[LOGO] FEDERATED INVESTORS
Since 1955
Federated
High Income
Bond Fund, Inc.
(formerly, Liberty High
Income Bond Fund, Inc.)
19th Annual Report
March 31, 1996
Established 1977
FIXED INCOME
President's Message
[PHOTO APPEARS HERE]
Dear Fellow Shareholder:
I am pleased to present the 19th Annual Report for Federated High Income Bond
Fund, Inc., formerly known as Liberty High Income Bond Fund, Inc. The fund's
name now begins with "Federated" to make it easy for investors to locate all
Federated Funds in newspapers and other publications.
This report covers the 12-month period from April 1, 1995, through March 31,
1996. It begins with an interview with the fund's portfolio manager, Mark E.
Durbiano, Senior Vice President, Federated Advisers. Following this discussion
are three additional items of shareholder interest. First is a series of graphs
which display the fund's performance with income dividends reinvested, and the
benefit of making additional investments in the fund shares with dividends
reinvested. Second is a complete listing of the fund's corporate bond
holdings. Third is the publication of the fund's financial statements.
During the 12-month reporting period covered by this report, the fund's assets
increased substantially from $513.7 on April 1, 1995, to $825.7 million on
March 31, 1996. This growth in assets can be attributed partly to appreciation
in the share value and reinvestment of the monthly dividends. More significant
to the growth, however, were additional investments in the fund, as new and
current shareholders continued to choose the fund for the high monthly income
potential from the 170 selected corporate bond issues.
Consistent with a favorable high yield bond market during the 12-month period,
the fund's broadly diversified portfolio rewarded shareholders with good
performanceAincluding a very healthy income stream:*
Total Return Income Share Price Growth
Class A Shares 15.24% $1.01 $10.54 to $11.08=5%
Class B Shares 14.31% $0.92 $10.54 to $11.08=5%
Class C Shares 14.35% $0.92 $10.54 to $11.08=5%
Thank you for joining more than 24,300 shareholders in Federated High Income
Bond Fund. The fund is now completing its 19th 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
May 15, 1996
* Performance quoted is based on net asset value and reflects past performance.
Performance is not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Total returns for the
period, based on offering price, for Class A Shares, Class B Shares, and
Class C Shares were 10.02%, 8.32%, and 13.22%, respectively.
Investment Review
[PHOTO APPEARS HERE]
Mark E. Durbiano
Senior Vice President
Federated Advisers
Q
Mark, would you begin with a discussion of the major factors that influenced
the performance of fixed-income securities in general over the past 12 months?
A
The past 12 months are best viewed as two distinct time periods. The first
period, which ran from the beginning of the fund's fiscal year, April 1, 1995,
and extended until calendar year end, was characterized by declining interest
rates and widening credit spreads.
The second period, encompassing the first quarter of 1996, January 1, 1996,
through March 31, 1996, was characterized by rising interest rates and
tightening credit spreads. Over the full period, interest rates fell
approximately 100 basis points, or 1%, and credit spreads remained relatively
stable. The main reason for the bond market's volatility was shifting
expectations about the domestic economy. The early period was characterized by
slow growth and recessionary fears. While in early 1996, the investor's
economic expectations shifted dramatically as recessionary concerns gave way
to a growth scenario.
Q
How did the high-yield bond market fare during this time period?
A
The high-yield market performed very well over the past 12 months on both an
absolute basis as well as relative to higher quality bonds. The high-yield
market benefited from falling interest rates as well as a stable economic
environment. For example, the Lehman Brothers High Yield Index returned 14.46%
for the period, outperforming the Lehman Brothers Aggregate Bond Index, a
measure of high-quality bond performance, which returned 10.78% for the
period.**
** Lehman Brothers High Yield Index includes all fixed income securities having
a maximum quality rating of Ba1 (including defaulted issues), a minimum
amount outstanding of $100 million and at least one year to maturity.
Indices are unmanaged and actual investments may not be made in an index.
Lehman Brothers Aggregate Bond Index is a total return index measuring both
the capital price changes and income provided by the underlying universe of
securities, weighted by market value outstanding.
Q
How did Federated High Income Bond Fund, Inc. perform?
A
Federated High Income Bond Fund, Inc. generated outstanding performance over
the period. The fund's Class A Shares had a total return of 15.24% based on
the net asset value, which included share value increase and monthly income
dividends. The total returns, based on the net asset value, for Class B Shares
and Class C Shares were 14.31% and 14.35%, respectively.*** Your fund
outperformed the Lehman Brothers High Yield Index** as well as the Lipper High
Current Yield Average, a measure of high yield bond mutual fund performance,
which had a total return of 14.99% over the period.
Q
Mark, what factors positively impacted the fund's performance relative to the
high-yield market?
A
Several factors influenced the fund over the period. First, we maintained a
higher-than-normal quality profile for most of the period. We increased the
fund's BB-rated exposure while upgrading the quality of its B-rated exposure.
This benefited the fund as higher quality, high-yield bonds are more sensitive
to declines in interest rates.
Second, we increased the fund's exposure to the broadcast TV, cable TV and
telecommunications industries early in the period. Broadcast TV operators
benefited from a strong advertising environment, as well as expectation of
strong cash flow growth in 1996 driven by political advertising. The fund's
U.S. cable TV holdings benefited as the industry continued to consolidate, with
larger entities purchasing smaller entities. For example, Continental
Cablevision, one of the fund's holdings, recently announced plans to be
acquired by US West, an investment-grade company.
In addition, both cable TV and broadcast TV, as well as the telecommunications
industries, benefited from the deregulation of their respective industries.
This has opened the door for consolidation among companies within their own
industries as well as across industries. Finally, the fund benefited from
several corporate actions. For example, Truck Components, Doehler-Jarvis, and
Surgical Health tendered for their bonds at attractive prices after being
acquired by higher quality companies.
*** Performance quoted reflects past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
Q
What is your outlook for the economy, interest rates, and high-yield bonds for
the balance of 1996?
A
I believe that the domestic economy continues to be in a slow-growth,
low-inflation mode. This is simply a continuation of the environment we've been
in for the past 12 months. Interest rates should stabilize around current
levels, as investors realize the economy is neither booming nor headed toward
recession. In this environment, carefully selected portfolios of high-yield
bonds should offer attractive returns relative to other fixed-income
investments. The higher income associated with high-yield bonds is a big plus
for high-yield bonds on the relative performance front for those investors who
are willing to assume more risk.
Q
What is your investment strategy for the fund?
A
There are several areas we are focusing on to maximize returns going forward.
First, we are returning to a more typical quality profile since our belief is
that a recession is not imminent.
Second, we continue to favor media-related companies and telecommunication
companies. On the cable side, we like the U.S. cable industry, as we believe
the trend toward consolidation will continue. This should favor a company like
Cablevison Systems which operates major clusters of cable systems in attractive
markets. We also like the U.K. cable market, where companies like Telewest and
International Cabletel are building out the U.K. cable infrastructure with both
cable and telephone capabilities. Longer term, we believe these companies will
become major players in both the cable and telephone markets. In broadcasting,
we like the local television affiliates like Young Broadcasting and Sinclair
Broadcasting.
These companies own good franchises and will benefit from recent regulatory
changes that allow companies to increase their ownership of TV properties
benefiting from economies of scale. On the telecommunication side, we like some
of the new players who will benefit from deregulation. Competitive local
exchange carriers like Brooks Fiber will benefit as the local loop is opened to
competition.
Q
One final question. The fund's name was recently changed from Liberty High
Income Bond Fund, Inc. to Federated High Income Bond Fund, Inc. Does this name
change mean anything to shareholders from an investment perspective?
A
No. The fund will continue to be managed in the same fashion as it has been
since its inception in 1977. The name of the fund has changed but the people,
the process, and the philosophy all remain the same.
Two Ways You May Seek to Invest for Success In
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
Initial Investment:
If you had made an initial investment of $19,000 in the Class A Shares of
Federated High Income Bond Fund, Inc. on 11/30/77, reinvested dividends and
capital gains, and did not redeem any shares, your account would have been
worth $120,743 on 3/31/96. You would have earned a 10.61%* average annual
total return for the 19-year investment lifespan.
One key to investing wisely is to reinvest all distributions in fund shares.
This increases the number of shares on which you can earn future dividends,
and you gain the benefit of compounding.
As of 3/31/96, the Class A Shares' average annual one-year, five-year, and
ten-year total returns were 10.02%, 15.00%, and 10.35%, respectively. Class B
Shares' average annual one-year and since inception (9/27/94) total returns
were 8.32%, and 9.09%, respectively. Class C Shares' average annual one-year
and since inception (4/30/93) total returns were 13.22% and 8.67%,
respectively.
See Appendix A
* Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 4.50%
sales charge 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.
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
One Step at a Time:
$1,000 invested each year for 19 years (reinvesting all dividends and capital
gains) grew to $63,664.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of Federated
High Income Bond Fund, Inc. on 11/30/77, reinvested your dividends and capital
gains and did not redeem any shares, you would have invested only $19,000, but
your account would have reached a total value of $63,664* by 3/31/96. You
would have earned an average annual total return of 11.69%.
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!
See Appendix B
* No method of investing can guarantee a profit or protect against loss in down
markets. However, by investing regularly over time and buying shares at
various prices, investors can purchase more shares at lower prices, and all
accumulated shares have the ability to pay income to the investor. Because
such a plan involves continuous investment, regard- less of changing price
levels, the investor should consider whether or not to continue purchases
through periods of low price levels.
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
Hypothetical Investor Profile: Investing for High Monthly Income
Chuck Colby is a fictional investor who, like many other shareholders, is
looking for high monthly income opportunities.
Chuck is an attorney on his way up the corporate ladder. On March 31, 1986, he
invested $5,000 in the Class A Shares of Federated High Income Bond Fund, Inc.
As this chart shows, over 10 years, his original $5,000 investment has grown to
$13,391. This represents a 10.35% average annual total return.* For Chuck,
that means extra money toward the construction of his first home.
See Appendix C
* This hypothetical scenario is provided for illustrative purposes only and does
not represent the results obtained by any particular shareholder. Past
performance does not guarantee future results.
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
A History of Solid Earnings Ten 10-Year Periods
-
$10,000 Invested with Distributions Reinvested
How a $10,000 investment grew during each
10-year period since fund inception.
