Liberty
High Income
Bond Fund, Inc.
18th Annual Report
March 31, 1995
Established 1977
President's Message
Dear Fellow Shareholder:
Liberty High Income Bond Fund, Inc. was established in 1977, and I am pleased
to present the 18th Annual Report for the fund.
This report covers the 12-month period from April 1, 1994 to March 31, 1995. It
contains an interview with the fund's portfolio manager, Mark E. Durbiano, Vice
President of Federated Advisers. Following the interview is a series of
investment record performance charts, a complete listing of the fund's
portfolio of high-yield bonds, and its financial statements.
During the past year, shareholder confidence in the fund was reflected by an
increase of more than $49.3 million to the fund's assets. As a result, the
fund's net assets totaled $513.7 million on March 31, 1995. Liberty High Income
Bond Fund, Inc. has over 24,300 shareholders who seek high current income
through corporate bonds.
In 1994, rising interest rates affected all bonds negatively. High-yield bonds,
however, were impacted less severely. Dividends paid per share to shareholders
of Class A Shares totaled $1.03. Total return for Class A Shares, based on net
asset value, amounted to 5.74%.*
Class B Shares paid dividends of $0.47 per share, and showed a total return of
4.47%, based on net asset value over the reporting period.*
Class C Shares generated dividends of $0.95 per share. Total return for Class C
Shares, based on net asset value was 4.91% for the reporting period.*
The fund's performance has continued to remain relatively strong in the current
financial environment in comparison to U.S. government bonds, municipal bonds,
and even high-grade corporate securities. Liberty High Income Bond Fund
maintains a high degree of diversification in more than 137 issues across 35
industries. The dollar amount invested in each issue is no more than 2.85% of
the fund's total assets.
*Past performance does not guarantee future results. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Total return based on
offering price for Class A Shares, Class B Shares, and Class C Shares was
0.96%, -1.28% and 3.82%, respectively. The start of performance for Class B
Shares was September 28, 1994.
As of March 31, 1995, many of the fund's investments are in well-known
household names:
Owens-Illinois 2.85%
Flagstar 2.56%
Stone Container 2.37%
American Standard 2.36%
Specialty Foods 2.17%
I urge you to read this report. The key to enhancing your potential for
long-term investment success is to add to your account regularly. Reinvesting
your dividends increases the number of shares you own, and expands your
potential for returns.
We appreciate your continued confidence in Liberty High Income Bond Fund, Inc.,
and invite your comments and questions.
Sincerely,
Richard B. Fisher
President
May 15, 1995
Investment Review
Mark E. Durbiano
Vice President,
Federated Advisers
Mark, how has the high-yield market performed in the last 12 months?
Like all fixed-income securities, high-yield bond prices have been negatively
affected by the rise in interest rates. However, high-yield bonds have
delivered strong relative performance compared to other fixed income securities
in 1994, given the strength in the U.S. economy. This economic strength has
boosted the creditworthiness of high-yield issuers, helping to offset some of
the interest rate-driven price decline experienced by most intermediate
fixed-income securities. High-yield securities with their higher income returns
provide some cushion to the securities' price decline.
How did Liberty High Income Bond Fund, Inc. do over the 12 month period?
Liberty High Income Bond Fund, Inc. performed quite well. Total return for the
reporting period, based on net asset value was 5.74% for Class A Shares. The
Lipper High Current Yield Funds Average returned 1.55% for the report period.*
The continued economic strength in the first quarter of 1995, has positively
affected the fund's performance. As of March 31, 1995, the year-to-date total
return based on net asset value for Class A Shares was 5.63%.
What factors helped with performance?
First, the fund began the period with an overweight in cyclical industries,
specifically in the chemical, steel, paper and forest product areas. As the
economy strengthened through most of 1994, issuers in these industries
performed well. Recently, the fund began to decrease its exposure to cyclical
holdings and to modestly upgrade the overall credit quality of the portfolio.
Also, the fund had zero exposure to either the casino sector or to emerging
market debt, which under-performed the overall market primarily because of
social and economic problems in Mexico.
* Past performance does not guarantee future results. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less that their original cost. Lipper averages do not
include the effect of sales charges.
What impact did the strength of the equity markets have on the fund?
The fund benefited as several portfolio holdings issued equity over the past
year. Some of the more notable initial public offerings involved American
Standard, Uniroyal Chemical, and Truck Components. Initial public offerings
improve the credit quality of an issuer by increasing a company's equity while
reducing its debt load. We expect this trend of high-yield issuers using the
strong equity market to decrease balance sheet risk to continue.
What does the balance of 1995 hold for high-yield investors?
Fund management remains optimistic on the outlook for high-yield bonds for the
rest of 1995. We are optimistic the economy will have a soft landing, which may
produce stable to falling interest rates as the year progresses. Fund
management expects further positive events to impact the high-yield market,
such as stock offerings, mergers and acquisition activities.
There have been some adjustments to the fund recently. What were these changes,
and why were they made?
The fund continues to maintain a modestly higher quality profile than at the
same time last year. Exposure to the double B and above sector stood at
approximately 20% at year end. Perhaps more importantly fund management has
adopted a higher quality profile within the single B sector based on our
fundamental credit judgements. For example, the fund's largest issuer exposure
is Owens Illinois which while still rated single B is valued more like a double
B by the market. Fund management likes this international packaging company
because of its stable business profile, large market shares, and free cash flow
generation ability.
The fund is currently emphasizing companies which have good growth
opportunities like Panamsat, a private satellite operator, and International
Cabletel, a major player in the rapidly growing United Kingdom cable business.
The fund is also emphasizing companies with stable business profiles like
Playtex, a manufacturer and distributor of personal care products, and Owens
Illinois. The fund is modestly reducing exposure to cyclical industries. The
near term outlook is very positive as price increases implemented in 1994
should begin to impact operating performance in 1995. However, longer term the
best relative price performance for these sectors is probably past.
Two Ways You May Seek to Invest for Success In
Liberty High Income Bond Fund, Inc.
Initial Investment:
If you had made an initial investment of $18,000 in the Class A Shares of
Liberty High Income Bond Fund, Inc. on 11/30/77, reinvested dividends and
capital gains, and didn't redeem any shares, your account would have been worth
$99,261 on 3/31/95. You would have earned a 10.35%* average annual total return
for the 18-year investment lifespan.
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 3/31/95, the Class A Shares' average annual one-year, five-year, and
ten-year total returns were 0.96%, 14.78%, and 11.10%, respectively. Class B
Shares' total return since inception on 9/28/94 was -1.28%. Class C Shares'
average annual one-year and since inception on 5/1/93 were 3.82% and 5.82%.
Graphic presentation. See Appendix A.
* Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 4.50%
sales load applicable to an initial investment in Class A Shares.
Data quoted represents past performance and does 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 18 years (reinvesting all dividends and capital
gains) grew to $54,384.
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 11/30/77, reinvested your dividends and capital
gains and didn't redeem any shares, you would have invested only $18,000, but
your account would have reached a total value of $54,384* by 3/31/95. You would
have earned an average annual total return of 11.40%.
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. See Appendix B.
* 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 opportunties.
Chuck is an attorney on his way up the corporate ladder. On March 31, 1985, 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
$14,328. This represents a 11.10% average annual total return. For Chuck, that
means extra money toward the construction of his first home.
Graphic presentation. See Appendix C.
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.-
A History of Solid Earnings-Nine 10-Year Periods
$10,000 Invested with Distributions Reinvested
How a $10,000 investment grew during each 10-year period since fund inception.
This chart shows what your account would be worth had you invested $10,000 at
the beginning of these consecutive decades.
Over every 10-year period since the fund's inception, a $10,000 investment in
its Class A Shares (with all dividends and capital gains reinvested) grew in
value. There was never a decade in which an investor would have lost money.
Graphic presentation. See Appendix D
.
