FEDERATED HIGH INCOME BOND FUND INC, 485APOS, 1997-05-29

FEDERATED HIGH INCOME BOND FUND INC
485APOS, 1997-05-29

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1933 Act File No. 2-60103
1940 Act File No. 811-2782

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No. ..............

Post-Effective Amendment No. 42 .......... X
-

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 35 ......................... X
--

FEDERATED HIGH INCOME BOND FUND, INC.

(Exact Name of Registrant as Specified in Charter)

Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
on pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
-----------------

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:

X filed the Notice required by that Rule on May 15, 1997; or
intends to file the Notice required by that Rule on or about
; or
------------
during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and,
pursuant to Rule 24f-2(b)(2), need not file the Notice.

Copies To:

Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037

CROSS-REFERENCE SHEET

This Amendment to the Registration Statement of FEDERATED HIGH INCOME
BOND FUND, INC., which is comprised of three classes of shares, (1) Class A
Shares, (2) Class B Shares, and (3) Class C Shares is comprised of the
following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 1. Cover Page...............(1-3) Cover Page.

Item 2. Synopsis.................(1-3) General Information, (1-3) Calling
the Fund, (1-3) Summary of Fund
Expenses.

Item 3. Condensed Financial
Information.............(1) Financial Highlights - Class A
Shares, (2) Financial Highlights - Class
B Shares, (3) Financial Highlights -
Class C Shares.

Item 4. General Description of
Registrant..............(1-3) Performance Information, (1-3)
Investment Information, (1-3) Investment
Objective, (1-3) Investment Policies,
(1-3) Investment Risks, (1-3) Investment
Limitations, (1-3) Appendix.

Item 5. Management of the Fund...(1-3) Fund Information, (1-3) Management
of the Fund, (1-3) Distribution of
Shares, (1-3) Administration of the
Fund.

Item 6. Capital Stock and Other
Securities..............(1-3) Account and Share Information, (1-
3) Confirmations and Certificates, (1-3)
Dividends and Distributions, (1-3)
Accounts with Low Balances,(1-3)
Shareholder Information, (1-3) Tax
Information, (1-3) Federal Income Tax,
(1-3) State and Local Taxes.

Item 7. Purchase of Securities Being
Offered.................(1-3) Net Asset Value, (1-3) Investing
in the Fund, (1-3) Purchasing Shares,
(1-3) Purchasing Shares through a
Financial Intermediary, (1-3) Purchasing
Shares by Wire, (1-3) Purchasing Shares
by Check, (1-3) Systematic Investment
Program, (1-3) Retirement Plans, (1)
Class A Shares, (2) Class B Shares, (3)
Class C Shares.

Item 8. Redemption or Repurchase. (1-3) Redeeming and Exchanging
Shares, (1-3) Redeeming or Exchanging
Shares through a Financial Intermediary,
(1-3) Redeeming or Exchanging Shares by
Telephone, (1-3) Redeeming or Exchanging
Shares by Mail, (1-3) Requirements for
Redemption, (1-3) Requirements for
Exchange, (1-3) Systematic Withdrawal
Program, (1-3) Contingent Deferred Sales
Charge.

Item 9. Pending Legal Proceedings None.

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

Item 10. Cover Page...............(1-3) Cover Page.

Item 11. Table of Contents........(1-3) Table of Contents.
Item 12. General Information and
History.................(1-3) General Information About the
Fund, (1-3) About Federated Investors.

Item 13. Investment Objectives and
Policies................(1-3) Investment Objective and Policies,
(1-3) Investment Limitations.

Item 14. Management of the Fund...(1-3) Federated High Income Bond Fund,
Inc. Management

Item 15. Control Persons and Principal
Holders of Securities...(1-3) Fund Ownership.

Item 16. Investment Advisory and Other
Services.................(1-3) Investment Advisory Services, (1-
3) Other Services.

Item 17. Brokerage Allocation.....(1-3) Brokerage Transactions.

Item 18. Capital Stock and Other
Securities..............Not Applicable.

Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered.................(1-3) Purchasing Shares, (1-3)
Determining Net Asset Value, (1-3)
Redeeming Shares.

Item 20. Tax Status...............(1-3) Tax Status.

Item 21. Underwriters.............(1-3) Distribution Plan and Shareholder
Services Agreement.

Item 22. Calculation of Performance
Data....................(1-3) Total Return, (1-3) Yield,
(1-3) Performance Comparisons.

Item 23. Financial Statements.....(1-3) Financial Statements (Financial
Statements are incorporated by reference
to the Annual Report of Registrant dated
March 31, 1997); File Nos. 2-60103 and
811-2782.

Federated High Income Bond Fund, Inc.

Class A Shares, Class B Shares, Class C Shares

PROSPECTUS

The shares of Federated High Income Bond Fund, Inc., (the "Fund") represent
interests in an open-end, diversified management investment company (a
mutual fund) investing in a professionally managed, diversified portfolio
limited primarily to fixed income securities which seek to achieve high
current income.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.

This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.

THE FUND MAY INVEST PRIMARILY IN LOWER RATED BONDS, COMMONLY REFERRED TO AS
"JUNK BONDS." INVESTMENTS OF THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS
OF PRINCIPAL AND INTEREST THAN INVESTMENTS IN HIGHER RATED SECURITIES.
PURCHASERS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT
IN THIS FUND.

The Fund has also filed a Statement of Additional Information dated May 31,
1997, with the Securities and Exchange Commission (the "SEC"). The
information contained in the Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy of
the Statement of Additional Information or a paper copy of this prospectus,
if you have received your prospectus electronically, free of charge by
calling 1-800-341-7400. To obtain other information, or make inquiries about
the Fund, contact your financial institution. The Statement of Additional
Information, material incorporated by reference into this document, and
other information regarding the Fund is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

Prospectus dated May 31, 1997

TABLE OF CONTENTS

Summary of Fund Expenses 1
Financial Highlights -- Class A Shares 2
Financial Highlights -- Class B Shares 3
Financial Highlights -- Class C Shares 4
General Information 5
Calling the Fund 5
Investment Information 5
Investment Objective 5
Investment Policies 5
Investment Risks 6
Investment Limitations 8
Net Asset Value 8
Investing in the Fund 8
Purchasing Shares 9
Purchasing Shares through a Financial Intermediary 9
Purchasing Shares by Wire 9
Purchasing Shares by Check 9
Systematic Investment Program 9
Retirement Plans 9
Class A Shares 9
Class B Shares 9
Class C Shares 9
Redeeming and Exchanging Shares 10
Redeeming or Exchanging Shares through a Financial Intermediary 10
Redeeming or Exchanging Shares by Telephone 10
Redeeming or Exchanging Shares by Mail 11
Requirements for Redemption 11
Requirements for Exchange 11
Systematic Withdrawal Program 11
Contingent Deferred Sales Charge 11
Account and Share Information 12
Confirmations and Certificates 12
Dividends and Distributions 12
Accounts with Low Balances 12
Fund Information 12
Management of the Fund 12
Distribution of Shares 13
Administration of the Fund 14
Shareholder Information 14
Tax Information 14
Federal Income Tax. 15
State and Local Taxes 15
Performance Information 15
Appendix 15
Standard & Poor's Ratings Group Corporate Bond
Ratings Definitions 15
Moody's Investors Service, Inc. Corporate Bond
Ratings 16
Fitch Investors Service, Inc. Commercial Paper
Ratings 17

SUMMARY OF FUND EXPENSES

SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as
a percentage of
offering price) 4.50% None None
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage
of offering price) None None None
Contingent Deferred Sales Charge (as a
percentage of original
purchase price or redemption proceeds, as None 5.50%(1) 1.00%(1)
applicable)
Redemption Fee (as a percentage of amount None None None
redeemed, if applicable)
Exchange Fee None None None
</TABLE>

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Management Fee 0.75% 0.75% 0.75%
12b-1 Fee None 0.75% 0.75%
Shareholder Services Fee (after waiver) 0.22%(2) 0.25% 0.25%
Total Other Expenses 0.46% 0.49% 0.49%
Total Operating Expenses 1.21%(3) 1.99%(4) 1.99%
</TABLE>

(1) For shareholders of Class B Shares, the contingent deferred sales charge
is 5.50% in the first year declining to 1.00% in the sixth year and 0.00%
thereafter. For shareholders of Class C Shares, the contingent deferred
sales charge assessed is 1.00% of the lesser of the original purchase price
or the net asset value of shares redeemed within one year of their purchase
date. For a more complete description, see "Contingent Deferred Sales
Charge."

(2) The shareholder services fee for Class A Shares has been reduced to
reflect the voluntary waiver of a portion of the shareholder services fee.
The shareholder service provider can terminate this voluntary waiver at any
time at its sole discretion. The maximum shareholder services fee is 0.25%.

(4) The total operating expenses for Class A Shares would have been 1.24%
absent the voluntary waiver described in note 2 above.

(5) Class B Shares convert to Class A Shares (which pay lower ongoing
expenses) approximately eight years after purchase.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs
and expenses, see "Investing in the Fund" and "Fund Information."
Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.

LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
<TABLE>
<CAPTION>
EXAMPLE CLASS A CLASS B CLASS C
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, (2) redemption at the end of each
time period, and (3) payment of the maximum sales charge.
<S> <C> <C> <C>
1 Year $ 57 $ 77 $ 31
3 Years $ 82 $106 $ 62
5 Years $108 $130 $107
10 Years $185 $211 $232
You would pay the following expenses on the same investment,
assuming no redemption.
1 Year $ 57 $ 20 $ 20
3 Years $ 82 $ 62 $ 62
5 Years $108 $107 $107
10 Years $185 $211 $232
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

FINANCIAL HIGHLIGHTS -- CLASS A SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated April 24, 1997, on the
Fund's financial statements for the year ended March 31, 1997, and on the
following table for the periods presented, is included in the Annual Report,
which is incorporated by reference. This table should be read in conjunction
with the Fund's financial statements and notes thereto, which may be
obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996 1995 1994(A) 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, $11.08 $10.54 $10.99 $11.19 $10.80 $ 8.79 $ 8.96 $10.99 $11.20 $12.53
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
Net investment 1.04 1.00 1.01 1.05 1.13 1.23 1.21 1.33 1.40 1.42
income
Net realized and
unrealized gain
(loss) on 0.22 0.55 (0.43) (0.19) 0.41 1.99 (0.14) (1.98) (0.20) (1.31)
investments
Total from 1.26 1.55 0.58 0.86 1.54 3.22 1.07 (0.65) 1.20 0.11
investment
operations
LESS DISTRIBUTIONS
Distributions from
net investment
income (1.03) (1.00) (1.03) (1.06) (1.15) (1.21) (1.24) (1.38) (1.41) (1.44)
Distributions in
excess of net
investment income(b) -- (0.01) -- -- -- -- -- -- -- --
Total distributions (1.03) (1.01) (1.03) (1.06) (1.15) (1.21) (1.24) (1.38) (1.41) (1.44)
NET ASSET $11.31 $11.08 $10.54 $10.99 $11.19 $10.80 $ 8.79 $ 8.96 $10.99 $11.20
VALUE,
END OF
PERIOD
TOTAL RETURN(C) 11.88% 15.24% 5.74% 7.82% 15.39% 38.83% 14.20% (6.82%) 11.34% 1.30%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.21% 1.22% 1.21% 1.18% 1.08% 1.02% 1.03% 1.02% 1.00% 1.05%
Net investment 9.19% 9.07% 9.64% 9.27% 10.44% 12.40% 14.62% 13.01% 12.55% 12.37%
income
Expense waiver/
reimbursement(d) 0.03% 0.06% 0.05% 0.05% 0.08% -- -- -- -- --
SUPPLEMENTAL DATA
Net assets, end of
period
(000 omitted) $599,736 $530,203 $448,040 $439,149 $417,015 $351,087 $252,147 $282,149 $379,876 $360,409
Portfolio turnover 55% 53% 52% 76% 49% 37% 32% 40% 43% 52%
</TABLE>

(a) As of July 29, 1994, Select Shares were no longer offered and were
reclassified as Class C Shares. For the year ended March 31, 1994, Select
Shares net assets (000 omitted) were $838.

(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.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, FOR THE FISCAL YEAR ENDED MARCH 31, 1997, WHICH CAN BE
OBTAINED FREE OF CHARGE.

FINANCIAL HIGHLIGHTS -- CLASS B SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

* Computed on an annualized basis.

(a) Reflects operations for the period from September 27, 1994 (date of
initial public investment) to March 31, 1995.

(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.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, FOR THE FISCAL YEAR ENDED MARCH 31, 1997, WHICH CAN BE
OBTAINED FREE OF CHARGE.

FINANCIAL HIGHLIGHTS -- CLASS C SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1996 1995 1994(A)(B)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.08 $10.54 $10.99 $11.18
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.95 0.92 0.94 0.92
Net realized and unrealized gain (loss) on investments 0.22 0.54 (0.44) (0.23)
Total from investment operations 1.17 1.46 0.50 0.69
LESS DISTRIBUTIONS
Distributions from net investment income (0.94) (0.91) (0.95) (0.88)
Distributions in excess of net investment income(c) -- (0.01) -- --
Total distributions (0.94) (0.92) (0.95) (0.88)
NET ASSET VALUE, END OF PERIOD $11.31 $11.08 $10.54 $10.99
TOTAL RETURN(D) 11.00% 14.35% 4.91% 6.23%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.99% 2.00% 1.98% 1.99%*
Net investment income 8.38% 8.30% 8.90% 8.54%*
Expense waiver/reimbursement(e) 0.00% 0.03% 0.05% 0.05%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $105,091 $57,422 $32,376 $24,360
Portfolio turnover 55% 53% 52% 76%
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from April 30, 1993 (date of initial
public investment) to March 31, 1994.

(b) As of July 29, 1994, Select Shares were no longer offered and were
reclassified as Class C Shares. For the year ended March 31, 1994, Select
Shares net assets (000 omitted) were $838.

