FEDERATED HIGH INCOME BOND FUND INC, N-30D, 2000-11-29

FEDERATED HIGH INCOME BOND FUND INC
N-30D, 2000-11-29

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Federated Investors
World-Class Investment Manager

Federated High Income Bond Fund, Inc.

24TH SEMI-ANNUAL REPORT

September 30, 2000

Established 1977

NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE

Richard B. Fisher

President

Federated High Income Bond Fund, Inc.

President's Message

Dear Fellow Shareholder:

Federated High Income Bond Fund, Inc. was created in 1977, and for over two decades, investors who seek generous income from high-yield bonds¹ have received monthly dividends for over 274 consecutive months. On September 30, 2000, the fund's $1.9 billion in assets were invested in over 300 carefully researched high-yield issues that spanned the entire business and industrial spectrum.

I am pleased to present the fund's 24th Semi-Annual Report, which covers the six-month reporting period from April 1, 2000 to September 30, 2000. It begins with an interview with the fund's portfolio manager, Mark E. Durbiano, Senior Vice President of Federated Investment Management Company. 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, and third is the publication of the fund's financial statements.

In Mark's management tenure, he has experienced both rising bond prices, as well as periods similar to the current rising interest rate environment (in 1990 and again in 1994). It has been a difficult time for bond investors in general, as rising interest rates have caused all bond prices to decline. Due to the performance of individual holdings, however, the returns of Federated High Income Bond Fund, Inc. outperformed the average high-yield bond fund over the six-month reporting period. The fund's strong income stream more than compensated for its decrease in share price. A fund manager's best friend in this rate environment is broad diversification by issuer and industry sector.

1 Lower rated bonds involve a higher degree of risk than investment-grade bonds in return for higher yield potential.

Individual share class total return performance for the six-month reporting period, including income distributions, follows.²

	Total Return	Income	Net Asset Value Change
Class A Shares	1.38%	$0.498	$9.82 to $9.46 = (3.67%)
Class B Shares	1.00%	$0.461	$9.81 to $9.45 = (3.67%)
Class C Shares	1.01%	$0.462	$9.81 to $9.45 = (3.67%)

Currently, high-yield bonds represent very attractive long-term value compared to high-quality bonds, as investors are being compensated with significantly higher yields for assuming the credit risk involved in owning these corporate bonds.

While a decline in share prices is of concern to both managers and shareholders, it is important to remember the nature of high-yield investing: income is generous and principal fluctuations are volatile. In the fund's 23-year history, share prices have increased and decreased due to many factors. Looking backward, in the past ten years, shareholders saw the fund's share value decline approximately 11% in 1990, rise over 57% in 1991, decline about 1% in 1994, and increase about 18% in 1995.

As I have always recommended buying more shares when prices are down, I again believe that now is just one of those buying opportunities. I also recommend adding to your account because the fund's income return is especially attractive.

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,

Richard B. Fisher

Richard B. Fisher
President
November 15, 2000

2 Performance quoted is based on net asset value, reflects past performance and is no guarantee 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 (i.e., less any applicable sales charge), for Class A, B, and C Shares were (3.15%), (4.30%), and (0.04%), respectively.

Mark E. Durbiano

Senior Vice President

Federated Investment Management Company

Investment Review

What is your view of the high-yield bond market for the first six months of the fund's current fiscal year?

The high-yield bond market, as represented by the Lehman Brothers High Yield Bond Index, generated positive total returns in both the second and third quarters this year. However, the high-yield bond market's returns lagged the returns on investment-grade securities, as represented by the Lehman Brothers Aggregate Bond Index, during the six-month reporting period ended September 30, 2000. For the period as a whole, the Lehman Brothers High Yield Bond Index returned 1.72%, underperforming the Lehman Brothers Aggregate Bond Index, a measure of high-quality bond performance, which returned 4.81%.¹

What factors caused the high-yield market's underperformance?