Liberty High Income Bond Fund, Inc.-
Serving A Wide Range of Investors
Liberty High Income Bond Fund, Inc. appeals to a broad range of investors
seeking current income.
The Fund invests primarily in a diversified portfolio of high yield corporate
bonds cover- ing more than 100 companies across 35 industries. Fund shares are
not guaranteed, and the value of your investment may fluctuate. Mutual funds
involve risk, including possible loss of principal.
Graphic presentation. See Appendix E.
Liberty High Income Bond Fund, Inc.-
Portfolio Update
Graphic presentation. See Appendix F.
Liberty High Income Bond Fund, Inc.
(Class A Shares)
Growth of $10,000 Invested in Liberty High Income Bond Fund, Inc. (Class A
Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Liberty High Income Bond Fund, Inc. (Class A Shares) from March 31, 1985 to
March 31, 1995, compared to the Lehman Brothers Single B Rated Index (LBSBRI)+
and the Lipper High Current Yield Funds Average (LHCYFA).++
Graphic presentation. See Appendix G.
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than original cost.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 4.50% ($10,000 investment minus $450 sales load =
$9,550). The Fund's performance assumes the reinvestment of all dividends and
dis tributions. The LBSBRI and the LHCYFA have been adjusted to reflect
reinvestment of dividends on securities in the indices.
** Total return quoted reflects all applicable sales loads and contingent
deferred sales charges.
+ The LBSBRI is not adjusted to reflect sales loads, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. This index is
unmanaged.
++The LHCYFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category, and is not adjusted to reflect any sales loads. However, these total
returns are reported net of expenses or other fees that the SEC requires to be
reflected in a fund's performance.
Liberty High Income Bond Fund, Inc.
(Class B Shares and Class C Shares)
Growth of $10,000 Invested in Liberty High Income Bond Fund, Inc.
The graphs below illustrate the hypothetical investment of $10,000 in the
Liberty High Income Bond Fund, Inc. from start of performance to March 31,1995,
compared to the Lehman Brothers Single B Rated Index (LBSBRI)++ and the Lipper
High Current Yield Funds Average (LHCYFA)+++.
Graphic presentation. See Appendix H.
Graphic presentation. See Appendix I.
Past Performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than original cost.
* Represents a hypothetical investment of $10,000 in the Class B Shares of the
fund. The ending value of the fund reflects a 5.50% contingent deferred sales
charge on any redemption made within one full year from the purchase date. The
fund's performance assumes the reinvestment of all dividends and distributions.
The LBSBRI and the LHCYFA have been adjusted to reflect reinvestment of
dividends on securities in the indices.
** Represents a hypothetical investment of $10,000 in the Class C Shares of the
fund. The ending value of the fund reflects a 1.00% contingent deferred sales
charge on any redemption made within one full year from the purchase date. The
fund's performance assumes the reinvestment of all dividends and distributions.
The LBSBRI and the LHCYFA have been adjusted to reflect reinvestment of
dividends on securities in the indices.
+ Total return quoted reflects all applicable sales loads and contingent
deferred sales charges.
++ The LBSBRI is not adjusted to reflect sales loads, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. This index is
unmanaged.
+++ The LHCYFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling into
the category, and is not adjusted to reflect any sales loads. However, these
total returns are reported net of expenses or other fees that the SEC requires
to be reflected in a fund's performance.
Liberty High Income Bond Fund, Inc.
Portfolio of Investments
--------------------------------------------------------------------------------
March 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
------------- --------------------------------------------------------------------------------- --------------
CORPORATE BONDS--92%
------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.5%
---------------------------------------------------------------------------------
$ 2,500,000 Tracor, Inc., Sr. Sub. Note, 10.875%, 8/15/2001 $ 2,518,750
--------------------------------------------------------------------------------- --------------
AIR TRANSPORTATION--0.6%
---------------------------------------------------------------------------------
3,250,000 USAir, Inc., Pass Thru Cert., Series 1993-A2, 9.625%, 9/1/2003 2,892,500
--------------------------------------------------------------------------------- --------------
AUTOMOTIVE--3.3%
---------------------------------------------------------------------------------
5,000,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 5,237,500
---------------------------------------------------------------------------------
3,800,000 Doehler-Jarvis, Inc., Sr. Note, 11.875%, 6/1/2002 3,904,500
---------------------------------------------------------------------------------
2,500,000 Lear Seating Corp., Sr. Sub. Note, 11.25%, 7/15/2000 2,600,000
---------------------------------------------------------------------------------
2,000,000 Lear Seating Corp., Sub. Note, 8.25%, 2/1/2002 1,840,000
---------------------------------------------------------------------------------
4,350,000 Motor Wheel Corp., Sr. Note, 11.50%, 3/1/2000 3,501,750
--------------------------------------------------------------------------------- --------------
Total 17,083,750
--------------------------------------------------------------------------------- --------------
BANKING--0.9%
---------------------------------------------------------------------------------
4,500,000 First Nationwide Holdings, Inc., Sr. Note, 12.25%, 5/15/2001 4,623,750
--------------------------------------------------------------------------------- --------------
BEVERAGE & TOBACCO--0.8%
---------------------------------------------------------------------------------
2,000,000 Dr. Pepper Bottling Holdings Co., Sr. Disc. Note, 0/11.625%,
2/15/2003 1,450,000
---------------------------------------------------------------------------------
3,750,000 Heileman Acquisition Co., Sr. Sub. Note, 9.625%, 1/31/2004 2,667,188
--------------------------------------------------------------------------------- --------------
Total 4,117,188
--------------------------------------------------------------------------------- --------------
BROADCAST RADIO & TV--6.3%
---------------------------------------------------------------------------------
6,000,000 Ackerley Communications, Inc., Sr. Secd. Note, 10.75%, 10/1/2003 6,045,000
---------------------------------------------------------------------------------
5,000,000 Allbritton Communication Co., Sr. Sub. Note, 11.50%, 8/15/2004 5,100,000
---------------------------------------------------------------------------------
2,250,000 Benedek Broadcasting Corp., Sr. Secd. Note, 11.875%, 3/1/2005 2,266,875
---------------------------------------------------------------------------------
3,250,000 Chancellor Broadcasting Co., Sr. Sub. Note, 12.50%, 10/1/2004 3,266,250
---------------------------------------------------------------------------------
4,000,000 NWCG Holding Corp., Sr. Disc. Note, 6/15/1999 2,320,000
---------------------------------------------------------------------------------
6,300,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 6,489,000
---------------------------------------------------------------------------------
4,750,000 Sinclair Broadcast Group, Sr. Sub. Note, 10.00%, 12/15/2003 4,684,688
---------------------------------------------------------------------------------
$ 2,000,000 Young Broadcasting Inc., Sr. Sub. Note, 11.75%, 11/15/2004 $ 2,155,000
--------------------------------------------------------------------------------- --------------
Total 32,326,813
--------------------------------------------------------------------------------- --------------
BUSINESS EQUIPMENT & SERVICES--0.9%
---------------------------------------------------------------------------------
4,300,000 Bell & Howell Co., Sr. Sub. Note, 10.75%, 10/1/2002 4,429,000
--------------------------------------------------------------------------------- --------------
CABLE TELEVISION--6.4%
---------------------------------------------------------------------------------
4,000,000 CF Cable TV, Inc., Sr. Secd. 2nd Priority Note, 11.625%, 2/15/2005 4,160,000
---------------------------------------------------------------------------------
3,000,000 Cablevision Industries Corp., Sr. Note, 9.25%, 4/1/2008 2,958,750
---------------------------------------------------------------------------------
4,000,000 Cablevision Systems Co., Sr. Sub. Deb., 9.875%, 2/15/2013 3,860,000
---------------------------------------------------------------------------------
6,000,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 5,812,500
---------------------------------------------------------------------------------