(c) 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.

(d) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(e) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, FOR THE FISCAL YEAR ENDED MARCH 31, 1997, WHICH CAN BE
OBTAINED FREE OF CHARGE.

GENERAL INFORMATION

The Fund was incorporated under the laws of the State of Maryland on October
14, 1977. Class A Shares, Class B Shares and Class C Shares of the Fund
("Shares") are designed for individuals as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio
of fixed income securities.

The Fund's current net asset value and offering price may be found in the
mutual funds section of local newspapers under "Federated" and the
appropriate class designation listing.

CALLING THE FUND

Call the Fund at 1-800-341-7400.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

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. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this prospectus. Unless otherwise noted,
the investment objective and the policies and limitations described below
cannot be changed without approval of shareholders.

INVESTMENT POLICIES

The fixed income securities in which the Fund intends to invest are
lower-rated corporate debt obligations. Some of these fixed income
securities may involve equity features. Capital growth will be considered,
but only when consistent with the investment objective of high current
income.

ACCEPTABLE INVESTMENTS

The Fund invests 65% of its assets in lower-rated fixed income bonds. Under
normal circumstances, the Fund will not invest more than 10% of the value of
its total assets in equity securities. The fixed income securities in which
the Fund invests include, but are not limited to:

* preferred stocks;

* bonds;

* convertible securities;

* debentures;

* notes;

* equipment lease certificates; and

* equipment trust certificates.

The Fund may purchase fixed income securities on a when-issued or delayed
delivery basis. There is no limit to portfolio maturity. The prices of fixed
income securities fluctuate inversely to the direction of interest rates.

The securities in which the Fund may invest are generally rated BBB or lower
by Standard & Poor's Ratings Group ("S&P") or Baa or lower by Moody's
Investors Service, Inc. ("Moody's"), or are not rated but are determined by
the Fund's investment adviser to be of comparable quality, and may include
bonds in default. Securities which are rated BBB or lower by S&P or Baa or
lower by Moody's have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to weakened
capacity to make principal and interest payments than higher rated bonds. A
description of these rating categories is contained in the Appendix to this
prospectus. There is no lower limit with respect to rating categories for
securities in which the Fund may invest. See "Investment Risks" below.
CONVERTIBLE SECURITIES

Convertible securities include a spectrum of securities which can be
exchanged for or converted into common stock. Convertible securities may
include, but are not limited to: convertible bonds or debentures;
convertible preferred stock; units consisting of usable bonds and warrants;
or securities which cap or otherwise limit returns to the convertible
security holder, such as DECS (Dividend Enhanced Convertible Stock, or Debt
Exchangeable for Common Stock when issued as a debt security), LYONS (Liquid
Yield Option Notes, which are corporate bonds that are purchased at prices
below par with no coupons and are convertible into stock), PERCS (Preferred
Equity Redemption Cumulative Stock, an equity issue that pays a high cash
dividend, has a cap price and mandatory conversion to common stock at
maturity), and PRIDES (Preferred Redeemable Increased Dividend Securities,
which are essentially the same as DECS; the difference is little more than
who initially underwrites the issue). Convertible securities are often rated
below investment grade or not rated because they fall below debt obligations
and just above common equity in order of preference or priority on the
issuer's balance sheet.

TEMPORARY INVESTMENTS

The Fund may invest temporarily in cash and short-term obligations during
times of unusual market conditions for defensive purposes. Short-term
obligations may include:

* certificates of deposit;

* commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's,
or F-1 or F-2 by Fitch Investors Service, Inc. and variable rate demand
master notes;

* short-term notes;

* obligations issued or guaranteed as to principal and interest by the U.S.
government or any of its agencies or instrumentalities; and

* repurchase agreements (arrangements in which the organization selling the
Fund a fixed income security agrees at the time of sale to repurchase it at
a mutually agreed upon time and price).

As a matter of investment practice, which can be changed without shareholder
approval, the Fund will not invest more than 15% of its net assets in
securities which are illiquid.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend portfolio
securities on a short-term or a long-term basis, up to one-third of the
value of its total assets to broker/dealers, banks, or other institutional
borrowers of securities. The Fund will only enter into loan arrangements
with broker/dealers, banks, or other institutions which the Adviser has
determined are creditworthy under guidelines established by the Directors
and will receive collateral equal to at least 100% of the value of the
securities loaned in the form of cash or U.S. government securities.

There is the risk that when lending portfolio securities, the securities may
not be available to the Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In
addition, in the event that a borrower of securities would file for
bankruptcy or become insolvent, disposition of the securities may be delayed
pending court action.

PORTFOLIO TURNOVER

Securities in the Fund's portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the
Fund's investment objective, without regard to the length of time a
particular security may have been held. The adviser to the Fund does not
anticipate that portfolio turnover will result in adverse tax consequences.
Any such trading will increase the Fund's portfolio turnover rate and
transaction costs.

INVESTMENT RISKS

The corporate debt obligations in which the Fund invests are usually not in
the three highest rating categories of the recognized rating agencies (AAA,
AA, or A for S&P and Aaa, Aa or A for Moody's) but are in the lower rating
categories or are unrated but are of comparable quality and are regarded as
predominately speculative. Lower-rated or unrated bonds are commonly
referred to as "junk bonds." There is no minimal acceptable rating for a
security to be purchased or held in the Fund's portfolio, and the Fund may,
from time to time, purchase or hold securities rated in the lowest rating
category. Companies who have received the lowest rating have failed to
satisfy their obligations under the bond indenture. A description of the
rating categories is contained in the Appendix to this prospectus.

Lower-rated securities will usually offer higher yields than higher-rated
securities. However, there is more risk associated with these investments.
This is because of reduced credit-worthiness and increased risk of default.
Lower-rated securities generally tend to reflect short-term corporate and
market developments to a greater extent than higher-rated securities which
react primarily to fluctuations in the general level of interest rates.
Short-term corporate and market developments affecting the prices or
liquidity of lower-rated securities could include adverse news affecting
major issuers, underwriters, or dealers in lower-rated securities. In
addition, since there are fewer investors in lower-rated securities, it may
be harder to sell the securities at an optimum time.
As a result of these factors, lower-rated securities tend to have more price
volatility and carry more risk to principal and income than higher-rated
securities.

An economic downturn may adversely affect the value of some lower-rated
bonds. Such a downturn may especially affect highly leveraged companies or
companies in cyclically sensitive industries, where deterioration in a
company's cash flow may impair its ability to meet its obligation to pay
principal and interest to bondholders in a timely fashion. From time to
time, as a result of changing conditions, issuers of lower-rated bonds may
seek or may be required to restructure the terms and conditions of the
securities they have issued. As a result of these restructurings, holders of
lower-rated securities may receive less principal and interest than they had
bargained for at the time such bonds were purchased.

In the event of a restructuring, the Fund may bear additional legal or
administrative expenses in order to maximize recovery from an issuer.

The secondary trading market for lower-rated bonds is generally less liquid
than the secondary trading market for higher-rated bonds. Adverse publicity
and the perception of investors relating to issuers, underwriters, dealers
or underlying business conditions, whether or not warranted by fundamental
analysis, may also affect the price or liquidity of lower-rated bonds. On
occasion, therefore, it may become difficult to price or dispose of a
particular security in the portfolio.

The Fund may, from time to time, own zero coupon bonds or pay-in-kind
securities. A zero coupon bond makes no periodic interest payments and the
entire obligation becomes due only upon maturity. Pay-in-kind securities
make periodic payments in the form of additional securities (as opposed to
cash). The price of zero coupon bonds and pay-in-kind securities are
generally more sensitive to fluctuations in interest rates than are
conventional bonds. Additionally, federal tax law requires that interest on
zero coupon bonds and paid-in-kind securities be reported as income to the
Fund even though the Fund received no cash interest until the maturity or
payment date of such securities. To maintain its qualification as a
regulated investment company and avoid liability of federal income taxes,
the Fund will be required to distribute income accrued from zero coupon
convertible securities which it owns, and may have to sell portfolio
securities (perhaps at disadvantageous times) in order to generate cash to
satisfy these distribution requirements.

Many corporate debt obligations, including many lower-rated bonds, permit
the issuers to call the security and thereby redeem their obligations
earlier than the stated maturity dates. Issuers are more likely to call
bonds during periods of declining interest rates. In these cases, if the
Fund owns a bond which is called, the Fund will receive its return of
principal earlier than expected and would likely be required to reinvest the
proceeds at lower interest rates, thus reducing income to the Fund.

The table below shows the weighted average of the ratings of the bonds in
the Fund's portfolio during the Fund's fiscal year ended March 31, 1997. The
credit ratings categories are those provided by Moody's and S&P, which are
both nationally recognized statistical rating organizations. A description
of these ratings can be found in the Appendix to this prospectus. The
percentages in the column titled "Rated" reflect the percentage of bonds in
the portfolio which received a rating from at least one of these
organizations. The percentages in the column titled "Not Rated" reflect the
percentage of bonds in the portfolio which are not rated but which the
Fund's investment adviser has judged to be comparable in quality to the
corresponding rated bonds.

AS A PERCENTAGE OF TOTAL
CREDIT RATING CORPORATE BOND INVESTMENTS
CATEGORY* RATED NOT RATED TOTAL
BB 17.26% 0.00% 17.26%
B 78.02% 0.75 78.77
CCC 2.84 0.47 3.31
CC 0.66 0.00 0.66
98.78% 1.22% 100.00%

* May include all degrees of risk within the rating category.

REDUCING RISKS OF LOWER-RATED SECURITIES

The Fund's investment adviser believes that the risks of investing in
lower-rated securities can be reduced. The professional portfolio management
techniques used by the Fund to attempt to reduce these risks include:

CREDIT RESEARCH

The Fund's investment adviser will perform its own credit analysis in
addition to using recognized rating agencies and other sources, including
discussions with the issuer's management, the judgment of other investment
analysts, and its own informed judgment. The adviser's credit analysis will
consider the issuer's financial soundness, its responsiveness to changes in
interest rates and business conditions, and its anticipated cash flow,
interest, or dividend coverage and earnings. In evaluating an issuer, the
adviser places special emphasis on the estimated current value of the
issuer's assets rather than historical cost.

DIVERSIFICATION

The Fund invests in securities of many different issuers, industries, and
economic sectors to reduce portfolio risk.

ECONOMIC ANALYSIS

The Fund's adviser will analyze current developments and trends in the
economy and in the financial markets. When investing in lower-rated
securities, timing and selection are critical, and analysis of the business
cycle can be important.

INVESTMENT LIMITATIONS

The Fund will not:

* borrow money or pledge securities except, under certain circumstances, the
Fund may borrow up to one-third of the value of its total assets and pledge
up to 10% of the value of those assets to secure such borrowings;

* invest more than 5% of its total assets in securities of one issuer
(except cash and cash items, repurchase agreements, and U.S. government
obligations);

* make loans, except that it may invest up to 5% of the value of its total
assets in repurchase agreements which mature in more than seven days from
the time they are entered into, and it may lend portfolio securities where
the borrower of the securities provides 100% collateral;

* sell securities short except, under strict limitations, the Fund may
maintain open short positions so long as not more than 10% of the value of
its net assets is held as collateral for those positions;

* invest more than 5% of its total assets in securities of issuers that have
records of less than three years of continuous operations; or

* invest more than 5% of its total assets in foreign securities which are
not publicly traded in the United States.

The above investment limitations cannot be changed without shareholder
approval. The following limitation, however, can be changed by the Directors
without shareholder approval. Shareholders will be notified before any
material change in this limitation becomes effective.

The Fund will not:

* invest more than 15% of its net assets in illiquid securities.

NET ASSET VALUE

The Fund's net asset value ("NAV") per Share fluctuates and is based on the
market value of all securities and other assets of the Fund. The NAV for
each class of Shares may differ due to the variance in daily net income
realized by each class. Such variance will reflect only accrued net income
to which the shareholders of a particular class are entitled.

All purchases, redemptions and exchanges are processed at the NAV next
determined after the request in proper form is received by the Fund. The NAV
is determined as of the close of trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern time) every day the New York Stock Exchange is
open.

INVESTING IN THE FUND

This prospectus offers three classes of Shares each with the characteristics
described below.

CLASS A CLASS B CLASS C
Minimum and Subsequent $500/$100 $1500/$100 $1500/$100
Investment Amounts
Minimum and Subsequent $50 $50 $50
Investment Amount
for Retirement Plans
Maximum Sales Charge 4.50%* None None
Maximum Contingent None 5.50+ 1.00%#
Deferred Sales
Charge**
Conversion Feature No Yes++ No

* Class A Shares are sold at NAV, plus a sales charge as follows:

SALES CHARGE DEALER
AS A PERCENTAGE OF CONCESSION AS
PUBLIC NET A PERCENTAGE OF
OFFERING AMOUNT PUBLIC OFFERING
AMOUNT OF TRANSACTION PRICE INVESTED PRICE
Less than 4.50% 4.71% 4.00%
$100,000
$100,000 but less
than $250,000 3.75% 3.90% 3.25%
$250,000 but less
than $500,000 2.50% 2.56% 2.25%
$500,000 but less
than $1 million 2.00% 2.04% 1.80%
$1 million or 0.00% 0.00% 0.25%
greater

** Computed on the lesser of the NAV of the redeemed Shares at the time of
purchase or the NAV of the redeemed Shares at the time of redemption.

+ The following contingent deferred sales charge schedule applies to Class B
Shares:

YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
First 5.50%
Second 4.75%
Third 4.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter 0.00%

++ Class B Shares convert to Class A Shares (which pay lower ongoing
expenses) approximately eight years after purchase. See "Conversion of Class
B Shares."