Three primary reasons accounted for the high-yield market's underperformance. First, credit risk remained high, as the default rate for high-yield securities has increased to the 5%-6% range on an annualized basis. Second, the U.S. economy appeared to be slowing, raising the possibility that the United States could slip into recession and drive default rates even higher. Finally, the high-yield market's largest industry sector, telecommunications, weakened as more aggressive issuers suffered from execution shortfalls and questions about future funding needs in increasingly volatile capital markets. These questions relating to overall market credit quality pushed the spread between the Credit Suisse First Boston High Yield Bond Index and U.S. Treasury securities from 624 basis points on March 31, 2000 to 823 basis points on September 30, 2000.²

1 Lehman Brothers High Yield Bond Index is an unmanaged index that includes all fixed income securities having a maximum quality rating of Ba1, a minimum amount outstanding of $100m, and at least one year to maturity. Lehman Brothers Aggregate Bond Index is an unmanaged index composed of securities from the Lehman Brothers Government/ Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. Total return comprises price appreciation/ depreciation and income as a percentage of the original investment. Indices are rebalanced monthly by market capitalization.

2 Credit Suisse First Boston High Yield Index serves as a benchmark to evaluate the performance of low quality bonds. Low quality is defined as those bonds in the range from BBB to CCC and defaults. Morningstar receives and publishes this figure as a monthly total return. Investments cannot be made in an index.

How did Federated High Income Bond Fund, Inc. perform over the six-month reporting period ended September 30, 2000?

The fund posted modest total returns for the six-month reporting period consistent with the difficult market conditions illustrated by the index performance previously mentioned. The fund's Class A, B, and C Shares produced total returns of 1.38%, 1.00%, and 1.01%, respectively, based on net asset value, for the six-month reporting period ended September 30, 2000. The fund performed in line with the Lehman Brothers High Yield Bond Index (when adjusted for expenses) and significantly outperformed the (1.13%) return of the Lipper High Current Yield Fund peer group.³

What factors were the major influences on the fund's performance versus the market?

Two main factors positively impacted the fund's performance during the six-month reporting period. First, the fund benefited by strong relative performance from selected issuers. For example, Chancellor Media Corp., R&B Falcon Corp., VoiceStream Wireless Corp., Triarc Consumer Products Group, USXchange, Intermedia Communications, Inc. and Verio all were either acquired or announced plans to be acquired by stronger companies. Also, Northpoint Communications Group received a substantial equity contribution from Verizon. These positive events caused the fund's holdings in these companies to increase in value substantially. Also, Allied Waste North America, Inc., Revlon Consumer Products Corp., Nextel and Fairchild Corp. outperformed the overall market based upon strong operating performance. Second, the fund is underweight in CCC-rated and non-rated issuers relative to both the Lehman Brothers index and the Lipper peer group, which underperformed given the heightened focus on credit quality during the six-month reporting period.

On the negative side, the fund's underweight in BB-rated securities relative to the Lehman Brothers index negatively impacted relative performance. Given the increased concern about credit quality, BB-rated securities outperformed B-rated securities during the period by 4.36%. Also, disappointing operating performance by Regal Cinemas, Inc., Dade International, Inc. and US Office Products Co. negatively impacted fund performance, as did several holdings in the weak wireline telecommunications sector, notably Teligent and Hermes Europe Railtel. The fund was also negatively impacted by its underweight in the energy sector, which outperformed given high oil and gas prices.

3 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 category indicated. These figures do not take sales charges into account.

What has been the fund's experience with defaults?

The fund's default experience remains well below the overall high-yield sector. However, the fund has experienced several defaults in the reporting period including Clark Material Handling, Glenoit Corp., Dyersburg Corp. and AMF Bowling Worldwide. While defaults are unfortunate, they are an inevitable part of high-yield investing and historically have been more than offset by the higher yields paid by high-yield corporate bond issuers.

What were the fund's top ten holdings as of September 30, 2000?