6,000,000 International Cabletel, Inc., Sr. Defd. Note, 0/10.875%, 10/15/2003 3,540,000
---------------------------------------------------------------------------------
1,100,000 Le Groupe Videotron Ltee, Sr. Note, 10.625%, 2/15/2005 1,124,750
---------------------------------------------------------------------------------
7,000,000 Marcus Cable Operating Co., Sr. Disc. Note, 0/13.50% 8/1/2004 4,025,000
---------------------------------------------------------------------------------
3,000,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%,
3/15/2005 2,996,250
---------------------------------------------------------------------------------
7,500,000 Rogers Cablesystems Ltd., Sr. Secd. Note, 9.65%, 1/15/2014 4,405,080
--------------------------------------------------------------------------------- --------------
Total 32,882,330
--------------------------------------------------------------------------------- --------------
CHEMICALS & PLASTICS--8.1%
---------------------------------------------------------------------------------
7,500,000 Arcadian Partners L.P., Sr. Note, Series B. 10.75%, 5/1/2005 7,396,875
---------------------------------------------------------------------------------
6,000,000 Foamex L.P., Sr. Sub. Deb., 11.875%, 10/1/2004 5,820,000
---------------------------------------------------------------------------------
13,000,000 G-I Holdings, Inc., Sr. Disc. Note, 11.4% accrual, 10/1/1998 8,482,500
---------------------------------------------------------------------------------
4,925,000 Harris Chemical North America, Inc., Sr. Secd. Disc. Note, 0/10.25%, 7/15/2001 4,309,375
---------------------------------------------------------------------------------
3,500,000 LaRoche Industries, Inc., Sr. Sub. Note, 13.00%, 8/15/2004 3,508,750
---------------------------------------------------------------------------------
5,500,000 Polymer Group, Inc., Sr. Note, 12.75%, 7/15/2002 (b) 5,335,000
---------------------------------------------------------------------------------
4,000,000 UCC Investors Holdings, Inc., Sr. Sub. Note, 11.00%, 5/1/2003 4,050,000
---------------------------------------------------------------------------------
3,000,000 Uniroyal Technology Corp., Sr. Secd. Note, 11.75 %, 6/1/2003 2,505,000
--------------------------------------------------------------------------------- --------------
Total 41,407,500
--------------------------------------------------------------------------------- --------------
CLOTHING & TEXTILES--1.7%
---------------------------------------------------------------------------------
$ 9,375,000 WestPoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 $ 8,648,438
--------------------------------------------------------------------------------- --------------
CONGLOMERATES--2.4%
---------------------------------------------------------------------------------
4,000,000 Fairchild Industries, Sr. Secd. Note, 12.25%, 2/1/1999 4,000,000
---------------------------------------------------------------------------------
4,500,000 Sherritt Gordon Ltd., Sr. Note, 9.75%, 4/1/2003 4,432,500
---------------------------------------------------------------------------------
1,000,000 Sherritt, Inc., Deb., 10.50%, 3/31/2014 985,000
---------------------------------------------------------------------------------
5,000,000 Walter Industries, Inc., Sub. Deb., 17.00%, 1/1/1996 (a) 3,125,000
--------------------------------------------------------------------------------- --------------
Total 12,542,500
--------------------------------------------------------------------------------- --------------
CONSUMER PRODUCTS--1.0%
---------------------------------------------------------------------------------
5,500,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 5,142,500
--------------------------------------------------------------------------------- --------------
CONTAINER & GLASS PRODUCTS--4.8%
---------------------------------------------------------------------------------
1,680,000 Kane Industries, Inc., Sr. Sub. Disc., Note, 8.00%, 2/1/1998 (a)(b) 0
---------------------------------------------------------------------------------
1,000,000 Owens-Illinois, Inc., Note, 10.00%, 8/1/2002 997,500
---------------------------------------------------------------------------------
1,500,000 Owens-Illinois, Inc., Sr. Sub. Note, 10.50%, 6/15/2002 1,526,250
---------------------------------------------------------------------------------
8,000,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.75%, 8/15/2004 7,780,000
---------------------------------------------------------------------------------
3,500,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.95%, 10/15/2004 3,443,125
---------------------------------------------------------------------------------
3,500,000 Plastic Containers, Inc., Sr. Secd. Note, 10.75%, 4/1/2001 3,570,000
---------------------------------------------------------------------------------
2,000,000 Silgan Corp., Sr. Sub. Note, 11.75%, 6/15/2002 2,090,000
---------------------------------------------------------------------------------
2,750,000 Silgan Holdings, Inc., Sr. Disc. Deb., 0/13.25%, 12/15/2002 2,447,500
---------------------------------------------------------------------------------
2,750,000 U.S. Can Co., Sr. Sub. Note, 13.50%, 1/15/2002 3,031,875
--------------------------------------------------------------------------------- --------------
Total 24,886,250
--------------------------------------------------------------------------------- --------------
COSMETICS & TOILETRIES--2.0%
---------------------------------------------------------------------------------
17,000,000 Revlon Worldwide Corp., Sr. Secd. Note, Series B, 12.00% accrual,
3/15/1998 10,157,500
--------------------------------------------------------------------------------- --------------
ECOLOGICAL SERVICES & EQUIPMENT--2.6%
---------------------------------------------------------------------------------
4,375,000 Allied Waste Industries, Inc., Sr. Sub. Note, 10.75%, 2/1/2004 4,385,938
---------------------------------------------------------------------------------
4,000,000 ICF Kaiser International, Inc., Sr. Sub Note, 12.00%, 12/31/2003 3,660,000
---------------------------------------------------------------------------------
$ 5,250,000 Mid-American Waste Systems, Inc., Sr. Sub. Note, 12.25%, 2/15/2003 $ 5,355,000
--------------------------------------------------------------------------------- --------------
Total 13,400,938
--------------------------------------------------------------------------------- --------------
FARMING & AGRICULTURE--0.6%
---------------------------------------------------------------------------------
3,000,000 Spreckels Industries, Inc., Sr. Secd. Note, 11.50%, 9/1/2000 2,962,500
--------------------------------------------------------------------------------- --------------
FINANCIAL INTERMEDIARIES--0.4%
---------------------------------------------------------------------------------
2,300,000 American Life Holding Co., Sr. Sub. Note, 11.25%, 9/15/2004 2,328,750
--------------------------------------------------------------------------------- --------------
FOOD & DRUG RETAILERS--2.5%
---------------------------------------------------------------------------------
10,500,000 Grand Union Co., Sr. Sub. Note, 12.25%, 7/15/2002 (a) 3,517,500
---------------------------------------------------------------------------------
5,000,000 Pathmark Stores, Inc., Sr. Sub. Note, 9.625%, 5/1/2003 4,700,000
---------------------------------------------------------------------------------
5,000,000 Penn Traffic Co., Sr. Sub. Note, 9.625%, 4/15/2005 4,637,500
--------------------------------------------------------------------------------- --------------
Total 12,855,000
--------------------------------------------------------------------------------- --------------
FOOD PRODUCTS--4.7%
---------------------------------------------------------------------------------
5,975,000 Curtice-Burns Foods, Inc., Sr. Sub. Note, 12.25%, 2/1/2005 6,243,875
---------------------------------------------------------------------------------
5,000,000 Doskocil Cos., Inc., Sr. Sub. Note, 9.75%, 7/15/2000 4,525,000
---------------------------------------------------------------------------------
3,500,000 PMI Acquisition Corp., Sr. Sub. Note, 10.25%, 9/1/2003 3,421,250
---------------------------------------------------------------------------------
17,000,000 Specialty Foods Acquisition Corp., Sr. Secd. Disc. Deb., 0/13.00%,
8/15/2005 8,755,000
---------------------------------------------------------------------------------
1,000,000 Specialty Foods Corp., Sr. Sub. Note, 11.25 %, 8/15/2003 980,000
--------------------------------------------------------------------------------- --------------
Total 23,925,125
--------------------------------------------------------------------------------- --------------
FOOD SERVICES--2.4%
---------------------------------------------------------------------------------
1,250,000 Flagstar Corp., Sr. Note, 10.75%, 9/15/2001 1,203,125
---------------------------------------------------------------------------------
