements. In
addition, Financial Highlights tables have been included for Class A Shares
and Class C Shares.
Interest rates have risen substantially throughout 1994, and have had a
significant impact on high-yield bonds. In response to these developments, the
net asset value of Class A Shares and Class C Shares decreased over the
reporting period. At the beginning of the reporting period, the share price of
Class A Shares and Class C Shares based on net asset value was $10.99, compared
to $10.58 on September 30, 1994.
For the six-month reporting period, Class A Shares and Class C Shares of the
Fund's monthly income totaled $0.51 and $0.47 per share, respectively. The
Fund's performance has been strong in comparison to investment revenue from
U.S. government bonds, municipal bonds, and even high grade corporates.
The Fund's management has helped it avoid credit problems with some issuers of
high-yield securities. The Fund maintained a high degree of diversification in
more than 100 issues across 35 industries. Many of the Fund's investments are
well-known household names, like Revlon, American Standard, Heileman, and Bell
and Howell.
I encourage you to take a few moments to review the series of charts in this
report which illustrate the Fund's overall record of success over time.
As always, we appreciate your continued confidence in Liberty High Income Bond
Fund, Inc., and invite your comments and questions.
Sincerely,
Richard B. Fisher
President
November 15, 1994
Investment Review
Mark Durbiano
Vice President,
Federated Advisers
Q. 1994 has been a difficult year for fixed-income investors. How have
high-yield bonds performed in the first three quarters of the year?
A. All fixed-income investors have been impacted by the substantial rise in
interest rates in 1994, and high-yield bonds have been no exception. From
December 31, 1993 to September 30, 1994, the yield on 10-year Treasurys
increased from 5.79% to 7.60%. This has caused most long-term bond prices to
fall dramatically. During this time period, high-yield bonds have generated
generally attractive relative returns versus other fixed-income investments,
although absolute total returns have been uninspiring. For example,
year-to-date through September 30, 1994, the Lehman Brothers High Yield Index
declined 0.73% while the Lehman Brothers Aggregate Index, a measure of
high-quality bonds, declined 3.28%.*
Q. What has caused high-yield bonds to outperform higher quality bonds in 1994?
A. The strong U.S. economy, which fueled inflationary fears and caused the
Federal Reserve Board to raise interest rates, is a double edged sword for
high-yield bonds. First, high-yield bonds are, like all bonds, interest rate
sensitive and therefore decline in price when interest rates rise. That has
negatively affected high-yield performance thus far in 1994. However, the
strong U.S. economy aids the financial performance of most high-yield issuers.
This reduction in credit risk and default risk helps to offset some of the
rise in interest rates. The prices of high-yield bonds have not been as
negatively affected by rising interest rates as the prices of high-quality
bonds. Also, high-yield bonds generally pay higher income than high-quality
bonds, which benefits total returns.
* These indices are unmanaged.
Q. How has the Fund performed so far in 1994?
A. The Fund has experienced generally strong relative performance. For example,
the Class A Shares of the Fund ranked 17th out of 85, 5th out of 59, and 6th
out of 30 high current yield funds according to Lipper Analytical Services for
the one-year, five-year and ten-year periods ended September 30, 1994. The
Class C Shares of the Fund ranked 23rd out of 85 high current yield funds
according to Lipper Analytical Services for the one-year period ended September
30, 1994.* The Fund outperformed the Lipper Average for several reasons.
First, the Fund was overweighted in cyclical industries such as steel,
chemicals and plastics and forest products, which performed well given the
economic strength. Second, the Fund's higher quality profile helped it avoid
specific credit problems that developed with several specific high-yield
issuers such as Mega Foods and Greyhound. Finally, the Fund has no exposure to
the casino sector, which dramatically underperformed the overall market in
response to overcapacity in new venues and the effect of new venues on
Atlantic City and Las Vegas. Our broad diversification of the Fund's holdings
had a meaningful impact on our performance.
Q. What is your outlook for the high-yield market going forward?
A. I believe the high-yield market continues to offer attractive relative
returns for fixed-income investors. Two factors should lead to these
attractive relative returns. First, high-yield bonds generally provide
investors with very high income returns. We believe that income will be the
primary influence on fixed-income investors' total return over the next six
months, as price changes will be minimal. Second, the strong U.S. economy
should lead to a continued narrowing of the yield spread between high-yield
bonds and high-quality bonds, as the fear of defaults by high-yield issuers
declines. These two factors favor high-yield bonds over high-quality bonds for
fixed-income investors.
*Past performance does not guarantee future results. Lipper rankings are based
on total return and do not include the effect of sales charges. For the year
ended September 30, 1994, the investment adviser waived fees. Otherwise, total
return would have been lower. Class B Shares have been in effect less than one
year.
Q. How is the Fund positioned?
A. The Fund remains overweighted in cyclical corporations because we expect the
U.S. economy to remain strong and foreign economies to begin to show better
growth. For example, the Fund's largest industry exposure is to the chemical
and plastic industry (9.2% of Fund net assets) with large holdings in UCC
Investors, a multinational rubber products and crop protection manufacturer and
Arcadian Partners, a major producer of nitrogen-based fertilizer. The Fund also
has large positions in the forest product segment (5.9% of Fund net assets)
with major exposure to Stone Container, a linerboard manufacturer and Domtar, a
diversified Canadian forest product company.
We are also seeking to enhance the Fund's overall yield by purchasing higher
yielding situations with positive credit fundamentals. In early 1994, investors
were not adequately compensated for the additional risk. That situation has
changed. We recently established a position in Computervision, a manufacturer
of CADD/CAM systems and increased the Fund's exposure to Specialty Foods, a
diversified food service company. These situations, which modestly increase
the Fund's risk profile, offer attractive return potential. As always, our own
fundamental credit analysis drives our decision making process and these
higher yielding situations have been thoroughly researched prior to purchase.
Two Ways You May Seek to Invest for Success In
Liberty High Income Bond Fund,Inc.
Initial Investment:
A $17,000 investment (reinvesting all dividends and capital gains) grew to
$89,532.
If you had invested $17,000 in the Class A Shares of Liberty High Income Bond
Fund, Inc. on November 30, 1977, reinvested dividends and capital gains, and
did not redeem any shares, your account would have been worth $89,532 on
September 30, 1994. You would have earned a 10.37% average annual total return
for the 17-year investment life span.*
One key to investing wisely is to reinvest all distributions in Fund shares.
This increases the number of shares on which you can earn future dividends, and
you gain the benefit of compounding.
As of September 30, 1994, the Class A Shares' average annual one-year,
five-year and ten-year total returns were -0.12%, 11.68%, and 11.63%,
respectively.** Class C Shares' one-year and since inception on April 30, 1993
total returns were 2.64% and 4.79%, respectively.**
Graphic presentation "A" omitted. See Appendix.
. See Appendix.
ion "C" omitted
*Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 4.5%
sales load applicable to an initial investment in Class A Shares.