This chart shows what your account would be worth had you invested $10,000 in
Class A Shares at the beginning of these consecutive decades.
Over every 10-year period since the fund's inception, a $10,000 investment in
its Class A Shares (with all dividends and capital gains reinvested) grew in
value. At the end of each decade, no investor would have lost money.
See Appendix D
* This initial investment period is November 30, 1997 through March 31, 1987.
For each time period shown, share price fluctuated.
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
Serving A Wide Range of Investors
Federated High Income Bond Fund, Inc. appeals to a broad range of investors
seeking current income.
The fund invests primarily in a diversified portfolio of high yield corporate
bonds covering more than 100 companies across 35 industries. Fund shares are
not guaranteed, and the value of your investment may fluctuate. Mutual funds
involve risk, including possible loss of principal.
See Appendix E
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
Portfolio Update
See Appendix F
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
(Class A Shares)
Growth of $10,000 Invested in Federated
High Income Bond Fund, Inc.
(Class A Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated High Income Bond Fund, Inc. (Class A Shares) from March 31, 1986 to
March 31, 1996 compared to the Lehman Brothers Single B Rated Index (LBSBRI)+
and the Lipper High Current Yield Funds Average (LHCYFA).++
See Appendix G
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the fund after deducting
the maximum sales charge of 4.50% ($10,000 investment minus $450 sales
charge = $9,550). The fund's performance assumes the reinvestment of all
dividends and distributions. The LSBRI and the LHCYFA have been adjusted to
reflect reinvestment of dividends on securities in the indices.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The LBSBRI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the fund's performance. This index
is unmanaged.
++ The LHCYFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
in the respective category, and is not adjusted to reflect any sales
charges. However, these total returns are reported net of expenses or other
fees that the SEC requires to be reflected in a fund's performance.
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
(Class B Shares)
Growth of $10,000 Invested in Federated
High Income Bond Fund, Inc.
(Class B Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated High Income Bond Fund, Inc. (Class B Shares) from September 27, 1994
(start of performance) to March 31, 1996 compared to the Lehman Brothers Single
B Rated Index (LBSBRI)+ and the Lipper High Current Yield Funds Average
(LHCYFA).++
See Appendix H
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the fund. The ending value
of the fund reflects a 5.50% contingent deferred sales charge on any
redemption less than one year from the purchase date. The fund's performance
assumes the reinvestment of all dividends and distributions. The LSBRI and
the LHCYFA have been adjusted to reflect reinvestment of dividends on
securities in the indices.
** Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+ The LBSBRI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the fund's performance. This index
is unmanaged.
++ The LHCYFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
in the respective category, and is not adjusted to reflect any sales
charges. However, these total returns are reported net of expenses or other
fees that the SEC requires to be reflected in a fund's performance.
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
(Class C Shares)
Growth of $10,000 Invested in
Federated High Income Bond Fund, Inc.
(Class C Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated High Income Bond Fund, Inc. (Class C Shares) from April 30, 1993
(start of performance) to March 31, 1996 compared to the Lehman Brothers Single
B Rated Index (LBSBRI)+ and the Lipper High Current Yield Funds Average
(LHCYFA).++
See Appendix I
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than their original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the fund. The ending
value of the fund reflects a 1.00% contingent deferred sales charge on any
redemption less than one year from the purchase date. The fund's performance
assumes the reinvestment of all dividends and distributions. The LBSBRI and
the LHCYFA have been adjusted to reflect reinvestment of dividends on
securities in the indices.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The LBSBRI is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the fund's performance. This
index is unmanaged.
++ The LHCYFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
in the respective category and is not adjusted to reflect any sales charges.
However, these total returns are reported net of expenses or other fees that
the SEC requires to be reflected in a fund's performance.
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
Portfolio of Investments
- --------------------------------------------------------------------------------
March 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--94.7%
- ---------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.7%
------------------------------------------------------------------------------
$ 5,750,000 Tracor, Inc., Sr. Sub. Note, 10.875%, 8/15/2001 $ 6,152,500
------------------------------------------------------------------------------ --------------
AUTOMOTIVE--2.9%
------------------------------------------------------------------------------
5,000,000 Aftermarket Technology Co., Sr. Sub. Note, Series B, 12.00%,
8/1/2004 5,412,500
------------------------------------------------------------------------------
2,500,000 Aftermarket Technology Co., Sr. Sub. Note, Series D, 12.00%,
8/1/2004 2,706,250
------------------------------------------------------------------------------
4,250,000 Exide Corp., Sr. Note, 10.00%, 4/15/2005 4,313,750
------------------------------------------------------------------------------
2,250,000 JPS Automotive Products Corp., Sr. Note, 11.125%, 6/15/2001 2,227,500
------------------------------------------------------------------------------
2,500,000 Lear Seating Corp., Sr. Sub. Note, 11.25%, 7/15/2000 2,618,750
------------------------------------------------------------------------------
2,000,000 Lear Seating Corp., Sub. Note, 8.25%, 2/1/2002 1,925,000
------------------------------------------------------------------------------
4,350,000 Motor Wheel Corp., Sr. Note, Series B, 11.50%, 3/1/2000 4,589,250
------------------------------------------------------------------------------ --------------
Total 23,793,000
------------------------------------------------------------------------------ --------------
BANKING--1.3%
------------------------------------------------------------------------------
6,100,000 First Nationwide Holdings, Inc., Sr. Exchange Note, 12.25%,
5/15/2001 6,908,250
------------------------------------------------------------------------------
3,500,000 (a)First Nationwide Holdings, Inc., Sr. Sub. Note, 9.125%, 1/15/2003 3,430,000
------------------------------------------------------------------------------ --------------
Total 10,338,250
------------------------------------------------------------------------------ --------------
BEVERAGE & TOBACCO--0.2%
------------------------------------------------------------------------------
2,000,000 Dr. Pepper Bottling Holdings Co., Sr. Disc. Note, 0/11.625%,
2/15/2003 1,680,000
------------------------------------------------------------------------------ --------------
BROADCAST RADIO & TV--8.3%
------------------------------------------------------------------------------
5,250,000 Ackerley Communications, Inc., Sr. Secd. Note, 10.75%, 10/1/2003 5,578,125
------------------------------------------------------------------------------
5,250,000 Allbritton Communication Co., Sr. Sub. Note, Series A, 11.50%,
8/15/2004 5,538,750
------------------------------------------------------------------------------
750,000 (a)Allbritton Communication Co., Sr. Sub. Note, 9.75%, 11/30/2007 708,750
------------------------------------------------------------------------------
4,700,000 Argyle Television, Inc., Sr. Sub. Note, 9.75%, 11/1/2005 4,594,250
------------------------------------------------------------------------------
3,075,000 Chancellor Broadcasting Co., Sr. Sub. Note, 12.50%, 10/1/2004 3,413,250
------------------------------------------------------------------------------
</TABLE>
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
BROADCAST RADIO & TV--CONTINUED
------------------------------------------------------------------------------
$ 2,400,000 Chancellor Broadcasting Co., Sr. Sub. Note, 9.375%, 10/1/2004 $ 2,316,000
------------------------------------------------------------------------------
1,650,000 Granite Broadcasting Corp., Sr. Sub. Deb., 12.75%, 9/1/2002 1,839,750
------------------------------------------------------------------------------
4,500,000 Granite Broadcasting Corp., Sr. Sub. Note, 10.375%, 5/15/2005 4,561,875
------------------------------------------------------------------------------
2,875,000 (a)Granite Broadcasting Corp., Sr. Sub. Note, Series A, 9.375%,
12/1/2005 2,734,844
------------------------------------------------------------------------------
3,625,000 Heritage Media Corp., Sr. Sub. Note, 8.75%, 2/15/2006 3,534,375
------------------------------------------------------------------------------
4,000,000 NWCG Holding Corp., Sr. Secd. Disc. Note, Series B, 13.50% accrual, 6/15/1999 2,920,000
------------------------------------------------------------------------------
4,000,000 Pegasus Media, Sr. Sub. Note, Series B, 12.50%, 7/1/2005 4,140,000
------------------------------------------------------------------------------
7,850,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 8,222,875
------------------------------------------------------------------------------
4,750,000 Sinclair Broadcast Group, Sr. Sub. Note, 10.00%, 12/15/2003 4,720,313
------------------------------------------------------------------------------
2,350,000 Sinclair Broadcast Group, Sr. Sub. Note, 10.00%, 9/30/2005 2,335,313
------------------------------------------------------------------------------
4,500,000 Sullivan Broadcast Holdings Inc., Sr. Sub. Note, 10.25%, 12/15/2005 4,443,750
------------------------------------------------------------------------------
1,875,000 Sullivan Broadcast Holdings Inc., Sr. Deb., 13.25%, 12/15/2006 1,650,000
------------------------------------------------------------------------------
3,250,000 Young Broadcasting, Inc., Sr. Sub. Note, Series B, 10.125%, 2/15/ 2005 3,298,750
------------------------------------------------------------------------------
2,000,000 Young Broadcasting, Inc., GTD. Sr. Sub. Note, 11.75%, 11/15/2004 2,185,000
------------------------------------------------------------------------------ --------------
Total 68,735,970
------------------------------------------------------------------------------ --------------
BUSINESS EQUIPMENT & SERVICES--1.9%
------------------------------------------------------------------------------
4,400,000 (a)Knoll Inc., Sr. Sub. Note, 10.875%, 3/15/2006 4,543,000
------------------------------------------------------------------------------
5,000,000 Monarch Acquisition Corp., Sr. Note, 12.50%, 7/1/2003 5,425,000
------------------------------------------------------------------------------
5,400,000 United Stationers Supply Co., Sr. Sub. Note, 12.75%, 5/1/2005 6,102,000
------------------------------------------------------------------------------ --------------
Total 16,070,000
------------------------------------------------------------------------------ --------------
CABLE TELEVISION--12.1%
------------------------------------------------------------------------------
5,300,000 Australis Media Limited, Unit, 0/14.00%, 5/15/2003 3,643,750
------------------------------------------------------------------------------
6,000,000 Bell Cablemedia, PLC, Sr. Disc. Note, 0/11.95%, 7/15/2004 4,320,000
------------------------------------------------------------------------------
3,250,000 CAI Wireless Systems, Inc., Sr. Disc. Note, 12.25%, 9/15/2002 3,461,250