7,050,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 6,785,625
---------------------------------------------------------------------------------
5,250,000 Flagstar Corp., Sr. Sub. Deb., 11.25%, 11/1/2004 4,383,750
--------------------------------------------------------------------------------- --------------
Total 12,372,500
--------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--5.2%
---------------------------------------------------------------------------------
1,500,000 Container Corp. of America, Sr. Note, 11.25%, 5/1/2004 1,571,250
---------------------------------------------------------------------------------
250,000 Container Corp. of America, Sr. Note, 9.75%, 4/1/2003 245,625
---------------------------------------------------------------------------------
$ 3,000,000 Domtar, Inc., Deb., 11.25%, 9/15/2017 $ 3,165,000
---------------------------------------------------------------------------------
3,000,000 Domtar, Inc., Note, 12.00%, 4/15/2001 3,315,000
---------------------------------------------------------------------------------
2,900,000 Riverwood International Corp., Sr. Sub. Note, 11.25%, 6/15/2002 3,074,000
---------------------------------------------------------------------------------
3,400,000 S. D. Warren Company, Sr. Sub. Note, 12.00%, 12/15/2004 (b) 3,612,500
---------------------------------------------------------------------------------
2,250,000 Stone Container Corp., Sr. Note, 11.50%, 10/1/2004 2,382,188
---------------------------------------------------------------------------------
9,350,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 9,139,625
--------------------------------------------------------------------------------- --------------
Total 26,505,188
--------------------------------------------------------------------------------- --------------
HEALTHCARE--2.8%
---------------------------------------------------------------------------------
6,459,694 AmeriSource Corp., Sr. PIK Deb., 11.25%, 7/15/2005 7,008,768
---------------------------------------------------------------------------------
4,500,000 National Medical Enterprises, Inc., Sr. Sub. Note, 10.125%, 3/1/2005 4,629,375
---------------------------------------------------------------------------------
2,375,000 Surgical Health Corp., Sr. Sub. Note, 11.50%, 7/15/2004 2,588,750
--------------------------------------------------------------------------------- --------------
Total 14,226,893
--------------------------------------------------------------------------------- --------------
HOME PRODUCTS & FURNISHINGS--3.7%
---------------------------------------------------------------------------------
3,000,000 American Standard, Inc., Sr. Deb., 11.375%, 5/15/2004 3,255,000
---------------------------------------------------------------------------------
12,000,000 American Standard, Inc., Sr. Sub. Disc. Deb., 0/10.50%, 6/1/2005 8,235,000
---------------------------------------------------------------------------------
3,250,000 Nortek, Inc., Sr. Sub. Note, 9.875%, 3/1/2004 2,941,250
---------------------------------------------------------------------------------
4,625,000 Triangle Pacific Corp., Sr. Note, 10.50%, 8/1/2003 4,601,875
--------------------------------------------------------------------------------- --------------
Total 19,033,125
--------------------------------------------------------------------------------- --------------
HOTELS, MOTELS, INNS & CASINOS--0.6%
---------------------------------------------------------------------------------
3,000,000 Motels of America, Inc., Sr. Sub. Note, 12.00%, 4/15/2004 3,082,500
--------------------------------------------------------------------------------- --------------
INDUSTRIAL PRODUCTS & EQUIPMENT--2%
---------------------------------------------------------------------------------
3,000,000 Fairfield Manufacturing Co., Inc., Sr. Sub. Note, 11.375%, 7/1/2001 2,880,000
---------------------------------------------------------------------------------
3,625,000 Pace Industries, Inc., Sr. Note, 10.625%, 12/1/2002 3,353,125
---------------------------------------------------------------------------------
3,700,000 Truck Components, Inc., Sr. Note, 12.25%, 6/30/2001 3,866,500
--------------------------------------------------------------------------------- --------------
Total 10,099,625
--------------------------------------------------------------------------------- --------------
LEISURE & ENTERTAINMENT--1%
---------------------------------------------------------------------------------
3,625,000 Affinity Group, Inc., Sr. Sub. Note, 11.50%, 10/15/2003 3,498,125
---------------------------------------------------------------------------------
$ 2,000,000 Viacom, Inc., Sub. Deb., 8.00%, 7/7/2006 $ 1,817,500
--------------------------------------------------------------------------------- --------------
Total 5,315,625
--------------------------------------------------------------------------------- --------------
MACHINERY & EQUIPMENT--1.4%
---------------------------------------------------------------------------------
3,250,000 Primeco Inc., Sr. Sub. Note, 12.75%, 3/1/2005 3,306,875
---------------------------------------------------------------------------------
4,000,000 Waters Corp., Sr. Sub. Note, 12.75%, 9/30/2004 4,070,000
--------------------------------------------------------------------------------- --------------
Total 7,376,875
--------------------------------------------------------------------------------- --------------
OIL & GAS--3.6%
---------------------------------------------------------------------------------
3,250,000 Falcon Drilling Co., Inc., Sr. Note, 9.75%, 1/15/2001 3,071,250
---------------------------------------------------------------------------------
1,900,000 Falcon Drilling Co., Inc., Sr. Sub. Note, 12.50%, 3/15/2005 (b) 1,914,250
---------------------------------------------------------------------------------
3,750,000 Giant Industries, Inc., Sr. Sub. Note, 9.75%, 11/15/2003 3,393,750
---------------------------------------------------------------------------------
3,250,000 H.S. Resources, Inc., Sr. Sub. Note, 9.875%, 12/1/2003 3,120,000
---------------------------------------------------------------------------------
2,300,000 Mesa Capital Corp., Note, 0/12.75%, 6/30/1998 2,219,500
---------------------------------------------------------------------------------
1,500,000 Triton Energy Corp., Sr. Sub. Disc. Note, 0/9.75%, 12/15/2000 1,218,750
---------------------------------------------------------------------------------
3,550,000 WRT Energy Corporation, Unit, 13.875%, 3/1/2002 3,514,500
--------------------------------------------------------------------------------- --------------
Total 18,452,000
--------------------------------------------------------------------------------- --------------
PRINTING & PUBLISHING--2.2%
---------------------------------------------------------------------------------
7,500,000 Affiliated Newspaper, Sr. Disc. Note, 0/13.25%, 7/1/2006 4,050,000
---------------------------------------------------------------------------------
2,400,000 American Media Operations, Inc., Sr. Sub. Note, 11.625%, 11/15/2004 2,553,000
---------------------------------------------------------------------------------
2,000,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 1,990,000
---------------------------------------------------------------------------------
3,000,000 Webcraft Technologies, Inc., Sr. Sub. Note, 9.375%, 2/15/2002 2,685,000
--------------------------------------------------------------------------------- --------------
Total 11,278,000
--------------------------------------------------------------------------------- --------------
RETAILERS--2.2%
---------------------------------------------------------------------------------
4,500,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 9/1/2003 4,432,500
---------------------------------------------------------------------------------
3,250,000 Hosiery Corp. of America, Inc., Unit, 13.75%, 8/1/2002 (b) 3,087,500
---------------------------------------------------------------------------------
3,750,000 ICON Health & Fitness, Inc., Unit, 13.00%, 7/15/2002 (b) 3,993,750
--------------------------------------------------------------------------------- --------------
Total 11,513,750
--------------------------------------------------------------------------------- --------------
SERVICES--0.8%
---------------------------------------------------------------------------------
$ 4,250,000 Solon Automated Services, Inc., Sr. Note, 12.75%, 7/15/2001 $ 4,228,750
--------------------------------------------------------------------------------- --------------
STEEL--5.4%
---------------------------------------------------------------------------------
4,500,000 Acme Metals, Inc., Sr. Secd. Disc. Note, 0/13.50%, 8/1/2004 3,352,500
---------------------------------------------------------------------------------
3,500,000 Armco, Inc., Sr. Note, 9.375%, 11/1/2000 3,215,625
---------------------------------------------------------------------------------
5,500,000 Carbide/Graphite Group, Sr. Note, 11.50%, 9/1/2003 5,802,500
