[LOGO OF FEDERATED INVESTORS]
Liberty
High Income
Bond Fund, Inc.
19th Semi-Annual Report
September 30, 1995
Established 1977
FIXED INCOME
President's Message
- --------------------------------------------------------------------------------
Dear Fellow Shareholder:
I am pleased to present the 19th Semi-Annual Report for Liberty High Income
Bond Fund, Inc., which covers the six-month period from April 1, 1995, to
September 30, 1995.
This report begins with an interview with the fund's portfolio manager, Mark E.
Durbiano, Vice President, Federated Advisers. Following this interview, there
are three items of shareholder interest: a complete listing of the fund's
holdings, a series of graphs showing investment performance, and the fund's
Financial Statements.
During the six-month reporting period covered by this report, fund assets
increased by a substantial 27% to stand at $651.8 million on September 30,
1995. This gain can be attributed partly to appreciation in the share value.
More significant, however, were the additional investments, as new and current
shareholders continued to choose the fund for its monthly income potential.
The fund's net asset value rose 3.89% during the reporting period. On April 1,
1995, it stood at $10.54. By September 30, 1995, it reached $10.95.
Dividends earned per share during the reporting period totaled $0.51 for Class
A Shares, $0.47 for Class B Shares, and $0.47 for Class C Shares. As a
shareholder, you should find the investment performance graphs in the report
particularly interesting. They show the long-term reward potential of
reinvesting dividends in additional shares, as well as the advantage of
attractive monthly income potential.
The fund is broadly diversified across 161 issues in 37 industry sectors. The
average maturity of the fund is currently 6.5 years. We are strong believers
that broad diversification is of vital importance in managing a portfolio of
high-yield bonds.
Between early 1994 and early 1995, the Federal Reserve Board increased
short-term interest rates seven times. These increases drove down high-yield
bond prices, though not as severely as the prices of other fixed-income
securities. July of this year brought the first decrease in short-term interest
rates in three years, helping to boost bond prices.
As always, we appreciate your confidence in Liberty High Income Bond Fund,
Inc., which is now completing its 18th year of service to investors. If you
have any questions, comments, or suggestions about your fund, we want to hear
from you.
Very sincerely yours,
Richard B. Fisher
President
November 15, 1995
Investment Review
- --------------------------------------------------------------------------------
Mark E. Durbiano
Vice President
Federated Advisers
Q. Mark, please review the performance of the bond market in general during the
reporting period.
A. The bond market continued to rebound from a poor 1994 during the six months
ended September 30, 1995. For example, the yield on a ten-year U.S. Treasury
security declined more than 100 basis points during the period. This decline in
interest rates was in response to signs of slower economic growth and
continued outstanding news on inflation. The appearance of a slow growth, low
inflation economic environment positively impacted most fixed-income
securities.
Q. How did high yield bonds perform in this environment?
A. High yield bonds performed quite well during the period, outperforming most
high-quality bond categories. For example the Lehman Brothers High Yield Bond
Index* returned 9.09% during the period compared to the Lehman Brothers
Government Bond Index,* which returned 8.08%. While the yield spread or risk
premium widened during the period in response to slower economic growth (a
negative for high yield bonds), this was offset by the higher income return on
high yield bonds. Another noticeable trend during the period was the out
performance of BB rated securities (higher quality high yield bonds) versus B
rated securities in response to the slowing of economic growth.
Q. How did Liberty High Income Bond Fund, Inc. perform during this period?
A. Liberty High Income Bond Fund, Inc. performed well during the period. The
fund had a total return based on net asset value of 8.89% for Class A Shares,
8.45% for Class B Shares, and 8.48% for Class C Shares for the six months
ended September 30, 1995,** versus 8.44% for the Lipper High Current Yield
Fund Average and 8.35% for the Lehman Brothers Single B Bond Index.*
*These indices are unmanaged.
**Performance quoted reflects past performance. 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 returns for the period
(based on offering price) for Class A Shares, Class B Shares, and Class C
Shares were 3.96%, 2.70%, and 7.39%, respectively.
Several factors were responsible for the fund's performance. First, the fund
had approximately 20% invested in the BB category which outperformed the B
market in response to the slowing of the U.S. economy. We also took a higher
quality approach to its B exposure, focusing on those companies with stronger
operating and financial profiles.
Second, the fund benefited by increasing exposure to the broadcast TV, cable TV
and telecommunications industries, which performed well given positive
industry fundamentals, proposed regulatory changes and stable operating
characteristics. At the same time, we decreased exposure to issuers in
cyclical industries, which underperformed as economic growth slowed.
Third, the fund had little exposure to the general retail sector and the
restaurant industry, which substantially underperformed the overall market.
Fourth, the fund benefited from initial public stock offerings by several
companies, including Arcadian Corp., PanAmSat and Carbide Graphite. Finally,
several specific portfolio holdings including Revlon, PanAmSat, Nextel,
-
American Standard, and California Energy outperformed the overall market
-
because of issuer-specific factors.
Q. Mark, what is your outlook for the economy and interest rates in general
over the next six months?
A. I believe that the economy will continue along a slow, steady path much as
it has over the second and third quarters of 1995. I don't anticipate a return
to stronger growth nor do I anticipate the economy slipping into recession. It
would appear that the oft-desired "soft landing" may be coming to fruition.
Given this economic environment and continued good news on the inflation front,
I believe interest rates could move somewhat lower over the near term.
Q. What does that mean for the performance of high yield securities?
A. High yield securities should do quite well in this environment. First, a
stable to falling interest rate environment is a positive for high yield
bonds. Second, a slowly growing economy that doesn't slip into recession should
lead to a stabilization of credit spreads. Third, we believe that merger and
acquisition activity involving high yield companies as well as initial public
stock offerings will remain robust.
Q. What are you buying in Liberty High Income Bond Fund, Inc. given this market
outlook?
A. There are several reoccurring themes that characterize the fund's current
positioning. First, we are buying companies that have a high-quality business
profile. We believe companies with a high-quality business profile will be able
to outperform in an environment of heightened competition given a slow growth
economy. A good example would be Owens Illinois, a diversified international
packaging company that has been able to increase cash flow despite difficult
industry conditions. Second, we like companies whose businesses can grow faster
than the overall economy. This would include companies in the
telecommunications business. One area we like in telecommunications is paging,
where we own positions in Paging Network, USA Mobile, and ProNet. Finally, we
like predictablity over volatility. For example, we have increased exposure to
the broadcast TV and cable TV sectors because of their predictable cash flow.
For the same reason, we continue to decrease exposure to companies in cyclical
businesses, especially where commodity pricing is a big issue such as steel and
forest products.
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
$108,084 on 9/30/95. You would have earned a 10.57%* 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 9/30/95, the Class A Shares' average annual one-year, five-year, and
ten-year total returns were 8.89%, 17.47%, and 10.97%, respectively. Class B
Shares' average annual one-year and since inception (9/28/94) total returns
were 7.09% and 8.05%, respectively. Class C Shares' average annual one-year
and since inception (5/1/93) total returns were 12.01% and 8.17%,
respectively.*
GRAPH APPEARS HERE. SEE APPENDIX.
*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.
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 $59,218.
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 $59,218* by 9/30/95. You
would have earned an average annual total return of 11.68%.
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!
GRAPH APPEARS HERE. SEE APPENDIX.
*No method of investing can guarantee a profit or protect against loss in down
markets. However, by investing regularly over time and buying shares at various
prices, investors can purchase more shares at lower prices, and all
accumulated shares have the ability to pay income to the investor.
Because such a plan involves continuous investment, regard- less 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 September 30, 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
$14,159. This represents a 10.97% average annual total return. For Chuck, that
means extra money toward the construction of his first home.
GRAPH APPEARS HERE.SEE APPENDIX.
This hypothetical scenario is provided for illustrative purposes only and does
not represent the results obtained by any particular shareholder. Past
performance does not guarantee future results.