------------------------------------------------------------------------------
</TABLE>
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
CABLE TELEVISION--CONTINUED
------------------------------------------------------------------------------
$ 4,000,000 CF Cable TV, Inc., Sr. Secd. 2nd Priority Note, 11.625%, 2/15/2005 $ 4,390,000
------------------------------------------------------------------------------
4,500,000 (a)CS Wireless Systems, Inc., Unit, 0/11.375%, 3/1/2006 2,407,500
------------------------------------------------------------------------------
3,175,000 Cablevision Systems Corp., Sr. Sub. Deb., 9.875%, 2/15/2013 3,321,844
------------------------------------------------------------------------------
1,500,000 Cablevision Systems Corp., Sr. Sub. Note, 9.25%, 11/1/2005 1,516,875
------------------------------------------------------------------------------
3,125,000 (a)Charter Communications Southeast, L.P., Sr. Note, 11.25%,
3/15/2006 3,148,437
------------------------------------------------------------------------------
3,250,000 Comcast UK Cable, Sr. Deb., 0/11.20%, 11/15/2007 1,917,500
------------------------------------------------------------------------------
7,850,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 8,811,625
------------------------------------------------------------------------------
9,000,000 Diamond Cable Co., Sr. Disc. Note, 0/11.75%, 12/15/2005 5,265,000
------------------------------------------------------------------------------
3,750,000 Diamond Cable Co., Sr. Disc. Note, 0/13.25%, 9/30/2004 2,643,750
------------------------------------------------------------------------------
6,625,000 (a)EchoStar Satellite Broadcasting Corp., Sr. Secd. Disc. Note,
0/13.125%, 3/15/2004 4,041,250
------------------------------------------------------------------------------
7,750,000 Insight Communication Co., Sr. Sub. Note, 11.25%, 3/1/2000 7,982,500
------------------------------------------------------------------------------
6,000,000 International Cabletel, Inc., Sr. Defd. Cpn. Note, 0/10.875%,
10/15/2003 4,455,000
------------------------------------------------------------------------------
3,400,000 (a)International Cabletel, Inc., Sr. Defd. Cpn. Note, 0/11.50%,
2/1/2006 1,955,000
------------------------------------------------------------------------------
5,600,000 International Cabletel, Inc., Sr. Defd. Cpn. Note, Series A,
0/12.75%, 4/15/2005 3,626,000
------------------------------------------------------------------------------
4,000,000 Le Groupe Videotron Ltee, Sr. Note, 10.625%, 2/15/2005 4,230,000
------------------------------------------------------------------------------
7,900,000 Peoples Choice TV Corp., Unit, 0/13.125%, 6/1/2004 5,135,000
------------------------------------------------------------------------------
750,000 (a)Rifkin Acquisition Partners, LP, Sr. Sub. Note, 11.125%, 1/15/2006 759,375
------------------------------------------------------------------------------
2,850,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%,
12/1/2007 2,964,000
------------------------------------------------------------------------------
2,500,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%,
3/15/2005 2,606,250
------------------------------------------------------------------------------
5,500,000 Rogers Cablesystems Ltd., Sr. Sub. GTD. Note, 11.00%, 12/1/2015 5,946,875
------------------------------------------------------------------------------
10,950,000 TeleWest, PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 6,624,750
------------------------------------------------------------------------------
</TABLE>
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
CABLE TELEVISION--CONTINUED
------------------------------------------------------------------------------
$ 4,800,000 Wireless One, Inc., Sr. Note, 13.00%, 10/15/2003 $ 5,064,000
------------------------------------------------------------------------------ --------------
Total 100,237,531
------------------------------------------------------------------------------ --------------
CHEMICALS & PLASTICS--7.6%
------------------------------------------------------------------------------
7,500,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 8,175,000
------------------------------------------------------------------------------
4,650,000 Crain Industries, Inc., Sr. Sub. Note, 13.50%, 8/15/2005 4,777,875
------------------------------------------------------------------------------
7,000,000 Foamex L.P., Sr. Sub. Deb., 11.875%, 10/1/2004 6,755,000
------------------------------------------------------------------------------
5,664,000 G-I Holdings, Inc., Sr. Disc. Note, Series B, 11.375% accrual,
10/1/1998 4,531,200
------------------------------------------------------------------------------
5,394,000 (a)G-I Holdings, Inc., Sr. Note, 10.00%, 2/15/2006 5,454,682
------------------------------------------------------------------------------
8,300,000 Harris Chemical North America, Inc., GTD. Sr. Secd. Disc. Note, 9.625%,
7/15/2001 8,196,250
------------------------------------------------------------------------------
2,400,000 LaRoche Industries, Inc., Sr. Sub. Note, 13.00%, 8/15/2004 2,622,000
------------------------------------------------------------------------------
6,450,000 Polymer Group, Inc., Sr. Note, 12.25%, 7/15/2002 7,062,750
------------------------------------------------------------------------------
2,500,000 (a)RBX Corp., Sr. Sub. Note, 11.25%, 10/15/2005 2,437,500
------------------------------------------------------------------------------
6,750,000 Sherritt Gordon Ltd., Sr. Note, 9.75%, 4/1/2003 7,003,125
------------------------------------------------------------------------------
2,150,000 Sherritt, Inc., Sr. Note, Deb., 10.50%, 3/31/2014 2,370,375
------------------------------------------------------------------------------
3,950,000 Uniroyal Technology Corp., Sr. Secd. Note, 11.75%, 6/1/2003 3,762,375
------------------------------------------------------------------------------ --------------
Total 63,148,132
------------------------------------------------------------------------------ --------------
CLOTHING & TEXTILES--2.3%
------------------------------------------------------------------------------
6,000,000 Dan River Inc., Sr. Sub. Note, 10.125%, 12/15/2003 5,790,000
------------------------------------------------------------------------------
12,825,000 WestPoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 12,792,938
------------------------------------------------------------------------------ --------------
Total 18,582,938
------------------------------------------------------------------------------ --------------
CONSUMER PRODUCTS--3.1%
------------------------------------------------------------------------------
4,000,000 American Safety Razor Co., Sr. Note, Series B, 9.875%, 8/1/2005 4,100,000
------------------------------------------------------------------------------
3,100,000 Herff Jones, Inc., Sr. Sub. Note, Series B, 11.00%, 8/15/2005 3,348,000
------------------------------------------------------------------------------
5,000,000 Hosiery Corp. of America, Inc., Sr. Sub. Note, 13.75%, 8/1/2002 5,375,000
------------------------------------------------------------------------------
</TABLE>
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--CONTINUED
------------------------------------------------------------------------------
$ 4,750,000 ICON Health & Fitness, Inc., Sr. Sub. Note, Series B, 13.00%,
7/15/2002 $ 5,320,000
------------------------------------------------------------------------------
8,000,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 7,200,000
------------------------------------------------------------------------------ --------------
Total 25,343,000
------------------------------------------------------------------------------ --------------
CONTAINER & GLASS PRODUCTS--3.7%
------------------------------------------------------------------------------
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 1,037,500
------------------------------------------------------------------------------
2,750,000 Owens-Illinois, Inc., Sr. Sub. Note, 10.50%, 6/15/2002 2,887,500
------------------------------------------------------------------------------
8,000,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.75%, 8/15/2004 8,210,000
------------------------------------------------------------------------------
3,500,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.95%, 10/15/2004 3,613,750
------------------------------------------------------------------------------
6,750,000 Plastic Containers, Inc., Sr. Secd. Note, 10.75%, 4/1/2001 6,834,375
------------------------------------------------------------------------------
3,025,000 Portola Packaging Inc., Sr. Note, 10.75%, 10/1/2005 3,183,812
------------------------------------------------------------------------------
2,000,000 Silgan Corp., Sr. Sub. Note, 11.75%, 6/15/2002 2,130,000
------------------------------------------------------------------------------
2,750,000 U.S. Can Co., Sr. Sub. Note, 13.50%, 1/15/2002 2,956,250
------------------------------------------------------------------------------ --------------
Total 30,853,187
------------------------------------------------------------------------------ --------------
COSMETICS & TOILETRIES--0.4%
------------------------------------------------------------------------------
3,050,000 Revlon Consumer Products Corp., Sr. Sub. Note, 10.50%, 2/15/2003 3,061,438
------------------------------------------------------------------------------ --------------
ECOLOGICAL SERVICES & EQUIPMENT--1.8%
------------------------------------------------------------------------------
4,375,000 Allied Waste Industries, Inc., Sr. Sub. Note, 12.00%, 2/1/2004 4,757,812
------------------------------------------------------------------------------
4,950,000 ICF Kaiser International, Inc., Sr. Sub. Note, 12.00%, 12/31/2003 4,677,750
------------------------------------------------------------------------------
7,850,000 (b)Mid-American Waste Systems, Inc., Sr. Sub. Note, 12.25%,
2/15/2003 5,024,000
------------------------------------------------------------------------------ --------------
Total 14,459,562
------------------------------------------------------------------------------ --------------
FARMING & AGRICULTURE--0.4%
------------------------------------------------------------------------------
3,175,000 Spreckels Industries, Inc., GTD. Sr. Secd. Note, 11.50%, 9/1/2000 3,222,625
------------------------------------------------------------------------------ --------------
FOOD & DRUG RETAILERS--2.2%
------------------------------------------------------------------------------
3,350,000 Carr-Gottstein Foods Co., Sr. Sub. Note, 12.00%, 11/15/2005 3,417,000
------------------------------------------------------------------------------
</TABLE>
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--CONTINUED
------------------------------------------------------------------------------
$ 1,000,000 Grand Union Co., Sr. Note, 12.00%, 9/1/2004 $ 880,000
------------------------------------------------------------------------------
4,500,000 Pathmark Stores, Inc., Sr. Sub. Note, 9.625%, 5/1/2003 4,263,750
------------------------------------------------------------------------------
7,450,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 7,189,250
------------------------------------------------------------------------------
3,050,000 Ralph's Grocery Co., Sr. Sub. Note, 11.00%, 6/15/2005 2,760,250
------------------------------------------------------------------------------ --------------
Total 18,510,250
------------------------------------------------------------------------------ --------------
FOOD PRODUCTS--4.1%
------------------------------------------------------------------------------
9,000,000 Curtice-Burns Foods, Inc., Sr. Sub. Note, 12.25%, 2/1/2005 8,820,000
------------------------------------------------------------------------------
4,800,000 Doskocil Cos., Inc., Sr. Sub. Note, 9.75%, 7/15/2000 5,004,000
------------------------------------------------------------------------------
5,250,000 PMI Acquisition Corp., Sr. Sub. Note, 10.25%, 9/1/2003 5,381,250