---------------------------------------------------------------------------------
5,000,000 EnviroSource, Inc., Sr. Note, 9.75%, 6/15/2003 4,481,250
---------------------------------------------------------------------------------
4,500,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 4,567,500
---------------------------------------------------------------------------------
3,000,000 Geneva Steel Co., Sr. Note, 11.125%, 3/15/2001 2,737,500
---------------------------------------------------------------------------------
3,825,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 3,499,875
--------------------------------------------------------------------------------- --------------
Total 27,656,750
--------------------------------------------------------------------------------- --------------
SURFACE TRANSPORTATION--3.4%
---------------------------------------------------------------------------------
3,750,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 3,946,875
---------------------------------------------------------------------------------
4,250,000 Sea Containers Ltd., Sr. Note, 9.50%, 7/1/2003 4,005,625
---------------------------------------------------------------------------------
1,750,000 Sea Containers Ltd., Sr. Sub. Note, 12.50%, 12/1/2004 1,876,875
---------------------------------------------------------------------------------
3,000,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 2,895,000
---------------------------------------------------------------------------------
5,000,000 Trism, Inc., Sr. Sub. Note, 10.75%, 12/15/2000 4,850,000
--------------------------------------------------------------------------------- --------------
Total 17,574,375
--------------------------------------------------------------------------------- --------------
TECHNOLOGY SERVICES--0.4%
---------------------------------------------------------------------------------
2,100,000 Computervision Corp., Sr. Sub. Note, 11.375%, 8/15/1999 1,932,000
--------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS & CELLULAR--2.7%
---------------------------------------------------------------------------------
4,500,000 Dial Call Communications, Inc., Unit, 0/12.25%, 4/15/2004 1,732,500
---------------------------------------------------------------------------------
7,750,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 3,255,000
---------------------------------------------------------------------------------
7,250,000 PanAmSat, Corp., Sr. Sub. Disc. Note, 0/11.375%, 8/1/2003 4,748,750
---------------------------------------------------------------------------------
4,750,000 USA Mobile Communications, Inc., Sr. Note, 9.50%, 2/1/2004 4,085,000
--------------------------------------------------------------------------------- --------------
Total 13,821,250
--------------------------------------------------------------------------------- --------------
UTILITIES--1.7%
---------------------------------------------------------------------------------
$ 11,325,000 California Energy Co., Inc., Sr. Disc. Note, 0/10.25%, 1/15/2004 $ 8,493,750
--------------------------------------------------------------------------------- --------------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $496,613,105) 472,094,038
--------------------------------------------------------------------------------- --------------
(A)COMMON STOCK--0.9%
------------------------------------------------------------------------------------------------
1,875 Advanstar Corp. 0
---------------------------------------------------------------------------------
583 Advanstar Corp., Warrants 7
---------------------------------------------------------------------------------
</TABLE>
Liberty High Income Bond Fund, Inc.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
<C> <S> <C>
------------- --------------------------------------------------------------------------------- --------------
(A)COMMON STOCK--CONTINUED
------------------------------------------------------------------------------------------------
7,500 Affilliated Newspaper (b) 187,500
---------------------------------------------------------------------------------
4,696 Atlantic Gulf Communities Corp. 42,264
---------------------------------------------------------------------------------
3,571 Atlantic Gulf Communities Corp., Warrants 1,227
---------------------------------------------------------------------------------
4,500 Dial Page Inc., Warrants 4,500
---------------------------------------------------------------------------------
6,589 Haynes International, Inc. (b) 6,589
---------------------------------------------------------------------------------
25,710 Hillsborough Holding Corp. (b) 257
---------------------------------------------------------------------------------
71,200 Kane Industries, Inc., Warrant (b) 0
---------------------------------------------------------------------------------
19,200 ICF Kaiser International, Inc., Warrants 14,400
---------------------------------------------------------------------------------
39,960 LaBarge, Inc. (b) 52,447
---------------------------------------------------------------------------------
353 MAFCO Acquisition, Warrants (b) 0
---------------------------------------------------------------------------------
1,750 Motels of America, Inc. 140,437
---------------------------------------------------------------------------------
315,000 Specialty Foods Acquisition Corp. (b) 787,500
---------------------------------------------------------------------------------
204,545 Spreckels Industries, Inc., Class A 1,917,609
---------------------------------------------------------------------------------
46 Sullivan Holdings, Inc. (b) 11
---------------------------------------------------------------------------------
771,314 Triton Group Ltd. 1,494,421
---------------------------------------------------------------------------------
14,862 UCC Investors Holdings, Inc. (b) 170,913
---------------------------------------------------------------------------------
30,000 Uniroyal Technology Corp., Warrants 63,750
--------------------------------------------------------------------------------- --------------
TOTAL COMMON STOCK (IDENTIFIED COST, $22,404,578) 4,883,832
--------------------------------------------------------------------------------- --------------
PREFERRED STOCK--1.4%
------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING--1.4%
---------------------------------------------------------------------------------
71,251 K-III Communications Corp., PIK Pfd., Series B. 11.625%
(IDENTIFIED COST, $7,237,440) 6,946,947
--------------------------------------------------------------------------------- --------------
(D)REPURCHASE AGREEMENTS--3.9%
------------------------------------------------------------------------------------------------
$ 19,985,000 J.P. Morgan & Co. Inc., 6.30%, dated 3/31/95, due 4/3/1995
(at amortized cost) $ 19,985,000
--------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST, $546,240,123)(C) $ 503,909,817(E)
--------------------------------------------------------------------------------- --------------
</TABLE>
Note: The categories of investments are shown as a percentage of net assets
($513,711,014) at March 31, 1995.
The following abbreviation is used throughout this portfolio:
PIK --Payment in Kind
(a) Non-income producing
(b) Indicates a private placement security which is restricted as to public
resale. At the date of acquisition, these securi-
ties were valued at cost, and at March 31, 1995, they were valued by an
independent pricing source. The total value of private placement securities
owned at March 31, 1995, was $22,315,612 or 4.3% of total assets.
(c) Includes Advanstar trust certificates and Vagabond Inns, Inc. common stock
which have been assigned a zero value and zero identified cost.
(d) 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.
(e) The cost for federal tax purposes amounts to $546,428,004. The net
unrealized depreciation of investments on a federal tax basis amounts to
$42,518,187, which is comprised of $6,887,349 appreciation and $49,405,536
depreciation at March 31, 1995.
(See Notes which are an integral part of the Financial Statements.)
Liberty High Income Bond Fund, Inc.
Notes to Portfolio of Investments
--------------------------------------------------------------------------------
February 28, 1995
WALTER INDUSTRIES (ALSO KNOWN AS GEORGIA MARBLE CO.; FORMERLY KNOWN AS JIM
WALTER CORP.)
On March 17, 1995, Walter Industries exited from Chapter 11 bankruptcy
protection. The distribution of new securities in exchange for the Trust's
Debentures is pending.
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 of
the U.S. Bankruptcy Code. The Trust's investment adviser is unable to predict
the outcome or timing of these proceedings.
GRAND UNION COMPANY
On January 25, 1995, The Grand Union Company announced that it had filed for
protection under Chapter 11 of the U.S. Bankruptcy Code. The Trust's investment
adviser is unable to predict the outcome or timing of these proceedings.
Liberty High Income Bond Fund, Inc.