Name		Percentage of Net Assets
NEXTEL Communications, Inc.		3.4%
Allied Waste Industries, Inc.		2.9%
Level 3 Communications, Inc.		2.7%
Tenet Healthcare Corp.		2.5%
NEXTLINK Communications, Inc.		2.2%
Intermedia Communications, Inc.		2.0%
R&B Falcon Corp.		1.9%
Charter Communications Holdings Capital Corp.		1.6%
Premier Parks, Inc.		1.6%
McLeod USA, Inc.		1.5%
TOTAL PERCENTAGE OF PORTFOLIO		22.3%

Have you made any material changes in the portfolio's sector weightings recently?

From a portfolio perspective, the telecommunications sector remains as the fund's largest industry exposure. We have recently increased our positions in the wireless sector by purchasing Sprint wireless affiliates like Airgate PCS, Inc. and Alamosa PCS Holdings, Inc. Most aggressive telecommunications issuers that underperformed during the period such as PSI Net, Inc. and Winstar Communications, Inc. were maintained or added to based on our belief that substantial value exists in these holdings. We took advantage of weak market conditions in the telecommunications sector to establish positions in, or add to, high-quality issuers at attractive yields such as: AES Corp., an independent power company; Columbia/HCA, a hospital management company; EchoStar, a satellite television company; and Triton Oil, a higher rated energy company. We also maintained, or added to, positions in lower rated issuers trading at a discount where we have strong credit opinions: CKE Restaurants Inc., Foamex, GFSI, Inc. and Hudson Respiratory Care Inc.

What do you expect from the high-yield bond market for the rest of the fund's fiscal year?

Higher levels of defaults, concerns about future economic growth and volatile equity markets (which have caused difficulties for the high-yield market over the past six months) remain areas of concern as 2000 draws to a close and we look forward into 2001. However, we believe that these concerns have been aggressively priced into the market, with yield spreads between high-yield bonds and U.S. Treasury securities in excess of 800 basis points, and that substantial value currently exists in high-yield bonds. While defaults will most likely remain above historical averages over the coming months, we believe most of the impact from these defaults has been factored into current market prices for defaulted securities. Prior periods of above-average default rates and wide yield spreads have been followed by substantial outperformance for high-yield securities. Shareholders should note that fund managers do not enjoy rising interest rates, inflation fears, or defaults on the upswing, but since the fund began in 1977, the forces have been dealt with, managed, and the income stream continues.

Two Ways You May Seek to Invest for Success:

INITIAL INVESTMENT

If you made an initial investment of $23,000 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 $187,712 on 9/30/00. You would have earned a 9.63%¹ average annual total return for the investment lifespan.

One key to investing wisely is to reinvest all distributions in fund shares. This increases the number of shares on which you can earn future dividends, and you gain the benefit of compounding.

[Graphic Representation Omitted - See Appendix]

As of 9/30/00, the Class A Shares' average annual 1-year, 5-year and 10-year total returns were (4.95%), 5.35%, and 11.76%, respectively. Class B Shares' average annual 1-year, 5-year and since inception (9/28/94) total returns were (6.22%), 5.22%, and 6.75%, respectively. Class C Shares' average annual 1-year, 5-year and since inception (5/1/93) total returns were (2.16%), 5.50%, and 6.36%, respectively.²

1 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 is no guarantee 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.

2 The total return stated takes into account all applicable sales charges. The maximum sales charge and contingent deferred sales charges for the fund are as follows: Class A Shares, 4.50% sales charge; Class B Shares, 5.50% contingent deferred sales charge; Class C Shares, 1.00% contingent deferred sales charge.

ONE STEP AT A TIME

$1,000 initial investment and subsequent investments of $1,000 each year for 22 years (reinvesting all dividends and capital gains) grew to $85,730.

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 $23,000, but your account would have reached a total value of $85,730¹ by 9/30/00. You would have earned an average annual total return of 9.97%.