------------------------------------------------------------------------------
17,000,000 Specialty Foods Acquisition Corp., Sr. Secd. Disc. Deb., Series B,
0/13.00%, 8/15/2005 8,181,250
------------------------------------------------------------------------------
1,000,000 Specialty Foods Corp., Sr. Note, 11.125%, Series B, 10/1/2002 945,000
------------------------------------------------------------------------------
1,000,000 Specialty Foods Corp., Sr. Sub. Note, Series B, 11.25%, 8/15/2003 845,000
------------------------------------------------------------------------------
4,300,000 Van de Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 4,558,000
------------------------------------------------------------------------------ --------------
Total 33,734,500
------------------------------------------------------------------------------ --------------
FOOD SERVICES--1.3%
------------------------------------------------------------------------------
1,250,000 Flagstar Corp., Sr. Note, 10.75%, 9/15/2001 1,143,750
------------------------------------------------------------------------------
7,625,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 6,976,875
------------------------------------------------------------------------------
3,350,000 Flagstar Corp., Sr. Sub. Deb., 11.25%, 11/1/2004 2,487,375
------------------------------------------------------------------------------ --------------
Total 10,608,000
------------------------------------------------------------------------------ --------------
FOREST PRODUCTS--4.1%
------------------------------------------------------------------------------
4,100,000 Container Corp. of America, GTD. Sr. Note, Series A, 11.25%,
5/1/2004 4,223,000
------------------------------------------------------------------------------
250,000 Container Corp. of America, Sr. Note, 9.75%, 4/1/2003 249,375
------------------------------------------------------------------------------
3,000,000 Domtar, Inc., Deb., 11.25%, 9/15/2017 3,191,250
------------------------------------------------------------------------------
3,600,000 Repap New Brunswick, 2nd Priority Sr. Secd. Note, 10.625%,
4/15/2005 3,510,000
------------------------------------------------------------------------------
</TABLE>
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
FOREST PRODUCTS--CONTINUED
------------------------------------------------------------------------------
$ 2,500,000 Riverwood International Corp., Sr. Note, 10.25%, 4/1/2006 $ 2,521,875
------------------------------------------------------------------------------
5,500,000 Riverwood International Corp., Sr. Sub. Note, 10.875%, 4/1/2008 5,534,375
------------------------------------------------------------------------------
5,750,000 S. D. Warren Co., Sr. Sub. Note, Series B, 12.00%, 12/15/2004 6,066,250
------------------------------------------------------------------------------
8,550,000 Stone Container Corp., Sr. Note, 11.50%, 10/1/2004 8,421,750
------------------------------------------------------------------------------ --------------
Total 33,717,875
------------------------------------------------------------------------------ --------------
HEALTHCARE--1.6%
------------------------------------------------------------------------------
3,558,845 AmeriSource Health Corp., Sr. Deb., 11.25%, 7/15/2005 3,923,627
------------------------------------------------------------------------------
1,350,000 Genesis Health Ventures, Inc., Sr. Sub. Note, 9.75%, 6/15/2005 1,414,125
------------------------------------------------------------------------------
7,550,000 Tenet Healthcare Corp., Sr. Sub. Note, 10.125%, 3/1/2005 8,135,125
------------------------------------------------------------------------------ --------------
Total 13,472,877
------------------------------------------------------------------------------ --------------
HOME PRODUCTS & FURNISHINGS--1.5%
------------------------------------------------------------------------------
3,000,000 American Standard, Inc., Sr. Deb., 11.375%, 5/15/2004 3,277,500
------------------------------------------------------------------------------
5,150,000 American Standard, Inc., Sr. Sub. Disc. Deb., 0/10.50%, 6/1/2005 4,416,125
------------------------------------------------------------------------------
4,625,000 Triangle Pacific Corp., Sr. Note, 10.50%, 8/1/2003 4,925,625
------------------------------------------------------------------------------ --------------
Total 12,619,250
------------------------------------------------------------------------------ --------------
HOTELS, MOTELS, INNS & CASINOS--1.1%
------------------------------------------------------------------------------
5,850,000 (a)Courtyard by Marriott II LP, Sr. Secd. Note, 10.75%, 2/1/2008 5,791,500
------------------------------------------------------------------------------
3,500,000 Motels of America, Inc., Sr. Sub. Note, Series B, 12.00%, 4/15/2004 3,465,000
------------------------------------------------------------------------------ --------------
Total 9,256,500
------------------------------------------------------------------------------ --------------
INDUSTRIAL PRODUCTS & EQUIPMENT--1.9%
------------------------------------------------------------------------------
5,900,000 Cabot Safety Acquisition Corp., Sr. Sub. Note, 12.50%, 7/15/2005 6,563,750
------------------------------------------------------------------------------
4,175,000 Fairfield Manufacturing Co., Inc., Sr. Sub. Note, 11.375%, 7/1/2001 4,279,375
------------------------------------------------------------------------------
5,000,000 Pace Industries, Inc., Sr. Note, 10.625%, 12/1/2002 4,700,000
------------------------------------------------------------------------------ --------------
Total 15,543,125
------------------------------------------------------------------------------ --------------
LEISURE & ENTERTAINMENT--3.7%
------------------------------------------------------------------------------
10,500,000 (a)AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 5,827,500
------------------------------------------------------------------------------
$ 3,700,000 (a)AMF Group, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 $ 3,695,375
------------------------------------------------------------------------------
</TABLE>
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--CONTINUED
------------------------------------------------------------------------------
5,400,000 Affinity Group, Inc., Sr. Sub. Note, 11.50%, 10/15/2003 5,508,000
------------------------------------------------------------------------------
4,000,000 Premier Parks, Inc., Sr. Note, Series A, 12.00%, 8/15/2003 4,260,000
------------------------------------------------------------------------------
13,500,000 Six Flags Theme Parks, Sr. Sub. Disc. Note, 0/12.25%, 6/15/2005 11,340,000
------------------------------------------------------------------------------ --------------
Total 30,630,875
------------------------------------------------------------------------------ --------------
MACHINERY & EQUIPMENT--1.8%
------------------------------------------------------------------------------
4,375,000 (a)Alvey Systems, Inc., Sr. Sub. Note, 11.375%, 1/31/2003 4,571,875
------------------------------------------------------------------------------
5,600,000 Primeco Inc., Sr. Sub. Note, 12.75%, 3/1/2005 5,908,000
------------------------------------------------------------------------------
3,750,000 Waters Corp., Sr. Sub. Note, 12.75%, 9/30/2004 4,518,750
------------------------------------------------------------------------------ --------------
Total 14,998,625
------------------------------------------------------------------------------ --------------
OIL & GAS--3.6%
------------------------------------------------------------------------------
7,925,000 (a)Clark USA, Inc., Sr. Note, 10.875%, 12/1/2005 8,261,812
------------------------------------------------------------------------------
3,200,000 (a)Coda Energy, Inc., Sr. Sub. Note, 10.50%, 4/1/2006 3,216,000
------------------------------------------------------------------------------
4,000,000 Falcon Drilling Co., Inc., Sr. Note, 9.75%, 1/15/2001 4,180,000
------------------------------------------------------------------------------
2,500,000 Falcon Drilling Co., Inc., Sr. Sub. Note, 12.50%, 3/15/2005 2,837,500
------------------------------------------------------------------------------
3,750,000 Giant Industries, Inc., GTD. Sr. Sub. Note, 9.75%, 11/15/2003 3,740,625
------------------------------------------------------------------------------
3,250,000 H.S. Resources, Inc., Sr. Sub. Note, 9.875%, 12/1/2003 3,168,750
------------------------------------------------------------------------------
4,050,000 United Meridian Corp., Sr. Sub. Note, 10.375%, 10/15/2005 4,262,625
------------------------------------------------------------------------------ --------------
Total 29,667,312
------------------------------------------------------------------------------ --------------
PRINTING & PUBLISHING--2.0%
------------------------------------------------------------------------------
3,700,000 (a)Adams Outdoor Advertising L.P., Sr. Note, 10.75%, 3/15/2006 3,792,500
------------------------------------------------------------------------------
9,000,000 Affiliated Newspaper, Sr. Disc. Note, 0/13.25%, 7/1/2006 6,120,000
------------------------------------------------------------------------------
3,500,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 3,631,250
------------------------------------------------------------------------------
2,925,000 Hollinger International Publishing, Inc., Sr. Sub. Note, 9.25%,
2/1/2006 2,859,187
------------------------------------------------------------------------------ --------------
Total 16,402,937
------------------------------------------------------------------------------ --------------
REAL ESTATE--0.9%
------------------------------------------------------------------------------
$ 7,150,000 Trizec Finance Ltd., GTD. Sr. Note, 10.875%, 10/15/2005 $ 7,257,250
------------------------------------------------------------------------------ --------------
</TABLE>
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
RETAILERS--CONTINUED
------------------------------------------------------------------------------
RETAILERS--0.6%
------------------------------------------------------------------------------
5,000,000 Brylane Capital Corp., Sr. Sub. Note, Series B, 10.00%, 9/1/2003 4,650,000
------------------------------------------------------------------------------ --------------
SERVICES--0.9%
------------------------------------------------------------------------------
7,633,000 (a)Coinmach Corp., Sr. Note, 11.75%, 11/15/2005 7,728,412
------------------------------------------------------------------------------ --------------
STEEL--4.0%
------------------------------------------------------------------------------
4,500,000 Acme Metals, Inc., Sr. Secd. Disc. Note, 0/13.50%, 8/1/2004 3,982,500
------------------------------------------------------------------------------
5,325,000 Armco, Inc., Sr. Note, 9.375%, 11/1/2000 5,325,000
------------------------------------------------------------------------------
2,400,000 (a)Bar Technologies, Inc., Unit, 13.50%, 4/1/2001 2,382,000
------------------------------------------------------------------------------
3,825,000 Bayou Steel Corp., 1st Mtg. Note, 10.25%, 3/1/2001 3,461,625
------------------------------------------------------------------------------
8,725,000 EnviroSource, Inc., Sr. Note, 9.75%, 6/15/2003 7,896,125
------------------------------------------------------------------------------
7,100,000 GS Technologies Operating Co., Inc., GTD. Sr. Note, 12.00%,
9/1/2004 7,171,000
------------------------------------------------------------------------------
3,000,000 Geneva Steel Co., Sr. Note, 11.125%, 3/15/2001 2,610,000
------------------------------------------------------------------------------ --------------
Total 32,828,250
------------------------------------------------------------------------------ --------------
SURFACE TRANSPORTATION--4.9%
------------------------------------------------------------------------------
3,450,000 AmeriTruck Distribution Corp., Sr. Sub. Note, Series B, 12.25%, 11/15/2005 3,398,250