Liberty High Income Bond Fund, Inc.
Portfolio of Investments
- --------------------------------------------------------------------------------
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--92.9%
- ---------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.5%
------------------------------------------------------------------------------
$ 3,250,000 Tracor, Inc., Sr. Sub. Note, 10.875%, 8/15/2001 $ 3,404,375
------------------------------------------------------------------------------ --------------
AUTOMOTIVE--2.9%
------------------------------------------------------------------------------
5,000,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 5,287,500
------------------------------------------------------------------------------
1,500,000 Aftermarket Technology Co., Sr. Sub. Note, Series C, 12.00%,
8/1/2004 1,586,250
------------------------------------------------------------------------------
3,250,000 Exide Corp., Sr. Note, 10.00%, 4/15/2005 3,436,875
------------------------------------------------------------------------------
2,500,000 Lear Seating Corp., Sr. Sub. Note, 11.25%, 7/15/2000 2,640,625
------------------------------------------------------------------------------
2,000,000 Lear Seating Corp., Sub. Note, 8.25%, 2/1/2002 1,945,000
------------------------------------------------------------------------------
4,350,000 Motor Wheel Corp., Sr. Note, 11.50%, 3/1/2000 3,980,250
------------------------------------------------------------------------------ --------------
Total 18,876,500
------------------------------------------------------------------------------ --------------
BANKING--1.3%
------------------------------------------------------------------------------
3,000,000 Dime Bancorp, Inc., Sr. Note, 10.50%, 11/15/2005 3,307,500
------------------------------------------------------------------------------
4,500,000 First Nationwide Holdings, Inc., Sr. Note, 12.25%, 5/15/2001 4,927,500
------------------------------------------------------------------------------ --------------
Total 8,235,000
------------------------------------------------------------------------------ --------------
BEVERAGE & TOBACCO--0.4%
------------------------------------------------------------------------------
1,250,000 Cott Corp., Sr. Note, 9.375%, 7/1/2005 1,275,000
------------------------------------------------------------------------------
2,000,000 Dr Pepper Bottling Holdings Co., Sr. Disc. Note, 0/11.625%,
2/15/2003 1,570,000
------------------------------------------------------------------------------ --------------
Total 2,845,000
------------------------------------------------------------------------------ --------------
BROADCAST RADIO & TV--7.6%
------------------------------------------------------------------------------
5,250,000 Ackerley Communications, Inc., Sr. Secd. Note, 10.75%, 10/1/2003 5,551,875
------------------------------------------------------------------------------
5,000,000 Allbritton Communication Co., Sr. Sub. Note, 11.50%, 8/15/2004 5,350,000
------------------------------------------------------------------------------
3,750,000 Chancellor Broadcasting Co., Sr. Sub. Note, 12.50%, 10/1/2004 3,928,125
------------------------------------------------------------------------------
4,500,000 Granite Broadcasting Corp., Sr. Sub. Deb., 10.375%, 5/15/2005 4,623,750
------------------------------------------------------------------------------
1,650,000 Granite Broadcasting Corp., Sr. Sub. Deb., 12.75%, 9/1/2002 1,817,062
------------------------------------------------------------------------------
4,000,000 NWCG Holding Corp., Sr. Disc. Note, 13.50% accrual, 6/15/1999 2,670,000
------------------------------------------------------------------------------
3,250,000 (b)Pegasus Media, Unit, 12.50%, 7/1/2005 3,298,750
------------------------------------------------------------------------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
BROADCAST RADIO & TV--CONTINUED
------------------------------------------------------------------------------
$ 8,350,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 $ 8,851,000
------------------------------------------------------------------------------
4,750,000 Sinclair Broadcast Group, Sr. Sub. Note, 10.00%, 12/15/2003 4,868,750
------------------------------------------------------------------------------
2,300,000 Sinclair Broadcast Group, Sr. Sub. Note, 10.00%, 9/30/2005 2,357,500
------------------------------------------------------------------------------
3,500,000 Young Broadcasting, Inc., Sr. Sub. Note, 10.125%, 2/15/2005 3,657,500
------------------------------------------------------------------------------
2,000,000 Young Broadcasting, Inc., Sr. Sub. Note, 11.75%, 11/15/2004 2,230,000
------------------------------------------------------------------------------ --------------
Total 49,204,312
------------------------------------------------------------------------------ --------------
BUSINESS EQUIPMENT & SERVICES--1.5%
------------------------------------------------------------------------------
5,000,000 (b)Monarch Acquisition Corp., Sr. Note, 12.50%, 7/1/2003 5,100,000
------------------------------------------------------------------------------
4,300,000 United Stationers Supply Co., Sr. Sub. Note, 12.75%, 5/1/2005 4,611,750
------------------------------------------------------------------------------ --------------
Total 9,711,750
------------------------------------------------------------------------------ --------------
CABLE TELEVISION--8.8%
------------------------------------------------------------------------------
5,300,000 Australis Media Limited, Unit, 0/14.00%, 5/15/2003 3,206,500
------------------------------------------------------------------------------
6,000,000 Bell Cablemedia PLC, Sr. Disc. Note, 0/11.95%, 7/15/2004 4,005,000
------------------------------------------------------------------------------
3,000,000 Cablevision Industries Corp., Sr. Note, 9.25%, 4/1/2008 3,195,000
------------------------------------------------------------------------------
3,175,000 Cablevision Systems Co., Sr. Sub. Deb., 9.875%, 2/15/2013 3,341,687
------------------------------------------------------------------------------
3,250,000 CAI Wireless Systems, Inc., Sr. Note, 12.25%, 9/15/2002 3,371,875
------------------------------------------------------------------------------
4,000,000 CF Cable TV, Inc., Sr. Secd. 2nd Priority Note, 11.625%, 2/15/2005 4,335,000
------------------------------------------------------------------------------
7,350,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 7,671,562
------------------------------------------------------------------------------
3,750,000 Diamond Cable Co., Sr. Disc. Note, 0/13.25%, 9/30/2004 2,470,312
------------------------------------------------------------------------------
6,000,000 International Cabletel, Inc., Sr. Defd. Cpn. Note, 0/10.875%,
10/15/2003 3,930,000
------------------------------------------------------------------------------
2,500,000 International Cabletel, Inc., Sr. Note, 0/12.75%, 4/15/2005 1,500,000
------------------------------------------------------------------------------
3,100,000 Le Groupe Videotron Ltee, Sr. Note, 10.625%, 2/15/2005 3,270,500
------------------------------------------------------------------------------
7,900,000 Peoples Choice TV Corp., Unit, 0/13.125%, 6/1/2004 4,068,500
------------------------------------------------------------------------------
3,000,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%,
3/15/2005 3,157,500
------------------------------------------------------------------------------
7,500,000 Rogers Cablesystems Ltd., Sr. Secd. Note, 9.65%, 1/15/2014 4,847,574
------------------------------------------------------------------------------
$ 4,000,000 TeleWest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 $ 2,370,000
------------------------------------------------------------------------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
CABLE TELEVISION--CONTINUED
------------------------------------------------------------------------------
4,000,000 Videotron Holdings PLC, Sr. Disc. Note, 0/11.00%, 8/15/2005 2,320,000
------------------------------------------------------------------------------ --------------
Total 57,061,010
------------------------------------------------------------------------------ --------------
CHEMICALS & PLASTICS--7.4%
------------------------------------------------------------------------------
7,500,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 7,912,500
------------------------------------------------------------------------------
3,750,000 (b)Crain Industries, Inc., Sr. Sub. Note, 13.50%, 8/15/2005 3,881,250
------------------------------------------------------------------------------
6,000,000 Foamex Capital Corp., Sr. Sub. Deb., 11.875%, 10/1/2004 5,970,000
------------------------------------------------------------------------------
13,000,000 G-I Holdings, Inc., Sr. Disc. Note, 11.375% accrual, 10/1/1998 9,425,000
------------------------------------------------------------------------------
5,150,000 Harris Chemical North America, Inc., Sr. Secd. Disc. Note,
0/10.25%, 7/15/2001 4,609,250
------------------------------------------------------------------------------
3,500,000 LaRoche Industries, Inc., Sr. Sub. Note, 13.00%, 8/15/2004 3,692,500
------------------------------------------------------------------------------
5,750,000 (b)Polymer Group, Inc., Sr. Note, 12.75%, 7/15/2002 5,951,250
------------------------------------------------------------------------------
