SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
------
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or
Sec. 240.14a-12
Federated High Income Bond Fund, Inc.
(Name of Registrant as Specified In Its Charter)
Federated Investors
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[X] Fee paid previously with preliminary proxy materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
FEDERATED HIGH INCOME BOND FUND, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 20, 1996
A Special Meeting of the shareholders of Federated High Income Bond Fund,
Inc. (the "Fund") will be held at the Fund's principal offices on the 19th Floor
of the Federated Investors Tower, Grant Street and Liberty Avenue, Pittsburgh,
Pennsylvania 15222-3779, at 2:00 p.m. September 20, 1996, for the following
purposes:
(1) To approve or disapprove the removal of the Fund's fundamental
investment limitation restricting the Fund's investment in restricted
securities to 10% of its total assets; and
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed July 16, 1996, as the record date for
determination of shareholders entitled to vote at the meeting.
By Order of the Directors
John W. McGonigle
Secretary
July 31, 1996
SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY TO AVOID ADDITIONAL EXPENSE
YOU CAN HELP THE FUND AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP
LETTERS TO ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE
UNABLE TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED
PROXY SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE SPECIAL MEETING.
THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
FEDERATED HIGH INCOME BOND FUND, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of the
Fund. The proxy is revocable at any time before it is voted by sending written
notice of the revocation to the Fund or by appearing personally on September 20,
1996, at the special meeting of shareholders ("Special Meeting"). The cost of
preparing and mailing the notice of meeting, this proxy statement, proxy card
and any additional proxy material has been or is to be borne by the Fund. Proxy
solicitations will be made primarily by mail, but may also be made by telephone,
telegraph, or personal interview conducted by certain officers or employees of
the Fund or of Federated Shareholder Services Company (the Fund's transfer
agent) or Federated Services Company (the Fund's administrator). In the event
that a shareholder does not indicate a choice as to any of the items on the
proxy ballot, the Fund will vote those shares in favor of such proposal(s).
On July 16, 1996, the Fund had outstanding 82,404,326 shares of beneficial
interest, each whole share being entitled to one vote and fractional shares
being entitled to fractional votes. Only shareholders of record at the close of
business on that date will be entitled to notice of and vote at the Special
Meeting. Holders of one-fourth of the total number of shares of the Fund then
outstanding, represented in person or by proxy, shall be required to constitute
a quorum at the Special Meeting for the purpose of transacting any business.
For purposes of determining the presence of a quorum and counting votes on the
matters presented, shares represented by abstentions and "broker non-votes" will
be counted as present, but not as votes cast, at the Special Meeting. This
would have the effect of treating abstentions and non-votes as if they were
votes against the proposal.
The Fund will furnish, without charge, a copy of the annual report and most
recent semi-annual report succeeding the annual report, if any, to any
shareholder of record of the Fund upon request. To request an annual and/or
semi-annual report, call 1-800-341-7400, or send a written request to Betsy
Hamilton at Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222-3779.
Federated Advisers, the Fund's adviser, is a Delaware Business Trust
organized on April 11, 1989, and is a registered investment adviser under the
Investment Advisers Act of 1940. Federated Securities Corp., the Fund's
distributor, is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Services Company is a Pennsylvania corporation organized on May 10, 1991, and
provides the Fund's administrative personnel and services (including certain
legal and financial reporting services). Federated Advisers, Federated
Securities Corp., and Federated Services Company are all wholly-owned
subsidiaries of Federated Investors, and they are all located at Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779.
APPROVAL OR DISAPPROVAL OF THE REMOVAL OF THE FUND'S FUNDAMENTAL INVESTMENT
LIMITATION RESTRICTING THE FUND'S INVESTMENT IN RESTRICTED SECURITIES TO 10% OF
ITS TOTAL ASSETS
One of the Fund's fundamental investment limitations currently provides
that the Fund will not "invest more than 10% of its total assets in securities
subject to restrictions on resale under the federal securities law." This
limitation impedes the Fund's ability to participate in new offerings of high
yield securities. In recent years, more of these offerings have been made
without initial registration under the Securities Act of 1933 (the "Securities
Act"). Most of these securities are exchanged at a later date for securities
that have been registered under the Securities Act. However, until the exchange,
these securities are subject to restrictions on resale and are therefore subject
to the fundamental limitation on restricted securities. This has prevented the
Fund from participating in some offerings during periods when the volume of new
offerings is high. The Directors believe that the Fund's participation in these
offerings would have been advantageous to its performance.