# The contingent deferred sales charge is assessed on Shares redeemed within
one year of their purchase date.

PURCHASING SHARES

Shares of the Fund are sold on days on which the New York Stock Exchange is
open. Shares of the Fund may be purchased as described below, either through
a financial intermediary (such as a bank or broker/dealer) or by sending a
wire or check directly to the Fund. Financial intermediaries may impose
different minimum investment requirements on their customers. An account
must be established with a financial intermediary or by completing, signing,
and returning the new account form available from the Fund before Shares can
be purchased. Shareholders in certain other funds advised and distributed by
affiliates of Federated Investors ("Federated Funds") may exchange their
Shares for Shares of the corresponding class of the Fund. The Fund reserves
the right to reject any purchase or exchange request.

In connection with any sale, Federated Securities Corp. may, from time to
time, offer certain items of nominal value to any shareholder or investor.

PURCHASING SHARES THROUGH A
FINANCIAL INTERMEDIARY
Orders placed through a financial intermediary are considered received when
the Fund is notified of the purchase order or when payment is converted into
federal funds. Purchase orders through a broker/dealer must be received by
the broker before 4:00 p.m. (Eastern time) and must be transmitted by the
broker to the Fund before 5:00 p.m. (Eastern time) in order for Shares to be
purchased at that day's price. Purchase orders through other financial
intermediaries must be received by the financial intermediary and
transmitted to the Fund before 4:00 p.m. (Eastern time) in order for Shares
to be purchased at that day's price. It is the financial intermediary's
responsibility to transmit orders promptly. Financial intermediaries may
charge fees for their services.

The financial intermediary which maintains investor accounts in Class B
Shares or Class C Shares with the Fund must do so on a fully disclosed basis
unless it accounts for share ownership periods used in calculating the
contingent deferred sales charge (see "Contingent Deferred Sales Charge").
In addition, advance payments made to financial intermediaries may be
subject to reclaim by the distributor for accounts transferred to financial
intermediaries which do not maintain investor accounts on a fully disclosed
basis and do not account for share ownership periods.

PURCHASING SHARES BY WIRE

Shares may be purchased by Federal Reserve wire by calling the Fund. All
information needed will be taken over the telephone, and the order is
considered received when State Street Bank receives payment by wire. Federal
funds should be wired as follows: Federated Shareholder Services Company,
c/o State Street Bank and Trust Company, Boston, MA; Attention; EDGEWIRE;
For Credit to: (Fund Name) (Fund Class); (Fund Number -- this number can be
found on the account statement or by contacting the Fund); Account Number;
Trade Date and Order Number; Group Number or Dealer Number; Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased by
wire on holidays when wire transfers are restricted.

PURCHASING SHARES BY CHECK

Shares may be purchased by mailing a check made payable to the name of the
Fund (designate class of Shares and account number) to: Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600. Orders
by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received).

SYSTEMATIC INVESTMENT PROGRAM

Under this program, funds may be automatically withdrawn periodically from
the shareholder's checking account at an Automated Clearing House ("ACH")
member and invested in the Fund. Shareholders should contact their financial
intermediary or the Fund to participate in this program.

RETIREMENT PLANS

Fund Shares can be purchased as an investment for retirement plans or IRA
accounts. For further details, contact the Fund and consult a tax adviser.

CLASS A SHARES

Class A Shares are sold at NAV, plus a sales charge. However:

NO SALES CHARGE IS IMPOSED FOR CLASS A SHARES PURCHASED:

* through financial intermediaries that do not receive sales charge dealer
concessions;

* by Federated Life Members who maintain a $500 minimum balance in at least
one of the Federated Funds; or
* through "wrap accounts" or similar programs under which clients pay a fee
for services.

IN ADDITION, THE SALES CHARGE CAN BE REDUCED OR ELIMINATED BY:

* purchasing in quantity and accumulating purchases at the levels in the
table noted above;

* combining concurrent purchases of two or more funds; or

* signing a letter of intent to purchase a specific quantity of shares
within 13 months.

Consult a financial intermediary or Federated Securities Corp. for details
on these programs. In order to eliminate the sales charge or receive sales
charge reductions, Federated Securities Corp. must be notified by the
shareholder in writing or by a financial intermediary at the time of
purchase.

DEALER CONCESSION

For sales of Class A Shares, a dealer will normally receive up to 90% of the
applicable sales charge. Any portion of the sales charge which is not paid
to a dealer will be retained by the distributor. However, the distributor
may offer to pay dealers up to 100% of the sales charge retained by it. Such
payments may take the form of cash or promotional incentives, such as
reimbursement of certain expenses of qualified employees and their spouses
to attend informational meetings about the Fund or other special events at
recreational-type facilities, or items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell a significant amount of Shares. On purchases of $1 million
or more, the investor pays no sales charge; however, the distributor will
make twelve monthly payments to the dealer totaling 0.25% of the public
offering price over the first year following the purchase. Such payments are
based on the original purchase price of Shares outstanding at each month
end.

Federated Securities Corp. may pay fees to banks out of the sales charge in
exchange for sales and/or administrative services performed on behalf of the
bank's customers in connection with the establishment of customer accounts
and purchases of Shares.

CLASS B SHARES

Class B Shares are sold at NAV. Under certain circumstances, a contingent
deferred sales charge will be assessed at the time of a redemption within
the first seven years after purchase. Orders for $250,000 or more of Class B
Shares will automatically be invested in Class A Shares.

CONVERSION OF CLASS B SHARES

Class B Shares will automatically convert into Class A Shares after eight
full years from the purchase date. Such conversion will be on the basis of
the relative NAVs per Share, without the imposition of any charge. Class B
Shares acquired by exchange from Class B Shares of another Federated Fund
will convert into Class A Shares based on the time of the initial purchase.

CLASS C SHARES

Class C Shares are sold at NAV. A contingent deferred sales charge of 1.00%
will be charged on assets redeemed within the first full 12 months following
purchase.

REDEEMING AND EXCHANGING SHARES

Shares of the Fund may be redeemed for cash or exchanged for Shares of the
same class of other Federated Funds on days on which the Fund computes its
NAV. Shares are redeemed at NAV less any applicable contingent deferred
sales charge. Exchanges are made at NAV. Depending upon the circumstances, a
capital gain or loss may be realized when Shares are redeemed or exchanged.

REDEEMING OR EXCHANGING SHARES THROUGH A FINANCIAL INTERMEDIARY

Shares of the Fund may be redeemed or exchanged by contacting your financial
intermediary before 4:00 p.m. (Eastern time). In order for these
transactions to be processed at that day's NAV, financial intermediaries
(other than broker/dealers) must transmit the request to the Fund before
4:00 p.m. (Eastern time), while broker/dealers must transmit the request to
the Fund before 5:00 p.m. (Eastern time). The financial intermediary is
responsible for promptly submitting transaction requests and providing
proper written instructions. Customary fees and commissions may be charged
by the financial intermediary for this service. Appropriate authorization
forms for these transactions must be on file with the Fund.

REDEEMING OR EXCHANGING SHARES BY TELEPHONE

Shares acquired directly from the Fund may be redeemed in any amount, or
exchanged, by calling 1-800-341-7400. Appropriate authorization forms for
these transactions must be on file with the Fund. Shares held in certificate
form must first be returned to the Fund as described in the instructions
under "Redeeming or Exchanging Shares by Mail." Redemption proceeds will
either be mailed in the form of a check to the shareholder's address of
record or wire-transferred to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System. The minimum
amount for a wire transfer is $1,000.

Telephone instructions will be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or
market changes, a shareholder may experience difficulty in redeeming by
telephone. If this occurs, "Redeeming or Exchanging Shares by Mail" should
be considered. The telephone transaction privilege may be modified or
terminated at any time. Shareholders would be promptly notified.

REDEEMING OR EXCHANGING SHARES BY MAIL

Shares may be redeemed in any amount, or exchanged, by mailing a written
request to: Federated Shareholder Services Company, Fund Name, Fund Class,
P.O. Box 8600, Boston, MA 02266-8600. If share certificates have been
issued, they must accompany the written request. It is recommended that
certificates be sent unendorsed by registered or certified mail.

All written requests should state: Fund Name and the Share Class name; the
account name as registered with the Fund; the account number; and the number
of Shares to be redeemed or the dollar amount of the transaction. An
exchange request should also state the name of the Fund into which the
exchange is to be made. All owners of the account must sign the request
exactly as the Shares are registered. A check for redemption proceeds is
normally mailed within one business day, but in no event more than seven
days, after receipt of a proper written redemption request. It is
recommended that any share certificates be sent by registered or certified
mail with the written request. Dividends are paid up to and including the
day that a redemption or exchange request is processed.

REQUIREMENTS FOR REDEMPTION

Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than
to the shareholder of record, must have their signatures guaranteed by a
commercial or savings bank, trust company or savings association whose
deposits are insured by an organization which is administered by the Federal
Deposit Insurance Corporation; a member firm of a domestic stock exchange;
or any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934. The Fund does not accept signatures guaranteed by a
notary public.

REQUIREMENTS FOR EXCHANGE

Shareholders must exchange Shares having a NAV equal to the minimum
investment requirements of the fund into which the exchange is being made.
Contact your financial intermediary directly or the Fund for free
information on and prospectuses for the Federated Funds into which your
Shares may be exchanged. Before the exchange, the shareholder must receive a
prospectus of the fund for which the exchange is being made.

Upon receipt of proper instructions and required supporting documents,
Shares submitted for exchange are redeemed and proceeds invested in the same
class of shares of the other fund. Signature guarantees will be required to
exchange between fund accounts not having identical shareholder
registrations. The exchange privilege may be modified or terminated at any
time. Shareholders will be notified of the modification or termination of
the exchange privilege.

SYSTEMATIC WITHDRAWAL PROGRAM

Under this program, Shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder. To be eligible to
participate in this program, a shareholder must have an account value of at
least $10,000, other than retirement accounts subject to required minimum
distributions. A shareholder may apply for participation in this program
through his financial intermediary or by calling the Fund.

Because participation in this program may reduce, and eventually deplete,
the shareholder's investment in the Fund, payments under this program should
not be considered as yield or income. It is not advisable for shareholders
to continue to purchase Class A Shares subject to a sales charge while
participating in this program. A contingent deferred sales charge may be
imposed on Class B and C Shares.

CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. Redemptions will be processed in a manner intended to maximize
the amount of redemption which will not be subject to a contingent deferred
sales charge. The contingent deferred sales charge will not be imposed with
respect to Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains.

In determining the applicability of the contingent deferred sales charge,
the required holding period for your new Shares received through an exchange
will include the period for which your original Shares were held.

ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE

Upon written notification to Federated Securities Corp. or the transfer
agent, no contingent deferred sales charge will be imposed on redemptions:

* following the death or disability, as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986, of the last surviving shareholder;

* representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age
of 701/2;

* which are involuntary redemptions of shareholder accounts that do not
comply with the minimum balance requirements;
* which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program;

* of Shares held by Directors, employees and sales representatives of the
Fund, the distributor, or affiliates of the Fund or distributor, and their
immediate family members; employees of any financial institution that sells
Shares of the Fund pursuant to a sales agreement with the distributor; and
spouses and children under the age of 21 of the aforementioned persons; and

* by the Fund of Shares originally purchased through a bank trust
department, an investment adviser registered under the Investment Advisers
Act of 1940 or retirement plans where the third party administrator has
entered into certain arrangements with Federated Securities Corp. or its
affiliates, or any other financial institution, to the extent that no
payments were advanced for purchases made through such entities.

For more information regarding the elimination of the contingent deferred
sales charge through a Systematic Withdrawal Program, or any of the above
provisions, contact your financial intermediary or the Fund. The Fund
reserves the right to discontinue or modify these provisions. Shareholders
will be notified of such action.

ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND CERTIFICATES

Shareholders will receive detailed confirmations of all transactions and
monthly confirmations reporting any dividends paid. Share certificates are
not issued unless requested in writing to Federated Shareholder Services
Company.

DIVIDENDS AND DISTRIBUTIONS
Dividends are declared and paid monthly to all shareholders invested in the
Fund on the record date. Net long-term capital gains realized by the Fund,
if any, will be distributed at least once every twelve months. Dividends and
distributions are automatically reinvested in additional Shares of the Fund
on payment dates at the ex-dividend date NAV without a sales charge, unless
shareholders request cash payments on the new account form or by contacting
the transfer agent.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
close an account by redeeming all Shares and paying the proceeds to the
shareholder if the account balance falls below the applicable minimum
investment amount. Retirement plan accounts and accounts where the balance
falls below the minimum due to NAV changes will not be closed in this
manner. Before an account is closed, the shareholder will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The Fund is managed by a Board of Directors. The Directors are responsible
for managing the Fund's business affairs and for exercising all the Fund's
powers except those reserved for the shareholders. An Executive Committee of
the Board of Directors handles the Board's responsibilities between meetings
of the Board.

INVESTMENT ADVISER

Investment decisions for the Fund are made by Federated Advisers, the Fund's
investment adviser, subject to direction by the Directors. The Adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase or sale of portfolio instruments, for which it
receives an annual fee from the Fund.

ADVISORY FEES

The Adviser receives an annual investment advisory fee equal to 0.75% of the
Fund's average daily net assets. Under the investment advisory contract, the
Adviser will reimburse the Fund the amount, limited to the amount of the
advisory fee. The Adviser may voluntarily choose to waive a portion of its
fee or reimburse the Fund for certain operating expenses.

The fee paid by the Fund, while higher than the advisory fee paid by other
mutual funds in general, is comparable to fees paid by many mutual funds
with similar objectives and policies.

ADVISER'S BACKGROUND

Federated Advisers, a Delaware business trust organized on April 11, 1989,
is a registered investment adviser under the Investment Advisers Act of
1940. It is a subsidiary of Federated Investors. All of the Class A (voting)
Shares of Federated Investors are owned by a trust, the trustees of which
are John F. Donahue, Chairman and Trustee of Federated Investors, Mr.
Donahue's wife, and Mr. Donahue's son, J. Christopher Donahue, who is
President and Trustee of Federated Investors.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to
a number of investment companies. With over $110 billion invested across
over 300 funds under management and/or administration by its subsidiaries,
as of December 31, 1996, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 2,000
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,500
financial institutions nationwide.

