[Graphic]
Federated Investors
Federated High Income Bond Fund, Inc.
21ST ANNUAL REPORT
MARCH 31, 1998
ESTABLISHED 1977
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
Federated High Income Bond Fund, Inc. was created in 1977, and I am pleased
to present its 21st Annual Report. The fund is designed to provide high
monthly income from a broadly diversified portfolio of high-yield bonds.*
This report covers the 12-month period from April 1, 1997 through March 31,
1998. It begins with a discussion with the fund's portfolio manager, Mark E.
Durbiano, Senior Vice President of Federated Advisers. Following his discussion
are three additional items of shareholder interest. First is a series of graphs
showing the fund's long-term investment performance. Second is a complete
listing of the fund's high-yielding corporate bond holdings. Third is the
publication of the fund's financial statements.
The continued favorable economy and a healthy demand for high-yield bonds
created a strong environment for Federated High Income Bond Fund, Inc. The fund
performed well -- both in terms of share value growth and current income. The
performance of each share class in terms of total return, income distribution,
and net asset value increase follows.**
TOTAL RETURN INCOME NET ASSET VALUE INCREASE
Class A Shares 16.48% $1.00 $11.31 to $12.10 = 7%
Class B Shares 15.52% $0.91 $11.31 to $12.09 = 7%
Class C Shares 15.51% $0.91 $11.31 to $12.09 = 7%
On March 31, 1998, the fund's nearly $2 billion in assets were widely
diversified across more than 300 carefully researched high-yield issues that
spanned the entire business and industrial spectrum.
* Lower rated bonds typically offer higher yields to help compensate investors
for the increased risk associated with them. Among these risks are lower
creditworthiness, greater price volatility, more risk to principal and income
than with higher-rated securities, and increased possibilities for default.
** Performance quoted is based on net asset value, represents past performance,
and is not indicative of future results. Investment return and principal value
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Total returns for the period based on offering
price for Class A, B, and C Shares were 11.27%, 9.60%, and 14.46%, respectively.
Thank you for investing a portion of your wealth in Federated High Income Bond
Fund, Inc. Your questions, comments, or suggestions about the fund are always
welcome.
Very sincerely yours,
[Graphic]
Richard B. Fisher
President
May 15, 1998
INVESTMENT REVIEW
[Graphic]
Mark E. Durbiano
Senior Vice President
Federated Advisers
[Graphic]
HIGH-YIELD BONDS DELIVERED ATTRACTIVE TOTAL RETURNS DURING THE 12-MONTH
REPORTING PERIOD ENDED MARCH 31, 1998. COULD YOU REVIEW THE PERFORMANCE OF
THE HIGH-YIELD SECTOR FOR THE FUND'S FISCAL YEAR?
The high-yield market delivered strong returns for the 12-month reporting period
ended March 31, 1998. The market benefited greatly from the period's almost
ideal economic and financial market conditions. The economy continued to expand
at a moderate-to-strong pace, while inflation continued to remain on the low
side. This scenario led to soaring stock prices (48.00% as reported by the
Standard & Poor's ("S&P") 500 Index*) and lower interest rates, as 10-year
Treasury bond yields declined approximately 125 basis points during the year.
Strength in the financial markets coupled with strong demand for high-yield
securities resulted in excellent total returns for high-yield securities. For
example, the Lehman Brothers High Yield Bond Index returned 15.27% for the
12-month reporting period ended March 31, 1998, outperforming the Lehman
Brothers Aggregate Bond Index, a measure of high-quality bond performance, which
returned 12.00%.**
[Graphic]
WHAT IMPACT DID THE ASIAN ECONOMIC CRISIS HAVE ON HIGH-YIELD BONDS?
The performance of all financial assets, including high-yield bonds, was hurt by
investors' interpretations of developments in Asia. Concerns over Asia had a
negative effect during the fourth quarter of 1997, as investors feared that
Asian economic problems would slow the U.S. economy and potentially push us into
recession. This caused equity prices to soften, the yield spread between
high-yield bonds and Treasuries to widen, and the cyclical sectors of the
high-yield market to underperform. During the fourth quarter of 1997,
high-quality bonds actually outperformed high-yield securities.
* The S&P 500 Index is an index of common stocks in industry, transportation,
financial, and public utility companies. This index is unmanaged, and
investments cannot be made in an index.
** The Lehman Brothers Aggregate Bond Index is an index comprising securities
from Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities
Index, and the Asset-Backed Securities Index. The Lehman Brothers High Yield
Bond Index is an index that covers the universe of fixed-rate, publicly issued,
non-investment grade debt securities. These indices are unmanaged, and
investments cannot be made in an index.
However, the U.S. economy shrugged off Asia's problems and continued to exhibit
the almost ideal combination of strong growth coupled with low inflation. As
investors became less concerned with an Asian-induced slowdown, the stock market
surged, yield spreads between high-yield bonds and U.S. Treasuries narrowed, and
cyclical high-yield sectors outperformed. For the first quarter of 1998 (the
last quarter of the fund's fiscal year), high-yield bonds generated strong
relative returns versus their high-quality counterparts. For example, the Lehman
Brothers High Yield Bond Index returned 3.36% -- outperforming the Lehman
Brothers Aggregate Bond Index, which returned 1.54% for the first quarter of
1998.
[Graphic]
LOOKING SPECIFICALLY AT THE HIGH-YIELD MARKET, WHAT SECTORS PERFORMED THE
STRONGEST?
Several areas of the high-yield market generated above-average performance over
the 12-month reporting period ended March 31, 1998. The telecommunication sector
was a star performer as aggressive young companies accelerated their plant build
out, signed up new customers, and captured market share from their
semi-monopolistic competitors. In some cases, these companies became acquisition
candidates for larger companies looking to expand their business profile in the
telecommunications market.
Investors were also rewarded for taking increasing levels of credit risk in the
high-yield marketplace. For example, the CCC-rated sector, one of the lowest
quality sectors, returned 19.15% during the period according to Lehman Brothers,
while the B-rated sector returned 15.66%, and the BB-rated sector, the highest
quality high-yield bonds, returned 14.21%.
[Graphic]
HOW DID FEDERATED HIGH INCOME BOND FUND, INC. PERFORM FOR THE FISCAL YEAR
ENDED MARCH 31, 1998?
Consistent with the overall performance of the high-yield market, Federated High
Income Bond Fund, Inc. generated attractive returns for shareholders during the
12-month reporting period ended March 31, 1998. Class A, B, and C Shares
produced total returns of 16.48%, 15.52%, and 15.51%, respectively, based on net
asset value.*** The fund's Class A, B, and C Shares outperformed the Lehman
Brothers High Yield Bond Index, which returned 15.27% for the 12-month reporting
period ended March 31, 1998. The fund's Class A, B, and C Shares modestly
underperformed the Lipper High Current Yield Funds Average, which returned
16.94% for the same period.+
[Graphic]
WHAT FACTORS AFFECTED THE FUND'S RETURN OVER THE PERIOD BOTH ON AN ABSOLUTE
BASIS AS WELL AS RELATIVE TO THE INDICES?
Several factors affected the fund's performance over the reporting period.
First, the fund's quality profile influenced returns relative to the indices.
The fund tended to have a higher quality profile relative to the Lipper High
Current Yield Funds Average and a modestly lower quality profile relative to the
Lehman Brothers High Yield Bond Index. The superior performance of lower quality
CCC-rated securities and the fund's underweight in this sector relative to the
average mutual fund explains the relative underperformance versus the Lipper
High Current Yield Funds Average.
*** Performance quoted is based on net asset value, represents past performance,
and is not indicative of future results. Investment return and principal value
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original cost. Total returns for the period based on offering
price for Class A, B, and C Shares were 11.27%, 9.60%, and 14.46%, respectively.
+ Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling into
the categories indicated. These figures do not reflect sales charges.
Second, the fund continued to benefit from its overweight in telecommunication,
cable and broadcasting as these sectors outperformed the overall market.
Particular telecommunication standouts were competitive local exchange carriers
(CLECs). These companies were affected favorably by continued success in
executing their aggressive business plans as well as consolidation activity. For
example, BROOKS FIBER was acquired by Worldcom, which tendered for the Brooks
securities at attractive levels, and TELEPORT COMMUNICATIONS announced plans to
be acquired by AT&T driving prices higher. NEXTEL, a cellular-like wireless
phone provider, also outperformed on better-than-expected subscriber growth. On
the cable side, the fund's United Kingdom cable TV holdings, like TELEWEST and
INTERNATIONAL CABLETEL, performed well as industry consolidation accelerated and
subscribers continued to grow. On the broadcasting side, consolidation continued
to benefit companies like SINCLAIR BROADCAST GROUP and CHANCELLOR MEDIA
contributing to growing cash flow and geographic diversification.
Finally, the fund benefited from the outperformance of specific issuers like
METTLER TOLEDO and AMF, which completed initial stock offerings during the
period, JOHNSTOWN AMERICA on improved financial results, and ASTOR CORP., which
was acquired by AlliedSignal, an investment grade issuer during the period.
[Graphic]
WHAT WERE THE FUND'S TOP HOLDINGS AS OF MARCH 31, 1998?
The top 10 holdings out of more than 300 total issues were as follows:
PERCENTAGE OF
NAME NET ASSETS
NEXTEL 2.03%
Viacom, Inc. 1.98%
Chancellor Media Corp. 1.97%
Tenet Healthcare Corp. 1.95%
Premier Parks/Six Flags 1.75%
First Nationwide Holdings, Inc. 1.55%
TeleWest PLC 1.46%
Sinclair Broadcast Group 1.42%
Revlon Consumer Products Corp. 1.36%
International Cabletel, Inc. 1.35%
TOTAL 16.82%
[Graphic]
AS A STRONG YEAR FOR HIGH-YIELD BONDS DRAWS TO A CLOSE, WHAT IS YOUR OUTLOOK FOR
THE HIGH-YIELD BOND MARKET, AND WHAT ARE YOUR SECTOR STRATEGIES GOING FORWARD?
As we proceed through 1998, we remain cautiously optimistic about the outlook
for high-yield bonds. We do expect to see some slowing in the domestic economy
as the problems in Asia begin to take effect. This may lead to some additional
spread widening between high-yield bonds and Treasuries, although it should be
modest given the approximately 75 basis point widening that had occurred since
the October 1997 lows. The widening should be concentrated in the lowest quality
sectors.
From a portfolio standpoint, we continue to maintain a modestly higher quality
portfolio than normal. We remain overweighted in the telecommunication sector.
