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. 43_ .................... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 36__ ................................... X
FEDERATED HIGH INCOME BOND FUND, INC.
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds, 5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(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)
X on May 31, 1998, pursuant to paragraph (b)
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.
Copies To:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
<PAGE>
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) 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) General Information, (1-3)
Calling the Fund,(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) Certificates and Account
Statements, (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.
<PAGE>
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.
<PAGE>
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 are
incorporated by reference to the
Annual Report of the Registrant dated
March 31, 1998; (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,
1998, 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, 1998 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
Year 2000 Statement 5
Investment Information 5
Investment Objective 5
Investment Policies 5
Investment Risks 7
Investment Limitations 8
Net Asset Value 8
Investing in the Fund 9
Purchasing Shares 9
Purchasing Shares through a Financial Intermediary 9
Purchasing Shares by Wire 9
Purchasing Shares by Check 10
Systematic Investment Program 10
Retirement Plans 10
Class A Shares 10
Class B Shares 10
Class C Shares 11
Redeeming and Exchanging Shares 11
Redeeming or Exchanging Shares through a Financial Intermediary 11
Redeeming or Exchanging Shares by Telephone 11
Redeeming or Exchanging Shares by Mail 11
Requirements for Redemption 11
Requirements for Exchange 12
Systematic Withdrawal Program 12
Systematic Withdrawal Program ("SWP") on Class B Shares 12
Contingent Deferred Sales Charge 12
Account and Share Information 13
Confirmations and Account Statements 13
Dividends and Distributions 13
Accounts with Low Balances 13
Fund Information 13
Management of the Fund 13
Distribution of Shares 14
Administration of the Fund 15
Shareholder Information 15
Tax Information 15
Federal Income Tax. 15
State and Local Taxes 15
Performance Information 16
Appendix 16
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 4.50% None None
percentage of offering price)
Maximum Sales Charge Imposed on Reinvested Dividends (as None None None
a percentage of offering price)
Contingent Deferred Sales Charge (as a percentage of None 5.50%(1) 1.00%(1)
original purchase price or redemption proceeds, as
applicable)
Redemption Fee (as a percentage of amount redeemed, if None None None
applicable)
Exchange Fee None None None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee 0.75% 0.75% 0.75%
12b-1 Fee None 0.75% 0.75%
Total Other Expenses 0.46% 0.47% 0.47%
Shareholder Services Fee (after waiver) 0.24%(2) 0.25% 0.25%
Total Operating Expenses 1.21%(3) 1.97%(4) 1.97%
</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 shareholders 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%.
(3) The total operating expenses for Class A Shares would have been 1.22% absent
the voluntary waiver described in note 2 above.
(4) 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," "Class A Shares," "Class B Shares," "Class C
Shares" 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.
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.
1 Year $ 57 $ 77 $ 30
3 Years $ 82 $106 $ 62
5 Years $108 $129 $106
10 Years $185 $209 $230
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 $106 $106
10 Years $185 $209 $230
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 May 15, 1998, on the Fund's
financial statements for the year ended March 31, 1998, 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 obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1998 1997 1996 1995 1994(A) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, $11.31 $11.08 $10.54 $10.99 $11.19 $10.80 $8.79 $8.96 $10.99 $11.20
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 1.00 1.04 1.00 1.01 1.05 1.13 1.23 1.21 1.33 1.40
Net realized and 0.79 0.22 0.55 (0.43) (0.19) 0.41 1.99 (0.14) (1.98) (0.20)
unrealized gain (loss)
on investments
Total from investment 1.79 1.26 1.55 0.58 0.86 1.54 3.22 1.07 (0.65) 1.20
operations
LESS DISTRIBUTIONS
Distributions from net (1.00) (1.03) (1.00) (1.03) (1.06) (1.15) (1.21) (1.24) (1.38) (1.41)
investment income
Distributions in -- -- (0.01) -- -- -- -- -- -- --
excess of net
investment income(b)
Total distributions (1.00) (1.03) (1.01) (1.03) (1.06) (1.15) (1.21) (1.24) (1.38) (1.41)
NET ASSET VALUE, END OF $12.10 $11.31 $11.08 $10.54 $10.99 $11.19 $10.80 $8.79 $8.96 $10.99
PERIOD
TOTAL RETURN(C) 16.48% 11.88% 15.24% 5.74% 7.82% 15.39% 38.83% 14.20% (6.82%) 11.34%
RATIOS TO AVERAGE NET
ASSETS
Expenses 1.21% 1.21% 1.22% 1.21% 1.18% 1.08% 1.02% 1.03% 1.02% 1.00%
Net investment income 8.46% 9.19% 9.07% 9.64% 9.27% 10.44% 12.40% 14.62% 13.01% 12.55%
Expense 0.01% 0.03% 0.06% 0.05% 0.05% 0.08% -- -- -- --
waiver/reimbursement(d)
SUPPLEMENTAL DATA
Net assets, end of $748,294 $599,736 $530,203 $448,040 $439,149 $417,015 $351,087 $252,147 $282,149 $379,876
period (000 omitted)
Portfolio turnover 58% 55% 53% 52% 76% 49% 37% 32% 40% 43%
</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, 1998, WHICH CAN BE
OBTAINED FREE OF CHARGE.
FINANCIAL HIGHLIGHTS--CLASS B 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 May 15, 1998, on the Fund's
financial statements for the year ended March 31, 1998, 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 obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1998 1997 1996 1995(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.31 $11.08 $10.54 $10.57
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.91 0.96 0.95 0.51
Net realized and unrealized gain (loss) on investments 0.78 0.21 0.51 (0.07)
Total from investment operations 1.69 1.17 1.46 0.44
LESS DISTRIBUTIONS
Distributions from net investment income (0.91) (0.94) (0.91) (0.47)
Distributions in excess of net investment income(b) -- -- (0.01) --
Total distributions (0.91) (0.94) (0.92) (0.47)
NET ASSET VALUE, END OF PERIOD $12.09 $11.31 $11.08 $10.54
TOTAL RETURN(C) 15.52% 10.99% 14.31% 4.47%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.97% 1.99% 2.03% 2.02%*
Net investment income 7.76% 8.39% 8.29% 9.47%*
Expense waiver/reimbursement(d) -- -- 0.01% 0.05%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $980,125 $513,169 $238,055 $33,295
Portfolio turnover 58% 55% 53% 52%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 27, 1994 (date of initial
public investment) to March 31, 1995.
(b) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE FUND'S
ANNUAL REPORT, FOR THE FISCAL YEAR ENDED MARCH 31, 1998, WHICH CAN BE
OBTAINED FREE OF CHARGE.
FINANCIAL HIGHLIGHTS--CLASS C 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 May 15, 1998, on the Fund's
financial statements for the year ended March 31, 1998, 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 obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1998 1997 1996 1995 1994(A)(B)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.31 $11.08 $10.54 $10.99 $11.18
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.91 0.95 0.92 0.94 0.92
Net realized and unrealized gain (loss) on 0.78 0.22 0.54 (0.44) (0.23)
investments
Total from investment operations 1.69 1.17 1.46 0.50 0.69
LESS DISTRIBUTIONS
Distributions from net investment income (0.91) (0.94) (0.91) (0.95) (0.88)
Distributions in excess of net investment income(c) -- -- (0.01) -- --
Total distributions (0.91) (0.94) (0.92) (0.95) (0.88)
NET ASSET VALUE, END OF PERIOD $12.09 $11.31 $11.08 $10.54 $10.99
TOTAL RETURN(D) 15.51% 11.00% 14.35% 4.91% 6.23%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.97% 1.99% 2.00% 1.98% 1.99%*
Net investment income 7.74% 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) $190,480 $105,095 $57,422 $32,376 $24,360
Portfolio turnover 58% 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, 1998, 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. Shares of the Fund are offered in three classes of shares known as Class A
Shares, Class B Shares, and Class C Shares ("Shares") which represent interests
in a single portfolio of securities. The Fund is designed primarily for
customers of financial institutions 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.
YEAR 2000 STATEMENT
Like other mutual funds and business organizations worldwide, the Fund's service
providers (among them, the adviser, distributor, administrator and transfer
agent) must ensure that their computer systems are adjusted to properly process
and calculate date-related information from and after January 1, 2000. Many
software programs and, to a lesser extent, computer hardware in use today cannot
distinguish the year 2000 from the year 1900. This design flaw may have a
negative impact in the handling of securities trades, pricing and accounting
services. The Fund and its service providers are actively working on necessary
changes to computer systems to deal with the year 2000 and reasonably believe
that systems will be year 2000 compliant when required. The Fund is continuing
to analyze the financial impact of instituting a year 2000 compliant program on
its operations.
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 ("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. Convertible securities rated below
investment grade may be subject to some of the same risks as lower-rated bonds.
FOREIGN SECURITIES
As a matter of operating policy which may be changed by the Directors without
shareholder approval, the Fund may invest without limit in foreign securities
that are publicly traded in the United States. These may include any of the
types of securities described above (see "Acceptable Investments"). As a matter
of fundamental policy, which may not be changed without shareholder approval,
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.
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investments in domestic issuers. These considerations include the possibility of
expropriation, the unavailability of financial information or the difficulty of
interpreting financial information prepared under foreign accounting standards,
less liquidity and more volatility in foreign securities markets, the impact of
political, social, or diplomatic developments, and the difficulty of assessing
economic trends in foreign countries. It may also be more difficult to enforce
contractual obligations abroad than would be the case in the United States
because of differences in the legal systems. Transaction costs in foreign
securities may be higher. The adviser will consider these and other factors
before investing in foreign securities and will not make such investments
unless, in its opinion, such investments will meet the Fund's standards and
objectives.
REAL ESTATE INVESTMENT TRUSTS
The Fund may invest in securities issued by real estate investment trusts which
may include any other types of securities described above (see "Acceptable
Investments"). Risks associated with real estate investments include the fact
that equity and mortgage real estate investment trusts are dependent upon
management skill and are not diversified, and are, therefore, subject to the
risk of financing single projects or unlimited numbers of projects. They are
also subject to heavy cash flow dependency, defaults by borrowers, and self
liquidation. Additionally, equity real estate investment trusts may be affected
by any changes in the value of the underlying property owned by the trusts, and
mortgage real estate investment trusts may be affected by the quality of any
credit extended. 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 IBCA, 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, 1998. 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
BBB 1.48% 0.00% 1.48%
BB 18.87% 0.00% 18.87%
B 73.05% 1.57% 74.62%
CCC 2.41% 2.56% 4.97%
CC 0.06% 0.00% 0.06%
Total 95.87% 4.13% 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.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Minimum and Subsequent Investment Amounts $1500/$100 $1500/$100 $1500/$100
Minimum and Subsequent Investment Amount $250/$100 $250/$100 $250/$100
for Retirement Plans
Maximum Sales Charge 4.50%* None None
Maximum Contingent Deferred Sales None 5.50% 1.00%#
Charge**
Conversion Feature No Yes++ No
</TABLE>
* 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 $100,000 4.50% 4.71% 4.00%
$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 greater 0.00% 0.00% 0.25%
** 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 02266-8600; 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 in a minimum amount of $50 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; or
* through "wrap accounts" or similar programs under which clients pay a fee
for services.
IN ADDITION, THE SALES CHARGE ON CLASS A SHARES CAN BE REDUCED OR ELIMINATED BY:
* purchasing in quantity;
* combining concurrent purchases of:
* Shares by you, your spouse, and your children under age 21, or * Shares of two
or more Federated Funds (other than money market funds);
* accumulating purchases. In calculating the sales charge on an
additional purchase, you may count the current value of previous Share
purchases still invested in the Fund;
* signing a letter of intent to purchase a specific dollar amount of
Shares within 13 months; or
* using the reinvestment privilege within 120 days of redeeming Shares of an
equal or lesser amount.
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. The sales
charge for Shares sold other than through registered broker/dealers will be
retained by Federated Securities Corp.