The Fund adopted this fundamental policy to reflect the Securities and
Exchange Commission (the "Commission") interpretive position that, in order to
maintain sufficient liquidity to meet shareholder redemptions, mutual funds such
as the Fund should limit their investments in illiquid securities and that
restricted securities are generally illiquid. When the Fund adopted this
limitation, the Commission required mutual funds to limit illiquid securities to
not more than 10% of net assets. The Securities Act did not provide an exemption
for secondary trading in restricted securities, which impeded the development of
a liquid secondary market.
The market for high yield securities has changed markedly since the
adoption of the Fund's limitation. On April 23, 1990, the Commission promulgated
Rule 144A under the Securities Act. Rule 144A provides a safe harbor for the
resale of certain restricted securities to "qualified institutional buyers"
without compliance with the registration requirements of the Securities Act of
1933. A "qualified institutional buyer" is generally defined as a broker/dealer
which owns and manages $10 million or more of securities and any other entity
that owns and manages $100 million or more of securities.
In its release adopting Rule 144A, the Commission noted that it was
modifying its position as to mutual funds with respect to securities eligible
for resale under Rule 144A ("Rule 144A Securities"). The Commission stated that
"[t]he determination of the liquidity of Rule 144A Securities in the portfolio
of [a mutual fund] is a question of fact for the directors to determine, based
upon the trading markets for the specific security." Under the Commission's
modified position, the investment adviser may determine, in accordance with
guidelines established and monitored by the Directors of the Fund, that a Rule
144A security is liquid, that the security will not count toward the Fund's
limitation on illiquid securities.
In accordance with the Commission's modified position, the Directors have
adopted the guidelines under which the investment adviser may determine the
liquidity of Rule 144A Securities. The guidelines require the investment adviser
to consider the following factors in making this determination:
1. The frequency of trades and quotes for the security;
2. The volatility of quotations and trade prices for the security;
3. The number of dealers willing to purchase or sell the security and the
number of potential purchasers;
4. Dealer undertakings to make a market in the security;
5. The nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers, and the mechanics of transfer);
6. The rating of the security and the financial condition and prospects of
the issuer of the security; and
7. Such other factors as may be relevant to the Fund's ability to dispose
of the security.
The Fund currently relies on Rule 144A to trade unregistered high yield
securities and, in accordance with the Director's guidelines, has determined
that some of these securities are liquid. This includes many securities acquired
in unregistered offerings that have not yet been exchanged for securities
registered under the Securities Act. However, the Fund's current investment
limitation restricts the acquisition of any restricted security, regardless of
its eligibility for resale under Rule 144A or its liquidity. Consequently, the
limitation may prevent the Fund from acquiring a liquid high yield security,
simply because it has not yet been registered under the Securities Act.
The Commission has also modified its position regarding the amount that a mutual
fund may invest in illiquid securities, increasing the amount from 10% to 15% of
net assets. Many state securities regulators have also modified their policies
in response to the Commission's changes. In order to comply with the
Commission's current position, the Directors have adopted a policy limiting the
Fund to investing not more than 15% of its net assets in illiquid securities.
Restricted securities are subject to this limitation unless they have been
determined to be liquid in accordance with the Director's guidelines. The
Directors may change this policy on illiquid securities, or the guidelines and
factors for determining the liquidity of restricted securities without the
approval of, or any notice to, the Fund's shareholders. This will allow the
Fund the flexibility to respond quickly to developments in the market and
regulations for high yield securities.
Therefore, if the proposal is approved, the Fund will remain subject to a
limitation on investments in unregistered high yield securities that do not meet
the Directors' guidelines for liquidity. However, the limitation will increase
to 15% from 10% of the Fund's net assets. This could adversely affect the Fund's
liquidity during periods of heavy redemptions.
The Directors, therefore, have, unanimously approved by consent dated July
16, 1996, subject to shareholder approval, "the removal of the Fund's
fundamental investment limitation restricting the Fund's investment in
restricted securities to 10% of is total assets." Approval of this change in
the Fund's investment limitation requires the affirmative vote of: (a) 67% or
more of the shares of the Fund present at the Special Meeting, if the holders of
more than 50% of the outstanding shares are present or represented by proxy; or
(b) more than 50% of the outstanding shares of the Fund, whichever is less. If
the shareholders fail to approve the change in this limitation, the Fund will
continue to invest no more than 10% of the value of its total assets in
restricted securities of any kind.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THE REMOVAL OF THE FUND'S
FUNDAMENTAL INVESTMENT LIMITATION RESTRICTING THE FUND'S INVESTMENT IN
RESTRICTED SECURITIES TO 10% OF ITS TOTAL ASSETS
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY
While the Special Meeting is called to act upon any other business that may
properly come before it, at the date of this proxy statement the only business
which the Board of Directors intends to present or knows that others will
present is the business mentioned in the notice of meeting. If any other
matters lawfully come before the Special Meeting, and as to all procedural
matters at the meeting, it is the intention that the enclosed proxy shall be
voted in accordance with the best judgment of the attorneys named therein, or
their substitutes, present and acting at the Special Meeting.