3,750,000 UCC Investors Holdings, Inc., Sr. Sub. Note, 11.00%, 5/1/2003 3,834,375
------------------------------------------------------------------------------
3,400,000 Uniroyal Technology Corp., Sr. Secd. Note, 11.75%, 6/1/2003 3,213,000
------------------------------------------------------------------------------ --------------
Total 48,489,125
------------------------------------------------------------------------------ --------------
CLOTHING & TEXTILES--2.1%
------------------------------------------------------------------------------
3,750,000 Dan River Inc., Sr. Sub. Note, 10.125%, 12/15/2003 3,787,500
------------------------------------------------------------------------------
10,325,000 WestPoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 10,144,312
------------------------------------------------------------------------------ --------------
Total 13,931,812
------------------------------------------------------------------------------ --------------
CONGLOMERATES--2.2%
------------------------------------------------------------------------------
4,000,000 Fairchild Industries, Sr. Secd. Note, 12.25%, 2/1/1999 4,200,000
------------------------------------------------------------------------------
7,750,000 Sherritt Gordon Ltd., Sr. Note, 9.75%, 4/1/2003 7,885,625
------------------------------------------------------------------------------
1,000,000 Sherritt, Inc., Deb., 10.50%, 3/31/2014 1,026,250
------------------------------------------------------------------------------
1,053,205 Walter Industries, Inc., Sr. Note, 12.19%, 3/15/2000 1,074,269
------------------------------------------------------------------------------ --------------
Total 14,186,144
------------------------------------------------------------------------------ --------------
CONSUMER PRODUCTS--1.2%
------------------------------------------------------------------------------
2,200,000 (b)American Safety Razor Co., Sr. Note, 9.875%, 8/1/2005 2,211,000
------------------------------------------------------------------------------
$ 6,000,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 $ 5,670,000
------------------------------------------------------------------------------ --------------
Total 7,881,000
------------------------------------------------------------------------------ --------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
CONTAINER & GLASS PRODUCTS--CONTINUED
------------------------------------------------------------------------------
CONTAINER & GLASS PRODUCTS--4.0%
------------------------------------------------------------------------------
1,680,000 (a)(b)Kane Industries, Inc., Sr. Sub. Disc. Note, 2/1/1998 0
------------------------------------------------------------------------------
1,000,000 Owens-Illinois, Inc., Note, 10.00%, 8/1/2002 1,036,250
------------------------------------------------------------------------------
2,750,000 Owens-Illinois, Inc., Sr. Sub. Note, 10.50%, 6/15/2002 2,880,625
------------------------------------------------------------------------------
8,000,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.75%, 8/15/2004 8,260,000
------------------------------------------------------------------------------
3,550,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.95%, 10/15/2004 3,674,250
------------------------------------------------------------------------------
3,500,000 Plastic Containers, Inc., Sr. Secd. Note, 10.75%, 4/1/2001 3,657,500
------------------------------------------------------------------------------
1,600,000 Portola Packaging Inc., Sr. Note, 10.75%, 10/1/2005 1,616,000
------------------------------------------------------------------------------
2,000,000 Silgan Corp., Sr. Sub. Note, 11.75%, 6/15/2002 2,115,000
------------------------------------------------------------------------------
2,750,000 U.S. Can Co., Sr. Sub. Note, 13.50%, 1/15/2002 3,011,250
------------------------------------------------------------------------------ --------------
Total 26,250,875
------------------------------------------------------------------------------ --------------
COSMETICS & TOILETRIES--1.3%
------------------------------------------------------------------------------
12,000,000 Revlon Worldwide Corp., Sr. Secd. Note, Series B, 12.00% accrual, 3/15/1998 8,745,000
------------------------------------------------------------------------------ --------------
ECOLOGICAL SERVICES & EQUIPMENT--2.3%
------------------------------------------------------------------------------
4,375,000 Allied Waste Industries, Inc., Sr. Sub. Note, 12.00%, 2/1/2004 4,692,187
------------------------------------------------------------------------------
4,000,000 ICF Kaiser International, Inc., Sr. Sub. Note, 12.00%, 12/31/2003 3,750,000
------------------------------------------------------------------------------
6,250,000 Mid-American Waste Systems, Inc., Sr. Sub. Note, 12.25%,
2/15/2003 6,453,125
------------------------------------------------------------------------------ --------------
Total 14,895,312
------------------------------------------------------------------------------ --------------
FARMING & AGRICULTURE--0.5%
------------------------------------------------------------------------------
3,175,000 Spreckels Industries, Inc., Sr. Secd. Note, 11.50%, 9/1/2000 3,048,000
------------------------------------------------------------------------------ --------------
FINANCIAL INTERMEDIARIES--0.4%
------------------------------------------------------------------------------
2,300,000 American Life Holding Co., Sr. Sub. Note, 11.25%, 9/15/2004 2,432,250
------------------------------------------------------------------------------ --------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--2.4%
------------------------------------------------------------------------------
$ 5,750,000 Pathmark Stores, Inc., Sr. Sub. Note, 9.625%, 5/1/2003 $ 5,735,625
------------------------------------------------------------------------------
4,000,000 Penn Traffic Co., Sr. Sub. Note, 9.625%, 4/15/2005 3,270,000
------------------------------------------------------------------------------
4,400,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 4,312,000
------------------------------------------------------------------------------
2,250,000 Ralph's Grocery Co., Sr. Sub. Note, 11.00%, 6/15/2005 2,115,000
------------------------------------------------------------------------------ --------------
Total 15,432,625
------------------------------------------------------------------------------ --------------
FOOD PRODUCTS--4.6%
------------------------------------------------------------------------------
6,200,000 Curtice-Burns Foods, Inc., Sr. Sub. Note, 12.25%, 2/1/2005 6,603,000
------------------------------------------------------------------------------
4,500,000 Doskocil Cos., Inc., Sr. Sub. Note, 9.75%, 7/15/2000 4,455,000
------------------------------------------------------------------------------
5,250,000 PMI Acquisition Corp., Sr. Sub. Note, 10.25%, 9/1/2003 5,368,125
------------------------------------------------------------------------------
17,000,000 Specialty Foods Acquisition Corp., Sr. Secd. Disc. Deb., 0/13.00%, 8/15/2005 8,585,000
------------------------------------------------------------------------------
1,000,000 Specialty Foods Corp., Sr. Note, 11.125%, 10/1/2002 965,000
------------------------------------------------------------------------------
1,000,000 Specialty Foods Corp., Sr. Sub. Note, 11.25%, 8/15/2003 905,000
------------------------------------------------------------------------------
3,300,000 (b)Van de Kamp's Inc., Sr. Sub. Note, 12.00%, 9/15/2005 3,349,500
------------------------------------------------------------------------------ --------------
Total 30,230,625
------------------------------------------------------------------------------ --------------
FOOD SERVICES--1.8%
------------------------------------------------------------------------------
1,250,000 Flagstar Corp., Sr. Note, 10.75%, 9/15/2001 1,179,688
------------------------------------------------------------------------------
7,100,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 6,638,500
------------------------------------------------------------------------------
5,250,000 Flagstar Corp., Sr. Sub. Deb., 11.25%, 11/1/2004 4,081,875
------------------------------------------------------------------------------ --------------
Total 11,900,063
------------------------------------------------------------------------------ --------------
FOREST PRODUCTS--4.4%
------------------------------------------------------------------------------
4,100,000 Container Corp. of America, Sr. Note, 11.25%, 5/1/2004 4,346,000
------------------------------------------------------------------------------
250,000 Container Corp. of America, Sr. Note, 9.75%, 4/1/2003 253,125
------------------------------------------------------------------------------
3,000,000 Domtar, Inc., Deb., 11.25%, 9/15/2017 3,195,000
------------------------------------------------------------------------------
1,500,000 Domtar, Inc., Note, 12.00%, 4/15/2001 1,740,000
------------------------------------------------------------------------------
2,600,000 Repap New Brunswick, 2nd Priority Sr. Secd. Note, 10.625%,
4/15/2005 2,639,000
------------------------------------------------------------------------------
$ 2,500,000 Riverwood International Corp., Sr. Sub. Note, 11.25%, 6/15/2002 $ 2,721,875
------------------------------------------------------------------------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
FOREST PRODUCTS--CONTINUED