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. 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 charges. 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. Shareholders who desire to automatically exchange
Shares, of a like Share class, in a pre-determined amount on a monthly,
quarterly, or annual basis may take advantage of a systematic exchange
privilege. Information on this privilege is available from the Fund or your
financial intermediary. 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.
Proceeds from redeemed Shares purchased by checks or through ACH will not be
wired until that method of payment has cleared.
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. 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 an 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 of not less than $100. 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. SYSTEMATIC WITHDRAWAL PROGRAM ("SWP") ON CLASS B SHARES
A contingent deferred sales charge will not be charged on SWP redemptions of
Class B Shares if:
* shares redeemed are 12% or less of the account value in a single year; *
the account is at least one year old; * all dividends and capital gains
distributions are reinvested; and * the account has at least a $10, 000
balance when the SWP is established
(multiple Class B Share accounts cannot be aggregated to meet this minimum
balance).
A contingent deferred sales charge will be charged on redemption amounts that
exceed the 12% annual limit. In measuring the redemption percentage, the account
is valued when the SWP is established and then annually at calendar year-end.
Redemptions can be made only at a rate of 1% monthly, 3% quarterly, or 6%
semi-annually. 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 701U2;
* 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;
* which are reinvested in the Fund under the reinvestment privilege;
* of Shares held by Directors, employees, and sales representatives of the
Fund, the distributor, or affiliates of the Fund or distributor, employees
of any financial intermediary that sells Shares of the Fund pursuant to a
sales agreement with the distributor, and their immediate family members to
the extent that no payments were advanced for purchases made by these
persons; and
* 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 intermediary, 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 ACCOUNT STATEMENTS
Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions). In addition, shareholders will receive
periodic statements reporting all account activity, including dividends
paid. The Fund will not issue share certificates.
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 (the "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 $120 billion invested
across over 300 funds under management and/or administration by its
subsidiaries, as of December 31, 1997, 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
approximately 4,000 financial institutions nationwide.
Mark E. Durbiano has been a portfolio manager of the Fund since August 1989.
Mr. Durbiano joined Federated Investors in 1982 and has been a Senior Vice
President of the Fund's Adviser since January 1996. From 1988 through 1995,
Mr. Durbiano was a Vice President of the Fund's Adviser. Mr. Durbiano is a
Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Pittsburgh.
Stefanie L. Bachhuber has been a portfolio manager of the Fund since May
1998. Ms. Bachhuber joined Federated Investors in 1993 as an Investment
Analyst and has been an Assistant Vice President of the Fund's Adviser since
1996. Ms. Bachhuber is a Chartered Financial Analyst and earned her M.B.A.
with a concentration in Finance, from Duke University in 1993.
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 AGREEMENT
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 unre-imbursed 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 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
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% 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 5, 1998,
Merrill Lynch Pierce Fenner & Smith, Jacksonville, Florida, for the sole benefit
of its customers, was the owner of record of 4,377,894 shares (27.30%) 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 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 CORPORATE BOND RATINGS DEFINITIONS
AAA--Debt rated AAA has the highest rating assigned by S&P. 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 IBCA, 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.
[Graphic]
Federated High Income Bond Fund, Inc.
Class A Shares, Class B Shares, Class C Shares
PROSPECTUS
MAY 31, 1998
An Open-End, Diversified Management Investment Company
FEDERATED HIGH INCOME
BOND FUND, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Advisers
Federated Investors Tower
1001 Liberty Avenue
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 Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com
Cusip 314195108
Cusip 314195207
Cusip 314195306
G00667-02 (5/98)
[Graphic]
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, 1998. 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 HIGH INCOME BOND FUND, INC.
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000
Statement dated May 31, 1998
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors Tower
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 314195108
Cusip 314195207
Cusip 314195306
8062805B (5/98)
[Graphic]
TABLE OF CONTENTS
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
Types of Investments 1
Corporate Debt Securities 1
Equity Securities 1
Convertible Securities 1
When-Issued and Delayed Delivery Transactions 2
Temporary Investments 2
Lending of Portfolio Securities 2
Portfolio Turnover 2
INVESTMENT LIMITATIONS 3
Buying on Margin 3
Borrowing Money 3
Diversification of Investments 3
Investing in New Issuers 3
Investing in Foreign Securities 3
Underwriting 3
Investing in Real Estate 3
Investing in Minerals 3
Investing in Commodities 3
Issuing Senior Securities 3
Making Loans 3
Investing in Issuers Whose Securities are Owned by Officers and
Directors of the Fund 4
Dealing in Puts and Calls 4
Purchasing Securities of Other Investment Companies 4
Selling Short 4
Acquiring Securities 4
Concentration of Investments 4
Restricted and Illiquid Securities 5
FEDERATED HIGH INCOME BOND FUND, INC. MANAGEMENT 5
Fund Ownership 9
Officer and Director Compensation 9
Director Liability 10
INVESTMENT ADVISORY SERVICES 10
Adviser to the Fund 10
Advisory Fees 10
BROKERAGE TRANSACTIONS 10
OTHER SERVICES 10
Fund Administration 10
Custodian and Portfolio Accountant 11
Transfer Agent 11
Independent Public Accountants 11
PURCHASING SHARES 11
Quantity Discounts and Accumulated Purchases 11
Concurrent Purchases 11
Letter of Intent 11
Reinvestment Privilege 12
Conversion of Class B Shares 12
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT 12
Conversion to Federal Funds 13
Purchases by Sales Representatives, Fund Directors, and Employees 13
DETERMINING NET ASSET VALUE 13
Determining Market Value of Securities 13
REDEEMING SHARES 13
Redemption in Kind 14
Contingent Deferred Sales Charge 14
TAX STATUS 14
The Fund's Tax Status 14
Shareholders' Tax Status 14
TOTAL RETURN 15
YIELD 15
PERFORMANCE COMPARISONS 15
Economic and Market Information 16
ABOUT FEDERATED INVESTORS 17
Mutual Fund Market 17
Institutional Clients 17
Bank Marketing 17
Broker/Dealers and Bank Broker/Dealer Subsidiaries 17
FINANCIAL STATEMENTS 17
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:
* preferred stocks;
* bonds;
* debentures;
* convertible securities;
* notes;
* equipment lease certificates; and
* 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 of 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, 1998, and 1997, the portfolio turnover rates were 58% and 55%,
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:
* during 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
* not 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 any one 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 to
be liquid under criteria established by the Directors.
The Directors may consider the following criteria in determining the liquidity
of certain restricted securities:
* the frequency of trades and quotes for the security;
* the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
* dealer undertakings to make a market in the security; and * the 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
Director, Member of Executive Committee, 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.
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; 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, and U.S. Space Foundation;
President Emeritus, University of Pittsburgh; Founding Chairman, National
Advisory Council for Environmental Policy and Technology, Federal Emergency
Management Advisory Board, and Czech Management Center, Prague; Director or
Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public Relations/Marketing/Conference Planning; 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; 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 Core
Trust; 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; RIMCO Monument
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds;
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; WCT 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 5, 1998, 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 Class A Shares for its clients), Jacksonville, Florida,
owned approximately 5,144,641 Shares (8.27%).
As of May 5, 1998, 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 Class B Shares for its clients), Jacksonville, Florida,
owned approximately 5,563,220 Shares (6.69%).
As of May 5, 1998, 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 Class C Shares for its clients), Jacksonville, Florida,
owned approximately 4,377,894 Shares (27.30%).
OFFICER AND DIRECTOR COMPENSATION
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
FUND FUND* FROM FUND COMPLEX+
John F. Donahue $0.00 $0 for the Fund and
Chairman and Director 56 investment companies
J. Christopher Donahue $0.00 $0 for the Fund and
Executive Vice President 18 investment companies
and Director
Thomas G. Bigley $1,992.96 $111,222 for the Fund and
Director 56 investment companies
John T. Conroy, Jr. $2,192.58 $122,362 for the Fund and
Director 56 investment companies
William J. Copeland $2,192.58 $122,362 for the Fund and
Director 56 investment companies
James E. Dowd $2,192.58 $122,362 for the Fund and
Director 56 investment companies
Lawrence D. Ellis, M.D. $1,992.96 $111,222 for the Fund and
Director 56 investment companies
Edward L. Flaherty, Jr. $2,192.58 $122,362 for the Fund and
Director 56 investment companies
Peter E. Madden $1,992.96 $111,222 for the Fund and
Director 56 investment companies
John E. Murray, Jr. $1,992.96 $111,222 for the Fund and
Director 56 investment companies
Wesley W. Posvar $1,992.96 $111,222 for the Fund and
Director 56 investment companies
Marjorie P. Smuts $1,992.96 $111,222 for the Fund and
Director 56 investment companies
* Information is furnished for the fiscal year ended March 31, 1998.
+ 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,
1998, 1997, and 1996, the Adviser earned $11,762,123, $7,658,537, and
$4,997,589, respectively, which were reduced by $0, $0, and $38,726,
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, 1998, 1997, and 1996, the Fund paid total
brokerage commissions of $3,388, $15, and $4,678, 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, 1998, 1997, and 1996, the Administrators earned $1,183,458, $771,550,
and $504,162, 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." For further information on any of the programs listed
below, please contact your financial intermediary or Federated Securities Corp.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES
As described in the prospectus, larger purchases of the same Share class reduce
or eliminate the sales charge paid. For example, the Fund will combine all Class
A Share purchases 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 into the same Share class 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 intermediary at the
time the purchase is made that Class A Shares are already owned or that
purchases are being combined. The Fund will reduce or eliminate the sales charge
after it confirms the purchases.
CONCURRENT PURCHASES
Shareholders have the privilege of combining concurrent purchases of the same
Share class of two or more funds in the Federated Complex in calculating the
applicable sales charge.
To receive this sales charge reduction or elimination, Federated Securities
Corp. must be notified by the shareholder in writing or by his financial
intermediary at the time the concurrent purchases are made. The Fund will reduce
or eliminate the sales charge after it confirms the purchases.
LETTER OF INTENT
A shareholder can sign a letter of intent committing to purchase a certain
amount of the same Share class within a 13-month period in order to combine such
purchases in calculating the applicable sales charge. The Fund's custodian will
hold Shares in escrow equal to the maximum applicable sales charge. If the
shareholder completes the commitment, the escrowed Shares will be released to
their account. If the commitment is not completed within 13 months, the
custodian will redeem an appropriate number of escrowed Shares to pay for the
applicable 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. The letter may be dated as
of a prior date to include any purchases made within the past 90 days. Prior
trade prices will not be adjusted.
REINVESTMENT PRIVILEGE
The reinvestment privilege is available for all Shares of the Fund within the
same Share class.
Class A shareholders who redeem from the Fund may reinvest the redemption
proceeds back into the same Share class at the next determined net asset value
without any sales charge. The original Shares must have been subject to a sales
charge and the reinvestment must be within 120 days.
Similarly, Class C shareholders who redeem may reinvest their redemption
proceeds in the same Share class within 120 days. Class B Shares also may be
reinvested within 120 days of redemption, although such reinvestment will be
made into Class A Shares. Shareholders would not be entitled to a reimbursement
of the contingent deferred sales charge if paid at the time of redemption on any
Share class. However, such reinvested Shares would not be subject to a
contingent deferred sales charge, if otherwise applicable, upon later
redemption.
In addition, if Shares were reinvested through a financial intermediary, the
financial intermediary would not be entitled to an advanced payment from
Federated Securities Corp. on the reinvested Shares, if otherwise applicable.
Federated Securities Corp. must be notified by the shareholder in writing or by
his financial intermediary of the reinvestment in order to eliminate a sales
charge or a contingent deferred sales charge. If the shareholder redeems Shares
in the Fund, there may be tax consequences.