**Data quoted represent past performance and do not guarantee future results.
Investment return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than their original cost.
Liberty High Income Bond Fund, Inc.
One Step at a Time:
$1,000 invested each year for 17 years (reinvesting all dividends and capital
gains) grew to $50,969.
With this approach, the key is consistency. If you had started investing $1,000
annually in the Class A Shares of Liberty High Income Bond Fund,Inc. on
November 30, 1977, reinvested your dividends and capital gains and did not
redeem any shares, you would have invested only $17,000, but your account
would have reached a total value of $50,969 by September 30, 1994. You would
have earned an average annual total return of 11.48%.*
A practical investment plan helps you pursue a high level of income through
corporate bonds. Through systematic investing, you buy shares on a regular
basis and reinvest all earnings. An investment plan works for you when you
invest only $1,000 annually. You can take it one step at a time. Put time and
compounding to work!
Graphic presentation "B" omitted. See Appendix.
*No method of investing can guarantee a profit or protect against loss in down
markets. However, by investing regularly over time and buying shares at
various prices, investors can purchase more shares at lower prices, and all
accumulated shares have the ability to pay income to the investor.
Because such a plan involves continuous investment, regardless of changing
price levels, the investor should consider whether or not to continue
purchases through periods of low price levels.
Liberty High Income Bond Fund, Inc. -
Hypothetical Investor Profile: Investing for High Monthly Income
Chuck Colby is a fictional investor who, like many other shareholders, is
looking for high monthly income opportunities.
Chuck is an attorney on his way up the corporate ladder. On September 30, 1984,
he invested $5,000 in the Class A Shares of Liberty High Income Bond Fund,
Inc.
As this chart shows, over 10 years, his original $5,000 investment has grown to
$15,023. This represents a 11.63% average annual total return.* For Chuck, that
means extra money toward the construction of his first home.
Graphic presentation "C" omitted. See Appendix.
*This hypothetical scenario is provided for illustrative purposes only and does
not represent the results obtained by any particular shareholder. Past
performance does not guarantee future results.
Liberty High Income Bond Fund, Inc.
Portfolio of Investments
- --------------------------------------------------------------------------------
September 30, 1994
(unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
CORPORATE BONDS--92.7%
- ------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.5%
---------------------------------------------------------------------------------
$ 2,500,000 Tracor, Inc., Sr. Sub. Note, 10.875%, 8/15/2001 $ 2,487,500
--------------------------------------------------------------------------------- --------------
AIR TRANSPORTATION--0.9%
---------------------------------------------------------------------------------
5,000,000 USAir, Inc., Pass Thru Cert., Series 1993-A2, 9.625%, 9/1/2003 4,300,000
--------------------------------------------------------------------------------- --------------
AUTOMOTIVE--3.4%
---------------------------------------------------------------------------------
4,000,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004* 4,090,000
---------------------------------------------------------------------------------
3,800,000 Doehler-Jarvis, Inc., Sr. Note, 11.875%, 6/1/2002 3,809,500
---------------------------------------------------------------------------------
2,500,000 Lear Seating Corp., Sr. Sub. Note, 11.25%, 7/15/2000 2,650,000
---------------------------------------------------------------------------------
1,500,000 Lear Seating Corp., Sub. Note, 8.25%, 2/1/2002 1,357,500
---------------------------------------------------------------------------------
4,350,000 Motor Wheel Corp., Sr. Note, 11.50%, 3/1/2000 4,284,750
--------------------------------------------------------------------------------- --------------
Total 16,191,750
--------------------------------------------------------------------------------- --------------
BANKING--1.0%
---------------------------------------------------------------------------------
4,500,000 First Nationwide Holdings, Inc., Sr. Note, 12.25%, 5/15/2001* 4,747,500
--------------------------------------------------------------------------------- --------------
BEVERAGE & TOBACCO--1.9%
---------------------------------------------------------------------------------
7,000,000 Dr. Pepper Bottling Holdings Co., Sr. Disc. Note, 0/11.625%, 2/15/2003 4,865,000
---------------------------------------------------------------------------------
4,750,000 Heileman Acquisition Co., Sr. Sub. Note, 9.625%, 1/31/2004 4,013,750
--------------------------------------------------------------------------------- --------------
Total 8,878,750
--------------------------------------------------------------------------------- --------------
BROADCAST RADIO & TV--4.5%
---------------------------------------------------------------------------------
6,000,000 Ackerly Communications, Inc., Sr. Secd. Note, 10.75%, 10/1/2003 5,820,000
---------------------------------------------------------------------------------
5,000,000 Allbritton Communication Co., Sr. Sub. Note, 11.50%, 8/15/2004 5,175,000
---------------------------------------------------------------------------------
7,300,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 7,409,500
---------------------------------------------------------------------------------
3,250,000 Sinclair Broadcast Group, Sr. Sub. Note, 10.00%, 12/15/2003 3,176,875
--------------------------------------------------------------------------------- --------------
Total 21,581,375
--------------------------------------------------------------------------------- --------------
BUSINESS EQUIPMENT & SERVICES--2.2%
---------------------------------------------------------------------------------
4,250,000 Anacomp, Inc., Sr. Sub. Note, 15.00%, 11/1/2000 4,728,125
---------------------------------------------------------------------------------
4,300,000 Bell & Howell Co., Sr. Sub. Note, 10.75%, 10/1/2002 4,192,500
---------------------------------------------------------------------------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
BUSINESS EQUIPMENT & SERVICES--CONTINUED
---------------------------------------------------------------------------------
$ 3,500,000 Bell & Howell Holdings Co., Sr. Disc. Deb., 0/11.50%, 3/1/2005 $ 1,776,250
--------------------------------------------------------------------------------- --------------
Total 10,696,875
--------------------------------------------------------------------------------- --------------
CABLE TV--5.3%
---------------------------------------------------------------------------------
3,000,000 Cablevision Industries Corp., Sr. Note, 9.25%, 4/1/2008 2,655,000
---------------------------------------------------------------------------------
5,000,000 Cablevision Systems Co., Sr. Sub. Deb., 9.875%, 2/15/2013 4,625,000
---------------------------------------------------------------------------------
6,000,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 5,445,000
---------------------------------------------------------------------------------
6,250,000 International Cabletel, Inc., Sr. Defd. Note, 0/10.875%, 10/15/2003 3,593,750
---------------------------------------------------------------------------------
4,500,000 Marcus Cable Co., L.P., Sr. Deb., 11.875%, 10/1/2005 4,162,500
---------------------------------------------------------------------------------
7,500,000 Rogers Cablesystems, Ltd., Sr. Secd. Note, 9.65%, 1/15/2014 4,783,663
--------------------------------------------------------------------------------- --------------
Total 25,264,913
--------------------------------------------------------------------------------- --------------
CHEMICALS & PLASTICS--9.2%