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
March 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost, $546,240,123, and tax cost, $546,428,004) $503,909,817
---------------------------------------------------------------------------------------------------
Cash 2,170
---------------------------------------------------------------------------------------------------
Income receivable 11,065,922
---------------------------------------------------------------------------------------------------
Receivable for investments sold 4,521,896
---------------------------------------------------------------------------------------------------
Receivable for shares sold 3,285,116
--------------------------------------------------------------------------------------------------- -----------
Total assets 522,784,921
---------------------------------------------------------------------------------------------------
LIABILITIES:
---------------------------------------------------------------------------------------------------
Payable for investments purchased $8,621,123
----------------------------------------------------------------------------------------
Payable for shares redeemed 220,898
----------------------------------------------------------------------------------------
Accrued expenses 231,886
---------------------------------------------------------------------------------------- ---------
Total liabilities 9,073,907
--------------------------------------------------------------------------------------------------- -----------
NET ASSETS for 48,755,476 shares outstanding $513,711,014
--------------------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
---------------------------------------------------------------------------------------------------
Paid-in capital $582,498,284
---------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (42,327,955)
---------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (28,519,873)
---------------------------------------------------------------------------------------------------
Undistributed net investment income 2,060,558
--------------------------------------------------------------------------------------------------- -----------
Total Net Assets $513,711,014
--------------------------------------------------------------------------------------------------- -----------
CLASS A SHARES:
---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($448,040,285 / 42,522,113 shares outstanding) $10.54
--------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/95.50 of $10.54)* $11.04
--------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share $10.54
--------------------------------------------------------------------------------------------------- -----------
CLASS C SHARES:
---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($32,376,229 / 3,073,035 shares outstanding) $10.54
--------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $10.54
--------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (99.00/100 of $10.54)** $10.43
--------------------------------------------------------------------------------------------------- -----------
CLASS B SHARES:
---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($33,294,500 / 3,160,328 shares outstanding) $10.54
--------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $10.54
--------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (94.50/100 of $10.54)** $9.96
--------------------------------------------------------------------------------------------------- -----------
</TABLE>
*See "How to Purchase Shares" in the Prospectus.
**See "How to Redeem Shares" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
Liberty High Income Bond Fund, Inc.
Statement of Operations
--------------------------------------------------------------------------------
Year ended March 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
----------------------------------------------------------------------------------------------------
Interest $50,113,589
----------------------------------------------------------------------------------------------------
Dividends 751,236
---------------------------------------------------------------------------------------------------- -----------
Total income 50,864,825
----------------------------------------------------------------------------------------------------
EXPENSES:
----------------------------------------------------------------------------------------------------
Investment advisory fee $3,519,356
-----------------------------------------------------------------------------------------
Administrative personnel and services fee 355,220
-----------------------------------------------------------------------------------------
Custodian fees 114,574
-----------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 516,149
-----------------------------------------------------------------------------------------
Directors'/Trustees' fees 16,596
-----------------------------------------------------------------------------------------
Auditing fees 38,158
-----------------------------------------------------------------------------------------
Legal fees 24,074
-----------------------------------------------------------------------------------------
Portfolio accounting fees 89,930
-----------------------------------------------------------------------------------------
Distribution services fee--Select Shares 2,197
-----------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 197,621
-----------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 39,968
-----------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 822,104
-----------------------------------------------------------------------------------------
Shareholder services fee--Select Shares 732
-----------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 61,454
-----------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 13,323
-----------------------------------------------------------------------------------------
Share registration costs 97,286
-----------------------------------------------------------------------------------------
Printing and postage 124,656
-----------------------------------------------------------------------------------------
Insurance premiums 13,628
-----------------------------------------------------------------------------------------
Taxes 94,805
-----------------------------------------------------------------------------------------
Miscellaneous 8,271
----------------------------------------------------------------------------------------- ---------
Total expenses 6,150,102
-----------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee $ 213,067
----------------------------------------------------------------------------------------- ---------
Net expenses 5,937,035
---------------------------------------------------------------------------------------------------- -----------
Net investment income 44,927,790
---------------------------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 262,009
----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (18,874,807)
---------------------------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments (18,612,798)
---------------------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $26,314,992
---------------------------------------------------------------------------------------------------- -----------
</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,
1995 1994
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
-------------------------------------------------------------------------------
OPERATIONS--
-------------------------------------------------------------------------------
Net investment income $ 44,927,790 $ 42,374,163
-------------------------------------------------------------------------------
Net realized gain (loss) on investments ($1,619,570 and $15,192,825,
respectively, as computed for federal income tax purposes) 262,009 15,492,911
-------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments (18,874,807) (24,237,819)
------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from operations 26,314,992 33,629,255
------------------------------------------------------------------------------- --------------- ---------------
NET EQUALIZATION CREDITS (DEBITS) 161,190 10,368
------------------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME
-------------------------------------------------------------------------------
Class A Shares (42,556,810) (41,478,274)
-------------------------------------------------------------------------------
Class C Shares (2,428,261) (943,649)
-------------------------------------------------------------------------------
Class B Shares (450,413) 0
-------------------------------------------------------------------------------
Select Shares (25,156) (9,149)
------------------------------------------------------------------------------- --------------- ---------------
Change in net assets from distributions to shareholders (45,460,640) (42,431,072)
------------------------------------------------------------------------------- --------------- ---------------
SHARE TRANSACTIONS (EXCLUSIVE OF AMOUNTS ALLOCATED TO NET INVESTMENT INCOME)--
-------------------------------------------------------------------------------
Proceeds from sales of Shares 162,685,494 165,279,381
-------------------------------------------------------------------------------
Net asset value of Shares issued to shareholders in
payment of distributions declared 21,301,954 20,093,179
-------------------------------------------------------------------------------
Cost of Shares redeemed (115,639,357) (129,248,655)
------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from share transactions 68,348,091 56,123,905
------------------------------------------------------------------------------- --------------- ---------------
Change in net assets 49,363,633 47,332,456
-------------------------------------------------------------------------------
NET ASSETS:
-------------------------------------------------------------------------------
Beginning of period 464,347,381 417,014,925
------------------------------------------------------------------------------- --------------- ---------------
End of period (including undistributed net investment income of $2,060,558 and
$2,432,218, respectively) $ 513,711,014 $ 464,347,381
------------------------------------------------------------------------------- --------------- ---------------
</TABLE>
(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)
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST
MARCH 31, 31,
<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 1.01 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 (0.43) (0.19) 0.41 1.99 (0.14) (1.98) (0.20) (1.31) -- 0.37
------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------- ---------
Total from
investment
operations 0.58 0.86 1.54 3.22 1.07 (0.65) 1.20 0.11 0.85 1.90
-------------------
LESS DISTRIBUTIONS
-------------------
Distributions
from net
investment income (1.03) (1.06) (1.15) (1.21) (1.24) (1.38) (1.41) (1.44) (0.85) (1.54)
------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------- ---------
NET ASSET VALUE,
END OF PERIOD $ 10.54 $ 10.99 $ 11.19 $ 10.80 $ 8.79 $ 8.96 $ 10.99 $ 11.20 $ 12.53 $ 12.53
------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------- ---------
TOTAL RETURN(B) 5.74% 7.82% 15.39% 38.83% 14.20% (6.82%) 11.34% 1.30% 7.09% 16.51%
-------------------
RATIOS TO AVERAGE
NET ASSETS
-------------------
Expenses 1.21% 1.18% 1.08% 1.02% 1.03% 1.02% 1.00% 1.05% 1.02%(d) 1.06%
-------------------
Net investment
income 9.64% 9.27% 10.44% 12.40% 14.62% 13.01% 12.55% 12.37% 11.72%(d) 12.41%
-------------------
Expense waiver/
reimbursement (c) 0.05% 0.05% 0.08% -- -- -- -- -- -- --
-------------------
SUPPLEMENTAL DATA
-------------------
Net assets,
end of period
(000 omitted) $448,040 $439,149 $417,015 $351,087 $252,147 $282,149 $379,876 $360,409 $390,160 $352,641
-------------------
Portfolio
Turnover 52% 76% 49% 37% 32% 40% 43% 52% 25% 27%
-------------------
<CAPTION>
<S> <C>
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