Mark E. Durbiano has been the Fund's portfolio manager since August 1989.
Mr. Durbiano joined Federated Investors in 1982 and has been a Senior Vice
President of the Fund's investment adviser since January 1996. From 1988
through 1995, Mr. Durbiano was a Vice President of the Fund's investment
adviser. Mr. Durbiano is a Chartered Financial Analyst and received his
M.B.A. in Finance from the University of Pittsburgh.

Both the Fund and the Adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Fund and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to
the Fund's shareholders and must place the interests of shareholders ahead
of the employees' own interests. Among other things, the codes: require
preclearance and periodic reporting of personal securities transactions;
prohibit personal transactions in securities being purchased or sold, or
being considered for purchase or sale, by the Fund; prohibit purchasing
securities in initial public offerings; and prohibit taking profits on
securities held for less than sixty days. Violations of the codes are
subject to review by the Directors, and could result in severe penalties.

DISTRIBUTION OF SHARES

Federated Securities Corp. is the principal distributor for Shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.

The distributor may offer to pay financial institutions an amount equal to
1% of the net asset value of Class C Shares purchased by their clients or
customers at the time of purchase. These payments will be made directly by
the distributor from its assets, and will not be made from assets of the
Fund. Financial institutions may elect to waive the initial payment
described above; such waiver will result in the waiver by the Fund of the
otherwise applicable contingent deferred sales charge.

The distributor will pay dealers an amount equal to 5.5% of the net asset
value of Class B Shares purchased by their clients or customers. These
payments will be made directly by the distributor from its assets, and will
not be made from the assets of the Fund. Dealers may voluntarily waive
receipt of all or any portion of these payments. The distributor may pay a
portion of the distribution fee discussed below to financial institutions
that waive all or any portion of the advance payments.

DISTRIBUTION PLAN (CLASS B SHARES AND CLASS C SHARES ONLY) AND SHAREHOLDER
SERVICES

Under a distribution plan adopted in accordance with Investment Company Act
Rule 12b-1 (the "Distribution Plan"), Class B Shares and Class C Shares will
pay a fee to the distributor in an amount computed at an annual rate of
0.75% of the average daily net assets of each class of Shares to finance any
activity which is principally intended to result in the sale of Shares
subject to the Distribution Plan. For Class C Shares, the distributor may
select financial institutions such as banks, fiduciaries, custodians for
public funds, investment advisers, and broker/dealers to provide sales
services or distribution-related support services as agents for their
clients or customers. With respect to Class B Shares, because distribution
fees to be paid by the Fund to the distributor may not exceed an annual rate
of 0.75% of each class of Shares' average daily net assets, it will take the
distributor a number of years to recoup the expenses it has incurred for its
sales services and distribution and distribution-related support services
pursuant to the Distribution Plan.

The Distribution Plan is a compensation type plan. As such, the Fund makes
no payments to the distributor except as described above. Therefore, the
Fund does not pay for unreimbursed expenses of the distributor, including
amounts expended by the distributor in excess of amounts received by it from
the Fund, interest, carrying or other financing charges in connection with
excess amounts expended, or the distributor's overhead expenses. However,
the distributor may be able to recover such amounts or may earn a profit
from future payments made by Shares under the Distribution Plan.

In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to 0.25% of the average daily net asset
value of Class A Shares, Class B Shares, and Class C Shares to obtain
certain personal services for shareholders and for the maintenance of
shareholder accounts. Under the Shareholder Services Agreement, Federated
Shareholder Services will either perform shareholder services directly or
will select financial institutions to perform shareholder services.
Financial institutions will receive fees based upon Shares owned by their
clients or customers. The schedules of such fees and the basis upon which
such fees will be paid will be determined from time to time by the Fund and
Federated Shareholder Services.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

Federated Securities Corp. will pay financial institutions, at the time of
purchase of Class A Shares, an amount equal to 0.50% of the net asset value
of Class A Shares purchased by their clients or by certain qualified plans
as approved by Federated Securities Corp. (Such payments are subject to a
reclaim from the financial institution should the assets leave the program
within 12 months after purchase.)

Furthermore, with respect to Class A Shares, Class B Shares, and Class C
Shares, in addition to payments made pursuant to the Distribution Plan and
Shareholder Services Agreement, Federated Securities Corp. and Federated
Shareholder Services, from their own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution-related support services, or shareholder services. The support
may include sponsoring sales, educational and training seminars for their
employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of Shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support
furnished by the financial institution. Any payments made by the distributor
may be reimbursed by the Fund's investment adviser or its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services
Company provides these at an annual rate which relates to the average
aggregate daily net assets of all funds advised by affiliates of Federated
Investors, as specified below:

MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may choose voluntarily to waive a portion of its
fee.

SHAREHOLDER INFORMATION

Each Share of the Fund gives the shareholder one vote in Director elections
and other matters submitted to shareholders for vote. All Shares of each
portfolio or class in the Fund have equal voting rights, except that in
matters affecting only a particular portfolio or class, only Shares of that
portfolio or class are entitled to vote.

Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors
upon the written request of shareholders owning at least 10% of the Fund's
outstanding Shares of all series entitled to vote.

As of May 7, 1997, Merrill Lynch Pierce Fenner & Smith, Jacksonville,
Florida, for the sole benefit of its customers, was the owner of record of
3,045,059 shares (31.08%) of the Class C Shares of the Fund, and, therefore,
may, for certain purposes, be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such
companies.

Unless otherwise exempt, shareholders are required to pay federal income tax
on any dividends and other distributions, including capital gains
distributions, received. This applies whether dividends and distributions
are received in cash or as additional Shares. Distributions representing
long-term capital gains, if any, will be taxable to shareholders as
long-term capital gains no matter how long the shareholders have held the
Shares. No federal income tax is due on any dividends earned in an IRA or
qualified retirement plan until distributed.

STATE AND LOCAL TAXES

Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.

Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.

PERFORMANCE INFORMATION

From time to time, the Fund advertises its total return and yield for each
class of Shares.

Total return represents the change, over a specific period of time, in the
value of an investment in each class of Shares after reinvesting all income
and capital gains distributions. It is calculated by dividing that change by
the initial investment and is expressed as a percentage.

The yield of each class of Shares is calculated by dividing the net
investment income per share (as defined by the SEC) earned by each class of
Shares over a thirty-day period by the maximum offering price per share of
each class on the last day of the period. This number is then annualized using
semi-annual compounding. The yield does not necessarily reflect income actually
earned by each class of Shares and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.

The performance information reflects the effect of non-recurring charges,
such as the maximum sales charge or contingent deferred sales charges,
which, if excluded, would increase the total return and yield.

Total return and yield will be calculated separately for Class A Shares,
Class B Shares and Class C Shares. Expense differences between Class A
Shares, Class B Shares and Class C Shares may affect the performance of each
class.

From time to time, advertisements for Class A Shares, Class B Shares, and
Class C Shares of the Fund may refer to ratings, rankings, and other
information in certain financial publications and/or compare the performance
of Class A Shares, Class B Shares, and Class C Shares to certain indices.

APPENDIX

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS DEFINITIONS

AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's
Ratings Group. Capacity to pay interest and repay principal is extremely
strong.

AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.

BB -- Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB-rating.

B -- Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments.

Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal. The B rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied BB or BB-rating.

CCC -- Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions
to meet timely payment of interest and repayment of principal. In the event
of adverse business, financial, or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied B or B-rating.

CC -- The rating CC typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC debt rating.

C -- The rating C typically is applied to debt subordinated to senior debt
which is assigned an actual or implied CCC-debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.

D -- Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS

AAA -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.

AA -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.

A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.

BAA -- Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

BA -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.

CAA -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.

CA -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.

C -- Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

FITCH INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

FITCH-1 -- (Highest Grade) Commercial paper assigned this rating is regarded
as having the strongest degree of assurance for timely payment.

FITCH-2 -- (Very Good Grade) Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than the strongest
issues.

FEDERATED HIGH INCOME BOND FUND, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
Federated Investors Tower
Pittsburgh, PA 15222-3779

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA
15222-3779

INVESTMENT ADVISER
Federated Advisers
Federated Investors Tower
Pittsburgh, PA 15222-3779

CUSTODIAN
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT AUDITORS
Arthur Anderson LLP
2100 One PPG Place
Pittsburgh, PA 15222

Federated Securities Corp., Distributor

Cusip 314195108
Cusip 314195207
Cusip 314195306
G00667-02 (5/97)

[Graphic]
Federated High Income Bond Fund, Inc.

Class A Shares, Class B Shares,
Class C Shares

PROSPECTUS
MAY 31, 1997

An Open-End, Diversified
Management Investment Company
FEDERATED HIGH INCOME BOND FUND, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus
of Class A Shares, Class B Shares, and Class C Shares of Federated High
Income Bond Fund, Inc. (the `Fund''), dated May 31, 1997. This Statement
is not a prospectus itself. You may request a copy of a prospectus or a
paper copy of this Statement, if you received it electronically, free of
charge by calling 1-800-341-7400. To receive a copy of the prospectus,
write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated May 31, 1997
Cusip 314195108
Cusip 314195207
Cusip 314195306
8062805B (5/97)
TABLE OF CONTENTS

GENERAL INFORMATION ABOUT THE FUND 1

INVESTMENT OBJECTIVE AND POLICIES 1

Types of Investments 1
When-Issued and Delayed
Delivery Transactions 2
Temporary Investments 2
Lending of Portfolio Securities 2
Portfolio Turnover 2
INVESTMENT LIMITATIONS 3

FEDERATED HIGH INCOME BOND
FUND, INC. MANAGEMENT 6

Fund Ownership 9
Director Compensation 10
Director Liability 10
INVESTMENT ADVISORY SERVICES 11

Adviser to the Fund 11
Advisory Fees 11
BROKERAGE TRANSACTIONS 11

OTHER SERVICES 11

Fund Administration 11
Custodian and Portfolio Accountant 11
Transfer Agent 11
Independent Public Accountants 12
PURCHASING SHARES 12

DISTRIBUTION PLAN AND SHAREHOLDER
SERVICES AGREEMENT 13

Conversion to Federal Funds 13
Purchases by Sales Representatives, Fund
Directors, and Employees 13
DETERMINING NET ASSET VALUE 14