This sector is experiencing a burst of entrepreneurial activity that is
resulting in aggressive new competitors creating enterprises with substantial
value. We believe that, as these companies successfully execute their business
plans, their bonds will outperform the overall market. We also believe that
consolidation will continue to benefit high-yield bondholders.
We continue to like the stability of the U.S. cable industry, as well as the
growth and consolidation prospects for our holdings in the United Kingdom. We
are also overweighted in the broadcast industry, which continues to benefit from
consolidation, especially on the radio side, where we believe several companies
will emerge as dominant nationwide players.
[Graphic]
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN FEDERATED HIGH INCOME BOND FUND,
INC.
INITIAL INVESTMENT:
IF YOU HAD MADE AN INITIAL INVESTMENT OF $21,000 IN THE CLASS A SHARES OF
FEDERATED HIGH INCOME BOND FUND, INC. ON 11/30/77, REINVESTED YOUR DIVIDENDS AND
CAPITAL GAINS, AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE BEEN WORTH
$173,982 ON 3/31/98. YOU WOULD HAVE EARNED A 10.96%* AVERAGE ANNUAL TOTAL RETURN
FOR THE INVESTMENT LIFE SPAN.
One key to investing wisely is to reinvest all distributions in fund shares.
This increases the number of shares on which you can earn future dividends, and
you gain the benefit of compounding.
As of 3/31/98,Class A Shares' average annual 1-year, 5-year, and 10-year total
returns were 11.27%, 10.33%, and 11.99%, respectively. Class B Shares' average
annual 1-year and since inception (9/27/94) total returns were 9.60% and 12.05%,
respectively. Class C Shares' average annual 1-year and since inception
(4/30/93) total returns were 14.46% and 10.50%, respectively.**
[Graphic representation A1 omitted. See Appendix.]
* Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 4.50% sales
charge applicable to an initial investment in Class A Shares.
Data quoted represents past performance and does not guarantee future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
** The total return stated takes into account the 4.50% sales charge for Class A
Shares, the 5.50% contingent deferred sales charge for Class B Shares, and the
1.00% contingent deferred sales charge for Class C Shares.
FEDERATED HIGH INCOME BOND FUND, INC.
ONE STEP AT A TIME:
$1,000 INITIAL INVESTMENT AND SUBSEQUENT INVESTMENTS OF $1,000 EACH YEAR FOR 20
YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL GAINS) GREW TO $85,117.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of Federated
High Income Bond Fund, Inc. on 11/30/77, reinvested your dividends and capital
gains, and did not redeem any shares, you would have invested only $21,000, but
your account would have reached a total value of $85,117* by 3/31/98. You would
have earned an average annual total return of 12.03%.
A practical investment plan helps you pursue long-term performance from
high-yield corporate bonds. Through systematic investing, you buy shares on a
regular basis and reinvest all earnings. An investment plan works for you when
you invest only $1,000 annually. You can take it one step at a time.
Put time, money, and compounding to work.
[Graphic representation A2 omitted. See Appendix.]
* This chart assumes that the subsequent annual investments are made on the last
day of each anniversary month. No method of investing can guarantee a profit or
protect against loss in down markets. However, by investing regularly over time
and buying shares at various prices, investors can purchase more shares at lower
prices. All accumulated shares have the ability to pay income to the investor.
Because such a plan involves continuous investment, regardless of changing price
levels, the investor should consider whether or not to continue purchases
through periods of low price levels.
FEDERATED HIGH INCOME BOND FUND, INC.
HYPOTHETICAL INVESTOR PROFILE: INVESTING FOR HIGH MONTHLY INCOME
Chuck Colby is a fictional investor who, like many other shareholders, is
looking for high monthly income opportunities.
Chuck is an attorney on his way up the corporate ladder. On March 31, 1988, he
invested $5,000 in the Class A Shares of Federated High Income Bond Fund, Inc.
As this chart shows, over 10 years, his original $5,000 investment has grown to
$15,517. This represents an 11.99% average annual total return. For Chuck, that
means extra money toward the construction of his first home.
[Graphic representation A3 omitted. See Appendix.]
This hypothetical scenario is provided for illustrative purposes only and
does not represent the result obtained by any particular shareholder. Past
performance does not guarantee future results.
FEDERATED HIGH INCOME BOND FUND, INC.
CLASS A SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED HIGH INCOME BOND FUND, INC. (CLASS A
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
Federated High
Income Bond Fund, Inc. (Class A Shares) (the "Fund") from March 31, 1988 to
March 31, 1998, compared to the Lehman Brothers Single B Rated Index (LBSBRI)
and the Lipper High Current Yield Funds Average (LHCYFA).+
[Graphic representation A4 omitted. See Appendix.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 4.50% ($10,000 investment minus $450 sales charge =
$9,550). The Fund's performance assumes the reinvestment of all dividends and
distributions. The LBSBRI and the LHCYFA have been adjusted to reflect
reinvestment of dividends on securities in the index and the average.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The LBSBRI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. This index is
unmanaged. The LHCYFA represents the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into this category, and is not adjusted to reflect any sales charges.
However, these total returns are reported net of expenses or other fees that the
SEC requires to be reflected in a fund's performance.
FEDERATED HIGH INCOME BOND FUND, INC.
CLASS B SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED HIGH INCOME BOND FUND, INC. (CLASS B
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
High Income Bond Fund, Inc. (Class B Shares) (the "Fund") from September 27,
1994 (start of performance) to March 31, 1998, compared to the Lehman Brothers
Single B Rated Index (LBSBRI) and the Lipper High Current Yield Funds Average
(LHCYFA).+
[Graphic representation A5 omitted. See Appendix.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 3.00% contingent deferred sales charge on any redemption
less than four years from the purchase date. The maximum contingent deferred
sales charge is 5.50% on any redemption less than one year from the purchase
date. The Fund's performance assumes the reinvestment of all dividends and
distributions. The LBSBRI and the LHCYFA have been adjusted to reflect
reinvestment of dividends on securities in the index and the average.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The LBSBRI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. This index is
unmanaged. The LHCYFA represents the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into this category and is not adjusted to reflect any sales charges.
However, these total returns are reported net of expenses or other fees that the
SEC requires to be reflected in a fund's performance.
FEDERATED HIGH INCOME BOND FUND, INC.
CLASS C SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED HIGH INCOME BOND FUND, INC. (CLASS C
SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
High Income Bond Fund, Inc. (Class C Shares) (the "Fund") from April 30, 1993
(start of performance) to March 31, 1998, compared to the Lehman Brothers Single
B Rated Index (LBSBRI) and the Lipper High Current Yield Funds Average
(LHCYFA).+
[Graphic representation A6 omitted. See Appendix.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 1.00% contingent deferred sales charge on any redemption
less than one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The LBSBRI and the LHCYFA have
been adjusted to reflect reinvestment of dividends on securities in the index
and average.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The LBSBRI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. This index is
unmanaged. The LHCYFA represents the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into this category, and is not adjusted to reflect any sales charges.
However, these total returns are reported net of expenses or other fees that the
SEC requires to be reflected in a fund's performance.
FEDERATED HIGH INCOME BOND FUND, INC.
PORTFOLIO OF INVESTMENTS
MARCH 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--92.7%
AEROSPACE & DEFENSE--0.3 %
$ 1,000,000 (a) Aviation Sales Co., Sr. Sub. Note, 8.125%, $ 995,000
2/15/2008
4,000,000 Tracor, Inc., Sr. Sub. Note, 8.50%, 4,130,000
3/1/2007
1,300,000 United Defense Industries, Inc., 1,340,625
Sr. Sub. Note, 8.75%, 11/15/2007
Total 6,465,625
AUTOMOBILE--2.7%
5,975,000 (a) Accuride Corp., Sr. Sub. Note, 9.25%, 5,975,000
2/1/2008
4,425,000 Aftermarket Technology Co., Sr. 4,933,875
Sub. Note, 12.00%, 8/1/2004
1,875,000 Aftermarket Technology Co., Sr.
Sub. Note, Series D, 12.00%,
8/1/2004 2,090,625
13,200,000 Collins & Aikman Products Co., Sr. 14,916,000
Sub. Note, 11.50%, 4/15/2006
1,700,000 Delco-Remy International, Inc., Sr. 1,759,500
Note, 8.625%, 12/15/2007
6,250,000 Exide Corp., Sr. Note, 10.00%, 6,625,000
4/15/2005
6,000,000 Lear Corp., Sub. Note, 9.50%, 6,652,500
7/15/2006
2,000,000 Lear Seating Corp., Sub. Note, 2,037,500
8.25%, 2/1/2002
2,550,000 OshKosh Truck Corp., Sr. Sub., 2,588,250
8.75%, 3/1/2008
4,125,000 Oxford Automotive, Inc., Sr. Sub. 4,382,813
Note, 10.125%, 6/15/2007
Total 51,961,063
BANKING--1.4%
13,435,000 First Nationwide Escrow Corp., Sr. 15,147,963
Sub. Note, 10.625%, 10/1/2003
8,600,000 First Nationwide Holdings, Inc., 9,589,000
Sr. Note, 12.25%, 5/15/2001
1,725,000 First Nationwide Holdings, Inc., 1,841,438
Sr. Sub. Note, 9.125%, 1/15/2003
Total 26,578,401
BEVERAGE & TOBACCO--0.4%
7,375,000 Dimon, Inc., Sr. Note, 8.875%, 7,651,563
6/1/2006
BROADCAST RADIO & TV--8.0%
11,800,000 ACME Television, LLC, Sr. Disc. 9,735,000
Note, 0/10.875%, 9/30/2004
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
BROADCAST RADIO & TV--CONTINUED
$ 7,725,000 (a) Big City Radio, Inc., Sr. Disc. Note, $ 5,716,500
0/11.25%, 3/15/2005
4,375,000 Capstar Broadcasting Partners, 4,637,500
Inc., Sr. Sub. Note, 9.25%,
7/1/2007
5,200,000 Chancellor Media Corp., Company 5,824,000
Guarantee, 10.50%, 1/15/2007
3,700,000 Chancellor Media Corp., Sr. Sub. 3,903,500
Note, 8.75%, 6/15/2007
7,250,000 Chancellor Media Corp., Sr. Sub. 7,721,250
Note, 9.375%, 10/1/2004
10,625,000 (a) Chancellor Radio Broadcasting Co., Sr. Sub.