CONVERSION OF CLASS B SHARES
Class B Shares will automatically convert into Class A Shares on or around the
15th of the month eight full years from the purchase date and will no longer be
subject to a fee under the distribution plan. 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 ended March 31, 1998, payments in the amount of $5,586,434
were made by Class B Shares pursuant to the Distribution Plan.
For the fiscal year ended March 31, 1998, payments in the amount of $1,090,776
were made by Class C Shares pursuant to the Distribution Plan.
In addition, for this period, payments in the amounts of $1,694,971 (Class A
Shares), $1,862,145 (Class B Shares), and $363,592 (Class C Shares), were made
pursuant to the Shareholder Services Agreement of which $48,877, $0, and $0,
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:
* Directors, employees, and sales representatives of the Fund, Federated
Advisers, and Federated Securities Corp. and its affiliates;
* Federated Life Members (Class A Shares only);
* any associated person of an investment dealer who has a sales agreement
with Federated Securities Corp.; and
* 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, Martin Luther King,
Jr. 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:
* according to the last sale price on a national securities exchange, if
available;
* for most short-term obligations, according to the average of the last offer
to buy and the last offer to sell the security, as provided by independent
pricing services;
* for short-term obligations, according to the prices as furnished by an
independent pricing service or at fair value as determined in good faith by
the Directors; or
* for short-term obligations with remaining maturities of 60 days or less at
the time of purchase, at amortized cost.
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
prospectus 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 six 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 six 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.
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:
* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
* invest in securities within certain statutory limits; and
* 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:
* the availability of higher relative yields; * differentials in market
values; * new investment opportunities; * changes in creditworthiness of an
issuer; or * an 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 based on offering price for the
following periods ended March 31, 1998, were:
SHARE CLASS
INCEPTION DATE ONE-YEAR FIVE-YEARS TEN-YEARS SINCE INCEPTION
Class A 11/30/77 11.27% 10.33% 11.99% 10.96%
Class B 9/27/94 9.60% -- -- 12.05%
Class C 4/30/93 14.46% -- -- 10.50%
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, 1998, were:
SHARE CLASS YIELD
Class A 6.87%
Class B 6.44%
Class C 6.44%
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:
* portfolio quality;
* average portfolio maturity;
* type of instruments in which the portfolio is invested; * changes in
interest rates and market value of portfolio securities; * changes in the
Fund's or a class of Shares' expenses; and * 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:
* 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.
* 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.
* 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.
* 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.
* 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 ("S&P"); and if no S&P rating is
available, bonds must be rated below investment grade by Fitch IBCA, 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 nonstandardized 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, 1997, Federated Investors
managed 11 money market funds and 16 bond funds with assets approximating $17.1
billion and $5.6 billion, respectively. Federated Investors' corporate bond
decision making--based on intensive, diligent credit analysis--is backed by over
22 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 $4.4 trillion to the more than 6,700 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 900 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 Timothy C. Pillion, Senior 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, 1998, are
incorporated herein by reference to the Annual Report of the Fund dated March
31, 1998 (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: Financial Statements are
incorporated by reference to the Annual Report of the
Registrant dated March 31, 1998 (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 (20);
(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) Conformed copy of Class B Shares
Distributor's Contract; +
(iv) 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 Domestic
Custody Fee Schedule; +
(iii) 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. 2-60103 and
811-2782).
20. Response is incorporated by refrence to Registrant's Post-Effective
Amendment No. 42 on Form N-1A filed May 29, 1997 (Files Nos. 2-60103 and
811-2782).
<PAGE>
(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).
(iv) Conformed copy of Amended and Restated Shareholder
Services Agreement; +
(v) Conformed copy of Class B Shares Shareholder
Services Agreement; +
(vi) Conformed copy of Class B Shares Principal
Shareholder Services Agreement; +
(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 (20);
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).
20. Response is incorporated by refrence to Registrant's Post-Effective
Amendment No. 42 on Form N-1A filed May 29, 1997 (Files Nos. 2-60103 and
811-2782).
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of May 5, 1998
Shares of Capital Stock
($0.01 per Share par value)
Class A Shares 35,246
Class B Shares 44,154
Class C Shares 7,362
Item 27. Indemnification: (19)
Item 28. Business and Other Connections of Investment Adviser:
(a) 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, Wilson, Halbrook &
Bayard), 107 W. Market Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Joseph M. Balestrino
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
Sandra L. McInerney
J. Alan Minteer
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
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).
<PAGE>
Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Randall S. Bauer
David A. Briggs
Micheal W. Casey
Kenneth J. Cody
Alexandre de Bethmann
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Susan R. Hill
Stephen A. Keen
Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak
Steven Lehman
Marian R. Marinack
Charles A. Ritter
Scott B. Schermerhorn
Frank Semack
Aash M. Shah
Christopher Smith
William F. Stotz
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
Assistant Vice Presidents:
Stefanie L. Bachhuber
Arthur J. Barry
Robert E. Cauley
Lee R. Cunningham, II
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
Natalie F. Metz
Joseph M. Natoli
Keith J. Sabol
John Sheehy
Michael W. Sirianni
Gregg S. Tenser
Leonardo A. Vila
Lori A. Wolff
Secretary: Stephen A. Keen
Treasurer: Thomas R. Donahue
Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine I. McGonigle
Assistant Treasurer: Richard B. Fisher
The business address of each of the Officers of the investment adviser
is Federated Investors Tower, Pittsburgh, Pennsylvania 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.
Item 29. Principal Underwriters:
(a) Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the
following open-end investment companies, including the Registrant:
111 Corcoran 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 Core Trust; 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 Planters Funds; The Virtus
Funds; The Wachovia Funds; The Wachovia Municipal 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.; 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.
<PAGE>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor 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 Vice Executive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
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 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
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
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
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
Ernest G. Anderson 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
David J. Callahan 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
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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities 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
Raymond Hanley 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
Charlene H. Jennings 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 Distributor With Registrant
Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael R. Manning 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
Alec H. Neilly 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 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
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 Distributor 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
Colin B. Starks 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
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. Wojnarowski 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
Terri E. Bush 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 Distributor With Registrant
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert M. Rossi 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
(c) Not applicable
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
<PAGE>
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.
<PAGE>
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., certifies that it meets all of the requirements for effectiveness of this
amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and 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
26th day of May, 1998.
FEDERATED HIGH INCOME BOND FUND, INC.
BY: /s/ Nickolas J. Seitanakis
Nickolas J. Seitanakis, Assistant Secretary
Attorney in Fact for John F. Donahue
May 26, 1998
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/ Nickolas J. Seitanakis Attorney In Fact May 26, 1998
Nickolas J. Seitanakis 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,
Treasurer, and Secretary
(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
John E. Murray, Jr.* Director
Wesley W. Posvar* Director
Marjorie P. Smuts* Director
* By Power of Attorney
Exhibit 6(iii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 24th day of October, 1997, by and between those
Investment Companies on behalf of the Portfolios and Classes of Shares
listed on Schedule A to Exhibit 1, as may be amended from time to time,
having their principal place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779, and who have approved this form of
Agreement, and FEDERATED SECURITIES CORP. ("FSC"), a Pennsylvania
Corporation. Each of the Exhibits hereto is incorporated herein in its
entirety and made a part hereof. In the event of any inconsistency between
the terms of this Agreement and the terms of any applicable Exhibit, the
terms of the applicable Exhibit shall govern.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. Each of the Investment Companies hereby appoint FSC as agent to sell and
distribute shares of the Investment Companies which may be offered in
one or more series (the "Funds") consisting of one or more classes (the
"Classes") of shares (the "Shares"), as described and set forth on one
or more exhibits to this Agreement, at the current offering price
thereof as described and set forth in the current Prospectuses of the
Funds. FSC hereby accepts such appointment and agrees to provide such
other services for the Investment Companies, if any, and accept such
compensation from the Investment Companies, if any, as set forth in the
applicable exhibits to this Agreement.
2. The sale of any Shares may be suspended without prior notice whenever in
the judgment of the applicable Investment Company it is in its best
interest to do so.
3. Neither FSC nor any other person is authorized by the Investment
Companies to give any information or to make any representation
relative to any Shares other than those contained in the Registration
Statement, Prospectuses, or Statements of Additional Information
("SAIs") filed with the Securities and Exchange Commission, as the
same may be amended from time to time, or in any supplemental
information to said Prospectuses or SAIs approved by the Investment
Companies. FSC agrees that any other information or representations
other than those specified above which it or any dealer or other
person who purchases Shares through FSC may make in connection with
the offer or sale of Shares, shall be made entirely without liability
on the part of the Investment Companies. No person or dealer, other
than FSC, is authorized to act as agent for the Investment Companies
for any purpose. FSC agrees that in offering or selling Shares as
agent of the Investment Companies, it will, in all respects, duly
conform to all applicable state and federal laws and the rules and
regulations of the National Association of Securities Dealers, Inc.,
including its Rules of Fair Practice. FSC will submit to the
Investment Companies copies of all sales literature before using the
same and will not use such sales literature if disapproved by the
Investment Companies.
4. This Agreement is effective with respect to each Class as of the date
of execution of the applicable exhibit and shall continue in effect
with respect to each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the initial
term of this Agreement for one year from the date set forth above, and
thereafter for successive periods of one year if such continuance is
approved at least annually by the Trustees/Directors of the Investment
Companies including a majority of the members of the Board of
Trustees/Directors of the Investment Companies who are not interested
persons of the Investment Companies and have no direct or indirect
financial interest in the operation of any Distribution Plan relating
to the Investment Companies or in any related documents to such Plan
("Disinterested Trustees/Directors") cast in person at a meeting
called for that purpose. If a Class is added after the first annual
approval by the Trustees/Directors as described above, this Agreement
will be effective as to that Class upon execution of the applicable
exhibit and will continue in effect until the next annual approval of
this Agreement by the Trustees/Directors and thereafter for successive
periods of one year, subject to approval as described above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Trustees/Directors or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to any other party to this
Agreement.
6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the
Investment Company Act of 1940, as amended, provided, however, that FSC
may employ such other person, persons, corporation or corporations as it
shall determine in order to assist it in carrying out its duties under
this Agreement.
7. FSC shall not be liable to the Investment Companies 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
by this Agreement.
8. This Agreement may be amended at any time by mutual agreement in writing
of all the parties hereto, provided that such amendment is approved by
the Trustees/Directors of the Investment Companies including a majority
of the Disinterested Trustees/Directors of the Investment Companies cast
in person at a meeting called for that purpose.
9. This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Investment
Companies agree to indemnify and hold harmless FSC and each person, if
any, who controls FSC within the meaning of Section 15 of the
Securities Act of 1933 and Section 20 of the Securities Act of 1934,
as amended, against any and all loss, liability, claim, damage and
expense whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any
claim whatsoever) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectuses or SAIs (as from time to time
amended and supplemented) or the omission or alleged omission
therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity with
written information furnished to the Investment Companies about FSC by
or on behalf of FSC expressly for use in the Registration Statement,
any Prospectuses and SAIs or any amendment or supplement thereof.
If any action is brought against FSC or any controlling person
thereof with respect to which indemnity may be sought against any
Investment Company pursuant to the foregoing paragraph, FSC shall
promptly notify the Investment Company in writing of the
institution of such action and the Investment Company shall assume
the defense of such action, including the employment of counsel
selected by the Investment Company and payment of expenses. FSC or
any such controlling person thereof shall have the right to employ
separate counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of FSC or such controlling
person unless the employment of such counsel shall have been
authorized in writing by the Investment Company in connection with
the defense of such action or the Investment Company shall not
have employed counsel to have charge of the defense of such
action, in any of which events such fees and expenses shall be
borne by the Investment Company. Anything in this paragraph to the
contrary notwithstanding, the Investment Companies shall not be
liable for any settlement of any such claim of action effected
without their written consent. The Investment Companies agree
promptly to notify FSC of the commencement of any litigation or
proceedings against the Investment Companies or any of their
officers or Trustees/Directors or controlling persons in
connection with the issue and sale of Shares or in connection with
the Registration Statement, Prospectuses, or SAIs.