---------------------------------------------------------------------------------
7,500,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 7,378,125
---------------------------------------------------------------------------------
6,000,000 Foamex Capital Corp., Sr. Sub. Deb., 11.875%, 10/1/2004 6,060,000
---------------------------------------------------------------------------------
13,000,000 G-I Holdings, Inc., Sr. Disc. Note, 0/11.375%, 10/1/98 8,125,000
---------------------------------------------------------------------------------
4,925,000 Harris Chemical, Sr. Secd. Disc. Note, 0/10.25%, 7/15/2001 4,038,500
---------------------------------------------------------------------------------
3,500,000 LaRoche Industries, Inc., Sr. Sub. Note, 13.00%, 8/15/2004 3,473,750
---------------------------------------------------------------------------------
5,500,000 Polymer Group, Inc., Sr. Note, 12.25%, 7/15/2002* 5,582,500
---------------------------------------------------------------------------------
4,000,000 UCC Investors Holdings, Inc., Sr. Sub. Note, 11.00%, 5/1/2003 4,140,000
---------------------------------------------------------------------------------
7,000,000 UCC Investors Holdings, Inc., Sr. Disc. Note, 0/12.00%, 5/1/2005 4,690,000
--------------------------------------------------------------------------------- --------------
Total 43,487,875
--------------------------------------------------------------------------------- --------------
CLOTHING & TEXTILES--1.8%
---------------------------------------------------------------------------------
9,375,000 WestPoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 8,507,813
--------------------------------------------------------------------------------- --------------
CONGLOMERATES--2.6%
---------------------------------------------------------------------------------
4,000,000 Fairchild Industries, Sr. Secd. Note, 12.25%, 2/1/99 3,900,000
---------------------------------------------------------------------------------
4,500,000 Sherritt Gordon, Ltd., Sr. Note, 9.75%, 4/1/2003 4,393,125
---------------------------------------------------------------------------------
5,000,000 (a)Walter Industries, Inc., Sub. Deb., 17.00%, 1/1/96 4,125,000
--------------------------------------------------------------------------------- --------------
Total 12,418,125
--------------------------------------------------------------------------------- --------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
CONTAINER & GLASS PRODUCTS--4.8%
---------------------------------------------------------------------------------
$ 4,000,000 Ivex Holdings Corp., Sr. Disc. Deb., Series A, 0/13.25%, 3/15/2005 $ 1,840,000
---------------------------------------------------------------------------------
1,680,000 (a)Kane Industries, Inc., Sr. Sub. Disc. Note, 0/8.00%, 2/1/98* 0
---------------------------------------------------------------------------------
2,500,000 Owens Illinois, Inc., Sr. Sub. Note, 10.50%, 6/15/2002 2,550,000
---------------------------------------------------------------------------------
1,000,000 Owens Illinois, Inc., Sr. Sub. Note, 9.75%, 8/15/2004 973,750
---------------------------------------------------------------------------------
1,250,000 Owens Illinois, Inc., Sr. Sub. Note, 9.95%, 10/15/2004 1,229,687
---------------------------------------------------------------------------------
3,500,000 Plastic Containers, Inc., Sr. Secd. Note, 10.75%, 4/1/2001 3,482,500
---------------------------------------------------------------------------------
2,000,000 Silgan Corp., Sr. Sub. Note, 11.75%, 6/15/2002 2,090,000
---------------------------------------------------------------------------------
7,000,000 Siligan Holdings, Inc., Sr. Disc. Deb., 0/13.25%, 12/15/2002 5,740,000
---------------------------------------------------------------------------------
4,250,000 U.S. Can Co., Sr. Sub. Note, 13.50%, 1/15/2002 4,749,375
--------------------------------------------------------------------------------- --------------
Total 22,655,312
--------------------------------------------------------------------------------- --------------
COSMETICS & TOILETRIES--2.0%
---------------------------------------------------------------------------------
20,000,000 Revlon Worldwide Corp., Sr. Secd. Note, Series B, 12.00%, 3/15/98 9,350,000
--------------------------------------------------------------------------------- --------------
ECOLOGICAL SERVICES & EQUIPMENT--2.7%
---------------------------------------------------------------------------------
4,375,000 Allied Waste Industries, Inc., Sr. Sub. Note, 10.75%, 2/1/2004 4,003,125
---------------------------------------------------------------------------------
4,000,000 ICF Kaiser International, Sr. Sub. Note, 12.00%, 12/31/2003 3,600,000
---------------------------------------------------------------------------------
5,250,000 Mid-American Waste Systems, Inc., Sr. Sub. Note, 12.25%, 2/15/2003 5,171,250
--------------------------------------------------------------------------------- --------------
Total 12,774,375
--------------------------------------------------------------------------------- --------------
FARMING & AGRICULTURE--0.6%
---------------------------------------------------------------------------------
3,000,000 Spreckels Industries, Inc., Sr. Secd. Note, 11.50%, 9/1/2000 2,880,000
--------------------------------------------------------------------------------- --------------
FINANCIAL INTERMEDIARIES--1.4%
---------------------------------------------------------------------------------
2,300,000 American Life Holding Company, Sr. Sub. Note, 11.25%, 9/15/2004 2,323,000
---------------------------------------------------------------------------------
4,000,000 Coldwell Banker Corp., Sr. Sub. Note, 10.25%, 6/30/2003 4,120,000
--------------------------------------------------------------------------------- --------------
Total 6,443,000
--------------------------------------------------------------------------------- --------------
FOOD & DRUG RETAILERS--3.6%
---------------------------------------------------------------------------------
10,500,000 Grand Union Co., Sr. Sub. Note, 12.25%, 7/15/2002 7,848,750
---------------------------------------------------------------------------------
5,000,000 Pathmark Stores, Inc., Sr. Sub. Note, 9.625%, 5/1/2003 4,525,000
---------------------------------------------------------------------------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--CONTINUED
---------------------------------------------------------------------------------
$ 5,000,000 Penn Traffic Co., Sr. Sub. Note, 9.625%, 4/15/2005 $ 4,525,000
--------------------------------------------------------------------------------- --------------
Total 16,898,750
--------------------------------------------------------------------------------- --------------
FOOD PRODUCTS--3.1%
---------------------------------------------------------------------------------
5,000,000 Doskocil Cos., Inc., Sr. Sub. Note, 9.75%, 7/15/2000 4,362,500
---------------------------------------------------------------------------------
2,500,000 PMI Acquisition Corp., Sr. Sub. Note, 10.25%, 9/1/2003 2,481,250
---------------------------------------------------------------------------------
19,000,000 Specialty Foods Acquisition Corp., Sr. Secd. Disc. Deb., 0/13.00%,
8/15/2005 7,030,000
---------------------------------------------------------------------------------
1,000,000 Specialty Foods Corp., Sr. Sub. Note, 11.25%, 8/15/2003 840,000
--------------------------------------------------------------------------------- --------------
Total 14,713,750
--------------------------------------------------------------------------------- --------------
FOOD SERVICES--3.1%
---------------------------------------------------------------------------------
3,500,000 Americold Corp., 1st Mtg. Bond, Series B, 11.50%, 3/1/2005 3,202,500
---------------------------------------------------------------------------------
1,250,000 Flagstar Corp., Sr. Note, 10.75%, 9/15/2001 1,184,375
---------------------------------------------------------------------------------