A practical investment plan helps you pursue a high level of income through corporate bonds. Through systematic investing, you buy shares on a regular basis and reinvest all earnings. An investment plan can work 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 Omitted - See Appendix]

1 This chart assumes that the subsequent annual investments are made on the last day of the anniversary month. No method of investing can guarantee a profit or protect against loss in down markets.

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 September 30, 1990, he invested $5,000 in the Class A Shares of Federated High Income Bond Fund, Inc.

As this chart shows, over ten years, his original $5,000 investment has grown to $15,200. This represents a 11.76% average annual total return.¹ For Chuck, that means extra money toward the construction of his first home.

[Graphic Representation Omitted - See Appendix]

1 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.

Portfolio of Investments

September 30, 2000 (unaudited)

Principal
Amount

Value

CORPORATE BONDS--92.4%

Aerospace & Defense--0.4%

7,425,000

Anteon Corp., Sr. Sub. Note, 12.00%, 5/15/2009

6,719,625

2,200,000

^{1, 2}

Condor Systems, Inc., Sr. Sub. Note, 11.875%, 5/1/2009

1,463,000

TOTAL

8,182,625

Auto/Truck--0.3%

7,725,000

J.L. French Automotive Castings, Inc., Sr. Sub. Note (Series B), 11.50%, 6/1/2009