(b) FSC agrees to indemnify and hold harmless the Investment
Companies, each of its Trustees/Directors, each of its officers
who have signed the Registration Statement and each other person,
if any, who controls the Investment Companies within the meaning
of Section 15 of the Securities Act of 1933, but only with
respect to statements or omissions, if any, made in the
Registration Statement or any Prospectus, SAI, or any amendment
or supplement thereof in reliance upon, and in conformity with,
information furnished to the Investment Companies about FSC by or
on behalf of FSC expressly for use in the Registration Statement
or any Prospectus, SAI, or any amendment or supplement thereof.
In case any action shall be brought against any Investment
Company or any other person so indemnified based on the
Registration Statement or any Prospectus, SAI, or any amendment
or supplement thereof, and with respect to which indemnity may be
sought against FSC, FSC shall have the rights and duties given to
the Investment Companies, and the Investment Companies and each
other person so indemnified shall have the rights and duties
given to FSC by the provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Investment Companies or their
shareholders to which such person would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in
the performance of the duties of such person or by reason of the
reckless disregard by such person of the obligations and duties of
such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940, as
amended, for Trustees/Directors, officers, FSC and controlling
persons of the Investment Companies by the Trustees/Directors
pursuant to this Agreement, the Investment Companies are aware of
the position of the Securities and Exchange Commission as set
forth in the Investment Company Act Release No. IC-11330.
Therefore, the Investment Companies undertakes that in addition
to complying with the applicable provisions of this Agreement, in
the absence of a final decision on the merits by a court or other
body before which the proceeding was brought, that an
indemnification payment will not be made unless in the absence of
such a decision, a reasonable determination based upon factual
review has been made (i) by a majority vote of a quorum of
non-party Disinterested Trustees/Directors, or (ii) by
independent legal counsel in a written opinion that the
indemnitee was not liable for an act of willful misfeasance, bad
faith, gross negligence or reckless disregard of duties. The
Investment Companies further undertakes that advancement of
expenses incurred in the defense of a proceeding (upon
undertaking for repayment unless it is ultimately determined that
indemnification is appropriate) against an officer,
Trustees/Directors, FSC or controlling person of the Investment
Companies will not be made absent the fulfillment of at least one
of the following conditions: (i) the indemnitee provides security
for his undertaking; (ii) the Investment Companies is insured
against losses arising by reason of any lawful advances; or (iii)
a majority of a quorum of non-party Disinterested
Trustees/Directors or independent legal counsel in a written
opinion makes a factual determination that there is reason to
believe the indemnitee will be entitled to indemnification.
FSC is hereby expressly put on notice of the limitation of liability as set
forth in the Declaration of Trust and agrees that the obligations assumed by the
Trust pursuant to this Agreement shall be limited "
11. If at any time the Shares of any Fund are offered in two or more
Classes, FSC agrees to adopt compliance standards as to when a class of
shares may be sold to particular investors.
12. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
<PAGE>
Exhibit 1
to the
Distributor's Contract
The following provisions are hereby incorporated and made part of the
Distributor's Contract (the "Distributor's Contract") dated October 24, 1997,
between the Investment Companies and Federated Securities Corp. as principal
distributor (the "Principal Distributor") with respect to the Class B Shares of
the portfolios (the "Funds") set forth on the attached Schedule A. References
herein to this Distributor's Contract refer to the Distributor's Contract as
supplemented hereby and made applicable hereby to the Class B Shares of the
Funds. In the event of any inconsistency between the terms of this Exhibit and
the terms of the Distributor's Contract, the terms of this Exhibit will govern.
Once effective in respect of the Class of Shares of any Fund set forth above,
the Distributors Contract as amended by this Exhibit shall be effective in
respect of all shares of such class outstanding whether issued prior to or after
such effectiveness.
1. The Investment Companies hereby appoints the Principal Distributor to
engage in activities principally intended to result in the sale of Class B
Shares ("Class B Shares") of each Fund. Pursuant to this appointment, the
Principal Distributor is authorized to select a group of financial
institutions ("Financial Institutions") to sell Class B Shares of a Fund
at the current offering price thereof as described and set forth in the
respective prospectuses of the Fund.
2. (a) In consideration of the Principal Distributor's services under this
Distributor's Contract in respect of each Fund the Investment Companies
on behalf of the Fund agree: (I) to pay the Principal Distributor or at
its direction its "Allocable Portion" (as hereinafter defined) of a fee
(the "Distribution Fee") equal to 0.75 of 1% per annum of the average
daily net asset value of the Class B Shares of the Fund outstanding
from time to time, and (II) to withhold from redemption proceeds in
respect of Class B Shares of the Fund such Principal Distributor's
Allocable Portion of the Contingent Deferred Sales Charges ("CDSCs")
payable in respect of such redemption as provided in the Prospectus for
the Fund and to pay the same over to such Principal Distributor or at
its direction at the time the redemption proceeds in respect of such
redemption are payable to the holder of the Class B Shares redeemed.
(b)The Principal Distributor will be deemed to have performed all
services required to be performed in order to be entitled to receive
its Allocable Portion of the Distribution Fee payable in respect of the
Class B Shares of a Fund upon the settlement of each sale of a
"Commission Share" (as defined in the Allocation Schedule attached
hereto as Schedule B) of the Fund taken into account in determining
such Principal Distributor's Allocable Portion of such Distribution
Fees.
(c)Notwithstanding anything to the contrary set forth in this Exhibit,
the Distributor's Contract or (to the extent waiver thereof is
permitted thereby) applicable law, the Investment Companies' obligation
to pay the Principal Distributor's Allocable Portion of the
Distribution Fees payable in respect of the Class B Shares of a Fund
shall not be terminated or modified for any reason (including a
termination of this Distributor's Contract as it relates to Class B
Shares of a Fund) except to the extent required by a change in the
Investment Company Act of 1940 (the "Act") or the Conduct Rules of the
National Association of Securities Dealers, Inc., in either case
enacted or promulgated after May 1, 1997, or in connection with a
"Complete Termination" (as hereinafter defined) of the Distribution
Plan in respect of the Class B Shares of a Fund.
(d)The Investment Companies will not take any action to waive or change
any CDSC in respect of the Class B Shares of a Fund, except as provided
in the Investment Companies' prospectus or statement of additional
information as in effect as of the date hereof without the consent of
the Principal Distributor and the permitted assigns of all or any
portion of its right to its Allocable Portion of the CDSCs.
(e)Notwithstanding anything to the contrary set forth in this Exhibit,
the Distributor's Contract, or (to the extent waiver thereof is
permitted thereby) applicable law, neither the termination of the
Principal Distributor's role as principal distributor of the Class B
Shares of a Fund, nor the termination of this Distributor's Contract
nor the termination of the Distribution Plan will terminate such
Principal Distributor's right to its Allocable Portion of the CDSCs in
respect of the Class B Shares of a Fund.
(f)Notwithstanding anything to the contrary in this Exhibit, the
Distributor's Contract, or (to the extent waiver thereof is permitted
thereby) applicable law, the Principal Distributor may assign, sell or
pledge (collectively, a "Transfer") its rights to its Allocable Portion
of the Distribution Fees and CDSCs earned by it (but not its
obligations to the Investment Companies under this Distributor's
Contract) in respect of the Class B Shares of a Fund to raise funds to
make the expenditures related to the distribution of Class B Shares of
the Fund and in connection therewith upon receipt of notice of such
Transfer, the Investment Companies shall pay, or cause to be paid to
the assignee, purchaser or pledgee (collectively with their subsequent
transferees, "Transferees") such portion of the Principal Distributor's
Allocable Portion of the Distribution Fees and CDSCs in respect of the
Class B Shares of the Fund so Transferred. Except as provided in (c)
above and notwithstanding anything to the contrary set forth elsewhere
in this Exhibit, the Distributor's Contract, or (to the extent waiver
thereof is permitted thereby) applicable law, to the extent the
Principal Distributor has Transferred its rights thereto to raise funds
as aforesaid, the Investment Companies' obligation to pay to the
Principal Distributor's Transferees the Principal Distributor's
Allocable Portion of the Distribution Fees payable in respect of the
Class B Shares of each Fund shall be absolute and unconditional and
shall not be subject to dispute, offset, counterclaim or any defense
whatsoever, including without limitation, any of the foregoing based on
the insolvency or bankruptcy of the Principal Distributor (it being
understood that such provision is not a waiver of the Investment
Companies' right to pursue such Principal Distributor and enforce such
claims against the assets of such Principal Distributor other than the
Distributor's right to the Distribution Fees, CDSCs and servicing fees,
in respect of the Class B Shares of any Fund which have been so
transferred in connection with such Transfer). The Fund agrees that
each such Transferee is a third party beneficiary of the provisions of
this clause (f) but only insofar as those provisions relate to
Distribution Fees and CDSCs transferred to such Transferee.
(g)For purposes of this Distributor's Contract, the term Allocable
Portion of Distribution Fees payable in respect of the Class B Shares
of any Fund shall mean the portion of such Distribution Fees allocated
to such Principal Distributor in accordance with the Allocation
Schedule attached hereto as Schedule B.
(h)For purposes of this Distributor's Contract, the term "Complete
Termination" of the Plan in respect of any Fund means a termination of
the Plan involving the complete cessation of the payment of
Distribution Fees in respect of all Class B Shares of such Fund, and
the termination of the distribution plans and the complete cessation of
the payment of distribution fees pursuant to every other Distribution
Plan pursuant to rule 12b-1 of the Investment Companies in respect of
such Fund and any successor Fund or any Fund acquiring a substantial
portion of the assets of such Fund and for every future class of shares
which has substantially similar characteristics to the Class B Shares
of such Fund including the manner of payment and amount of sales
charge, contingent deferred sales charge or other similar charges borne
directly or indirectly by the holders of such shares.
3. The Principal Distributor may enter into separate written agreements with
various firms to provide certain of the services set forth in Paragraph 1
herein. The Principal Distributor, in its sole discretion, may pay
Financial Institutions a lump sum fee on the settlement date for the sale
of each Class B Share of the Fund to their clients or customers for
distribution of such share. The schedules of fees to be paid such firms or
Financial Institutions and the basis upon which such fees will be paid
shall be determined from time to time by the Principal Distributor in its
sole discretion.
4. The Principal Distributor will prepare reports to the Board of
Trustees/Directors of the Investment Companies on a quarterly basis
showing amounts expended hereunder including amounts paid to Financial
Institutions and the purpose for such expenditures.
In consideration of the mutual covenants set forth in the Distributor's
Contract between the Investment Companies and the Principal Distributor, the
Principal Distributor and the Investment Companies hereby execute and deliver
this Exhibit with respect to the Class B Shares of the Fund.
<PAGE>
Witness the due execution hereof this 24th day of October, 1997.
ATTEST: INVESTMENT COMPANIES (listed on Schedule A)
By: /s/ S. Elliott Cohan By: /s/ John W. McGonigle
Title: Assistant Secretary` Title: Executive Vice President
ATTEST: FEDERATED SECURITIES CORP.
By: /s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
<PAGE>
Schedule A
Date: 10/24/97 DISTRIBUTOR'S CONTRACT
FEDERATED AMERICAN LEADERS FUND, INC.
Class B Shares
FEDERATED EQUITY FUNDS
Federated Aggressive Growth Fund
Class B Shares
Federated Growth Strategies Fund
Class B Shares
Federated Small Cap Strategies Fund
Class B Shares
Federated Capital Appreciation Fund
Class B Shares
FEDERATED EQUITY INCOME FUND, INC.
Class B Shares
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
Class B Shares
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
Class B Shares
FEDERATED HIGH INCOME BOND FUND, INC.
Class B Shares
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
Class B Shares
FEDERATED MUNICIPAL SECURITIES FUND, INC.