-------------------
Distributions
from net
investment income (1.55)
------------------- ---------
NET ASSET VALUE,
END OF PERIOD $ 12.17
------------------- ---------
TOTAL RETURN(B) 22.42%
-------------------
RATIOS TO AVERAGE
NET ASSETS
-------------------
Expenses 1.14%
-------------------
Net investment
income 13.27%
-------------------
Expense waiver/
reimbursement (c) --
-------------------
SUPPLEMENTAL DATA
-------------------
Net assets,
end of period
(000 omitted) $212,932
-------------------
Portfolio
Turnover 26%
-------------------
</TABLE>
(a) Reflects operations for the seven month period ended March 31, 1987.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) 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 B Shares
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31,
1995(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.57
------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
------------------------------------------------------------------------------------------------
Net investment income 0.51
------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.07)
------------------------------------------------------------------------------------------------ -------
Total from investment operations 0.44
------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
------------------------------------------------------------------------------------------------
Distributions from net investment income (0.47)
------------------------------------------------------------------------------------------------ -------
NET ASSET VALUE, END OF PERIOD $ 10.54
------------------------------------------------------------------------------------------------ -------
TOTAL RETURN (B) 4.47%
------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
------------------------------------------------------------------------------------------------
Expenses 2.02%(c)
------------------------------------------------------------------------------------------------
Net investment income 9.47%(c)
------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 0.05%(c)
------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $33,295
------------------------------------------------------------------------------------------------
Portfolio Turnover 52%
------------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from September 27, 1994 (date of initial
public offering) to March 31, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(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)
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31,
1995 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.99 $ 11.18
-------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------------------------------------------------------------
Net investment income 0.94 0.92
-------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.44) (0.23)
------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 0.50 0.69
-------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
-------------------------------------------------------------------------------------------
Distributions from net investment income (0.95) (0.88)
------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.54 $ 10.99
------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 4.91% 6.23%
-------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-------------------------------------------------------------------------------------------
Expenses 1.98% 1.99%(c)
-------------------------------------------------------------------------------------------
Net investment income 8.90% 8.54%(c)
-------------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 0.05% 0.05%(c)
-------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $32,376 $24,360
-------------------------------------------------------------------------------------------
Portfolio Turnover 52% 76%
-------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from April 30, 1993 (date of initial
public offering) to March 31, 1994.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Liberty High Income Bond Fund, Inc.
Financial Highlights--Select Shares
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1995(A) 1994(B)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.99 $ 11.53
------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
------------------------------------------------------------------------------------------
Net investment income 0.27 0.19
------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.35) (0.58)
------------------------------------------------------------------------------------------ ----------- -----------
Total from investment operations (0.08) (0.39)
------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (0.31) (0.15)
------------------------------------------------------------------------------------------ ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.60 $ 10.99
------------------------------------------------------------------------------------------ ----------- -----------
TOTAL RETURN(C) (0.74)% (3.40)%
------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
------------------------------------------------------------------------------------------
Expenses 2.02% 2.01%(d)
------------------------------------------------------------------------------------------
Net investment income 8.56% 8.18%(d)
------------------------------------------------------------------------------------------
Expense waiver/reimbursement(e) -- % 0.05%(d)
------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ -- $ 838
------------------------------------------------------------------------------------------
Portfolio Turnover 52% 76%
------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from April 1, 1994 to July 29, 1994 (date
Select Shares ceased operations).
(b) Reflects operations for the period from January 15, 1994 (date of initial
public offering) to March 31, 1994.
(c) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(d) Computed on an annualized basis.
(e) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Liberty High Income Bond Fund, Inc.
Notes to Financial Statements
--------------------------------------------------------------------------------
March 31, 1995
1. ORGANIZATION
Liberty High Income Bond Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end, management investment company. Effective July 29, 1994, the Select
Shares ceased operations and were reclassified as Class C Shares. Also,
effective September 19, 1994 the Fund added Class B Shares. Consequently, the
Fund currently offers three classes of shares: Class A, Class B, and Class C.
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, and other fixed income
securities are valued at the last sales price reported on national
securities exchanges. Listed corporate bonds, unlisted securities, and
short-term securities are generally valued at the price provided by an
independent pricing service. Short-term securities with remaining
maturities of sixty days or less at the time of purchase may be valued at
amortized cost, which approximates fair market value.
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 that 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 broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines and/or
procedures reviewed or established by 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--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
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").
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 income. Accordingly, no
provisions for federal tax are necessary. At March 31, 1995,
the Fund, for federal tax purposes, had a capital loss carryforward of
$27,133,024, 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 ($3,068,407), 2000 ($24,064,617).
Additionally, net capital losses of $1,172,805 attributable to security
transactions incurred after October 31, 1994 are treated as arising on
April 1, 1995 the first day of the Fund's next taxable year.
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 fund shares 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 fund shares.
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 RISK--Although the Fund has a diversified portfolio, the Fund
and 96% of its portfolio invested in lower rated and comparable quality
unrated high yield securities. Investments in higher yield securities are
accomplished 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. The Fund held defaulted securities with a value aggregating
$6,642,501, representing 1.29% of the Fund's net assets at March 31, 1995.
H. OTHER--Investment transactions are accounted for on the trade date.
3. SHARES OF CAPITAL STOCK
At March 31, 1995, par value shares authorized were as follows:
<TABLE>
<CAPTION>
NUMBER OF PAR VALUE
CLASS NAME SHARES AUTHORIZED
<S> <C>
Class A Shares 4,000,000
Class C Shares 4,000,000
Class B Shares 2,000,000
--------------------------
Total shares authorized 10,000,000
--------------------------
</TABLE>
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1995 MARCH 31, 1994
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares Sold 10,472,472 $ 110,355,520 11,912,803 $ 134,712,957
--------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 1,931,543 20,273,694 1,747,408 19,711,663
--------------------------------------------------
Shares redeemed (9,836,127) (103,267,837) (10,988,010) (124,250,451)
-------------------------------------------------- ----------- --------------- ------------- ---------------
Net change resulting from Class A share
transactions 2,567,888 $ 27,361,377 2,672,201 $ 30,174,169
-------------------------------------------------- ----------- --------------- ------------- ---------------
<CAPTION>
PERIOD ENDED
MARCH 31, 1995* MARCH 31, 1994
SELECT SHARES SHARES AMOUNT SHARES AMOUNT
<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 reclassed to Class C Shares (73,229) (772,938)
--------------------------------------------------
Shares redeemed (22,295) (240,408) (13,128) (146,256)
-------------------------------------------------- ----------- --------------- ------------- ---------------
Net change resulting from Select share
transactions (76,250) $ (804,759) 76,250 $ 882,523
-------------------------------------------------- ----------- --------------- ------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1995 MARCH 31, 1994**
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares Sold 1,757,459 $ 18,510,668 2,611,701 $ 29,542,663
---------------------------------------------------------
Shares reclassed from Select Shares 73,229 772,938 -- --
---------------------------------------------------------
Shares issued to shareholders in payment of dividends
declared 80,242 842,075 33,178 376,498
---------------------------------------------------------
Shares redeemed (1,054,722) (11,094,550) (428,052) (4,851,948)
--------------------------------------------------------- ----------- ------------- ---------- -------------
Net change resulting from Class C share
transactions 856,208 $ 9,031,131 2,216,827 $ 25,067,213
--------------------------------------------------------- ----------- ------------- ---------- -------------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1995*** MARCH 31, 1994
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares Sold 3,169,136 $ 32,850,636 -- --
---------------------------------------------------------
Shares issued to shareholders in payment of dividends
declared 16,778 173,330 -- --
---------------------------------------------------------
Shares redeemed (25,586) (263,624) -- --
--------------------------------------------------------- ----------- ------------- ---------- -------------
Net change resulting from Class B share
transactions 3,160,328 $ 32,760,342 -- --
--------------------------------------------------------- ----------- ------------- ---------- -------------
Net change resulting from Fund share
transactions 6,508,174 $ 68,348,091 4,965,278 $ 56,123,905
--------------------------------------------------------- ----------- ------------- ---------- -------------
</TABLE>
*Reflects operations for the period from April 1, 1994 to July 29, 1994 (date
Select Shares ceased operations).