Note, 8.125%,
12/15/2007 10,837,500
20,625,000 Fox/Liberty Networks, LLC, Sr. 14,128,125
Disc. Note, 0/9.75%, 8/15/2007
4,900,000 Fox/Liberty Networks, LLC, Sr. 5,120,500
Note, 8.875%, 8/15/2007
6,760,000 Heritage Media Corp., Sr. Sub. 7,300,800
Note, 8.75%, 2/15/2006
3,000,000 Lamar Advertising Co., Sr. Sub. 3,127,500
Note, 8.625%, 9/15/2007
5,400,000 Lamar Advertising Co., Sr. Sub. 5,892,750
Note, 9.625%, 12/1/2006
3,200,000 NWCG Holding Corp., Sr. Disc. Note, 2,981,760
13.50%, 6/15/1999
8,400,000 Outdoor Systems, Inc., Sr. Sub. 8,883,000
Note, 8.875%, 6/15/2007
4,850,000 Outdoor Systems, Inc., Sr. Sub. 5,225,875
Note, 9.375%, 10/15/2006
7,850,000 SCI Television, Inc., Sr. Secd. 8,059,438
Note, 11.00%, 6/30/2005
7,425,000 SFX Broadcasting, Inc., Sr. Sub. 8,316,000
Note, 10.75%, 5/15/2006
4,975,000 Sinclair Broadcast Group, Inc., Sr. 5,397,875
Sub. Note, 10.00%, 9/30/2005
6,475,000 Sinclair Broadcast Group, Inc., Sr. 6,734,000
Sub. Note, 8.75%, 12/15/2007
3,825,000 Sinclair Broadcast Group, Inc., Sr. 4,016,250
Sub. Note, 9.00%, 7/15/2007
1,875,000 Sullivan Broadcast Holdings Inc., 2,634,375
Deb., 13.25%, 12/15/2006
7,400,000 Sullivan Broadcast Holdings Inc., 8,066,000
Sr. Sub. Note, 10.25%, 12/15/2005
5,500,000 Young Broadcasting, Inc., Sr. Sub. 5,940,000
Note, 10.125%, 2/15/2005
2,000,000 Young Broadcasting, Inc., Sr. Sub. 2,220,000
Note, 11.75%, 11/15/2004
1,000,000 Young Broadcasting, Inc., Sr. Sub. 1,042,500
Note, 9.00%, 1/15/2006
Total 153,461,998
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
BUILDING & DEVELOPMENT--0.9%
$ 6,475,000 (a) American Architectural Products Corp., Sr.
Note, 11.75%,
12/1/2007 $ 6,814,938
5,850,000 American Builders & Contractors
Supply Co., Inc., Sr. Sub. Note,
10.625%, 5/15/2007 6,120,563
4,600,000 Building Materials Corp. of 4,795,500
America, Sr. Note, 8.625%,
12/15/2006
Total 17,731,001
BUSINESS EQUIPMENT & SERVICES--1.7%
10,025,000 Dialog Corp. PLC, Sr. Sub. Note, 11,052,563
11.00%, 11/15/2007
4,850,000 Electronic Retailing Systems International,
Inc., Unit, 0/13.25%, 2/1/2004 2,934,250
4,875,000 (a) Fisher Scientific International, Inc., Sr. 4,984,688
Sub. Note, 9.00%, 2/1/2008
4,225,000 Knoll Inc., Sr. Sub. Note, 10.875%, 4,816,500
3/15/2006
3,075,000 Outsourcing Solutions, Inc., Sr. 3,305,625
Sub. Note, 11.00%, 11/1/2006
5,166,000 United Stationers Supply Co., Sr. 5,992,560
Sub. Note, 12.75%, 5/1/2005
Total 33,086,186
CABLE TELEVISION--11.8%
91,523 Australis Media Ltd., Sr. Disc. 18,305
Note, 0/15.75%, 5/15/2003
5,350,000 Australis Media Ltd., Unit, 1,070,000
0/14.00%, 5/15/2003
3,600,000 CF Cable TV, Inc., Sr. Secd. 2nd 4,073,652
Priority Note, 11.625%, 2/15/2005
3,000,000 CSC Holdings, Inc., Sr. Note, 3,105,000
7.875%, 12/15/2007
4,925,000 CSC Holdings, Inc., Sr. Sub. Deb., 5,479,063
9.875%, 2/15/2013
1,500,000 CSC Holdings, Inc., Sr. Sub. Note, 1,762,500
10.50%, 5/15/2016
9,500,000 CSC Holdings, Inc., Sr. Sub. Note, 10,188,750
9.25%, 11/1/2005
4,175,000 CSC Holdings, Inc., Sr. Sub. Note, 4,582,063
9.875%, 5/15/2006
3,325,000 Charter Communications Holdings,
Inc., Sr. Disc. Note, 0/14.00%,
3/15/2007 2,701,563
5,875,000 Charter Communications Southeast, 6,557,969
LP, Sr. Note, 11.25%, 3/15/2006
5,750,000 Comcast Corp., Sr. Sub. Deb., 6,181,250
9.375%, 5/15/2005
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
CABLE TELEVISION--CONTINUED
$ 3,250,000 Comcast UK Cable, Deb., 0/11.20%, $ 2,746,250
11/15/2007
12,950,000 Diamond Cable Communications PLC,
Sr. Disc. Note, 0/10.75%,
2/15/2007 9,226,875
7,175,000 Diamond Cable Communications PLC,
Sr. Disc. Note, 0/11.75%,
12/15/2005 5,740,000
3,750,000 Diamond Cable Communications PLC,
Sr. Disc. Note, 0/13.25%,
9/30/2004 3,478,125
8,425,000 (a) Diva Systems Corp., Unit, 0/12.625%, 3/1/2008 4,739,063
13,025,000 EchoStar Satellite Broadcasting
Corp., Sr. Disc. Note, 0/13.125%,
3/15/2004 12,015,563
6,300,000 FrontierVision Holdings, LP, Sr. 4,929,750
Disc. Note, 0/11.875%, 9/15/2007
6,000,000 International Cabletel, Inc., Sr.
Defd. Cpn. Note, 0/10.875%,
10/15/2003 5,925,000
14,525,000 International Cabletel, Inc., Sr. 11,946,812
Defd. Cpn. Note, 0/11.50%, 2/1/2006
9,200,000 International Cabletel, Inc., Sr. 7,958,000
Disc. Note, 0/12.75%, 4/15/2005
4,700,000 Le Groupe Videotron Ltee, Sr. Note, 5,217,000
10.625%, 2/15/2005
5,300,000 Lenfest Communications Inc., Sr. 5,518,625
Note, 8.375%, 11/1/2005
2,150,000 Lenfest Communications Inc., Sr. 2,453,687
Sub. Note, 10.50%, 6/15/2006
5,600,000 (a) Lenfest Communications Inc., Sr. Sub. Note, 5,649,000
8.25%, 2/15/2008
24,425,000 (a) NTL, Inc., Sr. Defd. Cpn. Note, 0/9.75%, 16,120,500
4/1/2008
4,000,000 Pegasus Communications Corp., Sr. 4,210,000
Note, 9.625%, 10/15/2005
4,500,000 Pegasus Media, Note, 12.50%, 5,175,000
7/1/2005
4,225,000 Rogers Cablesystems Ltd., Sr. Secd.
2nd Priority Note, 10.00%,
12/1/2007 4,726,719
7,075,000 Rogers Cablesystems Ltd., Sr. Secd.
2nd Priority Note, 10.00%,
3/15/2005 7,915,156
6,500,000 Rogers Cablesystems Ltd., Sr. Sub. 7,605,000
Gtd. Note, 11.00%, 12/1/2015
33,925,000 TeleWest PLC, Sr. Disc. Deb., 27,988,125
0/11.00%, 10/1/2007
14,000,000 UIH Australia/Pacific, Sr. Disc. 9,835,000
Note, 0/14.00%, 5/15/2006
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
CABLE TELEVISION--CONTINUED
$ 15,000,000 (a) United International Holdings,
Inc., Sr. Secd. Disc. Note,
0/10.75%, 2/15/2008 $ 9,487,500
Total 226,326,865
CHEMICALS & PLASTICS--3.4%
1,350,000 Buckeye Cellulose Corp., Sr. Sub. 1,387,125
Note, 8.50%, 12/15/2005
6,025,000 Buckeye Cellulose Corp., Sr. Sub. 6,446,750
Note, 9.25%, 9/15/2008
2,500,000 Foamex L.P., Sr. Sub. Note, 13.50%, 2,912,500
8/15/2005
8,900,000 Harris Chemical North America, 9,367,250
Inc., Sr. Note, 10.25%, 7/15/2001
5,600,000 ISP Holding, Inc., Sr. Note, 9.00%, 5,894,000
10/15/2003
3,270,000 ISP Holding, Inc., Sr. Note, 9.75%, 3,490,725
2/15/2002
4,700,000 (a) Polymer Group, Inc., Sr. Sub. Note, 8.75% 4,817,500
3/1/2008
14,750,000 Polymer Group, Inc., Sr. Sub. Note, 15,340,000
9.00%, 7/1/2007
3,975,000 RBX Corp., Sr. Sub. Note, Series B, 3,418,500
11.25%, 10/15/2005
9,625,000 Sterling Chemicals Holdings, Inc.,
Sr. Disc. Note,
0/13.50%, 8/15/2008 5,630,625