If at the time any session of the Special Meeting is called to order a
quorum is not present in person or by proxy, the persons named as proxies may
vote those proxies which have been received to adjourn the Special Meeting to a
later date. In the event that a quorum is present but sufficient votes in favor
of one or more of the proposals have not been received, the persons named as
proxies may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies with respect to any such proposal. All such
adjournments will require the affirmative vote of a majority of the shares
present in person or by proxy at the session of the Special Meeting to be
adjourned. The persons named as proxies will vote those proxies which they are
entitled to vote in favor of the proposal, in favor of such an adjournment and
will vote those proxies required to be voted against the proposal, against any
such adjournment. A vote may be taken on one or more of the proposals in this
proxy statement prior to any such adjournment if sufficient votes for its
approval have been received and it is otherwise appropriate.
Officers and Directors of the Fund own less than 1% of the Fund's
outstanding shares.
The following list indicates the beneficial ownership of shareholders who,
to the best knowledge of the Fund, are the record/beneficial owners of more than
5% of the outstanding shares of the Fund as of July 16, 1996: Merrill Lynch
Pierce Fenner & Smith, Jacksonville, Florida, held of record approximately
4,700,594 (11.28%) of the Fund's Class A Shares; Merrill Lynch Pierce Fenner &
Smith, Jacksonville, Florida, held of record approximately 1,764,282 (6.69%) of
the Fund's Class B Shares; and Merrill Lynch Pierce Fenner & Smith,
Jacksonville, Florida, held of record approximately 1,908,830 (29.46%) of the
Fund's Class C Shares.
If you do not expect to attend the Special Meeting, please sign your proxy
and return it in the enclosed envelope to avoid necessary expense and delay. No
postage is necessary.
By Order of the Directors
John W. McGonigle
Secretary
July 31, 1996
Cusip 314195108
Cusip 314195207
Cusip 314195306
G00386-03 (7/96)
FEDERATED SECURITIES CORP.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
FEDERATED HIGH INCOME BOND FUND, INC. SPECIAL MEETING OF SHAREHOLDERS SEPTEMBER
20, 1996
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of
FEDERATED HIGH INCOME BOND FUND, INC. hereby appoint S. Elliott Cohan, Suzanne
W. Land, Carole Webber, Patricia F. Conner and Max F. Miller, or any one of
them, true and lawful attorneys, with the power of substitution of each, to vote
all Shares of FEDERATED HIGH INCOME BOND FUND, INC. which the undersigned is
entitled to vote at the Special Meeting of Shareholders to be held on SEPTEMBER
20, 1996, at Federated Investors Tower, Pittsburgh, Pennsylvania, at 2:00 p.m.,
(Eastern time) and at any adjournment thereof.
Discretionary authority is hereby conferred as to all other matters as may
properly come before the Special Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE ATTORNEYS
NAMED WILL VOTE THE SHARES REPRESENTED BY THIS PROXY IN ACCORDANCE WITH THE
CHOICES MADE ON THIS BALLOT. IF NO CHOICE IS INDICATED AS TO ANY ITEM, THIS
PROXY WILL BE VOTED AFFIRMATIVELY ON THAT MATTER. THE APPROVAL OF EACH PROPOSAL
IS NOT CONTINGENT ON THE APPROVAL OF ANY OTHER MATTER.
PLEASE RETURN BOTTOM PORTION WITH YOUR VOTE IN THE ENCLOSED ENVELOPE AND RETAIN
THE TOP PORTION.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS KEEP THIS PORTION
FOR YOUR RECORDS
FEDERATED HIGH INCOME BOND FUND, INC. DETACH AND RETURN THIS PORTION ONLY
VOTE ON PROPOSAL
FOR AGN ABS
---- ---- ----
1) TO APPROVE OR DISAPPROVE THE REMOVAL OF THE FUND'S FUNDAMENTAL INVESTMENT
LIMITATION RESTRICTING THE FUND'S INVESTMENT IN RESTRICTED SECURITIES TO 10% OF
ITS TOTAL ASSETS.
2) OTHER BUSINESS.
Please sign EXACTLY as your name(s) appear(s) above. When signing as attorney,
executor, administrator, guardian, trustee, custodian, etc., please give your
full title as such. If a corporation or partnership, please sign the full name
by an authorized officer or partner. If stock is owned jointly, all parties
should sign.
Signature Signature(s) of Shareholders(s) Date