7,050,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 6,679,875
---------------------------------------------------------------------------------
4,250,000 Flagstar Corp., Sr. Sub. Deb., 11.25%, 11/1/2004 3,676,250
--------------------------------------------------------------------------------- --------------
Total 14,743,000
--------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--5.9%
---------------------------------------------------------------------------------
1,500,000 Container Corp. of America, Sr. Note, 11.25%, 5/1/2004 1,571,250
---------------------------------------------------------------------------------
1,500,000 Container Corp. of America, Sr. Note, 9.75%, 4/1/2003 1,455,000
---------------------------------------------------------------------------------
3,000,000 Domtar, Inc., Deb., 11.25%, 9/15/2017 3,090,000
---------------------------------------------------------------------------------
3,000,000 Domtar, Inc., Note, 12.00%, 4/15/2001 3,255,000
---------------------------------------------------------------------------------
500,000 Repap Wisconsin, Inc., 1st Priority Sr. Secd. Note, 9.25%, 2/1/2002 446,250
---------------------------------------------------------------------------------
1,500,000 Repap Wisconsin, Inc., 2nd Priority Sr. Secd. Note, 9.875%, 5/1/2006 1,305,000
---------------------------------------------------------------------------------
2,900,000 Riverwood International Corp., Sr. Sub. Note, 11.25%, 6/15/2002 3,030,500
---------------------------------------------------------------------------------
1,500,000 Stone Container Corp., Sr. Note, 11.875%, 12/1/98 1,556,250
---------------------------------------------------------------------------------
1,000,000 Stone Container Corp., Sr. Note, 12.625%, 7/15/98 1,057,500
---------------------------------------------------------------------------------
8,850,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 8,341,125
---------------------------------------------------------------------------------
500,000 Stone Container Corp., 1st Mtg. Note, 10.75%, 10/1/2002 501,250
---------------------------------------------------------------------------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
FOREST PRODUCTS--CONTINUED
---------------------------------------------------------------------------------
$ 2,250,000 Stone Container Corp., Sr. Note, 11.50%, 10/1/2004 $ 2,264,063
--------------------------------------------------------------------------------- --------------
Total 27,873,188
--------------------------------------------------------------------------------- --------------
HEALTHCARE--2.5%
---------------------------------------------------------------------------------
6,115,687 AmeriSource Corp., Sr. PIK Deb., 11.25%, 7/15/2005 6,146,265
---------------------------------------------------------------------------------
3,500,000 Hillhaven Corp., Sr. Sub. Note, 10.125%, 9/1/2001 3,535,000
---------------------------------------------------------------------------------
2,375,000 Surgical Health Corp., Sr. Sub. Note, 11.50%, 7/15/2004 2,428,438
--------------------------------------------------------------------------------- --------------
Total 12,109,703
--------------------------------------------------------------------------------- --------------
HOME PRODUCTS & FURNISHINGS--4.2%
---------------------------------------------------------------------------------
3,000,000 American Standard, Inc., Sr. Deb., 11.375%, 5/15/2004 3,210,000
---------------------------------------------------------------------------------
13,000,000 American Standard, Inc., Sr. Sub. Disc. Deb., 0/10.50%, 6/1/2005 8,482,500
---------------------------------------------------------------------------------
4,000,000 Nortek, Inc., Sr. Sub. Note, 9.875%, 3/1/2004 3,680,000
---------------------------------------------------------------------------------
4,625,000 Triangle Pacific Corp., Sr. Note, 10.50%, 8/1/2003 4,567,188
--------------------------------------------------------------------------------- --------------
Total 19,939,688
--------------------------------------------------------------------------------- --------------
HOTELS, MOTELS, INNS & CASINOS--0.5%
---------------------------------------------------------------------------------
2,250,000 Motels of America, Inc., Sr. Sub. Note, 12.00%, 4/15/2004 2,531,250
--------------------------------------------------------------------------------- --------------
INDUSTRIAL PRODUCTS & EQUIPMENT--2.5%
---------------------------------------------------------------------------------
2,000,000 Fairfield Manufacturing Co., Inc. Sr. Sub. Note, 11.375%, 7/1/2001 1,995,000
---------------------------------------------------------------------------------
3,000,000 Interlake Corp., Sr. Sub. Deb., 12.125%, 3/1/2002 2,752,500
---------------------------------------------------------------------------------
3,625,000 Pace Industries, Inc., Sr. Note, 10.625%, 12/1/2002 3,298,750
---------------------------------------------------------------------------------
3,500,000 Truck Components, Inc., Sr. Note, 12.25%, 6/30/2001 3,718,750
--------------------------------------------------------------------------------- --------------
Total 11,765,000
--------------------------------------------------------------------------------- --------------
LEISURE & ENTERTAINMENT--1.8%
---------------------------------------------------------------------------------
3,000,000 Act III Theatres, Inc., Sr. Sub. Note, 11.875%, 2/1/2003 3,210,000
---------------------------------------------------------------------------------
3,625,000 Affinity Group, Inc., Sr. Sub. Note, 11.50%, 10/15/2003 3,625,000
---------------------------------------------------------------------------------
1,900,000 Plitt Theatres, Inc., Sr. Sub. Note, 10.875%, 6/15/2004 1,900,000
--------------------------------------------------------------------------------- --------------
Total 8,735,000
--------------------------------------------------------------------------------- --------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
MACHINERY & EQUIPMENT--0.8%
---------------------------------------------------------------------------------
$ 4,000,000 Waters Corp., Sr. Sub. Note, 12.75%, 9/30/2004* $ 4,060,000
--------------------------------------------------------------------------------- --------------
OIL & GAS--2.2%
---------------------------------------------------------------------------------
3,500,000 Falcon Drilling Co., Inc., Sr. Note, 9.75%, 1/15/2001 3,438,750
---------------------------------------------------------------------------------
3,000,000 Giant Industries, Sr. Sub. Note, 9.75%, 11/15/2003 2,790,000
---------------------------------------------------------------------------------
3,250,000 H.S. Resources, Inc., Sr. Sub. Note, 9.875%, 12/1/2003 3,071,250
---------------------------------------------------------------------------------
1,500,000 Triton Energy Corp., Sr. Sub. Disc. Note, 0/9.75%, 12/15/2000 1,140,000
--------------------------------------------------------------------------------- --------------
Total 10,440,000
--------------------------------------------------------------------------------- --------------
PRINTING & PUBLISHING--1.6%
---------------------------------------------------------------------------------
7,500,000 Affiliated Newspapers, Sr. Disc. Note, 13.25%, 7/1/2006 3,900,000
---------------------------------------------------------------------------------
1,000,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 995,000
---------------------------------------------------------------------------------
3,000,000 Webcraft Technologies, Inc., Sr. Sub. Note, 9.375%, 2/15/2002 2,782,500
--------------------------------------------------------------------------------- --------------
Total 7,677,500
--------------------------------------------------------------------------------- --------------
RETAILERS--0.9%
---------------------------------------------------------------------------------
4,500,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 9/1/2003 4,331,250