Class B Shares
FEDERATED STOCK AND BOND FUND, INC.
Class B Shares
FEDERATED UTILITY FUND, INC.
Class B Shares
FIXED INCOME SECURITIES, INC.
Federated Strategic Income Fund
Class B Shares
INTERNATIONAL SERIES, INC.
Federated International Equity Fund
Class B Shares
Federated International Income Fund
Class B Shares
<PAGE>
INVESTMENT SERIES FUNDS, INC.
Federated Bond Fund
Class B Shares
LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST
Class B Shares
MUNICIPAL SECURITIES INCOME TRUST
Federated Pennsylvania Municipal Income Fund
Class B Shares
WORLD INVESTMENT SERIES, INC.
Federated World Utility Fund
Class B Shares
Federated Asia Pacific Growth Fund
Class B Shares
Federated Emerging Markets Fund
Class B Shares
Federated European Growth Fund
Class B Shares
Federated International Small Company Fund
Class B Shares
Federated Latin American Growth Fund
Class B Shares
Federated International High Income Fund
Class B Shares
Federated International Growth Fund
Class B Shares
The following Funds were added as of December 1, 1997:
Municipal Securities Income Trust
Federated California Municipal Income Fund
Class B Shares
World Investment Series, Inc.
Federated Global Equity Income Fund
Class B Shares
The following Funds were added as of MARCH 1, 1998:
Federated Stock Trust
Class B Shares
Exhibit 8(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
STATE STREET
DOMESTIC CUSTODY
FEE SCHEDULE
FEDERATED FUNDS
I. Custody Services
Maintain custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make
cash disbursements and report cash transactions. Monitor corporate
actions.
ANNUAL FEES
ASSET
Per Fund .25 Basis Points
Wire Fees $3.00 per wire
Settlements:
o Each DTC Transaction $5.00
o Each Federal Reserve Book Entry Transaction $3.75
o Each Repo Transaction (All Repo) $3.75
o Each Physical Transaction (NY/Boston, Private Placement) $15.00
o Each Option Written/Exercised/Expired $18.75
Each Book Entry Muni (Sub-custody) Transaction $15.00
o Government Paydowns $5.00
o Maturity Collections $8.00
o PTC Transactions $6.00
II. Special Services
Fees for activities of a non-recurring nature such as fund consolidation
or reorganization, extraordinary security shipments and the preparation of
special reports will be subject to negotiation.
III. Balance Credit
Municipal Funds
A balance credit equal to 75% of the average demand deposit account
balance in the custodian account for the month billed times the 30 day
T-Bill Rate on the last Monday of the month billed, will be applied
against the month's custodian bill.
Transfer Agent
A balance credit equal to 100% of the average balance in the transfer
agent demand deposit accounts, less the reserve requirement and applicable
related expenses, times 75% of the 30 average Fed Funds Rate.
IV. Payment
The above fees will be charged against the funds' custodian checking
account thirty (30) days after the invoice is mailed to the funds' offices.
V. Term of Contract
The parties agree that this fee schedule shall become effective January 1,
1997.
FEDERATED SERVICES COMPANY STATE STREET
BY: /s/ Douglas L. Hein BY: /s/ Michael E. Hagerty
TITLE: Senior Vice President TITLE: Vice President
DATE: April 15, 1997 DATE: April 8, 1997
Exhibit 9(iv) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AMENDED AND RESTATED
SHAREHOLDER SERVICES AGREEMENT
THIS AGREEMENT, amended and restated as of the first day of September,
1995, (originally made and enterered into as of the first day of March, 1994),
by and between those investment companies listed on Exhibit 1, as may be amended
from time to time, having their principal office and place of business at
Federated Investors Tower, Pittsburgh, PA 15222-3779 and who have approved this
form of Agreement (individually referred to herein as a "Fund" and collectively
as "Funds") and Federated Shareholder Services, a Delaware business trust,
having its principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 ("FSS").
1. The Funds hereby appoint FSS to render or cause to be rendered personal
services to shareholders of the Funds and/or the maintenance of accounts
of shareholders of the Funds ("Services"). In addition to providing
Services directly to shareholders of the Funds, FSS is hereby appointed
the Funds' agent to select, negotiate and subcontract for the performance
of Services. FSS hereby accepts such appointments. FSS agrees to provide
or cause to be provided Services which, in its best judgment (subject to
supervision and control of the Funds' Boards of Trustees or Directors, as
applicable), are necessary or desirable for shareholders of the Funds. FSS
further agrees to provide the Funds, upon request, a written description
of the Services which FSS is providing hereunder.
2. During the term of this Agreement, each Fund will pay FSS and FSS agrees
to accept as full compensation for its services rendered hereunder a fee
at an annual rate, calculated daily and payable monthly, up to 0.25% of 1%
of average net assets of each Fund.
For the payment period in which this Agreement becomes effective or
terminates with respect to any Fund, there shall be an appropriate
proration of the monthly fee on the basis of the number of days that this
Agreement is in effect with respect to such Fund during the month.
3. This Agreement shall continue in effect for one year from the date of its
execution, and thereafter for successive periods of one year only if the
form of this Agreement is approved at least annually by the Board of each
Fund, including a majority of the members of the Board of the Fund who are
not interested persons of the Fund ("Independent Board Members") cast in
person at a meeting called for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be terminated as follows:
(a) at any time, without the payment of any penalty, by the vote of a
majority of the Independent Board Members of any Fund or by a
vote of a majority of the outstanding voting securities of any
Fund as defined in the Investment Company Act of 1940 on sixty
(60) days' written notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as
defined in the Investment Company Act of 1940; and
(c) by any party to the Agreement without cause by giving the other
party at least sixty (60) days' written notice of its intention
to terminate.
5. FSS agrees to obtain any taxpayer identification number certification from
each shareholder of the Funds to which it provides Services that is
required under Section 3406 of the Internal Revenue Code, and any
applicable Treasury regulations, and to provide each Fund or its designee
with timely written notice of any failure to obtain such taxpayer
identification number certification in order to enable the implementation
of any required backup withholding.
6. FSS shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Fund in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement. FSS shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for such Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice. Any person, even though also an officer, trustee, partner,
employee or agent of FSS, who may be or become a member of such Fund's
Board, officer, employee or agent of any Fund, shall be deemed, when
rendering services to such Fund or acting on any business of such Fund
(other than services or business in connection with the duties of FSS
hereunder) to be rendering such services to or acting solely for such Fund
and not as an officer, trustee, partner, employee or agent or one under the
control or direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. FSS is expressly put on notice of the limitation of liability as set forth
in the Declaration of Trust of each Fund that is a Massachusetts business
trust and agrees that the obligations assumed by each such Fund pursuant
to this Agreement shall be limited in any case to such Fund and its assets
and that FSS shall not seek satisfaction of any such obligations from the
shareholders of such Fund, the Trustees, Officers, Employees or Agents of
such Fund, or any of them.
9. The execution and delivery of this Agreement have been authorized by the
Trustees of FSS and signed by an authorized officer of FSS, acting as
such, and neither such authorization by such Trustees nor such execution
and delivery by such officer shall be deemed to have been made by any of
them individually or to impose any liability on any of them personally,
and the obligations of this Agreement are not binding upon any of the
Trustees or shareholders of FSS, but bind only the trust property of FSS
as provided in the Declaration of Trust of FSS.
10. Notices of any kind to be given hereunder shall be in writing (including
facsimile communication) and shall be duly given if delivered to any Fund
and to such Fund at the following address: Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President and if delivered to FSS at
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
11. This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof
whether oral or written. If any provision of this Agreement shall be held
or made invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Sections 3 and 4, hereof, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and shall be governed by Pennsylvania law;
provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or
regulation promulgated by the Securities and Exchange Commission
thereunder.
12. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the
same instrument.
13. This Agreement shall not be assigned by any party without the prior
written consent of FSS in the case of assignment by any Fund, or of the
Funds in the case of assignment by FSS, except that any party may assign
to a successor all of or a substantial portion of its business to a party
controlling, controlled by, or under common control with such party.
Nothing in this Section 14 shall prevent FSS from delegating its
responsibilities to another entity to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Attest: Investment Companies (listed on Exhibit 1)
/s/ John W. McGonigle By:/s/ John F. Donahue
John W. McGonigle John F. Donahue
Secretary Chairman
Attest: Federated Shareholder Services
/s/ Joseph M. Huber By: /s/ John W. McGonigle
Joseph M. Huber John W. McGonigle
Secretary President
<PAGE>
EXHIBIT 1
AUTOMATED GOVERNMENT MONEY TRUST
CASH TRUST SERIES, INC.:
Government Cash Series
Municipal Cash Series
Prime Cash Series
Treasury Cash Series
FEDERATED ADJUSTABLE RATE U.S. GOVERNMENT FUND, INC.
FEDERATED AMERICAN LEADERS FUND, INC.
Class A Shares
Class C Shares
Class F Shares
FEDERATED ARMS FUND
Institutional Service Shares
Institutional Shares
FEDERATED CORE TRUST:
High Yield Bond Portfolio
FEDERATED EQUITY FUNDS:
Federated Aggressive Growth Fund
Class A Shares
Class C Shares
Federated Capital Appreciation Fund
Class A Shares
Class C Shares
Federated Growth Strategies Fund
Class A Shares
Class C Shares
Federated Small Cap Strategies Fund
Class A Shares
Class C Shares
FEDERATED EQUITY INCOME FUND, INC.
Class A Shares
Class C Shares
Class F Shares
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
Class A Shares
Class C Shares
FEDERATED GNMA TRUST
Institutional Service Shares
Institutional Shares
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
Class A Shares
Class C Shares
Class F Shares
FEDERATED GOVERNMENT TRUST"
Automated Government Cash Reserves
Automated Treasury Cash Reserves
U.S. Treasury Cash Reserves
Institutional Service Shares
Institutional Shares
FEDERATED HIGH INCOME BOND FUND, INC.
Class A Shares
Class C Shares
FEDERATED HIGH YIELD TRUST
FEDERATED INCOME SECURITIES TRUST:
Federated Short-Term Income Fund
Institutional Service Shares
Institutional Shares
Federated Intermediate Income Fund
Institutional Service Shares
Institutional Shares
Federated Income Trust
Institutional Service Shares
Institutional Shares
FEDERATED INDEX TRUST:
Federated Max-Cap Fund
Class C Shares
Institutional Service Shares
Institutional Shares
Federated Mid-Cap Fund
Federated Mini-Cap Fund
Class C Shares
Institutional Shares
FEDERATED INSTITUTIONAL TRUST:
Federated Institutional Short-Term Government Fund
INSTITUTIONAL SERVICE SHARES
INSTITUTIONAL SHARES
FEDERATED INVESTMENT TRUST:
Federated Bond Index Fund
Institutional Shares
Institutional Service Shares
Federated Master Trust
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
Class A Shares
Class C Shares
Class F Shares
FEDERATED MUNICIPAL SECURITIES FUND, INC.
Class A Shares
Class C Shares
FEDERATED MUNICIPAL TRUST:
Alabama Municipal Cash Trust
ARIZONA MUNICIPAL CASH TRUST
INSTITUTIONAL SERVICE SHARES
California Municipal Cash Trust
Institutional Service Shares
Institutional Shares
Connecticut Municipal Cash Trust
Institutional Service Shares
Florida Municipal Cash Trust
Cash II Shares
Institutional Shares
Georgia Municipal Cash Trust
Maryland Municipal Cash Trust
Massachusetts Municipal Cash Trust
Institutional Service Shares
Boston 1784 Funds Shares
Michigan Municipal Cash Trust
Institutional Service Shares
Institutional Shares
Minnesota Municipal Cash Trust
Cash Series Shares
Institutional Shares
New Jersey Municipal Cash Trust
Institutional Service Shares
Institutional Shares
New York Municipal Cash Trust
Cash II Shares
Institutional Service Shares
North Carolina Municipal Cash Trust
Ohio Municipal Cash Trust
Cash II Shares
Institutional Shares
Institutional Service Shares
Pennsylvania Municipal Cash Trust
Cash Series Shares
Institutional Service Shares
Institutional Shares
Tennessee Municipal Cash Trust
Institutional Shares
Institutional Service Shares
Virginia Municipal Cash Trust
Institutional Service Shares
Institutional Shares
FEDERATED SHORT-TERM MUNICIPAL TRUST
Institutional Service Shares
Institutional Shares
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
FEDERATED STOCK AND BOND FUND, INC.