Determining Market Value of Securites 14
REDEEMING SHARES 14

Redemption in Kind 14
Contingent Deferred Sales Charge 14
TAX STATUS 15

The Fund's Tax Status 15
Shareholders' Tax Status 15
TOTAL RETURN 15

YIELD 16

PERFORMANCE COMPARISONS 16

Economic and Market Information 17
ABOUT FEDERATED INVESTORS 17

FINANCIAL STATEMENTS 18

GENERAL INFORMATION ABOUT THE FUND

The Fund was incorporated under the laws of the State of Maryland on
October 14, 1977. On April 29, 1993, the shareholders of the Fund voted to
permit the Fund to offer separate series and classes of shares. On February
26, 1996, the Board of Directors (the `Directors'') approved an amendment
to the Articles of Incorporation of the Fund to change the name of the Fund
from Liberty High Income Bond Fund, Inc. to Federated High Income Bond
Fund, Inc.
Shares of the Fund are offered in three classes known as Class A Shares,
Class B Shares, and Class C Shares (individually and collectively referred
to as `Shares'' as the context may require). This Statement of Additional
Information relates to all three classes of the above-mentioned Shares.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to seek high current income by
investing primarily in a diversified portfolio of professionally managed
fixed income securities. Some of these fixed income securities may involve
equity features. Capital growth will be considered, but only when
consistent with the investment objective of high current income. The
investment objective cannot be changed without approval of shareholders.
Unless otherwise indicated, the Fund's investment policies listed below may
not be changed by the Directors without shareholder approval.
TYPES OF INVESTMENTS
The Fund invests in lower-rated fixed income bonds which may include:
o preferred stocks;
o bonds;
o debentures;
o convertible securities;
o notes;
o equipment lease certificates; and
o equipment trust certificates.
CORPORATE DEBT SECURITIES
Corporate debt securities may bear fixed, fixed and contingent, or
variable rates of interest. They may involve equity features such as
conversion or exchange rights, warrants for the acquisition of common
stock of the same or a different issuer, participations based on
revenues, sales or profits, or the purchase of common stock in a unit
transaction (where corporate debt securities and common stock are
offered as a unit). Equipment lease or trust certificates are secured
obligations issued in serial form, usually sold by transportation
companies such as railroads or airlines, to finance equipment
purchases. The certificate holders own a share of the equipment, which
can be resold if the issuer of the certificate defaults.
EQUITY SECURITIES
Generally, less than 10% of the value of the Fund's total assets will
be invested in equity securities, including common stocks, warrants,
or rights. The Fund's investment adviser, Federated Advisers (the
`Adviser''), may choose to exceed this 10% limitation if unusual
market conditions suggest such investments represent a better
opportunity to reach the Fund's investment objective.
CONVERTIBLE SECURITIES
Dividend Enhanced Convertible Stock (`DECS''), or similar instruments
marketed under different names, offer a substantial dividend advantage
with the possibility of unlimited upside potential if the price of the
underlying common stock exceeds a certain level. DECS convert to
common stock at maturity. The amount received is dependent on the
price of the common at the time of maturity. DECS contain two call
options at different strike prices. The DECS participate with the
common up to the first call price. They are effectively capped at
that point unless the common rises above a second price point, at
which time they participate with unlimited upside potential.
Preferred Equity Redemption Cumulative Stock (`PERCS), or similar
instruments marketed under different names, offer a substantial
dividend advantage, but capital appreciation potential is limited to a
predetermined level. PERCS are less risky and less volatile than the
underlying common stock because their superior income mitigates
declines when the common falls, while the cap price limits gains when
the common rises.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. Settlement dates may be a month
or more after entering into these transactions, and the market values of
the securities purchased may vary from the purchase prices. No fees or
other expenses, other than normal transaction costs, are incurred. However,
liquid assets of the Fund sufficient to make payment for the securities to
be purchased are segregated on the Fund's records at the trade date. These
assets are marked to market daily and are maintained until the transaction
has been settled.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments from time to time for
defensive purposes.
CERTIFICATES OF DEPOSIT
The Fund may invest in certificates of deposit of domestic and foreign
banks and savings associations if they have capital, surplus, and
undivided profits of over $100,000,000, or if the principal amount of
the instrument is insured by the Federal Deposit Insurance
Corporation. These instruments may include Eurodollar Certificates of
Deposit issued by foreign branches of U.S. or foreign banks,
Eurodollar Time Deposits which are U.S. dollar- denominated deposits
in foreign branches of U.S. or foreign banks, Canadian Time Deposits
which are U.S. dollar-denominated deposits issued by branches of major
Canadian banks located in the United States, and Yankee Certificates
of Deposit which are U.S. dollar-denominated certificates of deposit
issued by U.S. branches of foreign banks and held in the United
States.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S.
government securities or certificates of deposit to the Fund and agree
at the time of sale to repurchase them at a mutually agreed upon time
and price. The Fund or its custodian will take possession of the
securities subject to repurchase agreements, and these securities will
be marked to market daily. To the extent that the original seller does
not repurchase the securities from the Fund, the Fund could receive
less than the repurchase price on any sale of such securities. In the
event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular
procedures normally in effect for custody of the Fund's portfolio
securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into
repurchase agreements with banks or other recognized financial
institutions such as broker/dealers which are deemed by the Fund's
Adviser to be creditworthy, pursuant to guidelines established by the
Directors.
LENDING OF PORTFOLIO SECURITIES
The Fund may pay reasonable administrative and custodial fees in
connection with a loan. The Fund does not have the right to vote securities
on loan, but would terminate the loan and regain the right to vote if that
were considered important with respect to the investment. The Fund will
only enter into loan arrangements with broker/dealers, banks or other
institutions which the Adviser has determined are creditworthy under
guidelines established by the Fund's Directors.
PORTFOLIO TURNOVER
The Fund does not intend to engage in substantial short-term trading;
however, it may from time to time sell portfolio securities without regard
to the time they have been held (i) to take advantage or short-term
differentials in yields or in market value, (ii) to take advantage of new
investment opportunities, (iii) because of changes in creditworthiness, or
(iv) in an attempt to preserve gains or limit losses. Similarly, efforts to
minimize any perceived risk in an individual portfolio security may result
in greater portfolio turnover than would otherwise be the case in a
portfolio of high rated securities. A high portfolio turnover will result
in increased transaction costs to the Fund. The Fund will not attempt to
achieve or be limited by a predetermined rate of portfolio turnover since
turnover is incidental to transactions undertaken with a view to achieving
the Fund's investment objective. For the fiscal years ended March 31, 1997
and 1996, the portfolio turnover rates were 55% and 53%, respectively.
INVESTMENT LIMITATIONS

BUYING ON MARGIN
The Fund will not purchase any securities on margin but may obtain
such short-term credits as may be necessary for the clearance of
transactions.
BORROWING MONEY
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only from banks and only
in amounts not in excess of 5% of the value of its total assets, taken
at the lower of cost or market.
In addition, to meet redemption requests without immediately selling
portfolio securities, the Fund may borrow up to one-third of the value
of its total assets (including the amount borrowed) less its
liabilities (not including borrowings, but including the current fair
market value of any securities carried in open short positions). If,
due to market fluctuations or other reasons, the value of the Fund's
assets falls below 300% of its borrowings, it will reduce its
borrowings within three business days. No more than 10% of the value
of the Fund's total assets at the time of providing such security may
be used to secure borrowings. This practice is not for investment
leverage but solely to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous.

DIVERSIFICATION OF INVESTMENTS
The Fund will not invest more than 5% of its total assets in the
securities of any one issuer (except cash and cash instruments,
securities issued or guaranteed by the U.S. government, its agencies,
or instrumentalities, or instruments secured by these money market
instruments, such as repurchase agreements).
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets
in securities of companies, including their predecessors, that have
been in operation for less than three years.
INVESTING IN FOREIGN SECURITIES
The Fund will not invest more than 5% of the value of its total assets
in foreign securities which are not publicly traded in the United
States.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, although it may invest
in marketable securities secured by real estate or interests in real
estate, and it may invest in the marketable securities of companies
investing or dealing in real estate.
INVESTING IN MINERALS
The Fund will not purchase or sell oil, gas, or other mineral
exploration or development programs, although it may invest in the
marketable securities of companies which invest in or sponsor such
programs.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities or commodity contracts,
although it may invest in the marketable securities of companies which
invest or deal in or sponsor such programs.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities.

MAKING LOANS
The Fund will not make loans, except through the purchase or holding
of securities in accordance with its investment objective, policies,
and limitations and through repurchase agreements.
The purchase of a portion of an issue of such securities distributed
publicly, whether or not the purchase is made on the original
issuance, is not considered the making of a loan. The Fund will not
enter into repurchase agreements with securities dealers if such
transactions constitute the purchase of an interest in such dealer
under applicable law.
Lending portfolio securities shall be permitted where the borrower of
such securities provides 100% collateral in the form of cash or U.S.
government securities. This collateral must be valued daily and should
the market value of the loaned securities increase, the borrower must
furnish additional collateral to the fund. During the time portfolio
securities are on loan, the Fund retains the right to any dividends or
interest or other distribution paid on the securities and any increase
in their market value. Loans will be subject to termination at the
option of the Fund or the borrower.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND
DIRECTORS OF THE FUND
The Fund will not purchase or retain the securities of any issuer if
the officers and Directors of the Fund or its Adviser owning
individually more than 1/2 of 1% of the issuer's securities together
own more than 5% of the issuer's securities. This limitation does not
apply to the Fund's securities.
DEALING IN PUTS AND CALLS
The Fund will not write, purchase, or sell puts, calls, or any
combination thereof.
PURCHASING SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies,
except purchases in the open market involving only customary brokerage
commissions and as a result of which not more than 5% of the value of
its total assets would be invested in such securities, or except as
part of a merger, consolidation, or other acquisition.
SELLING SHORT
The Fund will not make short sales of securities or maintain short
positions, unless:
oduring the time the short position is open, it owns an equal amount
of the securities sold or securities readily and freely convertible
into or exchangeable, without payment of additional consideration,
for securities of the same issue as, and equal in amount to, the
securities sold short; and
onot more than 10% of the Fund's net assets (taken at current value)
is held as collateral for such sales at any one time.
ACQUIRING SECURITIES
The Fund will not purchase securities of a company for the purpose of
exercising control or management. However, the Fund may invest in up
to 10% of the voting securities of any one issuer and may exercise its
voting powers consistent with the best interests of the Fund. From
time to time, the Fund, together with other investment companies
advised by subsidiaries or affiliates of Federated Investors, may
together buy and hold substantial amounts of a company's voting stock.
All such stock may be voted together.
In some such cases, the Fund and the other investment companies might
collectively be considered to be in control of the company in which
they have invested.
In some cases, Directors, agents, employees, officers, or others
affiliated with or acting for the Fund, its adviser, or affiliated
companies might possibly become directors of companies in which the
Fund holds stock.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if as a result of such purchase
more than 25% of the value of the Fund's assets would be invested in
one any industry. However, the Fund may at times invest more than 25%
of the value of its assets in cash or cash items (including bank time
and demand deposits such as certificates of deposits), securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or instruments secured by these money market
instruments, such as repurchase agreements, for temporary or defensive
purposes.
The above investment limitations cannot be changed without shareholder
approval. The following limitation, however, may be changed by the
Directors without shareholder approval. Shareholders will be notified
before any material change in this limitation becomes effective.
RESTRICTED AND ILLIQUID SECURITIES
The Fund will not invest more than 15% of its total assets in illiquid
securities, including repurchase agreements providing for settlement
in more than seven days after notice and certain restricted securities
not determined by the Directors to be liquid.
The Directors may consider the following criteria in determining the
liquidity of certain restricted securities:
othe frequency of trades and quotes for the security;
othe number of dealers willing to purchase or sell the security and
the number of other potential buyers;
odealer undertakings to make a market in the security; and
othe nature of the security and the nature of the marketplace trades.

Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.
The Fund did not make loans, borrow money, or sell securities short in
excess of 5% of the value of its net assets during the last fiscal year and
has no present intent to do so in the current fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be `cash items.''

FEDERATED HIGH INCOME BOND FUND, INC. MANAGEMENT

Officers and Directors are listed with their addresses, birthdates, present
positions with Federated High Income Bond Fund, Inc., and principal
occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President and Director of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director,
Member of Executive Committee, University of Pittsburgh; Director or
Trustee of the Funds.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director
Director and Member of the Executive Committee, Michael Baker, Inc.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.;
Director, Ryan Homes, Inc.; Director or Trustee of the Funds.

J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President and Director
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Director of the Company.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center - Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly, Hematologist,
Oncologist, and Internist, Presbyterian and Montefiore Hospitals; Director
or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Director
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street
Boston Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
Boca Grande Club
Boca Grande, FL
Birthdate: October 6, 1926
Director
Former Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or
Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., National Defense University, U.S. Space Foundation
and Czech Management Center; President Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory Council for Environmental Policy and
Technology, Federal Emergency Management Advisory Board and Czech
Management Center; Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/Marketing/Conference Planning, Manchester Craftsmen's
Guild; Restaurant Consultant, Frick Art & History Center; Conference
Coordinator, University of Pittsburgh Art History Department; Director or
Trustee of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President , Secretary and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds; Treasurer of some of the Funds.

* This Director is deemed to be an `interested person'' as defined in
the Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the
Board of Directors handles the responsibilities of the Board between
meetings of the Board.
As used in the table above, `The Funds'' and ``Funds'' mean the
following investment companies: 111 Corcoran Funds; Arrow Funds; Automated
Government Money Trust; Blanchard Funds; Blanchard Precious Metals Fund,
Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable Rate
U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund,
Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; Federated Government
Trust; Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Insurance Series; Federated
Investment Portfolios; Federated Investment Trust; Federated Master Trust;
Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated
Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust;
Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S.
Government Securities Fund: 2-5 Years; Federated U.S. Government Securities
Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds; Fixed
Income Securities, Inc.; High Yield Cash Trust; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Term Trust, Inc. - 1999; Liberty U.S.
Government Money Market Trust; Liquid Cash Trust; Managed Series Trust;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The
Starburst Funds; The Starburst Funds II; The Virtus Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
Wesmark Funds; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Directors as a group own less than 1% of the Fund's
outstanding Shares.
As of May 8, 1997, the following shareholder of record owned 5% or more of
the outstanding Class A Shares of the Fund: Merrill Lynch Pierce Fenner &
Smith (as record owner holding Shares for its clients), Jacksonville,
Florida, owned approximately 4,943,756 Shares (9.10% of Class A Shares).
As of May 7, 1997, the following shareholder of record owned 5% or more of
the outstanding Class B Shares of the Fund: Merrill Lynch Pierce Fenner &
Smith (as record owner holding Shares for its clients), Jacksonville,
Florida, owned approximately 3,620,104 Shares (7.37% of Class B Shares).
As of May 7, 1997, the following shareholder of record owned 5% or more of
the outstanding Class C Shares of the Fund: Merrill Lynch Pierce Fenner &
Smith (as record owner holding Shares for its clients), Jacksonville,
Florida, owned approximately 3,045,059 Shares (31.08% of Class C Shares).

OFFICERS AND DIRECTORS COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
FUND FUND* FROM FUND COMPLEX +

John F. Donahue, $0 $0 for the Fund and
Chairman and Director 56 investment companies
J. Christopher Donahue, $0 $0 for the Fund and
Executive Vice President 18 investment companies
and Director
Thomas G. Bigley, $1,808 $108,725 for the Fund and
Director 56 investment companies
John T. Conroy, Jr., $1,989 $119,615 for the Fund and
Director 56 investment companies
William J. Copeland, $1,989 $119,615 for the Fund and
Director 56 investment companies
James E. Dowd, $1,989 $119,615 for the Fund and
Director 56 investment companies
Lawrence D. Ellis, M.D.,$1,808 $108,725 for the Fund and
Director 56 investment companies
Edward L. Flaherty, Jr., $1,989 $119,615 for the Fund and
Director 56 investment companies
Peter E. Madden, $1,808 $108,725 for the Fund and
Director 56 investment companies
Gregor F. Meyer, $1,808 $108,725 for the Fund and
Director 56 investment companies
John E. Murray, Jr., $1,808 $108,725 for the Fund and
Director 56 investment companies
Wesley W. Posvar $1,808 $108,725 for the Fund and
Director 56 investment companies
Marjorie P. Smuts, $1,808 $108,725 for the Fund and
Director 56 investment companies
*Information is furnished for the fiscal year ended March 31, 1997.
+The information is provided for the last calendar year.
DIRECTOR LIABILITY
The Articles of Incorporation provide that the Directors will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
The Fund's investment Adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife, and
his son, J. Christopher Donahue.
The Adviser shall not be liable to the Fund or any shareholder for any
losses that may be sustained in the purchase, holding or sale of any
security or for anything done or omitted by it except acts or omissions
involving willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties imposed upon it by its contract with the Fund.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended
March 31, 1997, 1996, and 1995, the Adviser earned $7,658,537, $4,997,589,
and $3,519,356, respectively, which were reduced by $0, $38,726, and
$213,067, respectively, because of undertakings to limit the Fund's
expenses.
BROKERAGE TRANSACTIONS
The Adviser may select brokers and dealers who offer brokerage and
research services. These services may be furnished directly to the Fund or
to the Adviser and may include: advice as to the advisability of investing
in securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by
the Adviser or its affiliates in advising the Fund and other accounts. To
the extent that receipt of these services may supplant services for which
the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses. The Adviser and its affiliates exercise reasonable
business judgment in selecting brokers who offer brokerage and research
services to execute securities transactions. They determine in good faith
that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. For the fiscal
years ended March 31, 1997, 1996, and 1995, the Fund paid total brokerage
commissions of $15, $4,678, and $8,051, respectively.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser, investments of the type
the Fund may make may also be made by those other accounts. When the Fund
and one or more other accounts managed by the Adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the Adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. From March 1, 1994, to March 1, 1996,
Federated Administrative Services, a subsidiary of Federated Investors,
served as the Fund's Administrator. For purposes of this Statement of
Additional Information, Federated Services Company and Federated
Administrative Services may hereinafter collectively be referred to as the
`Administrators.'' For the fiscal years ended March 31, 1997, 1996, and
1995, the Administrators earned $771,550, $504,162, and $355,220,
respectively.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company, Pittsburgh,
PA, provides certain accounting and recordkeeping services with respect to
the Fund's portfolio investments. The fee paid for this service is based
upon the level of the Fund's average net assets for the period plus out-of-
pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary shareholder
records. For its services, the transfer agent receives a fee based on the
size, type and number of accounts and transactions made by shareholders.

INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
PURCHASING SHARES

Except under certain circumstances described in the prospectus, Shares are
sold at their net asset value (plus a sales charge on Class A Shares only)
on days the New York Stock Exchange is open for business. The procedure for
purchasing Shares is explained in the prospectus under `Investing in the
Fund''and ``Purchasing Shares.''

QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table in the
prospectus, larger purchases reduce the sales charge paid. The Fund will
combine purchases of Class A Shares made on the same day by the investor,
the investor's spouse, and the investor's children under age 21 when it
calculates the sales charge. In addition, the sales charge, if applicable,
is reduced for purchases made at one time by a trustee or fiduciary for a
single trust estate or a single fiduciary account.

If an additional purchase of Class A Shares is made, the Fund will consider
the previous purchases still invested in the Fund. For example, if a
shareholder already owns Class A Shares having a current value at the
public offering price of $90,000 and he purchases $10,000 more at the
current public offering price, the sales charge on the additional purchase
according to the schedule now in effect would be 3.75%, not 4.50%.

To receive the sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at
the time the purchase is made that Class A Shares are already owned or that
purchases are being combined. The Fund will reduce the sales charge after
it confirms the purchases.

CONCURRENT PURCHASES. For purposes of qualifying for a sales charge
reduction, a shareholder has the privilege of combining concurrent
purchases of Class A Shares of two or more funds for which affiliates of
Federated Investors serve as investment adviser or principal underwriter
(the `Federated Funds''), the purchase price of which includes a sales
charge. For example, if a shareholder concurrently invested $30,000 in the
Class A Shares of one of the other Federated Funds with a sales charge, and
$20,000 in this Fund, the sales charge would be reduced.

To receive this sales charge reduction, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at
the time the concurrent purchases are made. The Fund will reduce the sales
charge after it confirms the purchases.

LETTER OF INTENT. If a shareholder intends to purchase at least $50,000 of
Class A Shares of Federated Funds (excluding money market funds) over the
next 13 months, the sales charge may be reduced by signing a letter of
intent to that effect. This letter of intent includes a provision for a
sales charge adjustment depending on the amount actually purchased within
the 13-month period and a provision for the custodian to hold up to 5.50%
of the total amount intended to be purchased in escrow (in shares) until
such purchase is completed.

The Shares held in escrow in the shareholder's account will be released
upon fulfillment of the letter of intent or the end of the 13-month period,
whichever comes first. If the amount specified in the letter of intent is
not purchased, an appropriate number of escrowed Shares may be redeemed in
order to realize the difference in the sales charge.

While this letter of intent will not obligate the shareholder to purchase
Shares, each purchase during the period will be at the sales charge
applicable to the total amount intended to be purchased. At the time a
letter of intent is established, current balances in accounts in any Class
A Shares of any Federated Funds, excluding money market accounts, will be
aggregated to provide a purchase credit towards fulfillment of the letter
of intent. Prior trade prices will not be adjusted.

REINVESTMENT PRIVILEGE. If Class A Shares in the Fund have been redeemed,
the shareholder has the privilege, within 120 days, to reinvest the
redemption proceeds at the next-determined net asset value without any
sales charge. Federated Securities Corp. must be notified by the
shareholder in writing or by his financial institution of the reinvestment
in order to eliminate a sales charge. If the shareholder redeems his Class
A Shares in the Fund, there may be tax consequences.

CONVERSION OF CLASS B SHARES. Class B Shares will automatically convert
into Class A Shares after eight full years from the purchase date. For
purposes of conversion to Class A Shares, Shares purchased through the
reinvestment of dividends and distributions paid on Class B Shares will be
considered to be held in a separate sub-account. Each time any Class B
Shares in the shareholder's account (other than those in the sub-account)
convert to Class A Shares, an equal pro rata portion of the Class B Shares
in the sub-account will also convert to Class A Shares. The conversion of
Class B Shares to Class A Shares is subject to the continuing availability
of a ruling from the Internal Revenue Service or an opinion of counsel that
such conversions will not constitute taxable events for federal tax
purposes. There can be no assurance that such ruling or opinion will be
available, and the conversion of Class B Shares to Class A Shares will not
occur if such a ruling or opinion is not available. In such event, Class B
Shares would continue to be subject to higher expenses than Class A Shares
for an indefinite period.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
As explained in the prospectus, with respect to the Shares of the Fund,
the Fund has adopted a Shareholder Services Agreement, and, with respect to
Class B Shares and Class C Shares, the Fund has adopted a Distribution
Plan. These arrangements permit the payment of fees to financial
institutions, the distributor, and Federated Shareholder Services, to
stimulate distribution activities and to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may
include, but are not limited to: marketing efforts; providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances, answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Directors expect that the Fund will
be able to achieve a more predictable flow of cash for investment purposes
and to meet redemptions. This will facilitate more efficient portfolio
management and assist the Fund in pursuing its investment objective. By
identifying potential investors whose needs are served by the Fund's
objective and properly servicing these accounts, it may be possible to curb
sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail; (3)
enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the fiscal year ending March 31, 1997, payments in the amount of
$2,744,139 were made by Class B Shares pursuant to the Distribution Plan.
For the fiscal year ending March 31, 1997, payments in the amount of
$622,842 were made by Class C Shares pursuant to the Distribution Plan.
In addition, for this period, payments in the amounts of $1,430,515 (Class
A Shares), $914,713 (Class B Shares) and $207,614 (Class C Shares), were
made pursuant to the Shareholder Services Agreement of which $189,664, $0,
and $1,064, respectively, were waived.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be
in federal funds or be converted into federal funds before shareholders
begin to earn dividends. Federated Shareholder Services acts as the
shareholder's agent in depositing checks and converting them to federal
funds.
PURCHASES BY SALES REPRESENTATIVES, FUND DIRECTORS, AND EMPLOYEES
The following individuals and their immediate family members may buy Class
A Shares at net asset value without a sales charge:
oDirectors, employees, and sales representatives of the Fund, Federated
Advisers, and Federated Securities Corp. and its affiliates;
oFederated Life Members; and
oany associated person of an investment dealer who has a sales agreement
with Federated Securities Corp. Shares may also be sold without a sales
charge to trusts, pensions, or profit-sharing plans for these individuals.
These sales are made with the purchaser's written assurance that the
purchase is for investment purposes and that the securities will not be
resold except through redemption by the Fund.

DETERMINING NET ASSET VALUE
The Fund's net asset value per Share fluctuates and is based on the market
value of all securities and other assets of the Fund. The net asset value
for each class of Shares may differ due to the variance in daily net income
realized by each class.
Net asset value is not determined on (i) days on which there are not
sufficient changes in the value of the Fund's portfolio securities that its
net asset value might be materially affected; (ii) days during which no
Shares are tendered for redemption and no orders to purchase Shares are
received; or (iii) the following holidays: New Year's Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day, and Christmas Day.

DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:

oaccording to the last sale price on a national securities exchange, if
available;

oin the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices and for bonds and other
fixed income securities, as determined by an independent pricing service;
or

ofor short-term obligations, according to the prices as furnished by an
independent pricing service or for short-term obligations with remaining
maturities of 60 days or less at the time of purchase, at amortized cost or
at fair value as determined in good faith by the Directors.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data.

REDEEMING SHARES
The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Shareholder redemptions may be subject to
a contingent deferred sales charge. Redemption procedures are explained in
the respective prospectuses under `Redeeming and Exchanging Shares.''
Although the transfer agent does not charge for telephone redemptions, it
reserves the right to charge a fee for the cost of wire-transferred
redemptions of less than $5,000.

REDEMPTION IN KIND
Although the Fund intends to redeem Shares in cash, it reserves the right
under certain circumstances to pay the redemption price in whole or in part
by a distribution of securities from the Fund's portfolio.

Redemption in kind will be made in conformity with applicable SEC rules,
taking such securities at the same value employed in determining net asset
value and selecting the securities in a manner the Directors determine to
be fair and equitable.

The Fund has elected to be governed by Rule 18f-1 of the Investment Company
Act of 1940 under which the Fund is obligated to redeem Shares for any
shareholder in cash up to the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period.

Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
CONTINGENT DEFERRED SALES CHARGE

In computing the amount of the applicable Contingent Deferred Sales Charge,
redemptions are deemed to have occurred in the following order: (1) Shares
acquired through the reinvestment of dividends and long-term capital gains;
(2) Shares held for more than seven full years from the date of purchase
with respect to Class B Shares and one full year from the date of purchase
with respect to Class C Shares; (3) Shares held for fewer than seven years
with respect to Class B Shares and for less than one full year from the
date of purchase with respect to Class C Shares on a first-in, first-out
basis.

ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE. To qualify for
elimination of the contingent deferred sales charge through a Systematic
Withdrawal Program, the redemptions of Class B Shares must be from an
account that is at least 12 months old, has all Fund distributions
reinvested in Fund Shares, and has an account value of at least $10,000
when the Systematic Withdrawal Program is established. Qualifying
redemptions may not exceed 1.00% monthly of the account value as
periodically determined by the Fund. The amounts that a shareholder may
withdraw under a Systematic Withdrawal Program that qualify for elimination
of the Contingent Deferred Sales Charge may not exceed 12% annually with
reference initially to the value of the Class B Shares upon establishment
of the Systematic Withdrawal Program and then as calculated at the annual
valuation date. Redemptions on a qualifying Systematic Withdrawal Program
can be made at a rate of 1.00% monthly, 3.00% quarterly, or 6.00% semi-
annually with reference to the applicable account valuation amount.
Amounts that exceed the 12.00% annual limit for redemption, as described,
may be subject to the Contingent Deferred Sales Charge. To the extent that
a shareholder exchanges Shares for Class B Shares of other Federated Funds,
the time for which the exchanged-for Shares are to be held will be added to
the time for which exchanged-from Shares were held for purposes of
satisfying the 12-month holding requirement. However, for purposes of
meeting the $10,000 minimum account value requirement, Class B Share
accounts will be not be aggregated. Any Shares purchased prior to the
termination of this program would have the contingent deferred sales charge
eliminated as provided in the Fund's prospectus at the time of the purchase
of the Shares.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital
gains received as cash or additional Shares. The Fund's dividends, and any
short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Capital gains or losses may be realized on the sale of portfolio
securities and as a result of discounts from par value on securities
held to maturity. Sales would generally be made because of:
othe availability of higher relative yields;
odifferentials in market values;
onew investment opportunities;
ochanges in creditworthiness of an issuer; or
oan attempt to preserve gains or limit losses.
Distributions of long-term capital gains are taxed as such, whether
they are taken in cash or reinvested, and regardless of the length of
time the shareholder has owned the Shares. Any loss by a shareholder
on Shares held for less than six months and sold after a capital gains
distribution will be treated as a long-term capital loss to the extent
of the capital gains distribution.
TOTAL RETURN

The Fund's average annual total returns for the following periods ended
March 31, 1997 were:
Share Class INCEPTION ONE-YEAR FIVE-YEARS TEN-YEARS SINCE
DATE INCEPTION
Class A 11/30/77 6.86% 10.12% 10.44% 10.68%
Class B 9/27/94 5.01% - - 10.21%
Class C 4/30/93 9.92% - - 9.26%

The average annual total return for all classes of Shares of the Fund is
the average compounded rate of return for a given period that would equate
a $1,000 initial investment to the ending redeemable value of that
investment. The ending redeemable value is computed by multiplying the
number of Shares owned at the end of the period by the offering price per
Share at the end of the period. The number of Shares owned at the end of
the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming a quarterly reinvestment of all
dividends and distributions. Any applicable contingent deferred sales
charge is deducted from the ending value of the investments based on the
lesser of the original purchase price or the offering price of Shares
redeemed.
YIELD
The Fund's yields for the thirty-day period ended March 31, 1997 were:
SHARE CLASS YIELD
Class A 7.68%
Class B 7.42%
Class C 7.42%

The yield for all classes of Shares of the Fund is determined by
dividing the net investment income per Share (as defined by the SEC) earned
by any class of Shares over a thirty-day period by the maximum offering
price per Share of any class of Shares on the last day of the period. This
value is then annualized using semi-annual compounding. This means that the
amount of income generated during the thirty-day period is assumed to be
generated each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by
any class of Shares because of certain adjustments required by the SEC and,
therefore, may not correlate to the dividends or other distributions paid
to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in any
class of Shares, the performance will be reduced for those shareholders
paying those fees.
PERFORMANCE COMPARISONS