--------------------------------------------------------------------------------- --------------
SERVICES--0.9%
---------------------------------------------------------------------------------
4,250,000 Solon Automated Services, Inc., Sr. Note, 12.75%, 7/15/2001 4,250,000
--------------------------------------------------------------------------------- --------------
STEEL--6.2%
---------------------------------------------------------------------------------
4,500,000 Acme Metals, Inc., Sr. Secd. Disc. Note, 0/13.25%, 8/1/2004 3,127,500
---------------------------------------------------------------------------------
3,500,000 Armco, Inc., Sr. Note, 9.375%, 11/1/2000 3,255,000
---------------------------------------------------------------------------------
5,500,000 Carbide/Graphite Group, Sr. Note, 11.50%, 9/1/2003 5,582,500
---------------------------------------------------------------------------------
5,000,000 EnviroSource, Inc., Sr. Note, 9.75%, 6/15/2003 4,550,000
---------------------------------------------------------------------------------
3,000,000 Geneva Steel, Sr. Note, 11.125%, 3/15/2001 3,022,500
---------------------------------------------------------------------------------
4,000,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 4,065,000
---------------------------------------------------------------------------------
3,825,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 3,595,500
---------------------------------------------------------------------------------
2,500,000 WCI Steel, Inc., Sr. Secd. Note, 10.50%, 3/1/2002 2,481,250
--------------------------------------------------------------------------------- --------------
Total 29,679,250
--------------------------------------------------------------------------------- --------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
SURFACE TRANSPORTATION--3.3%
---------------------------------------------------------------------------------
$ 2,375,000 Moran Transportation Co., 1st Mtg. Note, 11.75%, 7/15/2004* $ 2,369,062
---------------------------------------------------------------------------------
3,500,000 Sea Containers, Ltd., Sr. Note, 9.50%, 7/1/2003 3,272,500
---------------------------------------------------------------------------------
1,750,000 Sea Containers, Ltd., Sr. Sub. Note, 12.50%, 12/1/2004 1,855,000
---------------------------------------------------------------------------------
3,000,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 2,964,000
---------------------------------------------------------------------------------
5,000,000 Trism, Inc., Sr. Sub. Note, 10.75%, 12/15/2000 5,000,000
--------------------------------------------------------------------------------- --------------
Total 15,460,562
--------------------------------------------------------------------------------- --------------
TECHNOLOGY SERVICES--0.5%
---------------------------------------------------------------------------------
2,600,000 Computervision Corp., Sr. Sub. Note, 11.375%, 8/15/99 2,197,000
--------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS & CELLULAR--3.1%
---------------------------------------------------------------------------------
4,500,000 Dial Call Communications, Inc., Unit, 0/12.25%, 4/15/2004 2,362,500
---------------------------------------------------------------------------------
7,750,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 3,836,250
---------------------------------------------------------------------------------
7,250,000 PanAmSat, L.P., Sr. Sub. Disc. Note, 0/11.375%, 8/1/2003 4,930,000
---------------------------------------------------------------------------------
4,000,000 USA Mobile Communications, Inc., Sr. Note, 9.50%, 2/1/2004 3,580,000
--------------------------------------------------------------------------------- --------------
Total 14,708,750
--------------------------------------------------------------------------------- --------------
UTILITIES--1.2%
---------------------------------------------------------------------------------
7,750,000 California Energy Co., Inc., Sr. Disc. Note, 0/10.25%, 1/15/2004 5,541,250
--------------------------------------------------------------------------------- --------------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $466,958,727) 440,320,054
--------------------------------------------------------------------------------- --------------
(A) COMMON STOCKS--1.3%
- ------------------------------------------------------------------------------------------------
1,875 Advanstar Holdings, Trust Shares Beneficial Interest 0
---------------------------------------------------------------------------------
583 Advanstar, Warrants 73
---------------------------------------------------------------------------------
7,500 Affiliated Newspapers 187,500
---------------------------------------------------------------------------------
4,696 Atlantic Gulf Communities Corp. 56,352
---------------------------------------------------------------------------------
3,571 Atlantic Gulf Communities Corp., Warrants 2,455
---------------------------------------------------------------------------------
6,589 Haynes International, Inc.* 329
---------------------------------------------------------------------------------
25,710 Hillsborough Holding Corp.* 257
---------------------------------------------------------------------------------
19,200 ICF Kaiser International, Warrants 4,800
---------------------------------------------------------------------------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- --------------
(A) COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
71,200 Kane Industries, Inc., Warrants* $ 0
---------------------------------------------------------------------------------
39,960 La Barge, Inc.* 52,448
---------------------------------------------------------------------------------
115,500 Lear Seating Corp. 2,122,312
---------------------------------------------------------------------------------
353 MAFCO, Warrants* 0
---------------------------------------------------------------------------------
1,750 Motels of America, Inc. 140,000
---------------------------------------------------------------------------------
315,000 Specialty Foods Acquisition Corp.* 314,685
---------------------------------------------------------------------------------
204,545 Spreckels Industries, Inc., Class A 1,713,882
---------------------------------------------------------------------------------
46 Sullivan Holdings, Inc.* 12
---------------------------------------------------------------------------------
771,314 Triton Group, Ltd. 1,398,007
---------------------------------------------------------------------------------
14,862 UCC Investors Holdings, Inc.* 178,344
---------------------------------------------------------------------------------
359,450 Vagabond Inns, Inc. 0
--------------------------------------------------------------------------------- --------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $22,702,948) 6,171,456
--------------------------------------------------------------------------------- --------------
PREFERRED STOCKS--1.4%
- ------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING--1.4%
---------------------------------------------------------------------------------
67,284 K-III Communications Corp., PIK Pfd., Series B, 11.625%
(IDENTIFIED COST, $6,855,244) $ 6,627,464
--------------------------------------------------------------------------------- --------------
REPURCHASE AGREEMENT**--2.9%
- ------------------------------------------------------------------------------------------------
$ 13,950,000 J.P. Morgan Securities, Inc., 4.90%, dated 9/30/94, due 10/3/94
(at amortized cost) 13,950,000
--------------------------------------------------------------------------------- --------------
TOTAL LNVESTMENTS (IDENTIFIED COST, $510,466,919)*** $ 467,068,974+
--------------------------------------------------------------------------------- --------------
</TABLE>
The following abbreviation is used in this portfolio:
PIK--Payment in Kind
(a) Non-income producing.