------------------------------------------------------------------------------
4,400,000 S. D. Warren Co., Sr. Sub. Note, 12.00%, 12/15/2004 4,873,000
------------------------------------------------------------------------------
2,250,000 Stone Container Corp., Sr. Note, 11.50%, 10/1/2004 2,373,750
------------------------------------------------------------------------------
6,350,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 6,294,438
------------------------------------------------------------------------------ --------------
Total 28,436,188
------------------------------------------------------------------------------ --------------
HEALTHCARE--2.2%
------------------------------------------------------------------------------
3,558,845 AmeriSource Health Corp., Sr. Deb., 11.25%, 7/15/2005 3,870,244
------------------------------------------------------------------------------
1,500,000 Genesis Health Ventures, Inc., Sr. Sub. Note, 9.75%, 6/15/2005 1,567,500
------------------------------------------------------------------------------
8,250,000 Tenet Healthcare Corp., Sr. Sub. Note, 10.125%, 3/1/2005 8,775,938
------------------------------------------------------------------------------ --------------
Total 14,213,682
------------------------------------------------------------------------------ --------------
HOME PRODUCTS & FURNISHINGS--2.8%
------------------------------------------------------------------------------
3,000,000 American Standard, Inc., Sr. Deb., 11.375%, 5/15/2004 3,315,000
------------------------------------------------------------------------------
12,000,000 American Standard, Inc., Sr. Sub. Disc. Deb., 0/10.50%, 6/1/2005 9,780,000
------------------------------------------------------------------------------
4,625,000 Triangle Pacific Corp., Sr. Note, 10.50%, 8/1/2003 4,833,125
------------------------------------------------------------------------------ --------------
Total 17,928,125
------------------------------------------------------------------------------ --------------
HOTELS, MOTELS, INNS & CASINOS--0.5%
------------------------------------------------------------------------------
3,500,000 Motels of America, Inc., Sr. Sub. Note, 12.00%, 4/15/2004 3,521,875
------------------------------------------------------------------------------ --------------
INDUSTRIAL PRODUCTS & EQUIPMENT--2.0%
------------------------------------------------------------------------------
5,650,000 (b)Cabot Safety Acquisition Corp., Sr. Sub. Note, 12.50%, 7/15/2005 5,904,250
------------------------------------------------------------------------------
4,000,000 Fairfield Manufacturing Co., Inc., Sr. Sub. Note, 11.375%, 7/1/2001 3,820,000
------------------------------------------------------------------------------
3,625,000 Pace Industries, Inc., Sr. Note, 10.625%, 12/1/2002 3,389,375
------------------------------------------------------------------------------ --------------
Total 13,113,625
------------------------------------------------------------------------------ --------------
LEISURE & ENTERTAINMENT--3.2%
------------------------------------------------------------------------------
4,000,000 Affinity Group, Inc., Sr. Sub. Note, 11.50%, 10/15/2003 4,035,000
------------------------------------------------------------------------------
3,500,000 (b)Alliance Entertainment Corp., Sr. Sub. Note, 11.25%, 7/15/2005 3,517,500
------------------------------------------------------------------------------
2,500,000 (b)Premier Parks, Inc., Sr. Note, 12.00%, 8/15/2003 2,562,500
------------------------------------------------------------------------------
11,500,000 Six Flags Theme Parks, Sr. Sub. Disc. Note, 0/12.25%, 6/15/2005 8,653,750
------------------------------------------------------------------------------
$ 2,000,000 Viacom, Inc., Sub. Deb., 8.00%, 7/7/2006 $ 1,980,000
------------------------------------------------------------------------------ --------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--CONTINUED
------------------------------------------------------------------------------
Total 20,748,750
------------------------------------------------------------------------------ --------------
MACHINERY & EQUIPMENT--1.4%
------------------------------------------------------------------------------
3,500,000 Primeco Inc., Sr. Sub. Note, 12.75%, 3/1/2005 3,622,500
------------------------------------------------------------------------------
5,000,000 Waters Corp., Sr. Sub. Note, 12.75%, 9/30/2004 5,462,500
------------------------------------------------------------------------------ --------------
Total 9,085,000
------------------------------------------------------------------------------ --------------
OIL & GAS--3.0%
------------------------------------------------------------------------------
2,000,000 Clark USA, Inc., Sr. Note, 11.00% accrual, 2/15/2000 1,270,000
------------------------------------------------------------------------------
4,200,000 Falcon Drilling Co., Inc., Sr. Note, 9.75%, 1/15/2001 4,221,000
------------------------------------------------------------------------------
2,500,000 Falcon Drilling Co., Inc., Sr. Sub. Note, 12.50%, 3/15/2005 2,662,500
------------------------------------------------------------------------------
3,750,000 Giant Industries, Inc., Sr. Sub. Note, 9.75%, 11/15/2003 3,750,000
------------------------------------------------------------------------------
3,250,000 H.S. Resources, Inc., Sr. Sub. Note, 9.875%, 12/1/2003 3,176,875
------------------------------------------------------------------------------
1,500,000 Triton Energy Corp., Sr. Sub. Disc. Note, 0/9.75%, 12/15/2000 1,389,375
------------------------------------------------------------------------------
3,550,000 WRT Energy Corp., Unit, 13.875%, 3/1/2002 3,088,500
------------------------------------------------------------------------------ --------------
Total 19,558,250
------------------------------------------------------------------------------ --------------
PRINTING & PUBLISHING--1.4%
------------------------------------------------------------------------------
7,500,000 Affiliated Newspaper, Sr. Disc. Note, 0/13.25%, 7/1/2006 4,237,500
------------------------------------------------------------------------------
2,000,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 1,970,000
------------------------------------------------------------------------------
3,000,000 Webcraft Technologies, Inc., Sr. Sub. Note, 9.375%, 2/15/2002 2,820,000
------------------------------------------------------------------------------ --------------
Total 9,027,500
------------------------------------------------------------------------------ --------------
RETAILERS--2.7%
------------------------------------------------------------------------------
4,500,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 9/1/2003 4,207,500
------------------------------------------------------------------------------
3,100,000 (b)Herff Jones, Inc., Sr. Sub. Note, 11.00%, 8/15/2005 3,200,750
------------------------------------------------------------------------------
3,250,000 Hosiery Corp. of America, Inc., Sr. Sub. Note, 13.75%, 8/1/2002 3,370,250
------------------------------------------------------------------------------
3,750,000 ICON Health & Fitness, Inc., Sr. Sub. Note, 13.00%, 7/15/2002 3,956,250
------------------------------------------------------------------------------
2,900,000 (b)Samsonite Corp., 11.125%, 7/15/2005 2,827,500
------------------------------------------------------------------------------ --------------
Total 17,562,250
------------------------------------------------------------------------------ --------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
SERVICES--0.7%
------------------------------------------------------------------------------
$ 4,250,000 Solon Automated Services, Inc., Sr. Note, 12.75%, 7/15/2001 $ 4,271,250
------------------------------------------------------------------------------ --------------
STEEL--4.5%
------------------------------------------------------------------------------
4,500,000 Acme Metals, Inc., Sr. Secd. Disc. Note, 0/13.50%, 8/1/2004 3,510,000
------------------------------------------------------------------------------
2,500,000 Armco, Inc., Sr. Note, 9.375%, 11/1/2000 2,471,875
------------------------------------------------------------------------------
5,500,000 Carbide/Graphite Group, Inc., Sr. Note, 11.50%, 9/1/2003 5,871,250
------------------------------------------------------------------------------
6,000,000 EnviroSource, Inc., Sr. Note, 9.75%, 6/15/2003 5,370,000
------------------------------------------------------------------------------
3,000,000 Geneva Steel Co., Sr. Note, 11.125%, 3/15/2001 2,475,000
------------------------------------------------------------------------------
6,000,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 6,030,000
------------------------------------------------------------------------------
3,825,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 3,719,813
------------------------------------------------------------------------------ --------------
Total 29,447,938
------------------------------------------------------------------------------ --------------
SURFACE TRANSPORTATION--3.1%
------------------------------------------------------------------------------
5,750,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 6,123,750
------------------------------------------------------------------------------
4,500,000 Sea Containers Ltd., Sr. Note, 9.50%, 7/1/2003 4,432,500