------------------------------------------------------------------------------
6,750,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 7,155,000
------------------------------------------------------------------------------
5,200,000 Great Dane Holdings, Inc., Sr. Sub. Deb., 12.75%, 8/1/2001 4,862,000
------------------------------------------------------------------------------
2,800,000 OMI Corp., Sr. Note, 10.25%, 11/1/2003 2,632,000
------------------------------------------------------------------------------
4,500,000 Sea Containers Ltd., Sr. Note, 9.50%, 7/1/2003 4,500,000
------------------------------------------------------------------------------
2,750,000 Sea Containers Ltd., Sr. Sub. Note, 12.50%, 12/1/2004 3,011,250
------------------------------------------------------------------------------
7,500,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 7,612,500
------------------------------------------------------------------------------
2,500,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 2,587,500
------------------------------------------------------------------------------
5,000,000 Trism, Inc., GTD. Sr. Sub. Note, 10.75%, 12/15/2000 4,812,500
------------------------------------------------------------------------------ --------------
Total 40,571,000
------------------------------------------------------------------------------ --------------
</TABLE>
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
CORPORATE BONDS--CONTINUED
- ---------------------------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR--6.1%
------------------------------------------------------------------------------
$ 2,500,000 (a)American Communications Services Inc., Sr. Disc. Note,
0/10.25%, 4/1/2006 $ 1,331,250
------------------------------------------------------------------------------
1,700,000 Arch Communications Group, Inc., Sr. Disc. Note, 0/10.875%,
3/15/2008 981,750
------------------------------------------------------------------------------
5,500,000 (a)Brooks Fiber Properties, Inc., Sr. Disc. Note, 0/10.875%, 3/1/2006 3,231,250
------------------------------------------------------------------------------
7,800,000 Cellular Communications International, Inc., Unit, 13.25% accrual, 8/15/2000 4,777,500
------------------------------------------------------------------------------
4,500,000 Dial Call Communications, Inc., Unit, 0/12.25%, 4/15/2004 2,790,000
------------------------------------------------------------------------------
2,850,000 Fonorola, Inc., Sr. Secd. Note, 12.50%, 8/15/2002 3,063,750
------------------------------------------------------------------------------
2,350,000 MobileMedia Communications, Inc., Sr. Sub. Note, 9.375%,
11/1/2007 2,308,875
------------------------------------------------------------------------------
7,750,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 4,456,250
------------------------------------------------------------------------------
4,400,000 Paging Network, Inc., Sr. Sub. Note, 10.125%, 8/1/2007 4,609,000
------------------------------------------------------------------------------
9,600,000 PanAmSat, L.P., Sr. Sub. Disc. Note, 0/11.375%, 8/1/2003 8,064,000
------------------------------------------------------------------------------
6,500,000 ProNet, Inc., Sr. Sub. Note, 11.875%, 6/15/2005 7,020,000
------------------------------------------------------------------------------
7,500,000 USA Mobile Communications, Inc., Sr. Note, 9.50%, 2/1/2004 7,350,000
------------------------------------------------------------------------------ --------------
Total 49,983,625
------------------------------------------------------------------------------ --------------
UTILITIES--1.7%
------------------------------------------------------------------------------
12,600,000 California Energy Co., Inc., Sr. Disc. Note, 0/10.25%, 1/15/2004 11,938,500
------------------------------------------------------------------------------
1,950,000 El Paso Electric Co., 1st Mtg. Note, 9.40%, 5/1/2011 1,979,250
------------------------------------------------------------------------------ --------------
Total 13,917,750
------------------------------------------------------------------------------ --------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $773,947,465) 781,776,546
------------------------------------------------------------------------------ --------------
COMMON STOCKS--0.9%
- ---------------------------------------------------------------------------------------------
BROADCAST RADIO & TV--0.1%
------------------------------------------------------------------------------
400 (a)(b)Pegasus Media, Class B 130,000
------------------------------------------------------------------------------
30,000 (b)Sullivan Broadcast Holdings Inc., Class B $ 300,000
------------------------------------------------------------------------------ --------------
Total 430,000
------------------------------------------------------------------------------ --------------
</TABLE>
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
BUILDING & DEVELOPMENT--CONTINUED
------------------------------------------------------------------------------
BUILDING & DEVELOPMENT--0.0%
------------------------------------------------------------------------------
4,696 (b)Atlantic Gulf Communities Corp. 28,176
------------------------------------------------------------------------------
3,571 (b)Atlantic Gulf Communities Corp., Warrants 167
------------------------------------------------------------------------------ --------------
Total 28,343
------------------------------------------------------------------------------ --------------
CABLE TELEVISION--0.0%
------------------------------------------------------------------------------
14,400 (b)Wireless One, Inc., Warrants 100,800
------------------------------------------------------------------------------ --------------
CHEMICALS & PLASTICS--0.0%
------------------------------------------------------------------------------
14,862 (b)Uniroyal Chemical Corp. 143,047
------------------------------------------------------------------------------
30,000 (b)Uniroyal Technology Corp., Warrants 58,125
------------------------------------------------------------------------------ --------------
Total 201,172
------------------------------------------------------------------------------ --------------
CONGLOMERATES--0.4%
------------------------------------------------------------------------------
353 (a)(b)MAFCO Acquisition, Warrants 0
------------------------------------------------------------------------------
775,071 Triton Group Ltd. 339,094
------------------------------------------------------------------------------
186,810 Walter Industries, Inc. 2,568,639
------------------------------------------------------------------------------ --------------
Total 2,907,733
------------------------------------------------------------------------------ --------------
CONSUMER PRODUCTS--0.0%
------------------------------------------------------------------------------
4,750 (b)Hosiery Corp. of America, Inc., Class A 23,750
------------------------------------------------------------------------------
3,750 (a)(b)IHF Capital, Inc., Warrants 93,750
------------------------------------------------------------------------------ --------------
Total 117,500
------------------------------------------------------------------------------ --------------
CONTAINER & GLASS PRODUCTS--0.0%
------------------------------------------------------------------------------
71,200 (a)(b)Kane Industries, Inc., Warrants 0
------------------------------------------------------------------------------ --------------
ECOLOGICAL SERVICES & EQUIPMENT--0.0%
------------------------------------------------------------------------------
22,560 (b)ICF Kaiser International, Inc., Warrants 14,100
------------------------------------------------------------------------------ --------------
FARMING & AGRICULTURE--0.3%
------------------------------------------------------------------------------
188,545 (b)Spreckels Industries, Inc., Class A $ 2,804,607
------------------------------------------------------------------------------ --------------
FOOD & DRUG RETAILERS--0.1%
------------------------------------------------------------------------------
185,579 (b)Grand Union Co. 1,113,474
------------------------------------------------------------------------------ --------------
</TABLE>
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
FOOD PRODUCTS--CONTINUED
------------------------------------------------------------------------------
FOOD PRODUCTS--0.0%
------------------------------------------------------------------------------
315,000 (a)(b)Specialty Foods Acquisition Corp. 157,500
------------------------------------------------------------------------------ --------------
HOTELS, MOTELS, INNS & CASINOS--0.0%
------------------------------------------------------------------------------
1,750 (b)Motels of America, Inc. 122,937
------------------------------------------------------------------------------ --------------
INDUSTRIAL PRODUCTS & EQUIPMENT--0.0%
------------------------------------------------------------------------------
1,875 (b)Advanstar Corp. 0
------------------------------------------------------------------------------
583 (b)Advanstar Corp. 0
------------------------------------------------------------------------------
6,589 (b)Haynes International, Inc. 6,589
------------------------------------------------------------------------------ --------------
Total 6,589
------------------------------------------------------------------------------ --------------
PRINTING & PUBLISHING--0.0%
------------------------------------------------------------------------------
7,500 (a)(b)Affiliated Newspaper, Class B 187,500
------------------------------------------------------------------------------
46 (b)Sullivan Graphics, Inc. 12
------------------------------------------------------------------------------ --------------
Total 187,512
------------------------------------------------------------------------------ --------------
TELECOMMUNICATIONS & CELLULAR--0.0%
------------------------------------------------------------------------------
4,500 (b)Dial Page, Inc., Warrants 45
------------------------------------------------------------------------------
247 Metromedia International Group, Inc. 3,334
------------------------------------------------------------------------------ --------------
Total 3,379
------------------------------------------------------------------------------ --------------
TOTAL COMMON STOCKS (IDENTIFIED COST $33,233,198) 8,195,646
------------------------------------------------------------------------------ --------------
PREFERRED STOCKS--1.4%
- ---------------------------------------------------------------------------------------------
PRINTING & PUBLISHING--1.0%
------------------------------------------------------------------------------
79,901 K-III Communications Corp., Cumulative PIK Pfd., Series B, 11.625% 8,229,805
------------------------------------------------------------------------------ --------------
TELECOMMUNICATIONS & CELLULAR--0.4%
------------------------------------------------------------------------------
2,741 PanAmSat Corp., PIK Pfd., 12.75% 3,111,035
------------------------------------------------------------------------------ --------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $10,331,313) 11,340,840
------------------------------------------------------------------------------ --------------
</TABLE>
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- ------------------------------------------------------------------------------ --------------
(C)REPURCHASE AGREEMENTS--0.4%
- ---------------------------------------------------------------------------------------------
$ 3,195,000 BT Securities Corporation, 5.43%, dated 3/29/1996, due 4/1/1996 (at amortized
cost) 3,195,000
------------------------------------------------------------------------------ --------------
TOTAL INVESTMENTS (IDENTIFIED COST $820,706,976)(D) $ 804,508,032
------------------------------------------------------------------------------ --------------
</TABLE>
(a) Indicates a private placement security which is restricted as to resale.