* Indicates a private placement security which is restricted as to public
resale. At the date of acquisition, these securities were valued at cost and
at September 30, 1994 they were valued by an independent pricing source. The
total value of private placement securities owned at September 30, 1994, was
$21,395,137 or 4.5% of total net assets.
** The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
*** Includes Advanstar trust certificates and warrants and Atlantic Gulf
Communities Corp. warrants which have been assigned a zero identified cost.
The cost for federal tax purposes amounts to $512,014,723. The net unrealized
depreciation of investments on a
federal tax basis amounts to $44,945,749, which is comprised of $5,008,878
appreciation and $49,954,627 depreciation at
September 30, 1994.
Note: The categories of investments are shown as a percentage of net assets
($475,121,900) at September 30, 1994.
(See Notes which are an integral part of the Financial Statements)
Liberty High Income Bond Fund, Inc.
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
WALTER INDUSTRIES (ALSO KNOWN AS GEORGIA MARBLE CO.;
FORMERLY KNOWN AS JIM WALTER CORP.)
Walter Industries filed for Chapter 11 bankruptcy protection in December, 1989.
The company was forced to seek protection because of pending litigation, as well
as an inability to reset the coupon on certain debt instruments as stipulated in
instruments' indentures. The bankruptcy court terminated the company's
exclusivity, effective August 3, 1993, which should accelerate a conclusion to
the company's bankruptcy proceedings. The Fund's management is currently
unable to predict the ultimate resolution or the timing of bankruptcy
proceedings.
KANE INDUSTRIES, INC.
On March 18, 1994, Kane Industries, Inc., along with two of its affiliates,
Kane, Inc. and Alford Industries, Inc., filed for protection under Chapter 11
with the U.S. Bankruptcy Court in
Wilmington, Delaware. At this time, the outcome of the bankruptcy proceedings is
difficult
to predict.
Liberty High Income Bond Fund, Inc.
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
September 30, 1994
(unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost, $510,466,919; tax cost, $512,014,723) $467,068,974
- ---------------------------------------------------------------------------------------------------
Cash 2,579
- ---------------------------------------------------------------------------------------------------
Interest receivable 10,213,289
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 2,265,000
- ---------------------------------------------------------------------------------------------------
Receivable for capital stock sold 909,625
- --------------------------------------------------------------------------------------------------- -----------
Total assets 480,459,467
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased $4,965,698
- ----------------------------------------------------------------------------------------
Payable for capital stock redeemed 324,691
- ----------------------------------------------------------------------------------------
Accrued expenses and other liabilities 47,178
- ---------------------------------------------------------------------------------------- ---------
Total liabilities 5,337,567
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS for 44,912,945 shares of capital stock outstanding $475,121,900
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $542,627,592
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (43,397,945)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (26,630,270)
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 2,522,523
- --------------------------------------------------------------------------------------------------- -----------
Total Net Assets $475,121,900
- --------------------------------------------------------------------------------------------------- -----------
NET ASSET VALUE PER SHARE:
- ---------------------------------------------------------------------------------------------------
Class A Shares (net assets of $447,414,252 / 42,293,761 shares of capital stock outstanding) $10.58
- --------------------------------------------------------------------------------------------------- -----------
Class C Shares (net assets of $27,707,648 / 2,619,184 shares of capital stock outstanding) $10.58
- --------------------------------------------------------------------------------------------------- -----------
OFFERING PRICE PER SHARE:
- ---------------------------------------------------------------------------------------------------
Class A Shares (100/95.5 of $10.58)* $11.08
- --------------------------------------------------------------------------------------------------- -----------
Class C Shares $10.58
- --------------------------------------------------------------------------------------------------- -----------
REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
Class A Shares $10.58
- --------------------------------------------------------------------------------------------------- -----------
Class C Shares (99/100 of $10.58)** $10.47
- --------------------------------------------------------------------------------------------------- -----------
</TABLE>
*See "What Shares Cost" in the prospectus.
**See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
Liberty High Income Bond Fund, Inc.
Statement of Operations
- --------------------------------------------------------------------------------
Six Months Ended September 30, 1994
(unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest income $24,584,840
- ----------------------------------------------------------------------------------------------------
Dividend income 369,040
- ---------------------------------------------------------------------------------------------------- -----------
Total income 24,953,880
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------------
Investment advisory fee $1,746,404
- -----------------------------------------------------------------------------------------
Directors' fees 7,000
- -----------------------------------------------------------------------------------------
Administrative personnel and services fees 176,492
- -----------------------------------------------------------------------------------------
Custodian fees 92,680
- -----------------------------------------------------------------------------------------
Portfolio accounting fees 14,320
- -----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 258,000
- -----------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 91,688
- -----------------------------------------------------------------------------------------
Distribution services fee--Select Shares 2,197
- -----------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 395,667
- -----------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 32,597
- -----------------------------------------------------------------------------------------
Shareholder services fee--Select Shares 732
- -----------------------------------------------------------------------------------------
Capital stock registration costs 47,196
- -----------------------------------------------------------------------------------------
Auditing fees 15,500
- -----------------------------------------------------------------------------------------
Legal fees 15,000
- -----------------------------------------------------------------------------------------
Printing and postage 44,000
- -----------------------------------------------------------------------------------------
Taxes 46,720
- -----------------------------------------------------------------------------------------
Insurance premiums 6,405
- -----------------------------------------------------------------------------------------
Miscellaneous 3,868
- ----------------------------------------------------------------------------------------- ---------
Total expenses 2,996,466
- -----------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 90,262
- ----------------------------------------------------------------------------------------- ---------
Net expenses 2,906,204
- ---------------------------------------------------------------------------------------------------- -----------
Net investment income 22,047,676
- ---------------------------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (identified cost basis) 2,153,313
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments (19,944,797)
- ---------------------------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments (17,791,484)
- ---------------------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $ 4,256,192
- ---------------------------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Liberty High Income Bond Fund, Inc.
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
<S> <C> <C>
1995* 1994
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------------
Net investment income $ 22,047,676 $ 42,374,163
- ---------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($2,122,132 net gain and
$15,192,825 net gain, respectively, as computed for federal income tax purposes) 2,153,313 15,492,911
- ---------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments (19,944,797) (24,237,819)
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from operations 4,256,192 33,629,255
- --------------------------------------------------------------------------------- -------------- --------------
NET EQUALIZATION CREDITS (DEBITS) 105,111 10,368
- --------------------------------------------------------------------------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- ---------------------------------------------------------------------------------
Class A Shares (20,899,689) (41,478,274)
- ---------------------------------------------------------------------------------
Class C Shares (1,139,340) (943,649)
- ---------------------------------------------------------------------------------
Select Shares (25,156) (9,149)
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets from distributions to shareholders (22,064,185) (42,431,072)
- --------------------------------------------------------------------------------- -------------- --------------
CAPITAL STOCK TRANSACTIONS--
- ---------------------------------------------------------------------------------
(Exclusive of amounts allocated to net investment income)
- ---------------------------------------------------------------------------------
Proceeds from sales of shares 79,157,101 165,279,381
- ---------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of dividends declared 10,349,970 20,093,179
- ---------------------------------------------------------------------------------
Cost of shares redeemed (61,029,670) (129,248,655)
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets from capital stock transactions 28,477,401 56,123,905
- --------------------------------------------------------------------------------- -------------- --------------
Change in net assets 10,774,519 47,332,456
- ---------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------
Beginning of period 464,347,381 417,014,925
- --------------------------------------------------------------------------------- -------------- --------------
End of period (including undistributed net investment income of $2,522,523 and
$2,432,218, respectively) $ 475,121,900 $ 464,347,381
- --------------------------------------------------------------------------------- -------------- --------------
</TABLE>
*Reflects operations for the six month period ended September 30, 1994
(unaudited).