Class A Shares
Class C Shares
FEDERATED STOCK TRUST
CLASS A SHARES
CLASS C SHARES
FEDERATED TAX-FREE TRUST
FEDERATED U.S. GOVERNMENT BOND FUND
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS
Institutional Service Shares
Institutional Shares
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS
Institutional Service Shares
Institutional Shares
FEDERATED U. S. GOVERNMENT SECURITIES FUND: 5-10 YEARS
Institutional Service Shares
Institutional Shares
FIXED INCOME SECURITIES, INC.:
Federated Limited Term Fund
Class A Shares
Class F Shares
Federated Limited Term Municipal Fund
Class A Shares
Class F Shares
Federated Strategic Income Fund
Class A Shares
Class C Shares
Class F Shares
FEDERATED TOTAL RETURN SERIES, INC.:
Federated Limited Duration Government Fund
Institutional Shares
Institutional Service Shares
Federated Total Return Bond Fund
Institutional Shares
Institutional Service Shares
Federated Total Return Government Fund
Institutional Shares
Institutional Service Shares
Federated Total Return Limited Duration Fund
Institutional Shares
Institutional Service Shares
FEDERATED UTILITY FUND, INC.
Class A Shares
Class C Shares
Class F Shares
INTERMEDIATE MUNICIPAL TRUST:
Federated Intermediate Municipal Trust
Federated Pennsylvania Intermediate Municipal Trust
INTERNATIONAL SERIES, INC.:
Federated International Equity Fund
Class A Shares
Class C Shares
Federated International Income Fund
Class A Shares
Class C Shares
INVESTMENT SERIES FUNDS, INC.:
Federated Bond Fund
Class A Shares
Class C Shares
Class F Shares
EDWARD D. JONES & CO. DAILY PASSPORT CASH TRUST
LIBERTY TERM TRUST, INC. -- 1999
LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST
Class A Shares
LIQUID CASH TRUST
MANAGED SERIES TRUST:
Federated Aggressive Growth Fund
Institutional Shares
Select Shares
Federated Managed Growth and Income Fund
Institutional Shares
Select Shares
Federated Managed Growth Fund
Institutional Shares
Select Shares
Federated Managed Income Fund
Institutional Shares
Select Shares
MONEY MARKET MANAGEMENT, INC.
MONEY MARKET OBLIGATIONS TRUST:
Automated Cash Management Trust
Cash II Shares
Institutional Shares
Government Obligations Fund
Institutional Shares
Institutional Service Shares
Government Obligations Tax-Managed Fund
Institutional Shares
Institutional Service Shares
Prime Obligations Fund
Institutional Shares
Institutional Service Shares
Tax-Free Obligations Fund
Institutional Shares
Institutional Service Shares
Treasury Obligations Fund
Institutional Capital Shares
Institutional Shares
Institutional Service Shares
MONEY MARKET OBLIGATIONS TRUST II:
Municipal Obligations Fund
Institutional Capital Shares
Institutional Service Shares
Institutional Shares
Prime Cash Obligations Fund
Institutional Capital Shares
Institutional Service Shares
Institutional Shares
Prime Value Obligations Fund
Institutional Capital Shares
Institutional Service Shares
Institutional Shares
MONEY MARKET TRUST
MUNICIPAL SECURITIES INCOME TRUST:
Federated California Municipal Income Fund
Class F Shares
Federated Michigan IntermediateMunicipal Trust
Federated New York Municipal Income Fund
Class F Shares
Federated Ohio Municipal Income Fund
Class F Shares
Federated Pennsylvania Municipal Income Fund
Class A Shares
TAX-FREE INSTRUMENTS TRUST
Institutional Service Shares
Investment Shares
TRUST FOR GOVERNMENT CASH RESERVES
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
TRUST FOR U.S. TREASURY OBLIGATIONS
WORLD INVESTMENT SERIES, INC.:
Federated Asia Pacific Growth Fund
Class A Shares
Class C Shares
Federated Emerging Markets Fund
Class A Shares
Class C Shares
Federated European Growth Fund
Class A Shares
Class C Shares
Federated Global Equity Income Fund
Class A Shares
Class C Shares
Federated International Growth Fund
Class A Shares
Class C Shares
Federated International High Income Fund
Class A Shares
Class C Shares
Federated International Small Company Fund
Class A Shares
Class C Shares
Federated Latin American Growth Fund
Class A Shares
Class C Shares
Federated World Utility Fund
Class A Shares
Class C Shares
Exhibit 9(v) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES AGREEMENT
THIS AGREEMENT, is made as of the 24th day of October, 1997, by and between
those Investment Companies on behalf of the Portfolios (individually referred to
herein as a "Fund" and collectively as "Funds") and Classes of Shares
("Classes") listed on Schedule A to Exhibit 1, as it may be amended from time to
time, having their principal office and place of business at Federated Investors
Tower, Pittsburgh, PA 15222-3779 and who have approved this form of Agreement
and Federated Securities Corp.("FSC"), a Pennsylvania Corporation, having its
principal office and place of business at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779 and Federated Shareholder Services, a Delaware business
trust, having its principal office and place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779 ("FSS"). Each of the Exhibits hereto
is incorporated herein in its entirety and made a part hereof. In the event of
any inconsistency between the terms of this Agreement and the terms of any
applicable Exhibit, the terms of the applicable Exhibit shall govern.
1. FSC as Principal Servicer (Principal Servicer") hereby contracts with FSS
to render or cause to be rendered personal services to shareholders and/or
the maintenance of accounts of shareholders of each Class of the Funds to
which this Agreement is made applicable by an Exhibit hereto ("Services").
In addition to providing Services directly to shareholders of the Funds,
FSS is hereby appointed the Investment Companies' agent to select,
negotiate and subcontract for the performance of Services. FSS hereby
accepts such appointment. FSS agrees to provide or cause to be provided
Services which, in its best judgment (subject to supervision and control of
the Investment Companies' Boards of Trustees or Directors, as applicable),
are necessary or desirable for shareholders of the Funds. FSS further
agrees to provide the Investment Companies, upon request, a written
description of the Services which FSS is providing hereunder. The
Investment Companies, on behalf of the Funds and each Class subject hereto
consents to the appointment of FSS to act in its capacity as described
herein and agrees to look solely to FSS for performance of the Services.
2. The term of the undertaking of FSS to render services hereunder in respect
of any Class of any Fund and the manner and amount of compensation to be
paid in respect thereof shall be specified in respect of each Class of the
Funds to which this Agreement is made applicable by an Exhibit hereto. FSS
agrees to look solely to the Principal Servicer for its compensation
hereunder.
3. This Agreement shall become effective in respect of any Class of Shares of
a Fund upon execution of an Exhibit relating to such Class of the Fund.
Once effective in respect of any Class of shares, this Agreement shall
continue in effect for one year from the date of its execution, and
thereafter for successive periods of one year only if the form of this
Agreement is approved at least annually by the Board of each Investment
Company, including a majority of the members of the Board of the
Investment Company who are not interested persons of the Investment
Company ("Independent Board Members") cast in person at a meeting called
for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be terminated as follows:
(a) By any Investment Company as to any Fund at any time, without the
payment of any penalty, by the vote of a majority of the Independent
Board Members of any Investment Company or by a vote of a majority of
the outstanding voting securities of any Fund as defined in the
Investment Company Act of 1940 on sixty (60) days' written notice to
the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as defined in
the Investment Company Act of 1940; and
5. FSS agrees to obtain any taxpayer identification number certification from
each shareholder of the Funds to which it provides Services that is
required under Section 3406 of the Internal Revenue Code, and any
applicable Treasury regulations, and to provide each Investment Company or
its designee with timely written notice of any failure to obtain such
taxpayer identification number certification in order to enable the
implementation of any required backup withholding.
6. FSS shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Investment Company in connection with the matters
to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance
of its duties or from reckless disregard by it of its obligations and
duties under this Agreement. FSS shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for such Investment Company) on
all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice. Any person, even though also an
officer, trustee, partner, employee or agent of FSS, who may be or become a
member of such Investment Company's Board, officer, employee or agent of
any Investment Company, shall be deemed, when rendering services to such
Investment Company or acting on any business of such Investment Company
(other than services or business in connection with the duties of FSS
hereunder) to be rendering such services to or acting solely for such
Investment Company and not as an officer, trustee, partner, employee or
agent or one under the control or direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. FSS is expressly put on notice of the limitation of liability as set forth
in the Declaration of Trust of each Investment Company that is a
Massachusetts business trust and agrees that the obligations assumed by
each such Investment Company pursuant to this Agreement shall be limited
in any case to such Investment Company and its assets and that FSS shall
not seek satisfaction of any such obligations from the shareholders of
such Investment Company, the Trustees, Officers, Employees or Agents of
such Investment Company, or any of them.
9. The execution and delivery of this Agreement have been authorized by the
Trustees of FSS and signed by an authorized officer of FSS, acting as
such, and neither such authorization by such Trustees nor such execution
and delivery by such officer shall be deemed to have been made by any of
them individually or to impose any liability on any of them personally,
and the obligations of this Agreement are not binding upon any of the
Trustees or shareholders of FSS, but bind only the trust property of FSS
as provided in the Declaration of Trust of FSS.
<PAGE>
10. Notices of any kind to be given hereunder shall be in writing (including
facsimile communication) and shall be duly given if delivered to any
Investment Company at the following address: Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President and if delivered to FSS at
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
11. This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof
whether oral or written. If any provision of this Agreement shall be held
or made invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Sections 3 and 4, hereof, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and shall be governed by Pennsylvania law;
provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or
regulation promulgated by the Securities and Exchange Commission
thereunder.
12. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the
same instrument.
13. This Agreement shall not be assigned by any party without the prior
written consent of the parties hereto. Nothing in this Section 13 shall
prevent FSS from delegating its responsibilities to another entity to the
extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Investment Companies (listed on Schedule
A)
Attest: /s/ S. Elliott Cohan By: /s/ John W. McGonigle
Title: Assistant Secretary Title: Executive Vice President
Federated Shareholder Services
Attest:/s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
Federated Securities Corp.
Attest: /s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
<PAGE>
EXHIBIT 1
TO SHAREHOLDER SERVICES AGREEMENT
FOR CLASS B SHARES OF
THE INVESTMENT COMPANIES
1. The Shareholder Services Agreement for Shares of the Investment
Companies on behalf of the portfolios (individually referred to as a "Fund" and
collectively as "Funds") and the classes of shares ("Classes") listed on the
attached Schedule A dated October 24, 1997 among Federated Securities Corp.
("Principal Servicer"), Federated Shareholder Services ("Class Servicer") and
the Investment Companies is hereby made applicable on the terms set forth herein
to the Class B Shares of the above-referenced Funds. In the event of any
inconsistency between the terms of this Exhibit and the Shareholder Services
Agreement, the terms of this Exhibit shall govern.