The total market value of private placement securities held at March 31,
1996 was $82,018,562, which represents 9.9% of total net assets.
(b) Non-income producing.
(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 $820,626,104.
The net unrealized depreciation of investments on a federal tax basis
amounts to $16,118,072 which is comprised of $27,137,582 appreciation and
$43,255,654 depreciation at March 31, 1996.
Note: The categories of investments are shown as a percentage of net assets
($825,679,669) at March 31, 1996.
The following acronyms are used throughout this portfolio:
GTD--Guaranty
LP--Limited Partnership
PIK--Payment in Kind
PLC--Public Limited Company
(See Notes which are an integral part of the Financial Statements)
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
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.
MID-AMERICAN WASTE SYSTEMS, INC.
On February 15, 1996, Mid-American Waste Systems failed to make its scheduled
interest payment. Currently, the company is in negotations with its debt holders
and has retained an investment bank to evaluate financing options. The
unofficial subordinated bondholders group has retained legal counsel and
financial advisors and is monitoring the situation closely.
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
March 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified cost $820,706,976 and tax cost $820,626,104) $804,508,032
- ---------------------------------------------------------------------------------------------------
Cash 1,415,358
- ---------------------------------------------------------------------------------------------------
Income receivable 17,880,621
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 5,661,071
- --------------------------------------------------------------------------------------------------- -----------
Total assets 829,465,082
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------
Payable for investments purchased $2,743,856
- ----------------------------------------------------------------------------------------
Payable for shares redeemed 465,877
- ----------------------------------------------------------------------------------------
Accrued expenses 575,680
- ---------------------------------------------------------------------------------------- ---------
Total liabilities 3,785,413
- --------------------------------------------------------------------------------------------------- -----------
Net Assets for 74,529,981 shares outstanding $825,679,669
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital $868,295,973
- ---------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (16,197,244)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (26,232,113)
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (186,947)
- --------------------------------------------------------------------------------------------------- -----------
Total Net Assets $825,679,669
- --------------------------------------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($530,202,873 / 47,859,170 shares outstanding) $11.08
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/95.50 of $11.08)* $11.60
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share $11.08
- --------------------------------------------------------------------------------------------------- -----------
CLASS C SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($57,421,517 / 5,182,758 shares outstanding) $11.08
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $11.08
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (99.00/100 of $11.08)** $10.97
- --------------------------------------------------------------------------------------------------- -----------
CLASS B SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($238,055,279 / 21,488,053 shares outstanding) $11.08
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $11.08
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (94.50/100 of $11.08)** $10.47
- --------------------------------------------------------------------------------------------------- -----------
</TABLE>
*See "Investing In The Fund" in the Prospectus.
**See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
Statement of Operations
- --------------------------------------------------------------------------------
Year Ended March 31, 1996
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Dividends $ 599,896
- ----------------------------------------------------------------------------------------------------
Interest 68,035,408
- ---------------------------------------------------------------------------------------------------- ----------
Total income 68,635,304
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------------
Investment advisory fee $4,997,589
- -----------------------------------------------------------------------------------------
Administrative personnel and services fee 504,162
- -----------------------------------------------------------------------------------------
Custodian fees 90,185
- -----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 582,812
- -----------------------------------------------------------------------------------------
Directors'/Trustees' fees 11,129
- -----------------------------------------------------------------------------------------
Auditing fees 29,907
- -----------------------------------------------------------------------------------------
Legal fees 2,791
- -----------------------------------------------------------------------------------------
Portfolio accounting fees 162,295
- -----------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 331,380
- -----------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 940,723
- -----------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 1,241,766
- -----------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 110,460
- -----------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 313,574
- -----------------------------------------------------------------------------------------
Share registration costs 198,462
- -----------------------------------------------------------------------------------------
Printing and postage 95,705
- -----------------------------------------------------------------------------------------
Insurance premiums 10,177
- -----------------------------------------------------------------------------------------
Taxes 160,555
- -----------------------------------------------------------------------------------------
Miscellaneous 8,178
- ----------------------------------------------------------------------------------------- ---------
]Total expenses 9,791,850
- -----------------------------------------------------------------------------------------
Waivers--
- ------------------------------------------------------------------------------
Waiver of investment advisory fee $ (38,726)
- ------------------------------------------------------------------------------
Waiver of shareholder services fee--Class A Shares (248,353)
- ------------------------------------------------------------------------------
Waiver of shareholder services fee--Class C Shares (7,888)
- ------------------------------------------------------------------------------ ---------
Total waivers (294,967)
- ----------------------------------------------------------------------------------------- ---------
Net expenses 9,496,883
- ---------------------------------------------------------------------------------------------------- ----------
Net investment income 59,138,421
- ---------------------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain on investments 2,635,257
- ----------------------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments 26,130,711
- ---------------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 28,765,968
- ---------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $87,904,389
- ---------------------------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
MARCH31,1996 MARCH 31, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------
Net investment income $ 59,138,421 $ 44,927,790
- -----------------------------------------------------------------------------
Net realized gain (loss) on investments ($1,232,954 and $1,619,570 net gains,
respectively, as computed for federal tax purposes) 2,635,257 262,009
- -----------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments and
translation of assets and liabilities in foreign currency 26,130,711 (18,874,807)
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from operations 87,904,389 26,314,992
- ----------------------------------------------------------------------------- ---------------- ----------------
NET EQUALIZATION CREDITS (DEBITS)-- 589,954 161,190
- ----------------------------------------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------------------
Distributions from net investment income
- -----------------------------------------------------------------------------
Class A Shares (45,324,508) (42,556,810)
- -----------------------------------------------------------------------------
Class C Shares (3,664,765) (2,428,261)
- -----------------------------------------------------------------------------
Class B Shares (10,149,148) (450,413)
- -----------------------------------------------------------------------------
Select Shares -- (25,156)
- -----------------------------------------------------------------------------
Distributions in excess of net investment income
- -----------------------------------------------------------------------------
Class A Shares (235,156) --
- -----------------------------------------------------------------------------
Class C Shares (19,014) --
- -----------------------------------------------------------------------------
Class B Shares (52,656) --
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from distributions
to shareholders (59,445,247) (45,460,640)
- ----------------------------------------------------------------------------- ---------------- ----------------
SHARE TRANSACTIONS (EXCLUSIVE OF AMOUNTS
ALLOCATED TO NET INVESTMENT INCOME)--
- -----------------------------------------------------------------------------
Proceeds from sale of shares 357,820,276 162,685,494
- -----------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 29,736,515 21,301,954
- -----------------------------------------------------------------------------
Cost of shares redeemed (104,637,232) (115,639,357)
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from share transactions 282,919,559 68,348,091
- ----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets 311,968,655 49,363,633
- -----------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------
Beginning of period 513,711,014 464,347,381
- ----------------------------------------------------------------------------- ---------------- ----------------
End of period (including undistributed net investment
income of $0 and $2,060,558, respectively) $ 825,679,669 $ 513,711,014
- ----------------------------------------------------------------------------- ---------------- ----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
Financial Highlights--Class A Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987(A)
<S> <C> <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 $ 12.53
- --------------------
INCOME FROM
INVESTMENT
OPERATIONS
- --------------------
Net investment
income 1.00 1.01 1.05 1.13 1.23 1.21 1.33 1.40 1.42 0.85
- --------------------
Net realized and
unrealized gain
(loss) on
investments 0.55 (0.43) (0.19) 0.41 1.99 (0.14) (1.98) (0.20) (1.31) --
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
Total from
investment
operations 1.55 0.58 0.86 1.54 3.22 1.07 (0.65) 1.20 0.11 0.85
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
LESS DISTRIBUTIONS
- --------------------
Distributions from
net investment
income (1.00) (1.03) (1.06) (1.15) (1.21) (1.24) (1.38) (1.41) (1.44) (0.85)
- --------------------
Distributions in
excess of net
investment
income(b) (0.01) -- -- -- -- -- -- -- -- --
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
Total Distributions (1.01) (1.03) (1.06) (1.15) (1.21) (1.24) (1.38) (1.41) (1.44) (0.85)
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
NET ASSET VALUE, END
OF PERIOD $ 11.08 $ 10.54 $ 10.99 $ 11.19 $ 10.80 $ 8.79 $ 8.96 $ 10.99 $ 11.20 $ 12.53
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
TOTAL RETURN (C) 15.24% 5.74% 7.82% 15.39% 38.83% 14.20% (6.82%) 11.34% 1.30% 7.09%
- --------------------
RATIOS TO AVERAGE
NET ASSETS
- --------------------
Expenses 1.22% 1.21% 1.18% 1.08% 1.02% 1.03% 1.02% 1.00% 1.05% 1.02%*
- --------------------
Net investment
income 9.07% 9.64% 9.27% 10.44% 12.40% 14.62% 13.01% 12.55% 12.37% 11.72%*
- --------------------
Expense waiver/
reimbursement (d) 0.06% 0.05% 0.05% 0.08% -- -- -- -- -- --
- --------------------
SUPPLEMENTAL DATA
- --------------------
Net assets,
end of period
(000 omitted) $530,203 $448,040 $439,149 $417,015 $351,087 $252,147 $282,149 $379,876 $360,409 $390,160
- --------------------
Portfolio turnover 53% 52% 76% 49% 37% 32% 40% 43% 52% 25%
- --------------------
<CAPTION>
AUGUST 31,
1986
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 12.17
- --------------------
INCOME FROM
INVESTMENT
OPERATIONS
- --------------------
Net investment
income 1.53
- --------------------
Net realized and
unrealized gain
(loss) on
investments 0.37
- -------------------- ------
Total from
investment
operations 1.90
- -------------------- ------
LESS DISTRIBUTIONS
- --------------------
Distributions from
net investment
income (1.54)
- --------------------
Distributions in
excess of net
investment
income(b) --
- -------------------- ------
Total Distributions (1.54)
- -------------------- ------
NET ASSET VALUE, END
OF PERIOD $ 12.53
- -------------------- ------
TOTAL RETURN (C) 16.51%
- --------------------
RATIOS TO AVERAGE
NET ASSETS
- --------------------
Expenses 1.06%
- --------------------
Net investment
income 12.41%
- --------------------
Expense waiver/
reimbursement (d) --
- --------------------
SUPPLEMENTAL DATA
- --------------------
Net assets,
end of period
(000 omitted) $352,641
- --------------------
Portfolio turnover 27%
- --------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the seven month period ended March 31, 1987.