1,650,000 Sterling Chemicals, Inc., Sr. Sub. 1,716,000
Note, 11.75%, 8/15/2006
3,950,000 Uniroyal Technology Corp., Sr. 4,187,000
Secd. Note, 11.75%, 6/1/2003
Total 64,607,975
CLOTHING & TEXTILES--2.8%
4,175,000 Collins & Aikman Floorcoverings,
Inc., Sr. Sub. Note,
10.00%, 1/15/2007 4,446,375
6,025,000 Dyersburg Corp., Sr. Sub. Note, 6,273,531
9.75%, 9/1/2007
4,100,000 GFSI, Inc., Sr. Sub. Note, 9.625%, 4,315,250
3/1/2007
7,075,000 (a) Glenoit Corp., Sr. Sub. Note, 11.00%, 7,711,750
4/15/2007
6,750,000 Pillowtex Corp., Sr. Sub. Note, 7,340,625
10.00%, 11/15/2006
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
CLOTHING & TEXTILES--CONTINUED
$ 4,500,000 Pillowtex Corp., Sr. Sub. Note, $ 4,702,500
9.00%, 12/15/2007
17,375,000 WestPoint Stevens, Inc., Sr. Sub. 18,526,094
Deb., 9.375%, 12/15/2005
Total 53,316,125
CONGLOMERATES--0.5%
2,500,000 (a) ClimaChem, Inc., Sr. Note, 10.75%, 12/1/2007 2,643,750
7,325,000 (a) Eagle Picher Industries, Inc., Sr. Sub. Note, 7,508,125
9.375%, 3/1/2008
Total 10,151,875
CONSUMER PRODUCTS--4.6%
4,300,000 American Safety Razor Co., Sr. 4,708,500
Note, 9.875%, 8/1/2005
2,500,000 Amscan Holdings, Inc., Sr. Sub. 2,621,875
Note, 9.875%, 12/15/2007
5,800,000 (a) Chattem, Inc., Sr. Sub. Note, 8.875%, 5,901,500
4/1/2008
1,100,000 (a) Diamond Triumph Auto Glass, Inc., Sr. Note, 1,122,000
9.25%, 4/1/2008
3,100,000 Herff Jones, Inc., Sr. Sub. Note, 3,425,500
11.00%, 8/15/2005
4,050,000 Hosiery Corp. of America, Inc., Sr. 4,465,125
Sub. Note, 13.75%, 8/1/2002
6,725,000 ICON Fitness Corp., Sr. Disc. Note, 3,396,125
0/14.00%, 11/15/2006
6,450,000 ICON Health & Fitness, Inc., Sr. 7,062,750
Sub. Note, 13.00%, 7/15/2002
1,000,000 NBTY, Inc., Sr. Sub. Note, 8.625%, 1,032,500
9/15/2007
9,750,000 Playtex Family Products Corp., Sr. 10,140,000
Sub. Note, 9.00%, 12/15/2003
1,475,000 Playtex Products, Inc., Sr. Note, 1,534,000
8.875%, 7/15/2004
3,500,000 (a) Revlon Consumer Products Corp., Sr. Note, 3,543,750
8.125%, 2/1/2006
22,200,000 (a) Revlon Consumer Products Corp., Sr. Sub. 22,616,250
Note, 8.625%, 2/1/2008
2,400,000 (a) Sealy Corporation, Sr. Sub. Note, 9.875%, 2,556,000
12/15/2007
5,050,000 (a) Sealy Mattress Co., Sr. Sub. Disc. Note, 3,370,875
0/10.875%, 12/15/2007
5,250,000 Simmons Co., Sr. Sub. Note, 10.75%, 5,696,250
4/15/2006
5,550,000 Syratech Corp., Sr. Note, 11.00%, 4,911,750
4/15/2007
Total 88,104,750
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
CONTAINER & GLASS PRODUCTS--0.6%
$ 4,350,000 Plastic Containers, Inc., Sr. Secd. $ 4,839,375
Note, 10.00%, 12/15/2006
5,700,000 (a) Tekni-Plex, Inc., Sr. Sub. Note, 9.25%, 5,885,250
3/1/2008
Total 10,724,625
ECOLOGICAL SERVICES & EQUIPMENT--1.5%
17,325,000 Allied Waste Industries, Inc., Sr. 12,755,531
Disc. Note, 0/11.30%, 6/1/2007
10,800,000 Allied Waste North America, Inc.,
Company Guarantee, 10.25%,
12/1/2006 12,028,500
4,050,000 ICF Kaiser International, Inc., Sr. 4,212,000
Sub. Note, 13.00%, 12/31/2003
Total 28,996,031
ELECTRONICS--0.8%
4,500,000 Fairchild Semiconductor Corp., Sr. 4,725,000
Sub., 10.125%, 3/15/2007
2,375,000 (a) PX Escrow Corp., Sr. Sub. Disc. Note, 1,698,125
0/9.625%, 2/1/2006
6,425,000 (a) Viasystems, Inc., Sr. Sub. Note, 9.75%, 6,746,250
6/1/2007
2,800,000 Viasystems, Inc., Sr. Sub. Note, 2,940,000
9.75%, 6/1/2007
Total 16,109,375
FARMING & AGRICULTURE--0.2%
3,825,000 (a) Purina Mills, Inc., Sr. Sub. Note, 9.00%, 3,968,438
3/15/2010
FINANCIAL INTERMEDIARIES--0.2%
3,475,000 ContiFinancial Corp., Sr. Note, 3,569,172
8.375%, 8/15/2003
FOOD & DRUG RETAILERS--1.4%
5,775,000 Carr-Gottstein Foods Co., Sr. Sub. 6,417,469
Note, 12.00%, 11/15/2005
4,750,000 Community Distributors, Inc., Sr. 4,916,250
Note, 10.25%, 10/15/2004
3,825,000 DiGiorgio Corp., Sr. Note, 10.00%, 3,844,125
6/15/2007
8,775,000 Jitney-Jungle Stores of America,
Inc., Sr. Sub. Note, 10.375%,
9/15/2007 9,191,812
3,200,000 Stater Brothers Holdings, Inc., Sr. 3,356,000
Sub. Note, 9.00%, 7/1/2004
Total 27,725,656
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
FOOD PRODUCTS--1.9%
$ 7,600,000 Aurora Foods, Inc., Sr. Sub. Note, $ 8,208,000
9.875%, 2/15/2007
6,250,000 Curtice-Burns Foods, Inc., Sr. Sub. 6,937,500
Note, 12.25%, 2/1/2005
3,050,000 (a) Eagle Family Foods, Inc., Sr. Sub. Note, 3,065,250
8.75%, 1/15/2008
10,950,000 International Home Foods, Inc., Sr. 12,236,625
Sub. Note, 10.375%, 11/1/2006
5,300,000 Van de Kamp's, Inc., Sr. Sub. Note, 5,962,500
12.00%, 9/15/2005
Total 36,409,875
FOOD SERVICES--1.1%
16,450,000 AmeriServe Food Distribution, Inc.,
Sr. Sub. Note, 10.125%,
7/15/2007 17,766,000
4,965,000 Nebco Evans Holding Co., Sr. Disc. 3,401,025
Note, 0/12.375%, 7/15/2007
Total 21,167,025
FOREST PRODUCTS--1.7%
4,250,000 Container Corp. of America, Sr. 4,653,750
Note, 11.25%, 5/1/2004
250,000 Container Corp. of America, Sr. 270,000
Note, 9.75%, 4/1/2003
7,200,000 Four M Corp., Sr. Note, 12.00%, 7,632,000
6/1/2006
5,850,000 S. D. Warren Co., Sr. Sub. Note, 6,552,000
12.00%, 12/15/2004
8,950,000 Stone Container Corp., Sr. Note, 9,643,625
11.50%, 10/1/2004
2,675,000 Stone Container Corp., Sr. Note, 2,902,375
12.58%, 8/1/2016
1,000,000 Stone Container Corp., Unit, 1,032,500
12.25%, 4/1/2002
Total 32,686,250
HEALTHCARE--3.4%
4,000,000 Alliance Imaging, Inc., Sr. Sub. 4,160,000
Note, 9.625%, 12/15/2005
1,500,000 (a) CONMED Corp., Sr. Sub. Note, 9.00%, 3/15/2008 1,530,000
9,100,000 Dade International, Inc., Sr. Sub. 10,146,500
Note, 11.125%, 5/1/2006
3,100,000 Genesis Health Ventures, Inc., Sr. 3,255,000
Sub. Note, 9.25%, 10/1/2006
3,600,000 Genesis Health Ventures, Inc., Sr. 3,834,000
Sub. Note, 9.75%, 6/15/2005
2,350,000 (a) PharMerica, Inc., Sr. Sub. Note, 8.375%, 2,373,500
4/1/2008
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
HEALTHCARE--CONTINUED
$ 2,375,000 (a) Prime Medical Services, Inc., Sr. Sub. Note, $ 2,386,875
8.75%, 4/1/2008
11,250,000 Tenet Healthcare Corp., Sr. Note, 11,587,500
8.00%, 1/15/2005
10,850,000 Tenet Healthcare Corp., Sr. Sub. 11,989,250
Note, 10.125%, 3/1/2005
13,300,000 Tenet Healthcare Corp., Sr. Sub. 13,865,250
Note, 8.625%, 1/15/2007
Total 65,127,875
HOME PRODUCTS & FURNISHINGS--0.7%
8,550,000 Falcon Building Products, Inc., Sr.