------------------------------------------------------------------------------
1,750,000 Sea Containers Ltd., Sr. Sub. Note, 12.50%, 12/1/2004 1,903,125
------------------------------------------------------------------------------
3,000,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 3,075,000
------------------------------------------------------------------------------
5,000,000 Trism, Inc., Sr. Sub. Note, 10.75%, 12/15/2000 4,975,000
------------------------------------------------------------------------------ --------------
Total 20,509,375
------------------------------------------------------------------------------ --------------
TELECOMMUNICATIONS & CELLULAR--6.2%
------------------------------------------------------------------------------
7,250,000 Cellular Communications International, Inc., Unit, 13.25% accrual, 8/15/2000 3,987,500
------------------------------------------------------------------------------
4,500,000 Dial Call Communications, Inc., Unit, 0/12.25%, 4/15/2004 2,362,500
------------------------------------------------------------------------------
5,300,000 (b)IXC Communications, Inc., Sr. Note, 12.50%, 10/1/2005 5,207,250
------------------------------------------------------------------------------
2,400,000 MetroCall, Inc., Sr. Sub. Note, 10.375%, 10/1/2007 2,436,000
------------------------------------------------------------------------------
7,750,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 3,855,625
------------------------------------------------------------------------------
4,400,000 Paging Network, Inc., Sr. Sub. Note, 10.125%, 8/1/2007 4,587,000
------------------------------------------------------------------------------
8,800,000 PanAmSat Corp., Sr. Sub. Disc. Note, 0/11.375%, 8/1/2003 6,908,000
------------------------------------------------------------------------------
2,200,000 (b)Peoples Telephone Co., Sr. Note, 12.25%, 7/15/2002 2,249,500
------------------------------------------------------------------------------
$ 4,100,000 ProNet, Inc., Sr. Sub. Note, 11.875%, 6/15/2005 $ 4,346,000
------------------------------------------------------------------------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR--CONTINUED
------------------------------------------------------------------------------
5,000,000 USA Mobile Communications, Inc., Sr. Note, 9.50%, 2/1/2004 4,675,000
------------------------------------------------------------------------------ --------------
Total 40,614,375
------------------------------------------------------------------------------ --------------
UTILITIES--1.6%
------------------------------------------------------------------------------
12,075,000 California Energy Co., Inc., Sr. Disc. Note, 0/10.25%, 1/15/2004 10,701,469
------------------------------------------------------------------------------ --------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $601,974,160) 605,500,430
------------------------------------------------------------------------------ --------------
COMMON STOCKS--1.6%
- ---------------------------------------------------------------------------------------------
BUILDING & DEVELOPMENT--0.0%
------------------------------------------------------------------------------
4,696 Atlantic Gulf Communities Corp. 35,807
------------------------------------------------------------------------------
3,571 Atlantic Gulf Communities Corp., Warrants 223
------------------------------------------------------------------------------ --------------
Total 36,030
------------------------------------------------------------------------------ --------------
CHEMICALS & PLASTICS--0.0%
------------------------------------------------------------------------------
14,862 (b)UCC Investors Holdings, Inc. 131,900
------------------------------------------------------------------------------
30,000 Uniroyal Technology Corp., Warrants 90,000
------------------------------------------------------------------------------ --------------
Total 221,900
------------------------------------------------------------------------------ --------------
CONGLOMERATES--0.8%
------------------------------------------------------------------------------
353 (b)MAFCO Acquisition, Warrants 0
------------------------------------------------------------------------------
771,314 Triton Group Ltd. 2,410,356
------------------------------------------------------------------------------
186,810 Walter Industries, Inc. 2,381,829
------------------------------------------------------------------------------ --------------
Total 4,792,185
------------------------------------------------------------------------------ --------------
CONTAINER & GLASS PRODUCTS--0.0%
------------------------------------------------------------------------------
71,200 (a)(b)Kane Industries, Inc., Warrants 0
------------------------------------------------------------------------------ --------------
ECOLOGICAL SERVICES & EQUIPMENT--0.0%
------------------------------------------------------------------------------
19,200 ICF Kaiser International, Inc., Warrants 12,000
------------------------------------------------------------------------------ --------------
ELECTRONICS--0.0%
------------------------------------------------------------------------------
39,960 (b)La Barge, Inc. 157,343
------------------------------------------------------------------------------ --------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
FARMING & AGRICULTURE--0.3%
------------------------------------------------------------------------------
204,545 Spreckels Industries, Inc., Class A $ 1,994,314
------------------------------------------------------------------------------ --------------
FOOD & DRUG RETAILERS--0.4%
------------------------------------------------------------------------------
185,579 Grand Union Co. 2,412,527
------------------------------------------------------------------------------ --------------
FOOD PRODUCTS--0.1%
------------------------------------------------------------------------------
315,000 (b)Specialty Foods Acquisition Corp. 393,750
------------------------------------------------------------------------------ --------------
HOTELS, MOTELS, INNS & CASINOS--0.0%
------------------------------------------------------------------------------
1,750 Motels of America, Inc. 149,188
------------------------------------------------------------------------------ --------------
INDUSTRIAL PRODUCTS & EQUIPMENT--0.0%
------------------------------------------------------------------------------
6,589 Haynes International, Inc. 6,589
------------------------------------------------------------------------------ --------------
PRINTING & PUBLISHING--0.0%
------------------------------------------------------------------------------
1,875 Advanstar Corp. 0
------------------------------------------------------------------------------
583 Advanstar Corp., Warrants 7
------------------------------------------------------------------------------
7,500 (b)Affiliated Newspaper 225,000
------------------------------------------------------------------------------
46 Sullivan Holdings, Inc. 12
------------------------------------------------------------------------------ --------------
Total 225,019
------------------------------------------------------------------------------ --------------
RETAILERS--0.0%
------------------------------------------------------------------------------
3,250 Hosiery Corp. of America, Inc. 9,750
------------------------------------------------------------------------------
3,750 (b)IHF Capital, Inc., Warrants 93,750
------------------------------------------------------------------------------ --------------
Total 103,500
------------------------------------------------------------------------------ --------------
TELECOMMUNICATIONS & CELLULAR--0.0%
------------------------------------------------------------------------------
4,500 Dial Page, Inc., Warrants 6,750
------------------------------------------------------------------------------ --------------
TOTAL COMMON STOCKS (IDENTIFIED COST $35,094,290) 10,511,095
------------------------------------------------------------------------------ --------------
PREFERRED STOCKS--1.6%
- ---------------------------------------------------------------------------------------------
PRINTING & PUBLISHING--1.1%
------------------------------------------------------------------------------
75,452 K-III Communications Corp., PIK Pfd., Series B, 11.625% 7,431,993
------------------------------------------------------------------------------ --------------
TELECOMMUNICATIONS & CELLULAR--0.5%
------------------------------------------------------------------------------
2,574 PanAmSat Corp., PIK Pfd., 12.75% $ 2,884,167
------------------------------------------------------------------------------ --------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $9,938,255) 10,316,160
------------------------------------------------------------------------------ --------------
</TABLE>
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
(C)REPURCHASE AGREEMENT--3.6%
- ---------------------------------------------------------------------------------------------
$ 23,605,000 J.P. Morgan Securities, Inc., 6.48%, dated 9/29/1995, due 10/2/1995 (at
amortized cost) 23,605,000
------------------------------------------------------------------------------ --------------
TOTAL INVESTMENTS (IDENTIFIED COST $670,611,705)(D) $ 649,932,685
------------------------------------------------------------------------------ --------------
</TABLE>
(a) Non-income producing security.