2. In connection with the Services to be rendered to holders of Class B
Shares of each Fund, the Principal Servicer and Class Servicer agree that the
Principal Servicer shall retain and compensate the Class Servicer for its
Services in respect of the Class B Shares of the Fund on one of the following
alternative basis as the Principal Servicer shall elect:
ALTERNATIVE A3: The Principal Servicer shall pay the Class Servicer
a dollar amount as set forth on Schedule A per Class B Commission Share
(as defined in the Principal Shareholder Servicer's Agreement) of the
Fund. Class Servicer agrees that upon receipt of such payment (which shall
be deemed to be full and adequate consideration for an irrevocable service
commitment (the "Irrevocable Service Commitment") of Class Servicer
hereunder), Class Servicer shall be unconditionally bound and obligated to
either: (1) provide the Services in respect of such Commission Share and
all other Shares derived therefrom via reinvestment of dividends, free
exchanges or otherwise for so long as the same is outstanding or (2) in
the event the Class Servicer for the Class B Shares is terminated by the
Investment Company, to arrange for a replacement Class Servicer
satisfactory to the Investment Company to perform such services, at no
additional cost to the Fund.
ALTERNATIVE B4: If Alternative A is not elected, the Principal
Servicer shall pay the Class Servicer twenty five basis points (0.25%) per
annum on the average daily net asset value of each Class B Share of the
Fund monthly in arrears. The Class Servicer agrees that such payment is
full and adequate consideration for the Services to be rendered by it to
the holder of such Class B Share.
3. In the event pursuant to paragraph 2 above, Alternative A has been
elected and the Class Servicer is terminated as Class Servicer for the Class B
Shares of the Fund, the Class Servicer agrees to pay to any successor Class
Servicer for the Class B Shares of the Fund any portion of the excess, if any,
of (A) the Servicing Fees received by it hereunder in respect of Class B Shares
of the Fund plus interest thereon at the percent as set forth on Schedule A per
annum minus (B) the costs it incurred hereunder in respect of the Class B Shares
of the Fund prior to such termination.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
Attest: FEDERATED SECURITIES CORP.
By: /s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
Attest: FEDERATED SHAREHOLDER SERVICES
By:/s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
Attest: INVESTMENT COMPANIES
(listed on Schedule A)
By: /s/ S. Elliott Cohan By: /s/ John W. McGonigle
Title: Assistant Secretary Title: Executive Vice President
<PAGE>
Schedule A
Date: 10/24/97 SHAREHOLDER SERVICES AGREEMENT
FEDERATED AMERICAN LEADERS FUND, INC.
Class B Shares
FEDERATED EQUITY FUNDS
Federated Aggressive Growth Fund
Class B Shares
Federated Growth Strategies Fund
Class B Shares
Federated Small Cap Strategies Fund
Class B Shares
Federated Capital Appreciation Fund
Class B Shares
FEDERATED EQUITY INCOME FUND, INC.
Class B Shares
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
Class B Shares
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
Class B Shares
FEDERATED HIGH INCOME BOND FUND, INC.
Class B Shares
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
Class B Shares
FEDERATED MUNICIPAL SECURITIES FUND, INC.
Class B Shares
FEDERATED STOCK AND BOND FUND, INC.
Class B Shares
FEDERATED UTILITY FUND, INC.
Class B Shares
FIXED INCOME SECURITIES, INC.
Federated Strategic Income Fund
Class B Shares
INTERNATIONAL SERIES, INC.
Federated International Equity Fund
Class B Shares
Federated International Income Fund
Class B Shares
<PAGE>
INVESTMENT SERIES FUNDS, INC.
Federated Bond Fund
Class B Shares
LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST
Class B Shares
MUNICIPAL SECURITIES INCOME TRUST
Federated Pennsylvania Municipal Income Fund
Class B Shares
WORLD INVESTMENT SERIES, INC.
Federated World Utility Fund
Class B Shares
Federated Asia Pacific Growth Fund
Class B Shares
Federated Emerging Markets Fund
Class B Shares
Federated European Growth Fund
Class B Shares
Federated International Small Company Fund
Class B Shares
Federated Latin American Growth Fund
Class B Shares
Federated International High Income Fund
Class B Shares
Federated International Growth Fund
Class B Shares
The following Funds were added as of December 1, 1997:
Municipal Securities Income Trust
Federated California Municipal Income Fund
Class B Shares
World Investment Series, Inc.
Federated Global Equity Income Fund
Class B Shares
The following Funds were added as of MARCH 1, 1998:
Federated Stock Trust
Class B Shares
Exhibit 9(vi) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
PRINCIPAL SHAREHOLDER SERVICER'S AGREEMENT
THIS AGREEMENT, is made as of the 24th day of October, 1997, by and between
those Investment Companies on behalf of the Portfolios (individually referred to
herein as a "Fund" and collectively as "Funds") and Classes of Shares
("Classes") listed on Schedule A to Exhibit 1, as may be amended from time to
time, having their principal office and place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779, and who have approved this form of
Agreement and Federated Securities Corp. as the principal shareholder servicer
(the "Principal Servicer"). Each of the Exhibits hereto is incorporated herein
in its entirety and made a part hereof. In the event of any inconsistency
between the terms of this Agreement and the terms of any applicable Exhibit, the
terms of the applicable Exhibit shall govern.
In consideration of the mutual covenants hereinafter contained it is hereby
agreed by and between the parties hereto as follows.
1. The Investment Companies hereby appoint the Principal Servicer as their
agent to select, negotiate and contract for the performance of and arrange
for the rendition of personal services to shareholders and/or the
maintenance of accounts of shareholders of each Class of the Funds as to
which this Agreement is made applicable (The Principal Servicer's duties
hereunder are referred to as "Services"). The Principal Servicer hereby
accepts such appointment and agrees to perform or cause to be performed the
Services in respect of the Classes of the Funds to which this Agreement has
been made applicable by an Exhibit. The Principal Servicer agrees to cause
to be provided shareholder services which, in its best judgment (subject to
supervision and control of the Investment Companies' Boards of Trustees or
Directors, as applicable), are necessary or desirable for shareholders of
the Funds. The Principal Servicer further agrees to provide the Investment
Companies, upon request, a written description of the shareholder services
for which the Principal Servicer is arranging hereunder.
2. During the term of this Agreement, each Investment Company will pay the
Principal Servicer and the Principal Servicer agrees to accept as full
compensation for its services rendered hereunder a fee as set forth on the
Exhibit applicable to the Class of each Fund subject to this Agreement.
For the payment period in which this Agreement becomes effective or
terminates with respect to any Class of a Fund, there shall be an
appropriate proration of the monthly fee on the basis of the number of
days that this Agreement is in effect with respect to such Class of the
Fund during the month.
3. This Agreement is effective with respect to each Class of a Fund as of the
date of execution of the applicable Exhibit and shall continue in effect
for one year from the date of its execution, and thereafter for successive
periods of one year only if the form of this Agreement is approved at
least annually by the Board of each Investment Company, including a
majority of the members of the Board of the Investment Company who are not
interested persons of the Investment Company ("Independent Board Members")
cast in person at a meeting called for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be terminated with regard to
a particular Class of a Fund as follows:
(a) at any time, without the payment of any penalty, by the vote of a
majority of the Independent Board Members of any Investment Company
or by a vote of a majority of the outstanding voting securities of
any Fund as defined in the Investment Company Act of 1940 on sixty
(60) days' written notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as defined in
the Investment Company Act of 1940; and
5. The Principal Servicer agrees to arrange to obtain any taxpayer
identification number certification from each shareholder of the Funds to
which it provides Services that is required under Section 3406 of the
Internal Revenue Code, and any applicable Treasury regulations, and to
provide each Fund or its designee with timely written notice of any
failure to obtain such taxpayer identification number certification in
order to enable the implementation of any required backup withholding.
6. The Principal Servicer shall not be liable for any error of judgment or
mistake of law or for any loss suffered by any Investment Company in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement. the Principal Servicer
shall be entitled to rely on and may act upon advice of counsel (who may be
counsel for such Investment Company) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such
advice. Any person, even though also an officer, trustee, partner, employee
or agent of the Principal Servicer, who may be or become a member of such
Investment Company's Board, officer, employee or agent of any Fund, shall
be deemed, when rendering services to such Fund or acting on any business
of such Fund (other than services or business in connection with the duties
of the Principal Servicer hereunder) to be rendering such services to or
acting solely for such Fund and not as an officer, trustee, partner,
employee or agent or one under the control or direction of the Principal
Servicer even though paid by the Principal Servicer.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. The Principal Servicer is expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust of each Investment
Company that is a Massachusetts business trust and agrees that the
obligations assumed by each such Investment Company pursuant to this
Agreement shall be limited in any case to such Investment Company and its
assets and that the Principal Servicer shall not seek satisfaction of any
such obligations from the shareholders of such Investment Company, the
Trustees, Officers, Employees or Agents of such Investment Company, or any
of them.
9. The execution and delivery of this Agreement have been authorized by the
Directors of the Principal Servicer and signed by an authorized officer of
the Principal Servicer, acting as such, and neither such authorization by
such Directors nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, and the obligations of this Agreement
are not binding upon any of the Directors or shareholders of the Principal
Servicer, but bind only the property of the Principal Servicer as provided
in the Articles of Incorporation of the Principal Servicer.
10. Notices of any kind to be given hereunder shall be in writing (including
facsimile communication) and shall be duly given if delivered to any
Investment Company at the following address: Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President and if delivered to the
Principal Servicer at Federated Investors Tower, Pittsburgh, PA
15222-3779, Attention:
President.
11. This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof
whether oral or written. If any provision of this Agreement shall be held
or made invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Sections 3 and 4, hereof, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and shall be governed by Pennsylvania law;
provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or
regulation promulgated by the Securities and Exchange Commission
thereunder.
12. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the
same instrument.
13. This Agreement shall not be assigned by any party without the prior
written consent of the Principal Servicer in the case of assignment by any
Investment Company, or of the Investment Companies in the case of
assignment by the Principal Servicer, except that any party may assign to
a successor all of or a substantial portion of its business to a party
controlling, controlled by, or under common control with such party.
Nothing in this Section 13 shall prevent the Principal Servicer from
delegating its responsibilities to another entity to the extent provided
herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Investment Companies (listed on Schedule
A)
Attest: /s/ S. Elliott Cohan By: /s/ John W. McGonigle
Title: Assistant Secretary Title: Executive Vice President
Federated Securities Corp.
Attest: /s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
<PAGE>
Exhibit 1
to the
Principal Shareholder Servicer's Agreement
Related to Class B Shares of
the Funds
The following provisions are hereby incorporated and made part of the
Principal Shareholder Servicer's Agreement (the "Principal Shareholder
Servicer's Agreement") as of the 24th day of October, 1997, by and between those
Investment Companies on behalf of the Portfolios (individually referred to
herein as a "Fund" and collectively as "Funds") and Classes of Shares
("Classes") listed on Schedule A to Exhibit 1, as may be amended from time to
time, having their principal office and place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779, and who have approved this form of
Agreement and Federated Securities Corp. as the principal shareholder servicer
(the "Principal Servicer"). Each of the Exhibits hereto is incorporated herein
in its entirety and made a part hereof. In the event of any inconsistency
between the terms of this Exhibit and the terms of the Principal Shareholder
Servicer's Agreement, the terms of this Exhibit shall govern.
1. Each Investment Company hereby appoints the Principal Servicer to arrange
for the rendition of the shareholder services in respect of Class B Shares
("Class B Shares") of each Fund. Pursuant to this appointment, the
Principal Servicer is authorized to select various companies including but
not limited to Federated Shareholder Services ("Companies or a Company ")
to provide such services.
2. (a) In consideration of the Principal Servicer's Services under this
Agreement in respect of the Class B Shares each Fund agrees to pay the
Principal Servicer or at its direction its "Allocable Portion" (as
hereinafter defined) of a fee (the "Servicing Fee") equal to 0.25 of 1%
per annum of the average daily net asset value of the Class B Shares of
the Fund outstanding from time to time, provided however, that in the
event the Fund operates as a fund of funds (a "FOF Fund") by investing
the proceeds of the issuance of its Class B Shares in Class A Shares of
another fund (the "Other Fund") and the Principal Shareholder Servicer
receives a servicing fee in respect of the Class A Shares of the Other
Fund so acquired by the FOF Fund, the Servicing Fee payable in respect
of such Class B Shares of the FOF Fund will be reduced by the amount of
the servicing fee actually received by the Principal Shareholder
Servicer or its assign from the Other Fund in respect of the Class A
Shares of the Other Fund acquired with the proceeds of such Class B
Shares of the FOF Fund.