Sub. Disc. Note, 0/10.50%,
6/15/2007 5,771,250
2,000,000 Falcon Building Products, Inc., Sr. 2,050,000
Sub. Note, 9.50%, 6/15/2007
5,200,000 (a) Werner Enterprises, Inc., Sr. Sub. Note, 5,512,000
10.00%, 11/15/2007
Total 13,333,250
HOTELS, MOTELS, INNS & CASINOS--0.4%
6,000,000 Courtyard by Marriott II LP, Sr. 6,630,000
Note, 10.75%, 2/1/2008
INDUSTRIAL PRODUCTS & EQUIPMENT--4.3%
5,600,000 Amphenol Corp., Sr. Sub. Note, 6,104,000
9.875%, 5/15/2007
4,600,000 (a) Anchor Lamina, Inc., Sr. Sub. Note, 9.875%, 4,680,500
2/1/2008
6,650,000 Cabot Safety Acquisition Corp., Sr. 7,581,000
Sub. Note, 12.50%, 7/15/2005
6,895,000 Continental Global Group, Inc., Sr. 7,446,600
Note, 11.00%, 4/1/2007
2,100,000 (a) Elgin National Industries, Inc., Sr. Note, 2,241,750
11.00%, 11/1/2007
6,850,000 Euramax International PLC, Sr. Sub. 7,569,250
Note, 11.25%, 10/1/2006
5,000,000 Fairfield Manufacturing Co., Inc., 5,250,000
Sr. Sub. Note, 11.375%, 7/1/2001
4,000,000 Hawk Corp., Sr. Note, 10.25%, 4,340,000
12/1/2003
5,100,000 International Knife & Saw, Inc., 5,635,500
Sr. Sub. Note, 11.375%, 11/15/2006
2,900,000 (a) International Utility Structures, Inc., Sr. 3,030,500
Sub. Note, 10.75%, 2/1/2008
4,000,000 Johnstown America Industries, Inc., 4,490,000
Sr. Sub. Note, 11.75%, 8/15/2005
4,125,000 Johnstown America Industries, Inc., 4,630,312
Sr. Sub. Note, 11.75%, 8/15/2005
6,850,000 MMI Products, Inc., Sr. Sub. Note, 7,603,500
11.25%, 4/15/2007
5,650,000 Neenah Corp., Sr. Sub. Note, 6,285,625
11.125%, 5/1/2007
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
INDUSTRIAL PRODUCTS & EQUIPMENT--CONTINUED
$ 5,000,000 Unifrax Investment Corp., Sr. Note, $ 5,275,000
10.50%, 11/1/2003
Total 82,163,537
LEISURE & ENTERTAINMENT--4.9%
9,477,000 AMF Group, Inc., Sr. Sub. Disc. 7,723,755
Note, 0/12.25%, 3/15/2006
2,450,000 AMF Group, Inc., Sr. Sub. Note, 2,710,312
10.875%, 3/15/2006
4,450,000 Cobblestone Golf Group, Inc., Sr. 4,984,000
Note, 11.50%, 6/1/2003
1,300,000 KSL Recreation Group, Inc., Sr. 1,426,750
Sub. Note, 10.25%, 5/1/2007
6,500,000 (a) Premier Cruises Ltd., Sr. Note, 11.00%, 6,451,250
3/15/2008
9,750,000 Premier Parks, Inc., Sr. Disc. Note 6,252,187
0/10.00%, 4/1/2008
4,000,000 Premier Parks, Inc., Sr. Note, 4,440,000
12.00%, 8/15/2003
2,650,000 Premier Parks, Inc., Sr. Note, 2,719,562
9.25%, 4/1/2006
500,000 Premier Parks, Inc., Sr. Note, 541,875
9.75%, 1/15/2007
17,450,000 Six Flags Theme Parks, Sr. Sub. 19,587,625
Disc. Note, 0/12.25%, 6/15/2005
36,925,000 Viacom, Inc., Sub. Deb., 8.00%, 37,940,437
7/7/2006
Total 94,777,753
MACHINERY & EQUIPMENT--1.8%
7,025,000 Alvey Systems, Inc., Sr. Sub. Note, 7,499,187
11.375%, 1/31/2003
8,375,000 Clark Material Handling Corp., Sr. 9,024,062
Note, 10.75%, 11/15/2006
5,150,000 (a) Columbus McKinnion Corp., Sr. Sub. Note, 5,207,937
8.50%, 4/1/2008
6,300,000 (a) National Equipment Services, Inc., Sr. Sub. 6,741,000
Note, 10.00%, 11/30/2004
4,900,000 Tokheim Corp., Sr. Sub. Note, 5,500,250
11.50%, 8/1/2006
Total 33,972,436
METALS & MINING--0.7%
4,900,000 (a) AEI Holding Co., Inc., Sr. Note, 10.00%, 5,181,750
11/15/2007
2,000,000 Anker Coal Group, Inc., Sr. Note, 1,965,000
9.75%, 10/1/2007
7,175,000 Royal Oak Mines, Inc., Sr. Sub. 5,488,875
Note, 11.00%, 8/15/2006
Total 12,635,625
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
OIL & GAS--4.4%
$ 11,775,000 Abraxas Petroleum Corp., Sr. Note, $ 12,128,250
11.50%, 11/1/2004
3,200,000 (a) Abraxas Petroleum Corp., Sr. Note, Series C, 3,296,000
11.50%, 11/1/2004
8,425,000 DI Industries, Inc., Sr. Note, 8,719,875
8.875%, 7/1/2007
6,275,000 (a) Dailey Petroleum Services Corp., Sr. Note, 6,353,437
9.50%, 2/15/2008
2,500,000 Falcon Drilling Co., Inc., Sr. Sub. 2,920,525
Note, 12.50%, 3/15/2005
12,225,000 Forcenergy, Inc., Sr. Sub. Note, 12,133,312
8.50%, 2/15/2007
4,700,000 Forcenergy, Inc., Sr. Sub. Note, 4,864,500
9.50%, 11/1/2006
3,750,000 Giant Industries, Inc., Sr. Sub. 3,937,500
Note, 9.75%, 11/15/2003
4,150,000 KCS Energy, Inc., Sr. Sub. Note, 4,139,625
8.875%, 1/15/2008
1,700,000 (a) Offshore Logistics, Inc., Sr. Note, 7.875%, 1,712,750
1/15/2008
2,575,000 Pacalta Resources Ltd., Sr. Note, 2,652,250
10.75%, 6/15/2004
3,150,000 Pride Petroleum Services, Inc., Sr. 3,386,250
Note, 9.375%, 5/1/2007
1,550,000 (a) The Houston Exploration Co., Sr. Sub. Note, 1,542,250
8.625%, 1/1/2008
6,150,000 United Meridian Corp., Sr. Sub. 6,849,562
Note, 10.375%, 10/15/2005
3,025,000 (a) Universal Compression Holdings, Inc., Sr.
Disc. Note, 0/11.375%,
2/15/2009 1,830,125
5,375,000 (a) Universal Compression Holdings, Inc., Sr.
Disc. Note, 0/9.875%,
2/15/2008 3,386,250
3,750,000 (a) XCL, Ltd., Unit, 13.50%, 5/1/2004 4,518,750
Total 84,371,211
PRINTING & PUBLISHING--1.9%
11,850,000 Affiliated Newspaper Investments,
Inc., Sr. Disc. Note, 0/13.25%,
7/1/2006 11,494,500
3,750,000 Garden State Newspapers, Inc., Sr. 4,218,750
Sub. Note, 12.00%, 7/1/2004
5,225,000 Garden State Newspapers, Inc., Sr. 5,355,625
Sub. Note, 8.75%, 10/1/2009
5,050,000 Hollinger International Publishing,
Inc., Sr. Sub. Note, 9.25%,
2/1/2006 5,353,000
3,675,000 Hollinger International Publishing,
Inc., Sr. Sub. Note, 9.25%,
3/15/2007 3,932,250
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
PRINTING & PUBLISHING--CONTINUED
$ 750,000 K-III Communications Corp., Company
Guarantee, Series B, 8.50%,
2/1/2006 $ 783,300
4,800,000 (a) Primedia, Inc., Sr. Note, 7.625%, 4/1/2008 4,776,000
Total 35,913,425
REAL ESTATE--0.3%
4,814,000 Trizec Finance Ltd., Sr. Note, 5,439,820
10.875%, 10/15/2005
RETAILERS--0.6%
7,600,000 Brylane Capital Corp., Sr. Sub. 8,094,000
Note, 10.00%, 9/1/2003
3,750,000 Leslie's Poolmart, Inc., Sr. Note, 3,937,500
10.375%, 7/15/2004
Total 12,031,500
SERVICES--0.7%
9,208,000 Coinmach Corp., Sr. Note, 11.75%, 10,359,000
11/15/2005
3,725,000 (a) SITEL Corp., Sr. Sub. Note, 9.25%, 3/15/2006 3,836,750
Total 14,195,750
STEEL--1.5%
3,200,000 Bayou Steel Corp., 1st Mtg. Note, 3,320,000
10.25%, 3/1/2001
7,750,000 EnviroSource, Inc., Sr. Note, 7,943,750
9.75%, 6/15/2003
7,400,000 GS Technologies Operating Co., 8,158,500
Inc., Sr. Note, 12.00%, 9/1/2004
3,175,000 GS Technologies Operating Co., 3,587,750
Inc., Sr. Note, 12.25%, 10/1/2005
1,000,000 Ryerson Tull, Inc., Sr. Note, 1,105,000
9.125%, 7/15/2006
4,575,000 (a) WHX Corp., Sr. Note, 10.50%, 4/15/2005 4,575,000
Total 28,690,000
SURFACE TRANSPORTATION--3.3%
3,450,000 Allied Holdings, Inc., Sr. Note, 3,570,750
8.625%, 10/1/2007
6,975,000 AmeriTruck Distribution Corp., Sr. 6,870,375
Sub. Note, 12.25%, 11/15/2005
6,025,000 Chemical Leaman Corp., Sr. Note, 6,537,125
10.375%, 6/15/2005
7,750,000 Gearbulk Holding Limited, Sr. Note, 8,515,312
11.25%, 12/1/2004
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
SURFACE TRANSPORTATION--CONTINUED
$ 9,250,000 Statia Terminals International $ 9,758,750
N.V., 1st Mtg. Note, 11.75%,
11/15/2003
12,700,000 Stena AB, Sr. Note, 10.50%, 13,938,250
12/15/2005
5,450,000 Stena AB, Sr. Note, 8.75%, 5,620,312
6/15/2007
4,400,000 (a) The Holt Group, Inc., Sr. Note, 9.75%, 4,499,000
1/15/2006
5,000,000 Trism, Inc., Sr. Sub. Note, 10.75%, 4,375,000
12/15/2000
Total 63,684,874
TELECOMMUNICATIONS & CELLULAR--15.0%
4,975,000 American Communications Services,
Inc., Sr. Disc. Note, 0/12.75%,
4/1/2006 3,980,000
2,925,000 American Communications Services,
Inc., Sr. Disc. Note, 0/13.00%,
11/1/2005 2,471,625
3,200,000 American Communications Services,
Inc., Sr. Note, 13.75%,
7/15/2007 3,856,000
1,725,000 Arch Communications Group, Inc.,
Sr. Disc. Note, 0/10.875%,
3/15/2008 1,000,500
11,875,000 Call-Net Enterprises, Inc., Sr. 8,490,625
Disc. Note, 0/9.27%, 8/15/2007
8,450,000 Comcast Cellular Holdings, Inc., 8,914,750
Sr. Note, 9.50%, 5/1/2007
3,550,000 Esprit Telecom Group PLC, Sr. Note, 3,922,750
11.50%, 12/15/2007
3,400,000 (a) FLAG Ltd., Sr. Note, 8.25%, 1/30/2008 3,510,500
9,750,000 Hermes Europe Railtel B.V., Sr. 11,090,625
Note, 11.50%, 8/15/2007
4,200,000 HighwayMaster Communications, Inc., 4,431,000
Sr. Note, 13.75%, 9/15/2005
3,800,000 ICG Holdings, Inc., Sr. Disc. Note, 2,802,500
0/11.625%, 3/15/2007
6,000,000 Intermedia Communications of
Florida, Inc., Sr. Disc. Note,
0/11.25%,
7/15/2007 4,530,000
18,300,000 Intermedia Communications of
Florida, Inc., Sr. Disc. Note,
0/12.50%,
5/15/2006 15,189,000
4,500,000 Intermedia Communications of
Florida, Inc., Sr. Note, 8.875%,
11/1/2007 4,826,250
12,350,000 McLeod, Inc., Sr. Disc. Note, 9,509,500
0/10.50%, 3/1/2007
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR UNITS VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
TELECOMMUNICATIONS & CELLULAR--CONTINUED
$ 3,000,000 (a) McLeod, Inc., Sr. Note, 8.375%, 3/15/2008 $ 3,127,500
4,725,000 McLeod, Inc., Sr. Note, 9.25%, 5,079,375
7/15/2007
6,925,000 MetroNet Communications Corp., Sr.