(b) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Fund, Inc.)
Financial Highlights--Class B Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1996 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.54 $ 10.57
- --------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------
Net investment income 0.95 0.51
- --------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.51 (0.07)
- -------------------------------------------------------------------------------------- ------------- -------------
Total from investment operations 1.46 0.44
- -------------------------------------------------------------------------------------- ------------- -------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------
Distributions from net investment income (0.91) (0.47)
- --------------------------------------------------------------------------------------
Distributions in excess of net investment income(b) (0.01) --
- -------------------------------------------------------------------------------------- ------------- -------------
Total Distributions (0.92) (0.47)
- -------------------------------------------------------------------------------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 11.08 $ 10.54
- -------------------------------------------------------------------------------------- ------------- -------------
TOTAL RETURN (C) 14.31% 4.47%
- --------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------
Expenses 2.02% 2.02%*
- --------------------------------------------------------------------------------------
Net investment income 8.29% 9.47%*
- --------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 0.01% 0.05%*
- --------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $238,055 $33,295
- --------------------------------------------------------------------------------------
Portfolio turnover 53% 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) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
Financial Highlights--Class C Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED MARCH 31,
1996 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 0.92 0.94 0.92
- --------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.54 (0.44) (0.23)
- -------------------------------------------------------------------------------------- --------- --------- -----------
Total from investment operations 1.46 0.50 0.69
- -------------------------------------------------------------------------------------- --------- --------- -----------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------
Distributions from net investment income (0.91) (0.95) (0.88)
- --------------------------------------------------------------------------------------
Distributions in excess of net investment income(b) (0.01) -- --
- -------------------------------------------------------------------------------------- --------- --------- -----------
Total Distributions (0.92) (0.95) (0.88)
- -------------------------------------------------------------------------------------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.08 $ 10.54 $ 10.99
- -------------------------------------------------------------------------------------- --------- --------- -----------
TOTAL RETURN (C) 14.35% 4.91% 6.23%
- --------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------
Expenses 2.00% 1.98% 1.99%*
- --------------------------------------------------------------------------------------
Net investment income 8.30% 8.90% 8.54%*
- --------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 0.03% 0.05% 0.05%*
- --------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $57,422 $32,376 $24,360
- --------------------------------------------------------------------------------------
Portfolio turnover 53% 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) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
Financial Highlights--Select Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1995(A) 1994(B)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.99 $ 11.53
- -------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------
Net investment income 0.27 0.19
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency (0.35) (0.58)
- ------------------------------------------------------------------------------------------- ----------- -----------
Total from investment operations (0.08) (0.39)
- ------------------------------------------------------------------------------------------- ----------- -----------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------------------
Distributions from net investment income (0.31) (0.15)
- ------------------------------------------------------------------------------------------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.60 $ 10.99
- ------------------------------------------------------------------------------------------- ----------- -----------
TOTAL RETURN (C) (0.74)% (3.40)%
- -------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------------------
Expenses 2.02%* 2.01%*
- -------------------------------------------------------------------------------------------
Net investment income 8.56%* 8.18%*
- -------------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) -- 0.05%
- -------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ -- $838
- -------------------------------------------------------------------------------------------
Portfolio turnover 52% 76%
- -------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 1, 1994 to July 29, 1994
(date Select Shares ceased operations).
(b) Reflects operations for the period from January 15, 1994 (date of initial
public offering) to May 31, 1994.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
Notes to Financial Statements
- --------------------------------------------------------------------------------
March 31, 1996
1. ORGANIZATION
Federated High Income Bond Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, (the "Act"), as a diversified, open-end
management investment company. The Fund offers three classes of shares: Class A
Shares, Class B Shares, and Class C Shares. The investment objective of the Fund
is to seek high current income by investing primarily in a diversified portfolio
of professionally managed fixed income securities.
Effective July 29, 1994, the Select Shares ceased operations and were
reclassified as Class C shares. Effective September 19, 1994 the Fund added
Class B Shares. Effective March 31, 1996, the Board of Directors changed the
name of the Fund from Liberty High Income Bond Fund, Inc. to Federated High
Income Bond Fund, Inc.
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--Listed corporate bonds, (other fixed income and
asset-backed securities), and unlisted securities and private placement
securities are generally valued at the mean of the latest bid and asked
price as furnished by an independent pricing service. Listed equity
securities are valued at the last sale price reported on a national
securities exchange. Short-term securities are valued at the prices
provided by an independent pricing service. However, 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.
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.
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
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.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
equalization, foreign currency transactions, and defaulted interest
payments and have been reclassified as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
UNDISTRIBUTED NET
INVESTMENT
ACCUMULATED INCOME/ACCUMULATED
NET REALIZED DISTRIBUTIONS IN EXCESS OF
PAID-IN CAPITAL GAIN/LOSS NET INVESTMENT INCOME
<S> <C> <C> <C>
$ 2,878,130 $ (347,497) $ (2,530,633)
</TABLE>
Net investment income, net realized gains/losses, and net assets were not
affected by this change.
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, 1996, the Fund, for federal tax purposes, had a capital loss
carryforward of $ 25,900,070, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
1999 1,835,453
2000 24,064,617
</TABLE>
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.
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
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.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Board of Directors. The Fund will not
incur any registration costs upon such resales. The Fund's restricted
securities are valued at the price provided by dealers in the secondary
market or, if no market prices are available, at the fair value as
determined by the Fund's pricing committee.
<TABLE>
<CAPTION>
Security Acquisition Date(s) Acquisition Cost
<S> <C> <C>
First Nationwide Holdings, Inc., Sr. Sub. Note 1/23/96 $ 3,500,000
Allbritton Communication Co., Sr. Sub. Note 2/1/96 746,250
Granite Broadcasting Corp., Sr. Sub. Note 2/13/96 2,808,125
Knoll Inc., Sr. Sub. Note 2/22/96-3/5/96 4,450,000
CS Wireless Systems, Inc., Unit 2/16/96 2,612,267
Charter Communications Southeast, L.P., Sr. Note 3/22/96 3,125,000
EchoStar Satellite Broadcasting Corp., Sr. Secd. Disc.
Note 3/19/96 4,008,443
International Cabletel, Inc., Sr. Defd. Cpn. Note 1/25/96 1,981,294
Rifkin Acquisition Partners, LP, Sr. Sub. Note 1/26/96 757,031
G-I Holdings, Inc., Sr. Note 2/15/96 5,080,375
RBX Corp., Sr. Sub. Note 2/14/95-2/9/96 2,471,875
Kane Industries, Inc., Sr. Sub. Disc. Note 1/10/86 1,784,512
Courtyard by Marriott II LP, Sr. Secd. Note 1/12/96-1/18/96 5,870,125
AMF Group, Inc., Sr. Sub. Disc. Note 3/7/96 3,700,000
AMF Group, Inc., Sr. Sub. Note 3/7/96 5,827,292
Alvey Systems, Inc., Sr. Sub. Note 1/19/96-1/24/96 4,407,969
Clark USA, Inc., Sr. Sub. Note 11/22/95-2/7/96 8,098,656
Coda Energy, Inc., Sr. Sub. Note 3/12/96 3,200,000
Adams Outdoor Advertising LP, Sr. Note 3/5/96 3,700,000
Coinmach Corp., Sr. Note 11/20/92-1/9/96 7,649,189
Bar Technologies, Inc., Unit 3/28/96 2,357,856
</TABLE>
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
American Communications Services, Inc., Sr. Disc. Note 3/21/96 1,348,043
Brooks Fiber Properties, Inc., Sr. Disc. Note 2/16/96-2/17/96 3,314,245
Pegasus Media, Class B 6/30/95-1/2/96 18,750
MAFCO Acquisition, Warrants 7/1/91 80,625
IHF Capital, Inc., Warrants 1/4/94 37,050
Kane Industries, Inc., Warrants 3/16/90 62,656
Specialty Foods Acquisition Corp. 8/10/93-8/27/93 250,415
Affiliated Newspaper, Class B 8/24/94 147,831
</TABLE>
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
INVESTMENT RISK--Although the Fund has a diversified portfolio, the Fund
has 98.6% of its portfolio invested in lower rated and comparable quality
unrated high yield securities. Investments in higher yield securities are
accompanied by a greater degree of credit risk and the risk tends to be
more sensitive to economic conditions than higher rated securities. The
risk of loss due to default by the issuer may be significantly greater for
the holders of high yielding securities because such securities are
generally unsecured and are often subordinated to other creditors of the
issuer. The Fund held defaulted securities with a value aggregating
$5,024,000, representing 0.61% of the Fund's net assets at March 31, 1996.
OTHER--Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At March 31, 1996, par value shares ($0.01 per share) authorized were as
follows:
<TABLE>
<CAPTION>
POUND OF PAR
VALUE
CAPITAL SHARES
CLASS NAME AUTHORIZED
<S> <C>
Class A 4,000,000
Class C 4,000,000
Class B 2,000,000
-----------------
Total Shares Authorized 10,000,000
-----------------
</TABLE>
Transactions in capital stock were as follows:
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, 1996 MARCH 31, 1995
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 9,541,576 $ 104,603,928 10,472,472 $ 110,355,520
- ----------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 2,113,256 23,120,673 1,931,543 20,273,694
- ----------------------------------------------------
Shares redeemed (6,317,775) (69,286,925) (9,836,127) (103,267,837)
- ---------------------------------------------------- ----------- -------------- ------------ ---------------
Net change resulting from
Class A share transactions 5,337,057 $ 58,437,676 2,567,888 $ 27,361,377
- ---------------------------------------------------- ----------- -------------- ------------ ---------------
<CAPTION>
MARCH 31, 1996 MARCH 31, 1995*
SELECT SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold -- -- 18,080 $ 195,732
- ----------------------------------------------------
Shares issued to shareholders
in payment of distributions declared -- -- 1,194 12,855
- ----------------------------------------------------
Shares reclassified 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>
*Reflects operations for the period from April 1, 1994 to July 29, 1994 (date
Select Shares ceased operations).