(b)(i) The Principal Servicer will be deemed to have fully earned its
Allocable Portion (computed as of any date) of the Servicing Fee
payable in respect of the Class B Shares of a Fund (and to have
satisfied its obligation to arrange for shareholder services in respect
of such Class B Shares) on the date it has arranged for shareholder
services to be performed by Federated Shareholder Services by payment
of the lump sum contemplated by Alternative A to Exhibit 1 to the
Shareholder Services Agreement among the Principal Servicer, Federated
Shareholder Services and the Fund dated as of the date hereof (the
"Shareholder Services Agreement") to Federated Shareholder Services
(whose obligations are fully supported by its parent company) in
respect of each "Commission Share" (as defined in the Allocation
Schedule attached hereto in Schedule B) of the Fund, taken into account
in determining such Principal Servicer's Allocable Portion of such
Servicing Fees as of such date. The Principal Servicer shall not be
deemed to have any other duties in respect of the Shares and its
Allocable Portion of the Servicing Fees to which the preceding sentence
applies and such arrangements shall be deemed a separate and distinct
contractual arrangement from that described in clause (ii).
(ii) The Principal Servicer will be deemed to have fully earned any
Servicing Fees not included in its Allocable Portion (i.e., those
attributable to Shares in respect of which Alternative A under Exhibit
1 to the Shareholder Services Agreement is not applicable) as such
services are performed in respect of such Shares.
(c)Notwithstanding anything to the contrary set forth in this Exhibit,
the Principal Shareholder Agreement, or (to the extent waiver thereof
is permitted thereby) applicable law, each Investment Company's
obligation to pay the Principal Servicer's Allocable Portion of the
Servicing Fees payable in respect of the Class B Shares of a Fund shall
not be terminated or modified for any reason (including a termination
of this Principal Shareholder Servicer's Agreement as it relates to the
Fund) except to the extent required by a change in the Investment
Company Act of 1940 (the "Act") or the Conduct Rules of the National
Association of Securities Dealers, Inc., in either case enacted or
promulgated after May 1, 1997, or in connection with a "Complete
Termination" (as hereinafter defined) in respect of the Class B Shares
of such Fund.
(d)Notwithstanding anything to the contrary in this Exhibit, the
Principal Shareholder Agreement, or (to the extent waiver thereof is
permitted thereby) applicable law, the Principal Servicer may assign,
sell or pledge (collectively, "Transfer") its rights to its Allocable
Portion of the Servicing Fees (but not its obligations to the
Investment Companies under this Principal Shareholder Servicer's
Agreement) in respect of the Class B Shares of a Fund to raise funds to
make the expenditures related to the Services and in connection
therewith upon receipt of notice of such Transfer, the Investment
Company shall pay to the assignee, purchaser or pledgee (collectively
with their subsequent transferees, "Transferees") such portion of the
Principal Servicer's Allocable Portion of the Servicing Fees in respect
of the Class B Shares of the Fund so Transferred. Except as provided in
(c) above and notwithstanding anything to the contrary set forth
elsewhere in this Exhibit, the Principal Shareholder Agreement, or (to
the extent waiver thereof is permitted thereby) applicable law, to the
extent the Principal Servicer has Transferred its rights thereto to
raise funds as aforesaid, the Investment Companies' obligation to pay
to the Principal Servicer's Transferees the Principal Servicer's
Allocable Portion of the Servicing Fees payable in respect of the Class
B Shares of each Fund shall be absolute and unconditional and shall not
be subject to dispute, offset, counterclaim or any defense whatsoever,
including without limitation, any of the foregoing based on the
insolvency or bankruptcy of the Principal Servicer, Federated
Shareholder Services (or its parent) or the failure of Federated
Shareholder Services (or its parent) to perform its Irrevocable Service
Commitment (it being understood that such provision is not a waiver of
the Investment Companies' right to pursue such Principal Servicer and
enforce such claims against the assets of such Principal Servicer other
than the Principal Servicer's right to the Distribution Fees, Servicing
Fees and CDSCs in respect of the Class B Shares of the Fund which have
been so transferred in connection with such Transfer). The Fund agrees
that each such Transferee is a third party beneficiary of the
provisions of this clause (d) but only insofar as those provisions
relate to Servicing Fees transferred to such Transferee.
(e)For purposes of this Principal Shareholder Servicer's Agreement, the
term Allocable Portion of Servicing Fees payable in respect of the
Class B Shares of any Fund shall mean the portion of such Servicing
Fees allocated to such Principal Servicer in accordance with the
Allocation Schedule attached hereto as Schedule B.
(f)For purposes of this Principal Shareholder Servicer's Contract, the
term "Complete Termination" of shareholder servicing arrangements in
respect of Class B Shares of a Fund means a termination of shareholder
servicing arrangements involving the complete cessation of payments of
Servicing Fees in respect of all Class B Shares, and the complete
cessation of payments of servicing fees for every existing and future
class of shares of the Fund and any successor Fund or any Fund
acquiring a substantial portion of the assets of the Fund ,which has
substantially similar characteristics to the Class B Shares taking into
account the manner and amount of sales charge, servicing fee,
contingent deferred sales charge or other similar charge borne directly
or indirectly by the holders of such shares.
3. The Principal Servicer may enter into separate written agreements with
Companies to provide the services set forth in Paragraph 1 herein. The
schedules of fees to be paid such Companies and the basis upon which such
fees will be paid shall be determined from time to time by the Principal
Servicer in its sole discretion.
4. The Principal Servicer will prepare reports to the Board of
Trustees/Directors of the Investment Companies on a quarterly basis
showing amounts expended hereunder including amounts paid to Companies and
the purpose for such expenditures.
In consideration of the mutual covenants set forth in the Principal
Shareholder Servicer's Contract, the Principal Servicer and the Investment
Companies hereby execute and deliver this Exhibit with respect to the Class B
Shares of each Fund.
<PAGE>
Witness the due execution hereof this 24th day of October, 1997.
ATTEST: INVESTMENT COMPANIES (listed on Schedule A)
By: /s/ S. Elliott Cohan By: /s/ John W. McGonigle
Title: Assistant Secretary Title: Executive Vice President
ATTEST: FEDERATED SECURITIES CORP.
By: /s/ Leslie K. Platt By: /s/ Byron F. Bowman
Title: Assistant Secretary Title: Vice President
<PAGE>
Schedule A
Date: 10/24/97 PRINCIPAL SHAREHOLDER SERVICER'S AGREEMENT
FEDERATED AMERICAN LEADERS FUND, INC.
Class B Shares
FEDERATED EQUITY FUNDS
Federated Aggressive Growth Fund
Class B Shares
Federated Growth Strategies Fund
Class B Shares
Federated Small Cap Strategies Fund
Class B Shares
Federated Capital Appreciation Fund
Class B Shares
FEDERATED EQUITY INCOME FUND, INC.
Class B Shares
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
Class B Shares
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
Class B Shares
FEDERATED HIGH INCOME BOND FUND, INC.
Class B Shares
FEDERATED MUNICIPAL OPPORTUNITIES FUND, INC.
Class B Shares
FEDERATED MUNICIPAL SECURITIES FUND, INC.
Class B Shares
FEDERATED STOCK AND BOND FUND, INC.
Class B Shares
FEDERATED UTILITY FUND, INC.
Class B Shares
FIXED INCOME SECURITIES, INC.
Federated Strategic Income Fund
Class B Shares
INTERNATIONAL SERIES, INC.
Federated International Equity Fund
Class B Shares
Federated International Income Fund
Class B Shares
<PAGE>
INVESTMENT SERIES FUNDS, INC.
Federated Bond Fund
Class B Shares
LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST
Class B Shares
MUNICIPAL SECURITIES INCOME TRUST
Federated Pennsylvania Municipal Income Fund
Class B Shares
WORLD INVESTMENT SERIES, INC.
Federated World Utility Fund
Class B Shares
Federated Asia Pacific Growth Fund
Class B Shares
Federated Emerging Markets Fund
Class B Shares
Federated European Growth Fund
Class B Shares
Federated International Small Company Fund
Class B Shares
Federated Latin American Growth Fund
Class B Shares
Federated International High Income Fund
Class B Shares
Federated International Growth Fund
Class B Shares
The following Funds were added as of December 1, 1997:
Municipal Securities Income Trust
Federated California Municipal Income Fund
Class B Shares
World Investment Series, Inc.
Federated Global Equity Income Fund
Class B Shares
The following Funds were added as of MARCH 1, 1998:
Federated Stock Trust
Class B Shares
Exhibit 11 under N-1A
Exhibit 23 under Item 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. 43 to Form N-1A Registration Statement of Federated
High Income Bond Fund, Inc. of our report dated May 15, 1998, on the financial
statements as of March 31, 1998, of Federated High Income Bond Fund, Inc.
included in or made part of this registration statement.
By: ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
May 22, 1998
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> Federated High Income Bond Fund, Inc.
Class A Shares
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Mar-31-1998
<PERIOD-END> Mar-31-1998
<INVESTMENTS-AT-COST> 1,794,504,924
<INVESTMENTS-AT-VALUE> 1,888,275,572
<RECEIVABLES> 49,907,011
<ASSETS-OTHER> 3,027,803
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,941,210,386
<PAYABLE-FOR-SECURITIES> 18,213,429
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,098,670
<TOTAL-LIABILITIES> 22,312,099
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,842,708,903
<SHARES-COMMON-STOCK> 61,849,176
<SHARES-COMMON-PRIOR> 53,025,919
<ACCUMULATED-NII-CURRENT> 961,701
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (18,542,965)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 93,770,648
<NET-ASSETS> 748,294,250
<DIVIDEND-INCOME> 5,732,560
<INTEREST-INCOME> 145,785,717
<OTHER-INCOME> 0
<EXPENSES-NET> 25,689,583
<NET-INVESTMENT-INCOME> 125,828,694
<REALIZED-GAINS-CURRENT> 3,952,748
<APPREC-INCREASE-CURRENT> 95,882,031
<NET-CHANGE-FROM-OPS> 225,663,473
<EQUALIZATION> 541,802
<DISTRIBUTIONS-OF-INCOME> 57,323,230
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17,322,252
<NUMBER-OF-SHARES-REDEEMED> 11,104,769
<SHARES-REINVESTED> 2,605,774
<NET-CHANGE-IN-ASSETS> 700,902,613
<ACCUMULATED-NII-PRIOR> 636,608
<ACCUMULATED-GAINS-PRIOR> (22,495,713)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,762,123
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 25,738,460
<AVERAGE-NET-ASSETS> 1,569,132,847
<PER-SHARE-NAV-BEGIN> 11.310
<PER-SHARE-NII> 1.000
<PER-SHARE-GAIN-APPREC> 0.790
<PER-SHARE-DIVIDEND> 1.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.100
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> Federated High Income Bond Fund, Inc.
Class B Shares
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Mar-31-1998
<PERIOD-END> Mar-31-1998
<INVESTMENTS-AT-COST> 1,794,504,924
<INVESTMENTS-AT-VALUE> 1,888,275,572
<RECEIVABLES> 49,907,011
<ASSETS-OTHER> 3,027,803
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,941,210,386
<PAYABLE-FOR-SECURITIES> 18,213,429
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,098,670
<TOTAL-LIABILITIES> 22,312,099
<SENIOR-EQUITY> 0
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<TABLE> <S> <C>
<S> <C>
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<NUMBER> 003
<NAME> Federated High Income Bond Fund, Inc.
Class C Shares
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