6,218,625

Automotive--2.8%

6,025,000

Accuride Corp., Sr. Sub. Note (Series B), 9.25%, 2/1/2008

5,151,375

4,875,000

Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004

4,899,375

2,375,000

Aftermarket Technology Co., Sr. Sub. Note (Series D), 12.00%, 8/1/2004

2,386,875

11,750,000

American Axle & Manufacturing, Inc., Company Guarantee, 9.75%, 3/1/2009

11,544,375

6,025,000

HDA Parts System, Inc., Sr. Sub. Note, 12.00%, 8/1/2005

4,066,875

9,125,000

Lear Corp., Sr. Note, 8.11%, 5/15/2009

8,574,124

4,725,000

Lear Corp., Sub. Note, 9.50%, 7/15/2006

4,748,625

8,700,000

Motor Coach Industries International, Inc., Company Guarantee, 11.25%, 5/1/2009

6,394,500

6,825,000

Oxford Automotive, Inc., Company Guarantee, 10.125%, 6/15/2007

6,176,625

TOTAL

53,942,749

Banking--0.7%

13,900,000

GS Escrow Corp., Sr. Note, 7.125%, 8/1/2005

12,876,126

Beverage & Tobacco--0.2%

4,825,000

National Wine & Spirits, Inc., Sr. Note, 10.125%, 1/15/2009

4,607,875

Broadcast Radio & TV--5.0%

7,900,000

ACME Television, LLC, Sr. Disc. Note (Series B), 0/10.875%, 9/30/2004

7,544,500

1,529,600

AMFM, Inc., Deb., 12.625%, 10/31/2006

1,789,632

10,475,000

Big City Radio, Inc., Sr. Disc. Note, 0/11.25%, 3/15/2005

6,023,125

4,786,700

Capstar Broadcasting Partners, Inc., Sub. Deb., 12.00%, 7/1/2009

5,576,506

4,375,000

Capstar Broadcasting Partners, Inc., Sr. Sub. Note, 9.25%, 7/1/2007

4,571,875

16,850,000

Chancellor Media Corp., Company Guarantee (Series B), 8.125%, 12/15/2007

17,102,750

7,500,000

Chancellor Media Corp., Company Guarantee (Series B), 8.75%, 6/15/2007

7,612,500

22,625,000

Fox/Liberty Networks, LLC, Sr. Disc. Note, 0/9.75%, 8/15/2007

19,174,687

3,400,000

Fox/Liberty Networks, LLC, Sr. Note, 8.875%, 8/15/2007

3,459,500

10,050,000

Orion Network Systems, Sr. Note, 11.25%, 1/15/2007

4,874,250

1,425,000

Sinclair Broadcast Group, Inc., Sr. Sub. Note, 10.00%, 9/30/2005

1,425,000

Principal
Amount

Value

CORPORATE BONDS--continued

Broadcast Radio & TV--continued

9,400,000

Sinclair Broadcast Group, Inc., Sr. Sub. Note, 8.75%, 12/15/2007

8,883,000

5,475,000

Sinclair Broadcast Group, Inc., Sr. Sub. Note, 9.00%, 7/15/2007

5,228,625

6,750,000

^{1, 2}

XM Satellite Radio, Inc., Sr. Note, 14.00%, 3/15/2010

4,826,250

TOTAL

98,092,200

Building & Development--0.8%

5,850,000

American Builders & Contractors Supply Co., Inc., Sr. Sub. Note, 10.625%, 5/15/2007

5,060,250

6,000,000

Formica Corp., Sr. Sub. Note (Series B), 10.875%, 3/1/2009

3,450,000

4,100,000

Juno Lighting, Inc., Sr. Sub. Note, 11.875%, 7/1/2009

3,464,500

4,225,000

NCI Building System, Inc., Sr. Sub. Note (Series B), 9.25%, 5/1/2009

4,077,125

TOTAL

16,051,875

Business Equipment & Services--1.6%

7,025,000

Buhrmann US, Inc., Sr. Sub. Note, 12.25%, 11/1/2009

7,341,125

317,333

Electronic Retailing Systems International, Inc., Sr. Disc. Note, 8.00%, 8/1/2004

22,213

317,333

Electronic Retailing Systems International, Inc., Sr. Disc. Note, 10.00%, 8/1/2001