The Fund's performance of each class of Shares depends upon such variables
as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Fund's or a class of Shares' expenses; and
o various other factors.
A class of Shares' performance fluctuates on a daily basis largely because
net earnings and offering price per Share fluctuate daily. Both net
earnings and offering price per Share are factors in the computation of
yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories by making comparative calculations using total return. Total
return assumes the reinvestment of all capital gains distributions and
income dividends and takes into account any change in net asset value
over a specific period of time. From time to time, the Fund will quote
its Lipper ranking in the high current yield funds category in
advertising and sales literature.
o MORNINGSTAR, INC., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their risk-
adjusted returns. The maximum rating is five stars, and ratings are
effective for two weeks.
o LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX is comprised of
approximately 5,000 issues which include: non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate bonds
guaranteed by the U.S. government and quasi-federal corporations; and
publicly issued, fixed-rate, non-convertible domestic bonds of
companies in industry, public utilities, and finance. The average
maturity of these bonds approximates nine years. Tracked by Lehman
Brothers, Inc., the index calculates total returns for one-month,
three-month, twelve-month, and ten-year periods and year-to-date.
o LEHMAN BROTHERS GOVERNMENT/CORPORATE (LONG-TERM) INDEX is composed of
the same types of issues as defined above. However, the average
maturity of the bonds included on this index approximates 22 years.
o LEHMAN BROTHERS HIGH YIELD INDEX covers the universe of fixed
rate, publicly issued, noninvestment grade debt registered with the
SEC. All bonds included in the High Yield Index must be dollar-
denominated and nonconvertible and have at least one year remaining to
maturity and an outstanding par value of at least $100 million.
Generally securities must be rated Ba1 or lower by Moody's Investors
Service, Inc. (``Moody's'), including defaulted issues. If no Moody's
rating is available, bonds must be rated BB+ or lower by Standard &
Poor's Ratings Group (``S&P'); and if no S&P rating is available, bonds
must be rated below investment grade by Fitch Investors Service, Inc. A
small number of unrated bonds is included in the index; to be eligible
they must have previously held a high yield rating or have been
associated with a high yield issuer, and must trade accordingly.
Advertisements and sales literature for any class of Shares may quote total
returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in
any class of Shares based on monthly reinvestment of dividends over a
specified period of time.
From time to time, the Fund may advertise the performance of any class of
Shares using charts, graphs, and descriptions, compared to federally
insured bank products, including certificates of deposit and time deposits,
and to money market funds using the Lipper Analytical Services money market
instruments average.
Advertisements may quote performance information which does not reflect the
effect of a sales charge or contingent deferred sales charge, as
applicable.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in
which it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by Fund portfolio managers and their views and analysis
on how such developments could affect the Funds. In addition, advertising
and sales literature may quote statistics and give general information
about the mutual fund industry, including the growth of the industry, from
sources such as the Investment Company Institute.
ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward,
and consistent. This has resulted in a history of competitive performance
with a range of competitive investment products that have gained the
confidence of thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio managers,
analysts, and traders dedicated to specific market sectors. These traders
handle trillions of dollars in annual trading volume.
In the corporate bond sector, as of December 31, 1996, Federated
Investors managed 12 money market funds and 17 bond funds with assets
approximating $17.2 billion and $4.0 billion, respectively. Federated
Investors' corporate bond decision making-based on intensive, diligent
credit analysis-is backed by over 21 years of experience in the corporate
bond sector. In 1972, Federated Investors introduced one of the first high-
yield bond funds in the industry. In 1983, Federated Investors was one of
the first fund managers to participate in the asset-backed securities
market, a market totaling more than $200 billion.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed
income management. Henry A. Frantzen, Executive Vice President, oversees
the management of Federated Investors' international and global portfolios.

MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3.5 trillion to the more than 6,000
funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for
a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and mutual
funds for a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional clients is
headed by John B. Fisher, President, Institutional Sales Division.
BANK MARKETING
Other institutional clients include close relationships with more than
1,600 banks and trust organizations. Virtually all of the trust divisions
of the top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide-we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country-supported by more wholesalers than any
other mutual fund distributor. Federated Investors' service to financial
professionals and institutions has earned it high ratings in several
surveys performed by DALBAR, Inc. DALBAR is recognized as the industry
benchmark for service quality measurement. The marketing effort to these
firms is headed by James F. Getz, President, Federated Securities Corp.

FINANCIAL STATEMENTS

The Financial Statements for the fiscal year ended March 31, 1997, are
incorporated herein by reference to the Annual Report of the Fund dated
March 31, 1997 (File Nos. 811-2782 and 2-60103). A copy of this report may
be obtained without charge by contacting the Fund.

*source: Investment Company Institute

PART C. OTHER INFORMATION.

Item 24. Financial Statements and Exhibits:
(a)Financial Statements. (Incorporated by reference to Annual
Report of Registrant dated March 31, 1997 (File Nos.
2-60103 and 811-2782);
(b) Exhibits:
(1) Conformed copy of Articles of Incorporation of the
Registrant, as amended (19);
(2) (i)Copy of By-Laws of the Registrant as Restated and
Amended (19);
(ii)Copy of Amendment to By-Laws effective August 26,
1987 (19);
(3) Not applicable;
(4) Copies of Specimen Certificates for Shares of Capital
Stock for Class A Shares, Class B Shares, and Class C
Shares of the Registrant; +
(5) Conformed copy of Investment Advisory Contract of the
Registrant (14);
(6) (i) Conformed copy of Distributor's Contract of the
Registrant, through and including Exhibit C (16);
(ii) Conformed copy of Exhibit D to Distributor's
Contract (18);
(iii) The Registrant hereby incorporates the conformed
copy of the specimen Mutual Funds Sales and
Service Agreement; Mutual Funds Service Agreement
from Item 4(b)(6) of the Cash Trust Series II
Registration Statement on Form N-1A, filed with
the Commission on July 24, 1995. (File Numbers
33-38550 and 811-6269).
(7) Not applicable;
(8) (i)..........Conformed copy of Custodian Contract of
the Registrant(18);
(ii)..........Conformed copy of Agency Agreement of
the ..........Registrant (14);

+ Exhibits have been filed electronically

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 33 on Form N-1A filed February 25, 1993 (File Nos. 2-
60103 and 811-2782).
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 38 on Form N-1A filed July 26, 1994 (File Nos. 2-60103
and 811-2782).
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 40 on Form N-1A filed May 25, 1995 (File Nos. 2-60103
and 811-2782).
19. Response is incorporated by refrence to Registrant's Post-Effective
Amendment No. 41 on Form N-1A filed May 29, 1996 (Files Nos. 2-6103
and 811-2782).

(9) (i) Conformed copy of Agreement for Fund Accounting
Services, Administrative Services, Transfer Agency
Services, Shareholder Recordkeeping and Custody
Services Procurement (19);
(ii) The responses described in Item 24(b)(6) are
hereby incorporated by reference.
(iii) The Registrant hereby incorporates the conformed
copy of the Shareholder services Sub-Contract between
Fidelity and Federated Shareholder Services from Item
24(b)(9)(iii) of the Federated GNMA Trust Registration
Statement on Form N-1A, filed with the Commission on
March 25, 1996. (File Nos. 2-75670 and 811-3375).
(10) Not applicable;
(11) Conformed copy of Consent of Independent Public
Accountants;+
(12) Not applicable;
(13) Not applicable;
(14) Not applicable;
(15) (i) The responses described in Item 24(b)(6)are hereby
incorporated by reference.
(ii)Conformed copy of Rule 12b-1 Plan of the
Registrant, through and including Exhibit B (16);
(iii)Conformed copy of Exhibit C to the Rule 12b-1 Plan
(18).
(16) Copy of Schedule for Computation of Yield Calculation
(10);
(17) Copy of Financial Data Schedules; +
(18) The Registrant hereby incorporates the conformed copy
of the specimen Multiple Class Plan from Item 24(b)(18)
of the World Investment series, Inc. Registration
Statement on Form N-1A, filed with the Commission on
January 26, 1996. (File Nos. 33-52149 and 811-07141);
(19) Conformed Copy of Power of Attorney;+

Item 25. Persons Controlled by or Under Common Control with Registrant:

None

+ Exhibits have been filed electronically

10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 24 on Form N-1A filed July 18, 1988 (File Nos. 2-60103
and 811-2782).
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 38 on Form N-1A filed July 26, 1994 (File Nos. 2-60103
and 811-2782).
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 40 on Form N-1A filed May 25, 1995 (File Nos. 2-60103
and 811-2782).
19. Response is incorporated by refrence to Registrant's Post-Effective
Amendment No. 41 on Form N-1A filed May 29, 1996 (Files Nos. 2-6103
and 811-2782).

Item 26. Number of Holders of Securities:

Number of Record Holders
Title of Class as of May 7, 1997

Shares of Capital Stock
($0.01 per Share par value)

Class A Shares 31,311
Class B Shares 24,508
Class C Shares 4,552

Item 27. Indemnification: (19)

Item 28. Business and Other Connections of Investment Adviser:

For a description of the other business of the investment
adviser, see the section entitled "Fund Information - Management
of the Fund" in Part A. The affiliations with the Registrant of
four of the Trustees and one of the Officers of the investment
adviser are included in Part B of this Registration Statement
under "Federated High Income Bond Fund, Inc. Management." The
remaining Trustee of the investment adviser, his position with
the investment adviser, and, in parentheses, his principal
occupation is: Mark D. Olson, Partner, Halbrook & Bayard, 107 W.
Market, Georgetown, Delaware 19947.

The remaining Officers of the investment adviser are: William D.
Dawson, III, Henry A. Frantzen and J. Thomas Madden, Executive
Vice Presidents; Peter R. Anderson, Drew J. Collins, Jonathan C.
Conley, Deborah A. Cunningham, Mark Durbiano, J. Alan Minteer and
Mary Jo Ochson, Senior Vice Presidents; J. Scott Albrecht, Joseph
M. Balestrino, Randall A. Bauer, David F. Belton, Christine A.
Bosio, David A. Briggs, Kenneth J. Cody, Alexandre de Bethmann,
Michael J. Donnelly, Michael P. Donnelly, Linda A. Duessel,
Kathleen Foody-Malus, Thomas M. Franks, Edward C. Gonzales, James
E. Grefenstette, Susan R. Hill, Stephen A. Keen, Robert M. Kowit,
Jeff A. Kozemchek, Marian R. Marinack, Sandra L. McInerney, Susan
M. Nason, Robert J. Ostrowski, Charles A. Ritter, Scott B.
Schermerhorn, Frank Semack, Aash M. Shah, William F. Stotz, Tracy
P. Stouffer, Edward J. Tiedge, Paige M. Wilhelm and Jolanta M.
Wysocka, Vice Presidents; Thomas R. Donahue, Treasurer, and
Stephen A. Keen, Secretary. The business address of each of the
Officers of the investment adviser is Federated Investors Tower,
Pittsburgh, PA 15222-3779. These individuals are also officers
of a majority of the investment advisers to the Funds listed in
Part B of this Registration Statement.
19. Response is incorporated by refrence to Registrant's Post-Effective
Amendment No. 41 on Form N-1A filed May 29, 1996 (Files Nos. 2-6103
and 811-2782).

Item 29. Principal Underwriters:

(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the
following open-end investment companies: 111 Corcoran Funds;
Arrow Funds; Automated Government Money Trust; BayFunds;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash
Trust Series II; Cash Trust Series, Inc.; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated
American Leaders Fund, Inc.; Federated ARMs Fund; Federated
Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund,
Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Insurance Series;
Federated Investment Portfolios; Federated Investment Trust;
Federated Master Trust; Federated Municipal Opportunities
Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated
Stock and Bond Fund, Inc.; Federated Stock Trust; Federated
Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S.
Government Securities Fund: 2-5 Years; Federated U.S.
Government Securities Fund: 5-10 Years; Federated Utility
Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Independence One Mutual Funds;
Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust;
Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Marshall Funds, Inc.; Money
Market Management, Inc.; Money Market Obligations Trust;
Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree
Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds; Star
Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
The Biltmore Funds; The Biltmore Municipal Funds; The Monitor
Funds; The Planters Funds; The Starburst Funds; The Starburst
Funds II; The Virtus Funds; Tower Mutual Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves;
Trust for Short-Term U.S. Government Securities; Trust for
U.S. Treasury Obligations; Vision Group of Funds, Inc.;
Wesmark Funds; and World Investment Series, Inc.

Federated Securities Corp. also acts as principal underwriter
for the following closed-end investment company: Liberty Term
Trust, Inc.- 1999.

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Richard B. Fisher Director, Chairman, Chief President Federated
Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive ViceExecutive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.

Thomas R. Donahue Director, Assistant --
Federated Investors Tower Secretary, Assistant
Pittsburgh, PA 15222-3779 Treasurer, Federated
Securities Corp.

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp
Pittsburgh, PA 15222-3779

Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Dale R. Browne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

H. Joeseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

George D. Riedel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward J. Wojnnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Matthew S. Propelka Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Item 30. Location of Accounts and Records:

All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:

Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Shareholder Services Company P.O. Box 8600
("Transfer Agent and Dividend Boston, MA 02266-8600
Disbursing Agent")

Federated Services Company Federated Investors Tower
("Adminstrator") Pittsburgh, PA 15222-3779

Federated Advisers Federated Investors Tower
("Adviser") Pittsburgh, PA 15222-3779

State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, MA 02266-8600

Item 31. Management Services: Not applicable

Item 32. Undertakings:

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Directors and the calling of special shareholder meetings by
shareholders.

Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.

SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED HIGH INCOME BOND
FUND, INC., has duly caused this Amendment to its Registration Statement to
be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Pittsburgh and Commonwealth of Pennsylvania, on the 29th day of
May, 1997.

FEDERATED HIGH INCOME BOND FUND, INC.