Disc. Note, 0/10.75%,
11/1/2007 4,535,875
6,650,000 MetroNet Communications Corp., Sr. 7,680,750
Note, 12.00%, 8/15/2007
15,250,000 Millicom International Cellular
S.A., Sr. Disc. Note, 0/13.50%,
6/1/2006 12,047,500
10,225,000 NEXTEL Communications, Inc., Sr. 6,927,437
Disc. Note, 0/10.65%, 9/15/2007
4,750,000 NEXTEL Communications, Inc., Sr. 4,583,750
Disc. Note, 0/9.75%, 8/15/2004
24,600,000 (a) NEXTEL Communications, Inc., Sr. Disc. Note, 15,928,500
0/9.95%, 2/15/2008
3,500,000 NEXTLINK Communications Inc., Sr. 3,727,500
Note, 9.625, 10/1/2007
3,225,000 (a) NEXTLINK Communications, Inc., Sr. Disc.
Note, 0/9.45%,
4/15/2008 2,055,937
8,650,000 (a) NEXTLINK Communications, Inc., Sr. Note, 8,952,750
9.00%, 3/15/2008
6,750,000 (a) Nextel International, Inc., Sr. Disc. Note, 4,083,750
0/12.125%, 4/15/2008
9,175,000 Paging Network, Inc., Sr. Sub. 9,679,625
Note, 10.00%, 10/15/2008
4,575,000 Paging Network, Inc., Sr. Sub. 4,826,625
Note, 10.125%, 8/1/2007
7,525,000 (a) Qwest Communications International, Inc., Sr.
Disc. Note, 0/8.29%,
2/1/2008 5,380,375
8,600,000 Qwest Communications International,
Inc., Sr. Disc. Note, 0/9.47%,
10/15/2007 6,299,500
10,600,000 Qwest Communications International,
Inc., Sr. Note, 10.875%,
4/1/2007 12,243,000
6,950,000 Rogers Cantel Mobile, Inc., Sr. 7,089,000
Sub. Note, 8.80%, 10/1/2007
7,750,000 Sygnet Wireless, Inc., Sr. Note, 8,680,000
11.50%, 10/1/2006
21,025,000 Teleport Communications Group,
Inc., Sr. Disc. Note, 0/11.125%,
7/1/2007 18,186,625
5,500,000 Telesystem International Wireless,
Inc., Sr. Disc. Note, 0/10.50%,
11/1/2007 3,520,000
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT,
UNITS,
OR SHARES VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
TELECOMMUNICATIONS & CELLULAR--CONTINUED
$12,425,000 Telesystem International Wireless,
Inc., Sr. Disc. Note, 0/13.25%,
6/30/2007 $ 8,697,500
7,000,000 (a) Teligent, Inc., Sr. Disc. Note, 0/11.50%, 4,077,500
3/1/2008
9,800,000 Teligent, Inc., Sr. Note, 11.50%, 10,339,000
12/1/2007
7,750,000 USA Mobile Communications, Inc., 7,556,250
Sr. Note, 9.50%, 2/1/2004
12,975,000 Vanguard Cellular Systems, Inc., 13,818,375
Deb., 9.375%, 4/15/2006
Total 287,649,624
UTILITIES--0.9%
3,150,000 CalEnergy Co., Inc., Sr. Note, 3,429,562
9.50%, 9/15/2006
4,350,000 California Energy Co., Inc., Sr. 4,703,437
Note, 10.25%, 1/15/2004
7,975,000 El Paso Electric Co., 1st Mtg. 9,077,544
Note, 9.40%, 5/1/2011
Total 17,210,543
TOTAL CORPORATE BONDS (IDENTIFIED 1,778,627,097
COST $1,684,166,279)
COMMON STOCKS--0.2%
7,500 (b) Affiliated Newspaper Investments, Inc. 828,750
77,506 (b) Alarmguard Holdings, Inc. 777,463
4,696 (b) Atlantic Gulf Communities Corp. 17,023
3,184 Australis Holdings Property Ltd., 0
Warrants
2,400 (a) (b)Bar Technologies, Inc., Warrants 144,000
8,050 (b) Cellular Communications International, Inc., 203,263
Warrants
136 (a) (b)CS Wireless Systems, Inc. 0
4,850 (a) Electronic Retailing Systems International, 121,250
Inc., Warrants
4,200 HighwayMaster Communications, Inc., 42,000
Warrants
4,750 (b) Hosiery Corp. of America, Inc. 24,938
25,200 (b) ICF Kaiser International, Inc., Warrants 2,520
3,750 (a) (b)IHF Capital, Inc., Warrants 185,625
71,200 (a) (b)Kane Industries, Inc., Warrants 0
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT,
UNITS,
OR SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
353 (a) (b)MAFCO Acquisition, Warrants $ 0
6,650 (a) MetroNet Communications Corp., Warrants 19,950
1,750 (b) Motels of America, Inc. 17,938
4,500 (b) NEXTEL Communications, Inc., Warrants 17,820
9,025 (b) Pegasus Communications Corp. 207,575
5,775 Pegasus Communications Corp., 190,575
Warrants
315,000 (a) (b)Specialty Foods Acquisition Corp. 98,280
6,325 (b) Sterling Chemicals Holdings, Inc., Warrants 180,263
30,000 (b) Sullivan Broadcast Holdings Inc., Class B 915,000
46 (a) (b)Sullivan Graphics, Inc. 0
14,000 UIH Australia/Pacific, Warrants 88,200
22,150 (b) Uniroyal Technology Corp., Warrants 135,669
14,400 (b) Wireless One, Inc., Warrants 0
TOTAL COMMON STOCKS (IDENTIFIED 4,218,102
COST $27,246,358)
PREFERRED STOCKS--4.6%
BANKING--0.2%
120,000 California Federal Preferred
Capital Corp., REIT Perpetual Pfd.
Stock,
Series A, $2.28 3,225,000
BROADCAST RADIO & TV--1.8%
54,121 American Radio Systems Corp., PIK 6,413,339
Pfd., 11.375%
40,191 Capstar Broadcasting Partners, 4,732,490
Inc., Sr. Pfd., $12.00
78,008 Chancellor Media Corp., 9,517,075
Exchangeable Pfd. Stock, $12.00
25,408 SFX Broadcasting, Inc., 3,112,564
Exchangeable Pfd. Stock, Series E
99,800 Sinclair Broadcast Group, Inc., 11,027,900
Pfd., $11.63
Total 34,803,368
CABLE TELEVISION--0.6%
2,240 Echostar Communications Corp., Sr. 2,486,400
Red. Pfd. Stk., $12.13
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
SHARES
PRINCIPAL
AMOUNT,
OR UNITS VALUE
<C> <S> <C>
PREFERRED STOCKS--CONTINUED
CABLE TELEVISION--CONTINUED
8,175 Pegasus Communications Corp., PIK $ 9,360,544
Pfd., Series A, 12.75%
Total 11,846,944
FOOD SERVICES--0.2%
45,100 (a) Nebco Evans Holding Co., Exchangeable Pfd. 4,690,400
Stock, $11.25
INDUSTRIAL PRODUCTS & EQUIPMENT--0.2%
3,575 Fairfield Manufacturing Co., Inc., 3,753,750
Exchangeable Pfd. Stock
475 (a) International Utility Structures, Inc., Unit, 501,125
$13.00
Total 4,254,875
PRINTING & PUBLISHING--0.9%
92,000 (a) Primedia, Inc., Exchangeable Pfd. Stock, 9,050,500
Series G, $8.63
72,500 Primedia, Inc., Pfd., $9.20 7,476,563
Total 16,527,063
REAL ESTATE--0.2%
52,000 Crown American Realty Trust, Sr. 2,817,776
Pfd., Series A, $1.38
TELECOMMUNICATIONS & CELLULAR--0.5%
2,124 IXC Communications, Inc., Jr. 2,602,008
Exchangeable Pfd. Stock
3,175 (a) NEXTEL Communications, Inc., Exchangeable
Pfd. Stock,
Series E, $11.13 3,375,025
3,483 NEXTEL Communications, Inc., Pfd. 4,092,914
Total 10,069,947
TOTAL PREFERRED STOCKS (IDENTIFIED 88,235,373
COST $65,897,287)
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT,
OR UNITS VALUE
<C> <S> <C>
(C)REPURCHASE AGREEMENT--0.9%
$17,195,000 BT Securities Corp., 5.97%, dated
3/31/1998,
due 4/1/1998 (AT AMORTIZED COST) $ 17,195,000
TOTAL INVESTMENTS (IDENTIFIED COST $1,888,275,572
$1,794,504,924)(D)
</TABLE>
(a) Denotes a restricted security. At March 31, 1998, these securities amounted
to $305,440,843 which represents 15.9% of total net assets.
(b) Non-income producing security.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $1,794,533,924.
The net unrealized appreciation of investments on a federal tax basis amounts to
$93,741,648 which is comprised of $117,938,621 appreciation and $24,196,973
depreciation at March 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($1,918,898,287) at March 31, 1998.
The following acronyms are used throughout this portfolio:
BIG --Bond Investors Guaranty
GTD --Guaranty
LLC --Limited Liability Corporation
LP --Limited Partnership
PIK --Payment in Kind
PLC --Public Limited Company
PP --Principal Payment
REIT --Real Estate Investment Trust
KANE INDUSTRIES, INC.
On March 18, 1994, Kane Industries, Inc., along with two of its affiliates,
Kane, Inc. and Alford Industries, Inc., filed for protection under Chapter 11 of
the U.S. Bankruptcy Code. The Fund's investment adviser is unable to predict the
outcome or timing of these proceedings.