**Reflects operations for the period from April 30, 1993 (date of initial
public offering) to March 31, 1994.
***Reflects operations for the period from September 27, 1994 (date of initial
public offering) to March 31, 1995.
(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
.75 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive a portion of its fee and/or reimburse certain operating expenses
of the Fund. The Adviser can modify or terminate this voluntary waiver and/or
reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with 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 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., the principal distributor, from the net
assets of the Fund to finance activities intended to result in the sale of Class
B and Class C shares. The Plan provides that the Fund may incur distribution
expenses up to 0.75 of 1% of the average daily net assets of Class B and C
shares, annually, to compensate Federated Securities Corp.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services, the Fund will pay Federated Shareholder
Services up to 0.25 of 1% of average daily net assets of the Fund for the
period. This fee is to obtain certain services for shareholders and to maintain
shareholder accounts.
PORTFOLIO ACCOUNTING FEES--Federated Services Company 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.
GENERAL--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 securities, for the
period ended March 31, 1995, were as follows:
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------
PURCHASES $ 277,337,369
-------------------------------------------------------------------------------------------------- --------------
SALES $ 232,525,535
-------------------------------------------------------------------------------------------------- --------------
</TABLE>
Report of Independent
Public Accountants
--------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
LIBERTY HIGH INCOME BOND FUND, INC.
We have audited the accompanying statement of assets and liabilities of Liberty
High Income Bond Fund, Inc. (a Maryland Corporation), including the schedule of
portfolio investments, as of March 31, 1995, 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. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1995, by correspondence with the custodian and brokers. As to securities
purchased but not received, we requested confirmation from brokers and, when
replies were not received, we carried out other alternative auditing procedures.
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
Liberty High Income Bond Fund, Inc. as of March 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
May 12, 1995
Directors Officers
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Richard B. Fisher
William J. Copeland President
J. Christopher Donahue J. Christopher Donahue
James E. Dowd Vice President
Lawrence D. Ellis, M.D. Edward C. Gonzales
Edward L. Flaherty, Jr. Vice President and Treasurer
Peter E. Madden John W. McGonigle
Gregor F. Meyer Vice President and Secretary
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Assistant Treasurer
Marjorie P. Smuts 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.
FEDERATED SECURITIES CORP.
Distributor
A Subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
530565100
530565407
530565209
8042507 (5/95)
Appendix A
The graphic presentation here displayed consists of a color-coded mountain
chart which shows that an initial investment of $18,000 in Liberty High Income
Bond Fund, Inc. in 1977 would have grown to $99,261. The "x" axis reflects
the computation periods from 1977 to 1995, the "y" axis reflects value of
investment, and the right margin reflects a total investment range from $0 to
$100,000. The chart further indicates the ending market value attributable to
principal, as well as the ending market value attributable to capital gains
and reinvested dividends.
Appendix B
The graphic presentation here displayed consists of a color-coded mountain
chart which shows that annual investments of $1,000 in Liberty High Income
Bond Fund, Inc. from 1977 to 1995, would have grown to $54,384. The "x" axis
reflects the computation periods from 1977 to 1995, the "y" axis reflects
value of investment, and the right margin reflects a total investment range
from $0 to $60,000. The chart further indicates the ending market value
attributable to principal, as well as the ending market value attributable to
capital gains and reinvested dividends.
Appendix C
The graphic presentation here displayed consists of a color-coded mountain
chart which shows that an initial investment of $5,000 in Liberty High Income
Bond Fund, Inc. in 1985 would have grown to $14,328. The "x" axis reflects
the computation periods from 1985 to 1995, the "y" axis reflects value of
investment, and the right margin reflects a total investment range from $0 to
$15,000. The chart further indicates the ending market value attributable to
principal, as well as the ending market value attributable to capital gains
and reinvested dividends.
Appendix D
The graphic presentation presented here is chart which lists the initial
number of shares, the dividends and capital gains reinvested, the total
shares, and the ending value of shares for the nine 10-year periods from April
1 1977 to March 31, 1995.
Appendix E
The graphic presentation presented here is a chart listing the Fund's major
shareholder groups: Individuals and joint tenants; IRAs; Trusts;
Clubs/Fraternal Organizations; Corporations; and Custodians under the Uniform
Gifts to Minors Act.
Appendix F
The graphic presentation presented here is a chart listing the Fund's top ten
portfolio holdings: Owens Illinois; Flagstar Corp; Stone Container; American
Standard; Specialty Foods; Revlon Worldwide; Westpoint Stevens, Inc.;
California Energy Co.; G-I Holdings; Rogers Cable Systems.
Appendix G
The graphic presentation here displayed consists of a boxed legend in the
bottom center indicating the components of the corresponding line graph.
Liberty High Income Bond Fund, Inc., Class A Shares, (the "Fund") is
represented by a solid line. The Lehman Brothers Single B Rated Index (the
"Index") is represented by a dotted line and the Lipper High Current Yield
Funds Average (the "Average") is represented by a broken line. The line graph
is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund, the Index and the Average. The "y"
axis reflects the value of the investment. The "x" axis reflects computation
periods from March 31, 1985, through March 31, 1995. The right margin
reflects the ending value of the hypothetical investment in the Fund, the
Index and the Average; the ending values are $28,657, $30,514, and $26,071,
respectively. There is also a legend below the graphic presentation which
indicates the Average Annual Total Return for the 1 year, 5 year, and 10 year
periods ended March 31, 1995; the Average Annual Total Returns are 0.96%,
14.78%, and 11.10%, respectively.
Appendix H
The graphic presentation here displayed consists of a boxed legend in the
bottom center indicating the components of the corresponding line graph.
Liberty High Income Bond Fund, Inc., Class B Shares, (the "Fund") is
represented by a solid line. The Lehman Brothers Single B Rated Index (the
"Index") is represented by a dotted line and the Lipper High Current Yield
Funds Average (the "Average") is represented by a broken line. The line graph
is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund, the Index and the Average. The "y"
axis reflects the value of the investment. The "x" axis reflects computation
periods from September 28, 1994, through March 31, 1995. The right margin
reflects the ending value of the hypothetical investment in the Fund, the
Index and the Average; the ending values are $9,872, $10,535, and $10,309,
respectively. There is also a legend below the graphic presentation which
indicates that the Average Annual Total Return for the period from September
28, 1994 to March 31, 1995 was -1.28%.
Appendix I
The graphic presentation here displayed consists of a boxed legend in the
bottom center indicating the components of the corresponding line graph.
Liberty High Income Bond Fund, Inc., Class C Shares, (the "Fund") is
represented by a solid line. The Lehman Brothers Single B Rated Index (the
"Index") is represented by a dotted line and the Lipper High Current Yield
Funds Average (the "Average") is represented by a broken line. The line graph
is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund, the Index and the Average. The "y"
axis reflects the value of the investment. The "x" axis reflects computation
periods from May 1, 1993, through March 31, 1995. The right margin reflects
the ending value of the hypothetical investment in the Fund, the Index and the
Average; the ending values are $11,156, $11,544, and $11,143, respectively.
There is also a legend below the graphic presentation which indicates that the
Average Annual Total Return for the one year period ended March 31, 1995, and
the period from May 1, 1993, to March 31, 1995, which were 3.82% and 5.82%,
respectively.