(b) Indicates private placement securities held at September 30, 1995, with a
total market value of $50,262,743 which represent 7.7% of total net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $670,611,705.
The net unrealized depreciation of investments on a federal tax basis
amounts to $20,679,020, which is comprised of $19,104,662 appreciation and
$39,783,682 depreciation at September 30, 1995.
Note: The categories of investments are shown as a percentage of net assets
($651,831,562) at September 30, 1995.
The following acronyms are used throughout this portfolio:
PIK--Payment in Kind
PLC--Public Limited Company
(See Notes which are an integral part of the Financial Statements)
Liberty High Income Bond Fund, Inc.
Notes to Portfolio of Investments
- --------------------------------------------------------------------------------
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 Fund'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
- --------------------------------------------------------------------------------
September 30, 1995 (unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified and tax cost, $670,611,705) $649,932,685
- ---------------------------------------------------------------------------------------------------
Cash 306,071
- ---------------------------------------------------------------------------------------------------
Income receivable 14,284,140
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 5,778,850
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 3,198,246
- --------------------------------------------------------------------------------------------------- -----------
Total assets 673,499,992
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased $20,933,331
- ---------------------------------------------------------------------------------------
Payable for shares redeemed 167,892
- ---------------------------------------------------------------------------------------
Income distribution payable 430
- ---------------------------------------------------------------------------------------
Accrued expenses 566,777
- --------------------------------------------------------------------------------------- ----------
Total liabilities 21,668,430
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS for 59,518,750 shares outstanding $651,831,562
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid-in capital $699,185,522
- ---------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (20,668,387)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (28,358,302)
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 1,672,729
- --------------------------------------------------------------------------------------------------- -----------
Total Net Assets $651,831,562
- --------------------------------------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($495,648,555 / 45,259,451 shares outstanding) $10.95
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/95.50 of $10.95)* $11.47
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share $10.95
- --------------------------------------------------------------------------------------------------- -----------
CLASS C SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($42,197,638 / 3,853,583 shares outstanding) $10.95
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $10.95
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (99.00/100 of $10.95)** $10.84
- --------------------------------------------------------------------------------------------------- -----------
CLASS B SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($113,985,369 / 10,405,716 shares outstanding) $10.95
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $10.95
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (94.50/100 of $10.95)** $10.35
- --------------------------------------------------------------------------------------------------- -----------
</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
- --------------------------------------------------------------------------------
Six Months Ended September 30, 1995 (unaudited)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Dividends $ 200,854
- ----------------------------------------------------------------------------------------------------
Interest 29,995,463
- ---------------------------------------------------------------------------------------------------- ----------
Total income 30,196,317
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------------
Investment advisory fee $2,188,450
- -----------------------------------------------------------------------------------------
Administrative personnel and services fees 220,887
- -----------------------------------------------------------------------------------------
Custodian fees 32,973
- -----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 270,493
- -----------------------------------------------------------------------------------------
Directors'/Trustees' fees 8,418
- -----------------------------------------------------------------------------------------
Auditing fees 19,032
- -----------------------------------------------------------------------------------------
Legal fees 12,993
- -----------------------------------------------------------------------------------------
Portfolio accounting fees 78,201
- -----------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 139,419
- -----------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 271,611
- -----------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 592,473
- -----------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 46,473
- -----------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 90,537
- -----------------------------------------------------------------------------------------
Share registration costs 43,188
- -----------------------------------------------------------------------------------------
Printing and postage 55,266
- -----------------------------------------------------------------------------------------
Insurance premiums 6,405
- -----------------------------------------------------------------------------------------
Taxes 69,540
- -----------------------------------------------------------------------------------------
Miscellaneous 2,928
- ----------------------------------------------------------------------------------------- ---------
Total expenses 4,149,287
- -----------------------------------------------------------------------------------------
Waivers--
- -----------------------------------------------------------------------------------------
Waiver of investment advisory fee $ (25,217)
- ------------------------------------------------------------------------------
Waiver of shareholder services fee--Class A Shares (118,495)
- ------------------------------------------------------------------------------
Waiver of shareholder services fee--Class C Shares (3,718)
- ------------------------------------------------------------------------------ ---------
Total waivers (147,430)
- ----------------------------------------------------------------------------------------- ---------
Net expenses 4,001,857
- ---------------------------------------------------------------------------------------------------- ----------
Net investment income 26,194,460
- ---------------------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain on investments 161,571
- ----------------------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments 21,659,568
- ---------------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 21,821,139
- ---------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $48,015,599
- ---------------------------------------------------------------------------------------------------- ----------
</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>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------
Operations--
- ---------------------------------------------------------------------
Net investment income $ 26,194,460 $ 44,927,790
- ---------------------------------------------------------------------
Net realized gain (loss) on investments ($161,571 and $1,619,570,
respectively, as computed for federal income tax purposes) 161,571 262,009
- ---------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 21,659,568 (18,874,807)
- --------------------------------------------------------------------- ----------------------- ------------------
Change in net assets resulting from operations 48,015,599 26,314,992
- --------------------------------------------------------------------- ----------------------- ------------------
NET EQUALIZATION CREDITS (DEBITS)-- 239,407 161,190
- --------------------------------------------------------------------- ----------------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------
Distributions from net investment income
- ---------------------------------------------------------------------
Class A Shares (22,217,586) (42,556,810)
- ---------------------------------------------------------------------
Select Shares -- (25,156)
- ---------------------------------------------------------------------
Class C Shares (1,591,057) (2,428,261)
- ---------------------------------------------------------------------
Class B Shares (3,013,053) (450,413)
- --------------------------------------------------------------------- ----------------------- ------------------
Change in net assets resulting from distributions
to shareholders (26,821,696) (45,460,640)
- --------------------------------------------------------------------- ----------------------- ------------------
SHARE TRANSACTIONS (EXCLUSIVE OF AMOUNTS ALLOCATED
TO NET INVESTMENT INCOME)--
- ---------------------------------------------------------------------
Proceeds from sale of shares 146,623,586 162,685,494
- ---------------------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 12,998,691 21,301,954
- ---------------------------------------------------------------------
Cost of shares redeemed (42,935,039) (115,639,357)
- --------------------------------------------------------------------- ----------------------- ------------------
Change in net assets resulting from share transactions 116,687,238 68,348,091
- --------------------------------------------------------------------- ----------------------- ------------------
Change in net assets 138,120,548 49,363,633
- ---------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------
Beginning of period 513,711,014 464,347,381