(See Notes which are an integral part of the Financial Statements)
FEDERATED HIGH INCOME BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost
$1,794,504,924 and
tax cost $1,794,533,924) $ 1,888,275,572
Cash 2,938,144
Income receivable 35,309,882
Receivable for investments sold 4,458,215
Receivable for shares sold 10,138,914
Prepaid expenses 89,659
Total assets 1,941,210,386
LIABILITIES:
Payable for investments purchased $ 18,213,429
Payable for shares redeemed 2,529,605
Accrued expenses 1,569,065
Total liabilities 22,312,099
NET ASSETS for 158,646,569 shares outstanding $ 1,918,898,287
NET ASSETS CONSIST OF:
Paid in capital $ 1,842,708,903
Net unrealized appreciation of investments 93,770,648
Accumulated net realized loss on investments (18,542,965)
Undistributed net investment income 961,701
Total Net Assets $ 1,918,898,287
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($748,294,250 / 61,849,176 shares $12.10
outstanding)
Offering Price Per Share (100/95.50 of $12.10)* $12.67
Redemption Proceeds Per Share $12.10
CLASS B SHARES:
Net Asset Value Per Share ($980,124,500 / 81,048,573 shares $12.09
outstanding)
Offering Price Per Share $12.09
Redemption Proceeds Per Share (94.50/100 of $12.09)** $11.43
CLASS C SHARES:
Net Asset Value Per Share ($190,479,537 / 15,748,820 shares $12.09
outstanding)
Offering Price Per Share $12.09
Redemption Proceeds Per Share (99.00/100 of $12.09)** $11.97
</TABLE>
* See "Investing in The Fund" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED HIGH INCOME BOND FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 5,732,560
Interest 145,785,717
Total income 151,518,277
EXPENSES:
Investment advisory fee $ 11,762,123
Administrative personnel and services fee 1,183,458
Custodian fees 91,146
Transfer and dividend disbursing agent fees and expenses 1,288,045
Directors'/Trustees' fees 12,763
Auditing fees 20,869
Legal fees 13,574
Portfolio accounting fees 184,962
Distribution services fee--Class B Shares 5,586,434
Distribution services fee--Class C Shares 1,090,776
Shareholder services fee--Class A Shares 1,694,971
Shareholder services fee--Class B Shares 1,862,145
Shareholder services fee--Class C Shares 363,592
Share registration costs 321,462
Printing and postage 215,744
Insurance premiums 11,753
Taxes 13,174
Miscellaneous 21,469
Total expenses 25,738,460
Waivers--
Waiver of shareholder services fee--Class A Shares (48,877)
Net expenses 25,689,583
Net investment income 125,828,694
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 3,952,748
Net change in unrealized appreciation (depreciation) of 95,882,031
investments
Net realized and unrealized gain on investments 99,834,779
Change in net assets resulting from operations $225,663,473
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED HIGH INCOME BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 125,828,694 $ 90,239,152
Net realized gain (loss) on investments ($7,052,046 and
$4,383,958
net gains, respectively, as computed for federal tax purposes) 3,952,748 3,736,400
Net change in unrealized appreciation (depreciation) 95,882,031 14,085,861
Change in net assets resulting from operations 225,663,473 108,061,413
NET EQUALIZATION CREDITS (DEBITS)-- 541,802 711,322
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Class A Shares (57,323,230) (52,284,090)
Class B Shares (57,006,059) (30,228,197)
Class C Shares (11,174,312) (6,903,310)
Change in net assets resulting from distributions
to shareholders (125,503,601) (89,415,597)
SHARE TRANSACTIONS (EXCLUSIVE OF AMOUNTS ALLOCATED TO
NET INVESTMENT INCOME)--
Proceeds from sale of shares 806,888,506 505,365,871
Net asset value of shares issued to shareholders in payment
of distributions declared 63,870,285 45,806,089
Cost of shares redeemed (270,557,852) (178,213,093)
Change in net assets resulting from share transactions 600,200,939 372,958,867
Change in net assets 700,902,613 392,316,005
NET ASSETS:
Beginning of period 1,217,995,674 825,679,669
End of period (including undistributed net investment
income of $961,701 and $636,608, respectively) $ 1,918,898,287$ 1,217,995,674
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED HIGH INCOME BOND FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<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,
BEGINNING OF $11.31 $11.08 $10.54 $10.99 $11.19 $10.80 $ 8.79 $ 8.96 $10.99 $11.20
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
unrealized gain
(loss) on 0.79 0.22 0.55 (0.43) (0.19) 0.41 1.99 (0.14) (1.98) (0.20)
investments
Total from
investment
operations 1.79 1.26 1.55 0.58 0.86 1.54 3.22 1.07 (0.65) 1.20
LESS DISTRIBUTIONS
Distributions
from
net investment
income (1.00) (1.03) (1.00) (1.03) (1.06) (1.15) (1.21) (1.24) (1.38) (1.41)
Distributions in
excess of net
investment
income(b) -- -- (0.01) -- -- -- -- -- -- --
Total (1.00) (1.03) (1.01) (1.03) (1.06) (1.15) (1.21) (1.24) (1.38) (1.41)
distributions
NET ASSET VALUE,
END OF PERIOD $12.10 $11.31 $11.08 $10.54 $10.99 $11.19 $10.80 $ 8.79 $ 8.96 $10.99
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 waiver/
reimbursement(d) 0.01% 0.03% 0.06% 0.05% 0.05% 0.08% -- -- -- --
SUPPLEMENTAL DATA
Net assets, end
of
period (000 $748,294 $599,736 $530,203 $448,040 $439,149 $417,015 $351,087 $252,147 $282,149 $379,876
omitted)
Portfolio 58% 55% 53% 52% 76% 49% 37% 32% 40% 43%
turnover
</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.
(See Notes which are an integral part of the Financial Statements)
FEDERATED HIGH INCOME BOND FUND, INC.
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<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 0.78 0.21 0.51 (0.07)
investments
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.
(See Notes which are an integral part of the Financial Statements)
FEDERATED HIGH INCOME BOND FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<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 investments 0.78 0.22 0.54 (0.44) (0.23)
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.
(See Notes which are an integral part of the Financial Statements)
FEDERATED HIGH INCOME BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
1. ORGANIZATION
Federated High Income Bond Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund offers three classes of shares:
Class A Shares, Class B Shares, and Class C Shares. The investment objective of
the Fund is to seek high current income by investing primarily in a diversified
portfolio of professionally managed fixed income securities.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS -- Listed corporate bonds, other fixed income and
asset-backed securities, and unlisted securities and private placement
securities are generally valued at the mean of the latest bid and asked price as
furnished by an independent pricing service. Listed equity securities are valued
at the last sale price reported on a national securities exchange. Short-term
securities are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days or less
at the time of purchase may be valued at amortized cost, which approximates fair
market value.
REPURCHASE AGREEMENTS -- It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the "Directors").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS -- Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for equalization.
The following reclassifications have been made to the financial statements.
INCREASE (DECREASE)
UNDISTRIBUTED NET
PAID-IN CAPITAL INVESTMENT INCOME
$541,802 $(541,802)
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES -- It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
At March 31, 1998, the Fund, for federal tax purposes, had a capital loss
carryforward of $14,461,005, which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent permitted by
the Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will expire in
2000.
EQUALIZATION -- The Fund follows the accounting practice known as equalization.
With equalization, a portion of the proceeds from sales and costs of redemptions
of fund shares (equivalent, on a per share basis, to the amount of undistributed
net investment income on the date of the transaction) is credited or charged to
undistributed net investment income. As a result, undistributed net investment
income per share is unaffected by sales or redemptions of fund shares.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
RESTRICTED SECURITIES -- Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions exempt
from such registration. In some cases, the issuer of restricted securities has
agreed to register such securities for resale, at the issuer's expense either
upon demand by the Fund or in connection with another registered offering of the
securities. Many restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may be
determined to be liquid under criteria established by the Board of Directors.
The Fund will not incur any registration costs upon such resales. The Fund's
restricted securities are valued at the price provided by dealers in the
secondary market or, if no market prices are available, at the fair value as
determined by the Fund's pricing committee.
Additional information on each restricted security held at March 31, 1998 is as
follows:
SECURITY ACQUISITION DATE ACQUISITION
COST
Aviation Sales Co., Sr. Sub. 2/11/1998 $ 993,950
Note
Accuride Corp., Sr. Sub. Note 1/15/1998 - 2/3/1998 5,949,378
Big City Radio, Inc., Sr. 3/12/1998 - 3/13/1998 5,669,674
Disc. Note
Chancellor Radio Broadcasting 12/15/1997 - 3/11/1998 10,530,399
Co., Sr. Sub. Note
American Architectural 12/4/1997 - 2/27/1998 6,554,938
Products Corp., Sr. Note
Fisher Scientific 1/13/1998 - 3/18/1998 4,905,938
International, Inc., Sr. Sub.