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, 1996 MARCH 31, 1995
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 3,399,750 $ 37,388,053 1,757,459 $ 18,510,668
- ------------------------------------------------
Shares reclassified from Select Shares -- -- 73,229 772,938
- ------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 176,754 1,940,671 80,242 842,075
- ------------------------------------------------
Shares redeemed (1,466,781) (16,099,182) (1,054,722) (11,094,550)
- ------------------------------------------------ ----------- -------------- ----------- --------------
Net change resulting from
Class C share transactions 2,109,723 $ 23,229,542 856,208 $ 9,031,131
- ------------------------------------------------ ----------- -------------- ----------- --------------
<CAPTION>
MARCH 31, 1996 MARCH 31, 1995**
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 19,654,299 $ 215,828,295 3,169,136 $ 32,850,636
- ------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 424,401 4,675,171 16,778 173,330
- ------------------------------------------------
Shares redeemed (1,750,975) (19,251,125) (25,586) (263,624)
- ------------------------------------------------ ----------- -------------- ----------- --------------
Net change resulting from
Class B share transactions 18,327,725 $ 201,252,341 3,160,328 $ 32,760,342
- ------------------------------------------------ ----------- -------------- ----------- --------------
Net change resulting from
share transactions 25,774,505 $ 282,919,559 6,508,174 $ 68,348,091
- ------------------------------------------------ ----------- -------------- ----------- --------------
</TABLE>
**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 0.75% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can modify
or terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during
the period of the Administrative Services Agreement shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated High Income Bond Fund, Inc.
(formerly, Liberty High Income Bond Fund, Inc.)
- --------------------------------------------------------------------------------
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 AVG. DAILY NET
SHARE CLASS NAME ASSETS OF CLASS
<S> <C>
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay
Federated Shareholder Services up to 0.25% of average daily net assets of
the Fund for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. FSS can modify or
terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through
its subsidiary, Federated Shareholder Services Company serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FServ is based
on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES--Fserv also 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 March 31, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 617,173,534
- -------------------------------------------------------------------------------------------------- --------------
Sales $ 339,925,718
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
FEDERATED HIGH INCOME BOND FUND, INC.
(formerly, Liberty High Income Bond Fund, Inc.)
We have audited the accompanying statement of assets and liabilities of
Federated High Income Bond Fund, Inc. (a Maryland Corporation), including the
schedule of portfolio investments, as of March 31, 1996, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated High Income Bond Fund, Inc. as of March 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
May 15, 1996
Directors Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Richard B. Fisher
William J. Copeland President
J. Christopher Donahue J. Christopher Donahue
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. Edward C. Gonzales
Edward L. Flaherty, Jr. Executive Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President and Secretary
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts Charles H. Field
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
[LOGO] FEDERATED INVESTORS
Since 1955
Federated Investors
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
314195108
314195207
314195306
8042507 (5/96)
APPENDIX
A. The graphic representation here displayed entitled "Initial Investment of
$19,000" conists of a boxed legend in the upper left quadrant indicating the
components of the corresponding mountain chart. The darker shaded portion
represents Reinvested Income and the lighter shaded portion represents the
Principal Value of $19,000 Investment (1,209 Shares). The color-coded
mountain chart is a visual representation of the narrative text above it,
which shows that an initial investment of $19,000 in the Class A Shares of
Federated High Income Bond Fund, Inc. on 11/30/77, would have a reinvested
total worth of $120,743/10,897 Shares on 3/31/96. The "x" axis reflects bi-
annual computation periods from 11/30/77 to 3/31/96. The right margin of the
chart reflects the ending values of a hypothetical investment of $19,000 in
the Fund measured in increments of $20,000 ranging from $0 to $140,000.
B. The graphic representation here displayed entitled "Yearly Investments of
$1,000," consists of a boxed legend in the upper left quadrant indicating
the components of the corresponding mountain chart. The darker shaded
portion represents Reinvested Income and the lighter shaded portion
represents the Principal Value of all your $1,000 Investments (totaling
$63,664 by 3/31/96). The color-coded mountain chart is a visual
representation of the narrative text above it, which shows that if you had
started investing $1,000 annually in the Class A Shares of Federated High
Income Bond Fund, Inc. on 11/30/77 you would have a reinvested total worth
of $63,664/5,746 Shares on 3/31/96. The "x" axis reflects bi-annual
computation periods from 11/30/77 through 3/31/96. The right margin reflects
the ending values of a hypothetical annual investment of $1,000 in the Fund
measured in increments of $10,000 ranging from $0 to $70,000.
C. The graphic representation here displayed, entitled "Income Over Time,"
consists of a boxed legend in the upper left quadrant indicating the
components of the corresponding mountain chart. The darker shaded portion
represents the value of Reinvested Income the lighter shaded portion
represents the Principal Value of $5,000 Investment (376 Shares). The color-
coded mountain chart is a visual representation of the narrative text above
it which shows that an original $5,000 investment in the Class A Shares of
Federated High Income Bond Fund, Inc. on 3/31/86, would have a reinvested
total worth of $13,391/1,209 Shares on 3/31/96. The "x" axis reflects annual
computation periods from 3/31/86 to 3/31/96. The right margin reflects the
ending values of a hypothetical investment of $5,000 in the Fund measured in
$5,000 increments ranging from $0 to $30,000.
D. The graphic representation here displayed, consists of a chart entitled
"A History of Investment Growth." The following chart shows what an account
would be worth had an investor invested $10,000 in Class A Shares at the
beginning of these consecutive decades:
April 1- Initial Number Dividends and Total Ending
Value
March 31 of Shares Capital Gains Shares of Shares
Reinvested
1977-1987* 637 $17,187 2,008 $25,163
1978-1988 652 18,597 2,312 25,899
1979-1989 693 19,998 2,512 27,609
1980-1990 850 20,612 3,153 28,216
1981-1991 836 20,541 3,173 27,890
1982-1992 943 27,488 3,491 37,667
1983-1993 771 22,248 2,759 30,875
1984-1994 816 22,078 2,825 31,050
1985-1995 816 20,058 2,719 28,653
1986-1996 752 18,445 2,417 26,782
E. The graphic representation here displayed consists of a list entitled
"Some of the Fund's Major Shareholder Groups." The list includes the
following investment groups and their dollar amounts invested in Federated
High Income Bond Fund, Inc.:
Individuals and Joint Tenants $265,277,336
IRAs 102,013,167
Trusts 47,227,776
Clubs/Fraternal Organizations 12,911,948
Corporations 9,390,588
Custodians (under Uniform Gift
to Minors Act) 6,539,585
F. The graphic representation here displayed consists of a boxed-legend
entitled "Top Ten Holdings (as of 3/31/96)" The list includes the following
basic industries and the percentage of net assets that Federated High Income
Bond Fund, Inc. has invested in these industries:
Owens Illinois 1.91%
Westpoint Stevens, Inc. 1.55%
California Energy Co. 1.45%
Six Flags Theme Parks 1.37%
Granite Broadcasting Corp. 1.11%
Curtice-Burns Foods, Inc. 1.07%
Continental Cablevision 1.07%
Stone Container Corp. 1.02%
Clark USA, Inc. 1.00%
K-III Communications Corp. 1.00%
G. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line graph.
Federated High Income Bond Fund, Inc. (Class A Shares) (the "Fund") is
represented by a solid black line. Lehman Brothers Single B Rated Index
(LBSBRI) is represented by a series of dashes separated by dots. Lipper
High Current Yield Funds Average (LHCYFA) is represented by a series of
dashes. The line graph is a visual representation of a comparison of a
change in value of a hypothetical $10,000 investment in the Fund, LBSBRI,
and LHCYFA. The "x" axis reflects annual computation periods from 3/31/86 to
3/31/96. The "y" axis reflects the cost of investment in $3,000 increments
ranging from $9,000 to $30,000. The right margin reflects the ending values
of the hypothetical investment in the Fund as compared to the LBSBRI, and
LHCYFA; the ending values are $26,787, $27,209 and $24,350, respectively.
Below the legend are the Average Annual Total Returns for the 1 Year, 5
Year, 10 Year, and Start of Performance (11/30/77) periods ended March 31,
1996; the total returns listed are 10.02%, 15.00%, 10.35%, and 10.61%,
respectively.
H. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line graph.
Federated High Income Bond Fund, Inc. (Class B Shares) (the "Fund") is
represented by a solid black line. Lehman Brothers Single B Rated Index
(LBSBRI) is represented by a series of dashes separated by dots. Lipper
High Current Yield Funds Average (LHCYFA) is represented by a series of
dashes. The line graph is a visual representation of a comparison of a
change in value of a hypothetical $10,000 investment in the Fund, LBSBRI,
and LHCYFA. The "x" axis reflects annual computation periods from 9/27/94 to
3/31/96. The "y" axis reflects the cost of investment in $1,000 increments
ranging from $9,000 to $13,000. The right margin reflects the ending values
of the hypothetical investment in the Fund as compared to the LBSBRI, and
LHCYFA; the ending values are $11,404, $12,215 and $11,677, respectively.
Below the legend is the Average Annual Total Returns for the 1 Year and
Start of Performance (9/27/94) periods ended March 31, 1996; the total
returns listed are 8.32%, and 9.09%, respectively.
I. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line graph.
Federated Fund for U.S. Government Securities Fund, Inc. (Class C Shares)
(the "Fund") is represented by a solid black line. Lehman Brothers Single B
Rated Index (LBSBRI) is represented by a series of dashes separated by
dots. Lipper High Current Yield Funds Average (LHCYFA) is represented by a
series of dashes. The line graph is a visual representation of a comparison
of a change in value of a hypothetical $10,000 investment in the Fund,
LBSBRI, and LHCYFA. The "x" axis reflects annual computation periods from
9/27/94 to 3/31/96. The "y" axis reflects the cost of investment in $1,000
increments ranging from $9,000 to $14,000. The right margin reflects the
ending values of the hypothetical investment in the Fund as compared to the
LBSBRI, and LHCYFA; the ending values are $12,744, $13,215 and $12,924,
respectively. Below the legend is the Average Annual Total Returns for the 1
Year and Start of Performance (4/30/93) periods ended March 31, 1996; the