- --------------------------------------------------------------------- ----------------------- ------------------
End of period (including undistributed net investment income of
$1,672,729 and $2,060,558, respectively) $ 651,831,562 $ 513,711,014
- --------------------------------------------------------------------- ----------------------- ------------------
</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>
SIX MONTHS
ENDED
(UNAUDITED) PERIOD ENDED
SEPTEMBER 30, MARCH 31,
1995 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 10.54 $ 10.99 $ 11.19 $ 10.80 $ 8.79 $ 8.96 $ 10.99 $ 11.20 $ 12.53
- ------------------
INCOME FROM
INVESTMENT
OPERATIONS
- ------------------
Net investment
income 0.50 1.01 1.05 1.13 1.23 1.21 1.33 1.40 1.42
- ------------------
Net realized and
unrealized gain
(loss) on
investments 0.42 (0.43) (0.19) 0.41 1.99 (0.14) (1.98) (0.20) (1.31)
- ------------------ ------ --------- --------- --------- --------- --------- --------- --------- ---------
Total from
investment
operations 0.92 0.58 0.86 1.54 3.22 1.07 (0.65) 1.20 0.11
- ------------------
LESS DISTRIBUTIONS
- ------------------
Distributions
from net
investment income (0.51) (1.03) (1.06) (1.15) (1.21) (1.24) (1.38) (1.41) (1.44)
- ------------------ ------ --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $ 10.95 $ 10.54 $ 10.99 $ 11.19 $ 10.80 $ 8.79 $ 8.96 $ 10.99 $ 11.20
- ------------------ ------ --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN(B) 8.89% 5.74% 7.82% 15.39% 38.83% 14.20% (6.82%) 11.34% 1.30%
- ------------------
RATIOS TO AVERAGE
NET ASSETS
- ------------------
Expenses 1.22%* 1.21% 1.18% 1.08% 1.02% 1.03% 1.02% 1.00% 1.05%
- ------------------
Net investment
income 9.10%* 9.64% 9.27% 10.44% 12.40% 14.62% 13.01% 12.55% 12.37%
- ------------------
Expense waiver/
reimbursement (c) 0.06%* 0.05% 0.05% 0.08% -- -- -- -- --
- ------------------
SUPPLEMENTAL DATA
- ------------------
Net assets,
end of period
(000 omitted) $459,649 $448,040 $439,149 $417,015 $351,087 $252,147 $282,149 $379,876 $360,409
- ------------------
Portfolio
turnover 37% 52% 76% 49% 37% 32% 40% 43% 52%
- ------------------
<CAPTION>
AUGUST 31,
1987(A) 1986
<S> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 12.53 $ 12.17
- ------------------
INCOME FROM
INVESTMENT
OPERATIONS
- ------------------
Net investment
income 0.85 1.53
- ------------------
Net realized and
unrealized gain
(loss) on
investments -- 0.37
- ------------------ ----------- ------
Total from
investment
operations 0.85 1.90
- ------------------
LESS DISTRIBUTIONS
- ------------------
Distributions
from net
investment income (0.85) (1.54)
- ------------------ ----------- ------
NET ASSET VALUE,
END OF PERIOD $ 12.53 $ 12.53
- ------------------ ----------- ------
TOTAL RETURN(B) 7.09% 16.51%
- ------------------
RATIOS TO AVERAGE
NET ASSETS
- ------------------
Expenses 1.02%* 1.06%
- ------------------
Net investment
income 11.72%* 12.41%
- ------------------
Expense waiver/
reimbursement (c) -- --
- ------------------
SUPPLEMENTAL DATA
- ------------------
Net assets,
end of period
(000 omitted) $390,160 $352,641
- ------------------
Portfolio
turnover 25 % 27 %
- ------------------
</TABLE>
*Computed on an annualized basis.
(a) Reflects operations for the seven month period ended March 31, 1987.
(b) Based on net asset value, which does not reflect the sales charge 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.
(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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) PERIOD ENDED
SEPTEMBER 30, MARCH 31,
1995 1995(A)
<S> <C> <C>
- ---------------------------------------------------------------------------- ----------------- -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.54 $ 10.57
- ----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------
Net investment income 0.46 0.51
- ----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.42 (0.07 )
- ---------------------------------------------------------------------------- ------- -------
Total from investment operations 0.88 0.44
- ----------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------
Distributions from net investment income (0.47 ) (0.47 )
- ---------------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.95 $ 10.54
- ---------------------------------------------------------------------------- ------- -------
TOTAL RETURN (B) 8.45% 4.47%
- ----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------
Expenses 2.02%* 2.02%*
- ----------------------------------------------------------------------------
Net investment income 8.32%* 9.47%*
- ----------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.01%* 0.05%*
- ----------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------
Net assets, end of period (000 omitted) $113,985 $33,295
- ----------------------------------------------------------------------------
Portfolio turnover 37% 52%
- ----------------------------------------------------------------------------
</TABLE>
*Computed on an annualized basis.
(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 charge 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.
(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>
SIX MONTHS ENDED
(UNAUDITED) PERIOD ENDED
SEPTEMBER 30, MARCH 31,
1995 1995 1994(A)
<S> <C> <C> <C>
- -------------------------------------------------------------------------- ----------------- --------- -----------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.54 $ 10.99 $ 11.18
- --------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------
Net investment income 0.46 0.94 0.92
- --------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.42 (0.44) (0.23 )
- -------------------------------------------------------------------------- ------- --------- -----------
Total from investment operations 0.88 0.50 0.69
- --------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------
Distributions from net investment income (0.47 ) (0.95) (0.88 )
- -------------------------------------------------------------------------- ------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.95 $ 10.54 $ 10.99
- -------------------------------------------------------------------------- ------- --------- -----------
TOTAL RETURN (B) 8.48 % 4.91% 6.23 %
- --------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------
Expenses 2.00 %* 1.98% 1.99 %*
- --------------------------------------------------------------------------
Net investment income 8.32 %* 8.90% 8.54 %*
- --------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.03 %* 0.05% 0.05 %*
- --------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------
Net assets, end of period (000 omitted) $42,198 $32,376 $24,360
- --------------------------------------------------------------------------
Portfolio turnover 37 % 52% 76 %
- --------------------------------------------------------------------------
</TABLE>
*Computed on an annualized basis.
(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 charge 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.
(See Notes which are an integral part of the Financial Statements)
Liberty High Income Bond Fund, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
September 30, 1995 (unaudited)
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.
INVESTMENT VALUATIONS--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. All other securities are valued at
prices provided by an independent pricing service.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of 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.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax 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
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
gain on investments, if any, to the extent permitted by the Code, and thus
will reduce the amount of the distributions to shareholders which would
otherwise be necessary to relieve the Fund of any liability for federal
tax. Pursuant to the Code, such capital loss carryforward will expire as
follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
1999 $ 3,068,407
2000 $ 24,064,617
</TABLE>
Additionally, net capital losses of ($1,172,805) attributable to security
transactions incurred
after October 31, 1994, are treated as arising on the first day of the
Fund's next taxable year.
EQUALIZATION--The Fund follows the accounting practice known as
equalization. With equalization, 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.
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.
INVESTMENT RISK--Although the Fund has a diversified portfolio, the Fund
has 95% 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 $0.
OTHER--Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At September 30, 1995, par value shares ($0.01 per share) authorized were as
follows:
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<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 capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 4,493,216 $ 48,683,610 10,472,472 $ 110,355,520
- -----------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 1,011,113 10,935,305 1,931,543 20,273,694
- -----------------------------------------------------
Shares redeemed (2,766,991) (29,943,558) (9,836,127) (103,267,837)
- ----------------------------------------------------- ----------- -------------- ------------ ---------------
Net change resulting from
Class A share transactions 2,737,338 $ 29,675,357 2,567,888 $ 27,361,377
- ----------------------------------------------------- ----------- -------------- ------------ ---------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995(A)
<S> <C> <C> <C> <C>
SELECT SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold -- $ -- 18,080 $ 195,732
- --------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared -- -- 1,194 12,855
- --------------------------------------------------------------
Shares reclassed to Class C Shares -- -- (73,229) (772,938)
- --------------------------------------------------------------
Shares redeemed -- -- (22,295) (240,408)
- -------------------------------------------------------------- ----------- ------------- --------- -----------
Net change resulting from
Select share transactions -- $ -- (76,250) ($ 804,759)
- -------------------------------------------------------------- ----------- ------------- --------- -----------
</TABLE>
(a) Reflects operations for the period from April 1, 1994 to July 29, 1994 (date
Select Shares ceased operations).