Note
Diva Systems Corp., Unit 2/11/1998 - 2/12/1998 4,784,676
Lenfest Communications Inc., 1/30/1998 - 3/26/1998 5,635,177
Sr. Sub. Note
NTL, Inc., Sr. Defd. Cpn. 3/6/1998 - 3/19/1998 15,253,176
Note
United International
Holdings, Inc.,
Sr. Secd. Disc. Note 1/30/1998 - 2/3/1998 9,037,315
Polymer Group, Inc., Sr. Sub. 2/27/1998 - 3/17/1998 4,706,375
Note
Glenoit Corp., Sr. Sub. Note 3/26/1997 - 8/19/1997 7,280,944
ClimaChem, Inc., Sr. Note 11/21/1997 2,506,250
Eagle Picher Industries, 2/19/1998 7,340,923
Inc., Sr. Sub. Note
Chattem, Inc., Sr. Sub. Note 3/20/1998 - 3/23/1998 5,812,906
Diamond Triumph Auto Glass, 3/25/1998 1,100,000
Inc., Sr. Note
Revlon Consumer Products 1/28/1998 3,488,835
Corp., Sr. Note
Revlon Consumer Products 1/28/1998 22,206,630
Corp., Sr. Sub. Note
Sealy Corporation, Sr. Sub. 12/11/1997 2,400,000
Note
Sealy Mattress Co., Sr. Sub. 12/11/1997 3,074,188
Disc. Note
Tekni-Plex, Inc., Sr. Sub. 2/26/1998 - 3/18/1998 5,727,500
Note
PX Escrow Corp., Sr. Sub. 2/6/1998 - 3/16/1998 1,669,195
Disc. Note
Viasystems, Inc., Sr. Sub. 2/9/1998 6,714,125
Note
Purina Mills, Inc., Sr. Sub. 3/6/1998 3,825,000
Note
Eagle Family Foods, Inc., Sr. 1/16/1998 - 3/17/1998 3,042,500
Sub. Note
CONMED Corp., Sr. Sub. Note 2/26/1998 1,500,000
PharMerica, Inc., Sr. Sub. 3/31/1998 2,350,000
Note
Prime Medical Services, Inc., 3/24/1998 2,363,125
Sr. Sub. Note
Werner Enterprises, Inc., Sr. 11/14/1997 - 1/29/1998 5,270,000
Sub. Note
Anchor Lamina, Inc., Sr. Sub. 1/30/1998 - 3/17/1998 4,635,094
Note
Elgin National Industries, 11/3/1997 - 12/4/1997 2,109,875
Inc., Sr. Note
International Utility
Structures, Inc.,
Sr. Sub. Note 1/27/1998 - 1/28/1998 2,939,187
Premier Cruises Ltd., Sr. 3/6/1998 6,309,550
Note
Columbus McKinnion Corp., Sr. 3/26/1998 5,160,804
Sub. Note
National Equipment Services, 11/20/1997 - 12/3/1997 6,221,520
Inc., Sr. Sub. Note
SECURITY ACQUISITION DATE ACQUISITION
COST
AEI Holding Co., Inc., Sr. 11/6/1997 - 12/18/1997 $4,939,063
Note
Abraxas Petroleum Corp., Sr. 1/20/1998 3,416,000
Note, Series C
Dailey Petroleum Services 2/6/1998 6,275,000
Corp., Sr. Note
Offshore Logistics, Inc., Sr. 1/22/1998 1,695,291
Note
The Houston Exploration Co., 2/25/1998 1,522,766
Sr. Sub. Note
Universal Compression
Holdings, Inc.,
Sr. Disc. Note 2/13/1998 - 3/24/1998 1,796,137
Universal Compression
Holdings, Inc.,
Sr. Disc. Note 2/13/1998 - 3/24/1998 3,371,835
XCL, Ltd. 5/13/1997 3,750,000
Primedia, Inc., Sr. Note 2/11/1998 4,772,400
SITEL Corp., Sr. Sub. Note 3/5/1998 3,725,000
WHX Corp., Sr. Note 3/31/1998 4,575,000
The Holt Group, Inc., Sr. 1/14/1998 - 2/9/1998 4,463,000
Note
FLAG Ltd., Sr. Note 1/23/1998 3,275,000
McLeod, Inc., Sr. Note 3/10/1998 3,000,000
NEXTEL Communications, Inc., 2/6/1998 - 3/3/1998 15,227,974
Sr. Disc. Note
NEXTLINK Communications,
Inc.,
Sr. Disc. Note 3/27/1998 2,028,349
NEXTLINK Communications, 2/26/1998 8,632,527
Inc., Sr. Note
Nextel International, Inc., 3/9/1998 3,738,633
Sr. Disc. Note
Qwest Communications
International, Inc.,
Sr. Disc. Note 1/22/1998 5,088,453
Teligent, Inc., Sr. Disc. 3/18/1998 - 3/23/1998 4,000,913
Note
Bar Technologies, Inc., 8/27/1996 0
Warrants
CS Wireless Systems, Inc. 12/2/1996 0
Electronic Retailing Systems
International, Inc., 1/21/1997 168,247
Warrants
IHF Capital, Inc., Warrants 11/4/1994 37,050
Kane Industries, Inc., 3/16/1990 62,656
Warrants
MAFCO Acquisition, Warrants 7/1/1991 80,625
MetroNet Communications 12/31/1997 0
Corp., Warrants
Specialty Foods Acquisition 8/10/1993 - 8/27/1993 250,415
Corp.
Sullivan Graphics, Inc. 2/8/1990 217,112
Nebco Evans Holding Co.,
Exchangeable Pfd. Stock 2/27/1998 4,510,000
International Utility 1/27/1998 475,000
Structures, Inc., Unit
Primedia, Inc., Exchangeable 2/11/1998 9,144,800
Pfd. Stock, Series G
NEXTEL Communications, Inc.,
Exchangeable
Pfd. Stock, Series E 2/6/1998 3,175,000
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses, and
revenues reported in the financial statements. Actual results could differ from
those estimated.
OTHER -- Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At March 31, 1998, par value shares ($0.01 per share) authorized were as
follows:
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A 4,000,000,000
Class B 2,000,000,000
Class C 4,000,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
MARCH 31,
1998 1997
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 17,322,252 $ 204,316,349 11,332,321 $ 127,059,070
Shares issued to shareholders in
paymentof distributions declared 2,605,774 30,621,664 2,477,211 27,712,430
Shares redeemed (11,104,769) (131,161,460) (8,642,783) (96,856,760)
Net change resulting from
Class A Share transactions 8,823,257 $ 103,776,553 5,166,749 $ 57,914,740
<CAPTION>
MARCH 31,
1998 1997
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 42,537,839 $ 501,512,752 28,139,746 $316,878,366
Shares issued to shareholders in
payment of distributions declared 2,239,670 26,393,364 1,241,207 13,936,174
Shares redeemed (9,110,993) (107,775,700) (5,486,949) (61,971,208)
Net change resulting from
Class B Share transactions 35,666,516 $ 420,130,416 23,894,004 $268,843,332
</TABLE>
FEDERATED HIGH INCOME BOND FUND, INC.
<TABLE>
<CAPTION>
MARCH 31,
1998 1997
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 8,559,493 $ 101,059,405 5,462,599 $ 61,428,435
Shares issued to shareholders in
payment of distributions declared 577,521 6,855,257 370,644 4,157,485
Shares redeemed (2,683,277) (31,620,692) (1,720,918) (19,385,125)
Net change resulting from
Class C Share transactions 6,453,737 $ 76,293,970 4,112,325 $ 46,200,795
Net change resulting from Fund
share transactions 50,943,510 $600,200,939 33,173,078 $372,958,867
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Advisers, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets.
ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Class B and Class C Shares. The Plan provides
that the Fund may incur distribution expenses according to the following
schedule annually, to compensate FSC.
PERCENTAGE OF
AVERAGE DAILY NET
SHARE CLASS NAME ASSETS OF CLASS
Class B Shares 0.75%
Class C Shares 0.75%
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25%
of average daily net assets of the Fund shares for the period. The fee paid to
FSS is used to finance certain services for shareholders and to maintain
shareholder accounts. FSS may voluntarily choose to waive any portion of its
fee. FSS can modify or terminate this voluntary waiver at any time at its sole
discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL -- Certain of the Officers and Directors of the Corporation are Officers
and Directors or Trustees of the above companies.
5. YEAR 2000 ISSUE
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the fund.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended March 31, 1998, were as follows:
PURCHASES $1,431,913,736
SALES $885,972,740
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of FEDERATED HIGH INCOME BOND FUND,
INC.
We have audited the accompanying statement of assets and liabilities of
Federated High Income Bond Fund, Inc. (a Maryland Corporation), including the
schedule of portfolio investments, as of March 31, 1998, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998, by correspondence with the custodian and brokers. As to securities
purchased but not yet received, we requested confirmation from brokers and, when
replies were not received, we carried out other alternative procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated High Income Bond Fund, Inc. as of March 31, 1998, and the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and its financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
May 15, 1998
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
J. Christopher Donahue
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President,
Treasurer, and Secretary
Nicholas J. Seitanakis
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses, and other
information.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 314195108
Cusip 314195207
Cusip 314195306
8042507 (5/98)
[Graphic]
APPENDIX
A1. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 11/30/77
to 3/31/98. The "y" axis is measured in increments of $50,000 ranging from $0 to
$200,000 and indicates that the ending value of hypothetical initial investment
of $21,000 in Federated High Income Bond Fund, Inc.'s Class A Shares, assuming a
4.50% sales charge and the reinvestment of all capital gains and dividends,
would have grown to $173,982 on 3/31/98.
A2. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 11/30/77
to 3/31/98. The "y" axis is measured in increments of $25,000 ranging from $0 to
$100,000 and indicates that the ending value of hypothetical yearly investments
of $1,000 in the fund's Class A Shares, assuming the reinvestment of all capital
gains and dividends, would have grown to $85,117 on 3/31/98.
A3. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 3/31/88
to 3/31/98. The "y" axis is measured in increments of $2,500 ranging from $0 to
$17,500 and indicates that the ending value of a hypothetical investment of
$5,000 in the fund's Class A Shares, assuming the reinvestment of all capital
gains and dividends, would have grown to $15,517 on 3/31/98.
A4. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of the fund based on a 4.50% sales charge are represented by a solid
line. The Leham Brothers Single B Rated Index (the "LBSBRI") is represented by a
dotted line. The Lipper High Current Yield Funds Average (the "LHCYFA") is
represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
A Shares of the fund and the LBSBRI and the LHCYFA. The "x" axis reflects
computation periods from 3/31/88 to 3/31/98. The "y" axis reflects the cost of
the investment. The right margin reflects the ending value of the hypothetical
investment in the fund's Class A Shares based on a 4.50% sales charge, as
compared to the LBSBRI and the LHCYFA; the ending values were $31,034, $29,665,
and $27,751, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the fund's Class A Shares Average Annual Total Returns
for the period ended 3/31/98, beginning with the inception date of the fund
(11/30/77), and the one-year, five-year, and ten-year periods thereafter, the
Average Annual Total Returns were 10.96%, 11.27%, 10.33%, and 11.99%,
respectively.
A5. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of the fund based on a 3.00% contingent deferred sales charge are
represented by a solid line. The Leham Brothers Single B Rated Index (the
"LBSBRI") is represented by a dotted line. The Lipper High Current Yield Funds
Average (the "LHCYFA") is represented by a broken line. The line graph is a
visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class B Shares of the fund and the LBSBRI and the
LHCYFA. The "x" axis reflects computation periods from 9/27/94 to 3/31/98. The
"y" axis reflects the cost of the investment. The right margin reflects the
ending value of the hypothetical investment in the fund's Class A Shares based
on a 3.00% contingent deferred sales charge, as compared to the LBSBRI and the
LHCYFA; the ending values were $14,907, $15,834, and $15,205, respectively. The
legend in the bottom quadrant of the graphic presentation indicates the fund's
Class B Shares Average Annual Total Returns for the period ended 3/31/98,
beginning with the inception date of the fund (9/27/94), and the one-year period
thereafter; the Average Annual Total Returns were 12.05% and 9.60%,
respectively.
A6. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of the fund based on a 1.00% contingent deferred sales charge are
represented by a solid line. The Leham Brothers Single B Rated Index (the
"LBSBRI") is represented by a dotted line. The Lipper High Current Yield Funds
Average (the "LHCYFA") is represented by a broken line. The line graph is a
visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class C Shares of the fund and the LBSBRI and the
LHCYFA. The "x" axis reflects computation periods from 4/30/93 to 3/31/98. The
"y" axis reflects the cost of the investment. The right margin reflects the
ending value of the hypothetical investment in the fund's Class C Shares based
on a 1.00% contingent deferred sales charge, as compared to the LBSBRI and the
LHCYFA; the ending values were $16,340, $17,131, and $16,829, respectively. The
legend in the bottom quadrant of the graphic presentation indicates the fund's
Class C Shares Average Annual Total Returns for the period ended 3/31/98,
beginning with the inception date of the fund (4/30/93), and the one-year period
thereafter, the Average Annual Total Returns were 10.50% and 14.46%,
respectively.