(See Notes which are an integral part of the Financial Statements)
Liberty High Income Bond Fund, Inc.
Financial Highlights--Class A Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Class B Shares were effective, but did not have public investment as of
September 30, 1994. Accordingly, there are no Financial Highlights for such
Shares. The Financial Highlights listed below represent historical information
for Class A Shares.
<TABLE>
<CAPTION>
YEAR ENDED
AUGUST
MARCH 31, 31,
1995* 1994 1993 1992 1991 1990 1989 1988 1987** 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.99 $ 11.19 $ 10.80 $ 8.79 $ 8.96 $ 10.99 $ 11.20 $ 12.53 $ 12.53 $ 12.17
- --------------------
INCOME FROM
INVESTMENT
OPERATIONS
- --------------------
Net investment
income 0.51 1.05 1.13 1.23 1.21 1.33 1.40 1.42 0.85 1.53
- --------------------
Net realized and
unrealized gain
(loss) on
investments (0.41) (0.19) 0.41 1.99 (0.14) (1.98) (0.20) (1.31) -- 0.37
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------- ---------
Total from
investment
operations 0.10 0.86 1.54 3.22 1.07 (0.65) 1.20 0.11 0.85 1.90
- --------------------
LESS DISTRIBUTIONS
- --------------------
Dividends to
shareholders from
net investment
income (0.51) (1.06) (1.15) (1.21) (1.24) (1.38) (1.41) (1.44) (0.85) (1.54)
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------- ---------
NET ASSET VALUE,
END OF PERIOD $ 10.58 $ 10.99 $ 11.19 $ 10.80 $ 8.79 $ 8.96 $ 10.99 $ 11.20 $ 12.53 $ 12.53
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------- ---------
TOTAL RETURN*** 0.97% 7.82% 15.39% 38.83% 14.20% (6.82%) 11.34% 1.30% 7.09% 16.51%
- --------------------
RATIOS TO AVERAGE
NET ASSETS
- --------------------
Expenses 1.20%(b) 1.18% 1.08% 1.02% 1.03% 1.02% 1.00% 1.05% 1.02%(b) 1.06%
- --------------------
Net investment
income 9.55%(b) 9.27% 10.44% 12.40% 14.62% 13.01% 12.55% 12.37% 11.72%(b) 12.41%
- --------------------
Expense waiver/
reimbursement (a) 0.04%(b) 0.05% 0.08% -- -- -- -- -- -- --
- --------------------
SUPPLEMENTAL DATA
- --------------------
Net assets,
end of period
(000 omitted) $447,414 $439,149 $417,015 $351,087 $252,147 $282,149 $379,876 $360,409 $390,160 $352,641
- --------------------
Portfolio turnover
rate 30% 76% 49% 37% 32% 40% 43% 52% 25% 27%
- --------------------
<CAPTION>
1985
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 11.35
- --------------------
INCOME FROM
INVESTMENT
OPERATIONS
- --------------------
Net investment
income 1.56
- --------------------
Net realized and
unrealized gain
(loss) on
investments 0.81
- -------------------- ---------
Total from
investment
operations 2.37
- --------------------
LESS DISTRIBUTIONS
- --------------------
Dividends to
shareholders from
net investment
income (1.55)
- -------------------- ---------
NET ASSET VALUE,
END OF PERIOD $ 12.17
- -------------------- ---------
TOTAL RETURN*** 22.42%
- --------------------
RATIOS TO AVERAGE
NET ASSETS
- --------------------
Expenses 1.14%
- --------------------
Net investment
income 13.27%
- --------------------
Expense waiver/
reimbursement (a) --
- --------------------
SUPPLEMENTAL DATA
- --------------------
Net assets,
end of period
(000 omitted) $212,932
- --------------------
Portfolio turnover
rate 26%
- --------------------
</TABLE>
* Reflects operations for the six month period ended September 30, 1994
(unaudited).
** Reflects operations for the seven month period ended March 31, 1987.
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Liberty High Income Bond Fund, Inc.
Financial Highlights--Class C Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Class B Shares were effective, but did not have public investment as of
September 30, 1994. Accordingly, there are no Financial Highlights for such
Shares. The Financial Highlights listed below represent historical information
for Class C Shares.
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1995* 1994**
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.99 $ 11.18
- -------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------
Net investment income 0.47 0.92
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.41) (0.23)
- ------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 0.06 0.69
- -------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.47) (0.88)
- ------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.58 $ 10.99
- ------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN*** 0.58% 6.23%
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------
Expenses 1.98%(b) 1.99%(b)
- -------------------------------------------------------------------------------------------
Net investment income 8.81%(b) 8.54%(b)
- -------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.04%(b) 0.05%(b)
- -------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $27,708 $24,360
- -------------------------------------------------------------------------------------------
Portfolio turnover rate 30% 76 %
- -------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the six month period ended September 30, 1994
(unaudited).
** Reflects operations for the period from April 30, 1993 (date of initial
public offering) to March 31, 1994.
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Liberty High Income Bond Fund, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
September 30, 1994
(unaudited)
(1) ORGANIZATION
Liberty High Income Bond Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end,
management investment company. Effective July 29, 1994, the Fund's Select Shares
ceased operations and were reclassified as Class C Shares. Also, effective
September 27, 1994, the Fund added Class B Shares. Consequently, the Fund
currently provides three classes of shares ("Class A Shares", "Class B Shares",
and "Class C Shares"). As of September 30, 1994, Class B Shares did not have
public investment.
(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.
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other
fixed income securities are valued at the last sales price reported on
national securities exchanges. Unlisted securities and bonds are generally
valued at the price provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at
amortized cost, which approximates value.
B. 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 in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure the value of
collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as brokers/dealers, which are
deemed by the Fund's adviser to be creditworthy pursuant to guidelines
established by the Board of Directors (the "Directors"). 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.