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 1,279,546 $ 13,869,134 1,757,459 $ 18,510,668
- --------------------------------------------------------
Shares reclassed from Select Shares -- -- 73,229 772,938
- --------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 66,636 721,587 80,242 842,075
- --------------------------------------------------------
Shares redeemed (565,634) (6,115,592) (1,054,722) (11,094,550)
- -------------------------------------------------------- ---------- ------------- ----------- --------------
Net change resulting from
Class C share transactions 780,548 $ 8,475,129 856,208 $ 9,031,131
- -------------------------------------------------------- ---------- ------------- ----------- --------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995(B)
<S> <C> <C> <C> <C>
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 7,756,912 $ 84,070,842 3,169,136 $ 32,850,636
- -------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 123,669 1,341,799 16,778 173,330
- -------------------------------------------------------
Shares redeemed (635,193) (6,875,889) (25,586) (263,624)
- ------------------------------------------------------- ------------ -------------- ---------- -------------
Net change resulting from
Class B share transactions 7,245,388 $ 78,536,752 3,160,328 $ 32,760,342
- ------------------------------------------------------- ------------ -------------- ---------- -------------
Net change resulting from share
transactions 10,763,274 116,687,238 6,508,174 $ 68,348,091
- ------------------------------------------------------- ------------ -------------- ---------- -------------
</TABLE>
(b) 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 any 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, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This 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
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
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. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's Class B and Class C shares. The Plan provides that the Fund may
incur distribution expenses according to the following schedule, annually, to
compensate FSC.
<TABLE>
<CAPTION>
% OF AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
<S> <C>
Class B Shares 0.75 of 1%
Class C Shares 0.75 of 1%
</TABLE>
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25 of
1% of daily average net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts.
TRANSFER AGENT FEES--Federated Services Company ("FServ") serves as transfer and
dividend disbursing agent for the Fund. This fee is based on the size, type, and
number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and 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 September 30, 1995, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
PURCHASES $ 207,072,195
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 598,427,667
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
Liberty High Income Bond Fund, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
September 30, 1995 (unaudited)
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.
INVESTMENT VALUATIONS--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. All other securities are valued at
prices provided by an independent pricing service.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of 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.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax 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
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
gain on investments, if any, to the extent permitted by the Code, and thus
will reduce the amount of the distributions to shareholders which would
otherwise be necessary to relieve the Fund of any liability for federal
tax. Pursuant to the Code, such capital loss carryforward will expire as
follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
1999 $ 3,068,407
2000 $ 24,064,617
</TABLE>
Additionally, net capital losses of ($1,172,805) attributable to security
transactions incurred
after October 31, 1994, are treated as arising on the first day of the
Fund's next taxable year.
EQUALIZATION--The Fund follows the accounting practice known as
equalization. With equalization, 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.
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.
INVESTMENT RISK--Although the Fund has a diversified portfolio, the Fund
has 95% 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 $0.
OTHER--Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At September 30, 1995, par value shares ($0.01 per share) authorized were as
follows:
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<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 capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 4,493,216 $ 48,683,610 10,472,472 $ 110,355,520
- -----------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 1,011,113 10,935,305 1,931,543 20,273,694
- -----------------------------------------------------
Shares redeemed (2,766,991) (29,943,558) (9,836,127) (103,267,837)
- ----------------------------------------------------- ----------- -------------- ------------ ---------------
Net change resulting from
Class A share transactions 2,737,338 $ 29,675,357 2,567,888 $ 27,361,377
- ----------------------------------------------------- ----------- -------------- ------------ ---------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995(A)
<S> <C> <C> <C> <C>
SELECT SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold -- $ -- 18,080 $ 195,732
- --------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared -- -- 1,194 12,855
- --------------------------------------------------------------
Shares reclassed to Class C Shares -- -- (73,229) (772,938)
- --------------------------------------------------------------
Shares redeemed -- -- (22,295) (240,408)
- -------------------------------------------------------------- ----------- ------------- --------- -----------
Net change resulting from
Select share transactions -- $ -- (76,250) ($ 804,759)
- -------------------------------------------------------------- ----------- ------------- --------- -----------
</TABLE>
(a) Reflects operations for the period from April 1, 1994 to July 29, 1994 (date
Select Shares ceased operations).
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 1,279,546 $ 13,869,134 1,757,459 $ 18,510,668
- --------------------------------------------------------
Shares reclassed from Select Shares -- -- 73,229 772,938
- --------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 66,636 721,587 80,242 842,075
- --------------------------------------------------------
Shares redeemed (565,634) (6,115,592) (1,054,722) (11,094,550)
- -------------------------------------------------------- ---------- ------------- ----------- --------------
Net change resulting from
Class C share transactions 780,548 $ 8,475,129 856,208 $ 9,031,131
- -------------------------------------------------------- ---------- ------------- ----------- --------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995(B)
<S> <C> <C> <C> <C>
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 7,756,912 $ 84,070,842 3,169,136 $ 32,850,636
- -------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 123,669 1,341,799 16,778 173,330
- -------------------------------------------------------
Shares redeemed (635,193) (6,875,889) (25,586) (263,624)
- ------------------------------------------------------- ------------ -------------- ---------- -------------
Net change resulting from
Class B share transactions 7,245,388 $ 78,536,752 3,160,328 $ 32,760,342
- ------------------------------------------------------- ------------ -------------- ---------- -------------
Net change resulting from share
transactions 10,763,274 116,687,238 6,508,174 $ 68,348,091
- ------------------------------------------------------- ------------ -------------- ---------- -------------
</TABLE>
(b) 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 any 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, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This 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
Liberty High Income Bond Fund, Inc.
- --------------------------------------------------------------------------------
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. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's Class B and Class C shares. The Plan provides that the Fund may
incur distribution expenses according to the following schedule, annually, to
compensate FSC.
<TABLE>
<CAPTION>
% OF AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
<S> <C>
Class B Shares 0.75 of 1%
Class C Shares 0.75 of 1%
</TABLE>
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25 of
1% of daily average net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts.
TRANSFER AGENT FEES--Federated Services Company ("FServ") serves as transfer and
dividend disbursing agent for the Fund. This fee is based on the size, type, and
number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and 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 September 30, 1995, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
PURCHASES $ 207,072,195
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 598,427,667
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
Directors Officers
- --------------------------------------------------------------------------------
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Richard B. Fisher
J. Christopher Donahue President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden Executive Vice President
Gregor F. Meyer John W. McGonigle
John E. Murray, Jr. Executive Vice President and Secretary
Wesley W. Posvar David M. Taylor
Marjorie P. Smuts Treasurer
Charles H. Field
Assistant Secretary
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.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
[LOGO OF FEDERATED FUNDS]
Where Experts Invest
Federated Securities Corp. is the distributor of the fund.
A Subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 530586100
Cusip 530585407
Cusip 530585209
8110103 (11/95)
LHIBF APPENDIX
A. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text above it, which shows that an initial investment of $18,000 in
Liberty High Income Bond Fund, Inc. Class A Shares on November 30, 1977, would
have grown to $108,084 by September 30, 1995.. The "x" axis reflects the cost
of investment, the "y" axis reflects computation periods from 1977 to 1995, and
the right margin reflects a total investment range from $0 to $120,000. 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.
B. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text above it, which shows that $1,000 invested each year for 18 years
in Liberty High Income Bond Fund, Inc. Class A Shares beginning on November 30,
1977, would have grown to $59,218 by September 30, 1995.. The "x" axis reflects
the cost of investment, the "y" axis reflects computation periods from 1977 to
1995, 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.
C. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text above it, which shows that an initial investment of $5,000
invested in Liberty High Income Bond Fund, Inc. Class A Shares on September 30,
1985, would have grown to $14,159 by September 30, 1995.. The "x" axis reflects
the cost of investment, the "y" axis reflects computation periods from 1985 to
1995, 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.