BY: /s/ J. Crilley Kelly
J. Crilley Kelly, Assistant Secretary
Attorney in Fact for John F. Donahue
May 29, 1997

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:

NAME TITLE DATE

By:/s/ J. Crilley Kelly Attorney In Fact May 29, 1997
J. Crilley Kelly For the Persons
ASSISTANT SECRETARY Listed Below

NAME TITLE

John F. Donahue* Chairman and Director
(Chief Executive Officer)

Richard B. Fisher* President

John W. McGonigle* Executive Vice President
and Treasurer
(Principal Financial and
Accounting Officer)

J. Christopher Donahue* Executive Vice President
and Director

Thomas G. Bigley* Director

John T. Conroy, Jr.* Director

William J. Copeland* Director

James E. Dowd* Director

Lawrence D. Ellis, M.D.* Director

Edward L. Flaherty, Jr.* Director

Peter E. Madden* Director

Gregor F. Meyer* Director

John E. Murray, Jr.* Director

Wesley W. Posvar* Director

Marjorie P. Smuts* Director

* By Power of Attorney

Exhibit 11 under Form N-1A
Exhibit 23 under 601/Reg. S-K

ARTHUR ANDERSEN LLP

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use in Post-
Effective Amendment No. 42 to Form N-1A Registration Statement of Federated
High Income Bond Fund, Inc. of our report dated April 24, 1997, on the
financial statements of Federated High Income Bond Fund, Inc. as of March
31, 1997, included in or made part of this registration statement.

/S/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania,
May 28, 1997

Exhibit 19 under Form N1-A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED HIGH INCOME
BOND FUND, INC. and the Deputy General Counsel of Federated Services
Company, and each of them, their true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for them and in
their names, place and stead, in any and all capacities, to sign any and
all documents to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934
and the Investment Company Act of 1940, by means of the Securities and
Exchange Commission's electronic disclosure system known as EDGAR; and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as each
of them might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.

SIGNATURES TITLE DATE

/s/John F. Donahue Chairman and Director May 1, 1997
John F. Donahue (Chief Executive Officer)

/s/Richard B. Fisher President May 1, 1997
Richard B. Fisher

/s/J. Christopher Donahue Executive Vice PresidentMay 1, 1997
J. Christopher Donahue and Director

/s/John W. McGonigle Treasurer, Executive May 1, 1997
John W. McGonigle Vice President and Secretary
(Principal Financial and
Accounting Officer)

/s/Thomas G. Bigley Director May 1, 1997
Thomas G. Bigley

/s/John T. Conroy, Jr. Director May 1, 1997
John T. Conroy, Jr.

SIGNATURES TITLE DATE

/s/William J. Copeland Director May 1, 1997
William J. Copeland

/s/James E. Dowd Director May 1, 1997
James E. Dowd

/s/Lawrence D. Ellis, M.D. Director May 1, 1997
Lawrence D. Ellis, M.D.

/s/Edward L. Flaherty, Jr. Director May 1, 1997
Edward L. Flaherty, Jr.

/s/Peter E. Madden Director May 1, 1997
Peter E. Madden

/s/Gregor F. Meyer Director May 1, 1997
Gregor F. Meyer

/s/John E. Murray, Jr. Director May 1, 1997
John E. Murray, Jr.

/s/Wesley W. Posvar Director May 1, 1997
Wesley W. Posvar

/s/Marjorie P. Smuts Director May 1, 1997
Marjorie P. Smuts

Sworn to and subscribed before me this 1st day of May, 1997

/s/Marie M. Hamm
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Oct. 9, 2000
Member, Pennsylvania Association of Notaries

Exhibit 4 under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K

FEDERATED HIGH INCOME BOND FUND, INC.
(CLASS A SHARES)

Number Shares
PORTFOLIO

KC 308057

ACCOUNT NO. ALPHA CODE INCORPORATED UNDER THE SEE REVERSE SIDE FOR
LAWS OF THE STATE OF CERTAIN DEFINITIONS
MARYLAND

THIS IS TO CERTIFY THAT is the owner of

CUSIP 314195 108

FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
FEDERATED HIGH INCOME BOND FUND, INC. (CLASS A SHARES)
hereafter called the `Company'' transferable on the books of the
Company by the owner, in person or by duly authorized attorney, upon
surrender of this Certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Articles of Incorporation and By-Laws of the Company,
and all amendments thereto, to all of which the holder by acceptance hereof
assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed in its name by its proper officers and to be sealed with its seal.

Dated: FEDERATED HIGH INCOME BOND FUND, INC.
CORPORATE SEAL
1977
MARYLAND

/s/David M. Taylor /s/ John F. Donahue
Treasurer Chairman

Countersigned: Federated Shareholder
Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature

The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN
ACT-...Custodian...
TEN ENT - as tenants by the entirety (Cust)
(Minors)
JT TEN -as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)

Additional abbreviations may also be used though not in the above
list.

The Company will furnish to any stockholder, on request and without
charge, a full statement of designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the stock of each
class which the corporation is authorized to issue.

For value received hereby sell, assign, and transfer unto
----------

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

===========================================================================
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
ASSIGNEE)

shares
of common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint

===========================================================================
Attorney to transfer the said shares on the books of the within named
Company with full power of substitution in the premises.

Dated
----------------------
NOTICE:
------------------------------
THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by purple one-half inch border.

B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Maryland corporate seal appears in the bottom middle of the page.

Page Two

A. The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.

Exhibit 4 under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K

FEDERATED HIGH INCOME BOND FUND, INC.
(CLASS B SHARES)

Number Shares
PORTFOLIO

KC 212

ACCOUNT NO. ALPHA CODE INCORPORATED UNDER THE SEE REVERSE SIDE FOR
LAWS OF THE STATE OF CERTAIN DEFINITIONS
MARYLAND

THIS IS TO CERTIFY THAT is the owner of

CUSIP 314195 207

FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
FEDERATED HIGH INCOME BOND FUND, INC. (CLASS B SHARES)
hereafter called the `Company'' transferable on the books of the
Company by the owner, in person or by duly authorized attorney, upon
surrender of this Certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Articles of Incorporation and By-Laws of the Company,
and all amendments thereto, to all of which the holder by acceptance hereof
assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed in its name by its proper officers and to be sealed with its seal.

Dated: FEDERATED HIGH INCOME BOND FUND, INC.
CORPORATE SEAL
1977
MARYLAND

/s/David M. Taylor /s/ John F. Donahue
Treasurer Chairman

Countersigned: Federated Shareholder
Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature

Additional abbreviations may also be used though not in the above
list.

For value received hereby sell, assign, and transfer unto
----------

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

===========================================================================
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
ASSIGNEE)

shares
of common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by purple one-half inch border.

B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Maryland corporate seal appears in the bottom middle of the page.

Page Two

A. The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.

Exhibit 4 under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K

FEDERATED HIGH INCOME BOND FUND, INC.
(CLASS C SHARES)

Number Shares
PORTFOLIO
KC 1103

ACCOUNT NO. ALPHA CODE INCORPORATED UNDER THE SEE REVERSE SIDE FOR
LAWS OF THE STATE OF CERTAIN DEFINITIONS
MARYLAND

THIS IS TO CERTIFY THAT is the owner of

CUSIP 314195 306

FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
FEDERATED HIGH INCOME BOND FUND, INC. (CLASS C SHARES)
hereafter called the `Company'' transferable on the books of the
Company by the owner, in person or by duly authorized attorney, upon
surrender of this Certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Articles of Incorporation and By-Laws of the Company,
and all amendments thereto, to all of which the holder by acceptance hereof
assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed in its name by its proper officers and to be sealed with its seal.

Dated: FEDERATED HIGH INCOME BOND FUND, INC.
CORPORATE SEAL
1977
MARYLAND

/s/David M. Taylor /s/ John F. Donahue
Treasurer Chairman

Countersigned: Federated Shareholder
Services Company
(Pittsburgh)
Transfer Agent
By:
Authorized Signature

Additional abbreviations may also be used though not in the above
list.

For value received hereby sell, assign, and transfer unto
----------

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

===========================================================================
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
ASSIGNEE)

shares
of common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by purple one-half inch border.

B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Maryland corporate seal appears in the bottom middle of the page.

Page Two

A. The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> Federated High Income Bond Fund, Inc.
Class A

<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Mar-31-1997
<PERIOD-END> Mar-31-1997
<INVESTMENTS-AT-COST> 1,191,349,815
<INVESTMENTS-AT-VALUE> 1,189,238,432
<RECEIVABLES> 45,369,195
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,234,607,627
<PAYABLE-FOR-SECURITIES> 10,020,077
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,591,876
<TOTAL-LIABILITIES> 16,611,953
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,241,966,162
<SHARES-COMMON-STOCK> 53,025,919
<SHARES-COMMON-PRIOR> 47,859,170
<ACCUMULATED-NII-CURRENT> 636,608
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (22,495,713)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,111,383)
<NET-ASSETS> 599,735,773
<DIVIDEND-INCOME> 1,703,261
<INTEREST-INCOME> 104,400,848
<OTHER-INCOME> 0
<EXPENSES-NET> 15,864,957
<NET-INVESTMENT-INCOME> 90,239,152
<REALIZED-GAINS-CURRENT> 3,736,400
<APPREC-INCREASE-CURRENT> 14,085,861
<NET-CHANGE-FROM-OPS> 108,061,413
<EQUALIZATION> 711,322
<DISTRIBUTIONS-OF-INCOME> 52,284,090
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,332,321
<NUMBER-OF-SHARES-REDEEMED> 8,642,783
<SHARES-REINVESTED> 2,477,211
<NET-CHANGE-IN-ASSETS> 392,316,005
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (26,232,113)
<OVERDISTRIB-NII-PRIOR> 186,947
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,658,537
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 16,055,685
<AVERAGE-NET-ASSETS> 1,023,787,012
<PER-SHARE-NAV-BEGIN> 11.080
<PER-SHARE-NII> 1.040
<PER-SHARE-GAIN-APPREC> 0.220
<PER-SHARE-DIVIDEND> 1.030
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.310
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> Federated High Income Bond Fund, Inc.
Class B

<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Mar-31-1997
<PERIOD-END> Mar-31-1997
<INVESTMENTS-AT-COST> 1,191,349,815
<INVESTMENTS-AT-VALUE> 1,189,238,432
<RECEIVABLES> 45,369,195
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,234,607,627
<PAYABLE-FOR-SECURITIES> 10,020,077
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,591,876
<TOTAL-LIABILITIES> 16,611,953
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,241,966,162
<SHARES-COMMON-STOCK> 45,382,057
<SHARES-COMMON-PRIOR> 21,488,053
<ACCUMULATED-NII-CURRENT> 636,608
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (22,495,713)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,111,383)
<NET-ASSETS> 513,169,109
<DIVIDEND-INCOME> 1,703,261
<INTEREST-INCOME> 104,400,848
<OTHER-INCOME> 0
<EXPENSES-NET> 15,864,957
<NET-INVESTMENT-INCOME> 90,239,152
<REALIZED-GAINS-CURRENT> 3,736,400
<APPREC-INCREASE-CURRENT> 14,085,861
<NET-CHANGE-FROM-OPS> 108,061,413
<EQUALIZATION> 711,322
<DISTRIBUTIONS-OF-INCOME> 30,228,197
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28,139,746
<NUMBER-OF-SHARES-REDEEMED> 5,486,949
<SHARES-REINVESTED> 1,241,207
<NET-CHANGE-IN-ASSETS> 392,316,005
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (26,232,113)
<OVERDISTRIB-NII-PRIOR> 186,947
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,658,537
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 16,055,685
<AVERAGE-NET-ASSETS> 1,023,787,012
<PER-SHARE-NAV-BEGIN> 11.080
<PER-SHARE-NII> 0.950
<PER-SHARE-GAIN-APPREC> 0.220
<PER-SHARE-DIVIDEND> 0.940
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.310
<EXPENSE-RATIO> 1.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 003
<NAME> Federated High Income Bond Fund, Inc.
Class C

<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Mar-31-1997
<PERIOD-END> Mar-31-1997
<INVESTMENTS-AT-COST> 1,191,349,815
<INVESTMENTS-AT-VALUE> 1,189,238,432
<RECEIVABLES> 45,369,195
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,234,607,627
<PAYABLE-FOR-SECURITIES> 10,020,077
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,591,876
<TOTAL-LIABILITIES> 16,611,953
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,241,966,162
<SHARES-COMMON-STOCK> 9,295,083
<SHARES-COMMON-PRIOR> 5,182,758
<ACCUMULATED-NII-CURRENT> 636,608
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (22,495,713)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,111,383)
<NET-ASSETS> 105,090,792
<DIVIDEND-INCOME> 1,703,261
<INTEREST-INCOME> 104,400,848
<OTHER-INCOME> 0
<EXPENSES-NET> 15,864,957
<NET-INVESTMENT-INCOME> 90,239,152
<REALIZED-GAINS-CURRENT> 3,736,400
<APPREC-INCREASE-CURRENT> 14,085,861
<NET-CHANGE-FROM-OPS> 108,061,413
<EQUALIZATION> 711,322
<DISTRIBUTIONS-OF-INCOME> 6,903,310
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,462,599
<NUMBER-OF-SHARES-REDEEMED> 1,720,918
<SHARES-REINVESTED> 370,644
<NET-CHANGE-IN-ASSETS> 392,316,005
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (26,232,113)
<OVERDISTRIB-NII-PRIOR> 186,947
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,658,537
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 16,055,685
<AVERAGE-NET-ASSETS> 1,023,787,012
<PER-SHARE-NAV-BEGIN> 11.080
<PER-SHARE-NII> 0.950
<PER-SHARE-GAIN-APPREC> 0.220
<PER-SHARE-DIVIDEND> 0.940
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.310
<EXPENSE-RATIO> 1.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>