C. 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.
D. 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 taxable income. Accordingly, no provisions for federal tax are
necessary. At March 31, 1994, the Fund, for federal tax purposes, had a
capital loss carryforward of $28,752,593 which will reduce the Fund's
taxable income arising from future net realized gain on investments, if
any, to the extent permitted by the Code, and thus will reduce the amount
of the distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal tax. Pursuant to the Code,
such capital loss carryforward will expire in 1999 ($4,687,976) and 2000
($24,064,617).
E. EQUALIZATION--The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
redemptions of capital stock equivalent, on a per share basis, to the
amount of undistributed net investment income on the date of the
transaction is credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share is unaffected by
sales or redemptions of capital stock.
F. 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.
G. INVESTMENT RISKS--Although the Fund has a diversified portfolio, the Fund
has 94.3% of its portfolio invested in lower rated and comparable quality
unrated high yield securities. Investments in higher yield securities are
accompanied by a greater degree of credit risk and the risk tends to be
more sensitive to economic conditions than higher rated securities. The
risk of loss due to default by the issuer may be significantly greater for
the holders of high yielding securities because such securities are
generally unsecured and are often subordinated to other creditors of the
issuer.
H. OTHER--Investment transactions are accounted for on the trade date.
(3) CAPITAL STOCK
At September 30, 1994, the Corporation was authorized to issue 10,000,000,000
shares of $0.01
par value stock. Of these shares, 4,000,000,000 have been designated to Class A
Shares and
Class C Shares, respectively, of the Fund. 2,000,000,000 shares have been
designated as Class B Shares of the Fund. Transactions in capital stock were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1995* 1994
CLASS A SHARES SHARES DOLLARS SHARES DOLLARS
<S> <C> <C> <C> <C>
Shares sold 6,424,670 $ 68,540,991 11,912,803 $ 134,712,957
- ----------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 930,535 9,938,037 1,747,408 19,711,663
- ----------------------------------------------------
Shares redeemed (5,015,669) (53,504,112) (10,988,010) (124,250,451)
- ---------------------------------------------------- ----------- -------------- ------------- ---------------
Net change resulting from Class A Shares
transactions 2,339,536 $ 24,974,916 2,672,201 $ 30,174,169
- ---------------------------------------------------- ----------- -------------- ------------- ---------------
<CAPTION>
YEAR ENDED MARCH 31,
1995* 1994**
CLASS C SHARES SHARES DOLLARS SHARES DOLLARS
<S> <C> <C> <C> <C>
Shares sold 976,646 $ 10,420,378 2,611,701 $ 29,542,663
- ----------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 37,358 399,078 33,178 376,498
- ----------------------------------------------------
Shares redeemed (611,647) (6,512,213) (428,052) (4,851,948)
- ---------------------------------------------------- ----------- -------------- ------------- ---------------
Net change resulting from Class C Shares
transactions 402,357 $ 4,307,243 2,216,827 $ 25,067,213
- ---------------------------------------------------- ----------- -------------- ------------- ---------------
</TABLE>
* Six months ended September 30, 1994.
** For the period from April 30, 1993 (date of initial public offering) to March
31, 1994.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1995+ 1994+
SELECT SHARES SHARES DOLLARS SHARES DOLLARS
<S> <C> <C> <C> <C>
Shares sold 18,080 $ 195,732 88,939 $ 1,023,761
- ---------------------------------------------------------
Shares issued to shareholders in payment of dividends
declared 1,194 12,855 439 5,018
- ---------------------------------------------------------
Shares redeemed (95,524) (1,013,345) (13,128) (146,256)
- --------------------------------------------------------- ---------- ------------- ---------- -------------
Net change resulting from Select Shares
transactions (76,250) $ (804,758) 76,250 $ 882,523
- --------------------------------------------------------- ---------- ------------- ---------- -------------
Net change resulting from capital stock transactions 2,665,643 $ 28,477,401 4,965,278 $ 56,123,905
- --------------------------------------------------------- ---------- ------------- ---------- -------------
</TABLE>
For the period from April 1, 1994 to July 29, 1994.
+ For the period from January 15, 1994 (date of initial public offering) to
March 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.75 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive a portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the
Fund's administrative personnel and services. The FAS fee is based on the level
of average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
DISTRIBUTION AND SHAREHOLDER SERVICES FEE--The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the assets of the Fund to finance activities intended to
result in the sale of the Class B Shares and Class C Shares. The Plan provides
that the Fund may incur distribution expenses of up to 0.75 of 1% of the average
daily net assets of the Class B Shares and Class C Shares, respectively,
annually, to compensate FSC.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25 of 1% of average daily net
assets of the Fund for the period. This fee is to obtain certain personal
services for shareholders and to maintain shareholder accounts.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND ACCOUNTING FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
Certain of the Officers and Directors of the Fund are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term obligations, for the
six months
ended September 30, 1994 were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
PURCHASES $ 153,490,894
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 134,259,108
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
<PAGE>
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Directors Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Richard B. Fisher
J. Christopher Donahue President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden Vice President and Treasurer
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar Vice President and Secretary
Marjorie P. Smuts David M. Taylor
Assistant Treasurer
Charles H. Field
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the Fund's prospectus which contains facts concerning its
objective and policies, management fees, expenses and other information.
[LOGO] FEDERATED SECURITIES CORP.
-------------------------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
530565100
530565209
8110103 (11/94)
APPENDIX
A. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding
mountain chart. The color-coded mountain chart is a visual representation of
the narrative text above it, which shows that an initial investment of $17,000
in the Class A Shares of Liberty High Income Bond Fund, Inc. on November 30,
1997 would have grown to $89,532 on September 30, 1994. The "x" axis reflects
computation periods from November 30, 1977, through 1994. The "y" axis
reflects the cost of the investment with a range from $0 to $100,000. The
right margin reflects the ending value of $89,532 for the hypothetical
investment in the Class A Shares of Liberty High Income Bond Fund, Inc..
B. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding
mountain chart. The color-coded mountain chart is a visual representation of
the narrative text listed above it, which shows that the annual investment of
$1,000 in the Class A Shares of Liberty High Income Bond Fund, Inc. from
November 30, 1977 through September 30, 1994 would have grown to $50,969. The
"x" axis reflects computation periods from November 30, 1977, through 1994.
The "y" axis reflects the cost of investment with a range from $0 to $60,000.
The right margin reflects the ending value of $50,969 for the hypothetical
investment in the Class A Shares of Liberty High Income Bond Fund, Inc.
C. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding
mountain chart. The color-coded mountain chart is a visual representation of
the narrative text above it, which shows that an initial investment of $5,000
in the Class A Shares of Liberty High Income Bond Fund, Inc. on September 30,
1984 would have grown to $15,023 on September 30, 1994. The "x" axis reflects
computation periods from September 30, 1994, through 1994. The "y" axis
reflects the cost of the investment with a range from $0 to $20,000. The
right margin reflects the ending value of $15,023 for the hypothetical
investment in the Class A Shares of Liberty High Income Bond Fund, Inc..