120,587

22,050,000

Fisher Scientific International, Inc., Sr. Sub. Note, 9.00%, 2/1/2008

20,616,750

17,900,000

U.S. Office Products Co., Sr. Sub. Note, 9.75%, 6/15/2008

2,237,500

TOTAL

30,338,175

Cable Television--11.5%

91,523

⁴

Australis Media Ltd., Sr. Disc. Note, 15.75%, 5/15/2003

1,373

5,350,000

⁴

Australis Media Ltd., Unit, 15.75%, 5/15/2003

80,250

3,000,000

CSC Holdings, Inc., Sr. Note, 7.875%, 12/15/2007

2,950,530

3,850,000

CSC Holdings, Inc., Sr. Sub. Deb., 9.875%, 2/15/2013

3,946,250

11,500,000

CSC Holdings, Inc., Sr. Sub. Note, 9.25%, 11/1/2005

11,643,750

4,175,000

CSC Holdings, Inc., Sr. Sub. Note, 9.875%, 5/15/2006

4,279,375

52,925,000

Charter Communications Holdings Capital Corp., Sr. Disc. Note, 0/9.92%, 4/1/2011

31,225,750

550,000

Charter Communications Holdings Capital Corp., Sr. Note, 8.625%, 4/1/2009

496,375

3,250,000

Comcast UK Cable, Deb., 0/11.20%, 11/15/2007

3,103,750

13,275,000

Diamond Cable Communications PLC, Sr. Disc. Note, 0/10.75%, 2/15/2007

10,022,625

7,675,000

Diamond Cable Communications PLC, Sr. Disc. Note, 0/11.75%, 12/15/2005

7,329,625

3,750,000

Diamond Cable Communications PLC, Sr. Disc. Note, 0/13.25%, 9/30/2004

3,937,500

14,275,000

^{1, 2}

Echostar Broadband Corp., Sr. Note, 10.375%, 10/1/2007

14,275,000

16,000,000

Echostar DBS Corp., Sr. Note, 9.375%, 2/1/2009

15,760,000

1,725,000

Golden Sky DBS, Inc., Sr. Disc. Note (Series B), 0/13.50%, 3/1/2007

1,216,125

12,625,000

International Cabletel, Inc., Sr. Defd. Cpn. Note, 0/11.50%, 2/1/2006

11,930,625

Principal
Amount

Value

CORPORATE BONDS--continued

Cable Television--continued

6,250,000

International Cabletel, Inc., Sr. Defd. Cpn. Note, 0/12.75%, 4/15/2005

6,375,000

2,475,000

Lenfest Communications, Inc., Sr. Sub. Note, 10.50%, 6/15/2006

2,761,877

5,600,000

Lenfest Communications, Inc., Sr. Sub. Note, 8.25%, 2/15/2008

5,653,480

16,000,000

NTL, Inc., Sr. Defd. Cpn. Note, 0/9.75%, 4/1/2008

9,920,000

7,775,000

NTL, Inc., Sr. Defd. Cpn. Note, 0/12.375%, 10/1/2008

4,859,375

2,000,000

NTL, Inc., Sr. Note, 11.50%, 10/1/2008

1,970,000

5,225,000

Pegasus Communications Corp., Sr. Note, 9.625%, 10/15/2005

5,120,500

4,000,000

Pegasus Communications Corp., Sr. Note, 9.75%, 12/1/2006

3,920,000

4,500,000

Pegasus Media, Sr. Sub. Note, 12.50%, 7/1/2005

4,702,500

2,375,000

RCN Corp., Sr. Disc. Note, 0/9.80%, 2/15/2008

1,104,375

400,000

RCN Corp., Sr. Disc. Note, 0/11.00%, 7/1/2008

186,000

11,425,000

RCN Corp., Sr. Disc. Note, 0/11.125%, 10/15/2007

5,883,875

6,500,000

Rogers Cablesystems Ltd., Company Guarantee, 11.00%, 12/1/2015

7,280,000

1,000,000

TeleWest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007

970,000

1,825,000

TeleWest PLC, Sr. Note, 11.25%, 11/1/2008

1,834,125

12,900,000

UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006

11,997,000

19,600,000

United International Holdings, Inc., Sr. Secd. Disc. Note, 0/10.75%, 2/15/2008

13,524,000

19,675,000

United Pan-Europe Communications NV, Sr. Disc. Note (Series B), 0/12.50%, 8/1/2009

9,345,625

10,250,000

United Pan-Europe Communications NV, Sr. Disc. Note (Series B), 0/13.375%, 11/1/2009

4,894,375

1,000,000

United Pan-Europe Communications NV, Sr. Note (Series B), 10.875%, 8/1/2009

852,500

TOTAL

225,353,510

Chemicals & Plastics--4.6%

5,050,000

Buckeye Cellulose Corp., Sr. Sub. Note, 9.25%, 9/15/2008

5,125,750

6,825,000

Foamex LP, Sr. Sub. Note, 13.50%, 8/15/2005

5,630,625

4,350,000

General Chemical Industrial Products, Inc., Sr. Sub. Note, 10.625%, 5/1/2009

3,501,750

2,750,000

Georgia Gulf Corp., Sr. Sub. Note, 10.375%, 11/1/2007

2,777,500

8,150,000

^{1, 2}

Huntsman Corp., Sr. Sub. Note, 9.50%, 7/1/2007

6,642,250

8,525,000

Huntsman ICI Chemicals LLC, Sr. Sub. Note, 10.125%, 7/1/2009

8,439,750

2,250,000

ISP Holding, Inc., Sr. Note, 9.00%, 10/15/2003

2,036,250

3,270,000

ISP Holding, Inc., Sr. Note, 9.75%, 2/15/2002

3,122,850

1,150,000

Lyondell Chemical Co., Sr. Secd. Note (Series A), 9.625%, 5/1/2007

1,124,125

21,650,000

Lyondell Chemical Co., Sr. Sub. Note, 10.875%, 5/1/2009

21,162,875

7,900,000

Polymer Group, Inc., Company Guarantee, 8.75%, 3/1/2008

6,280,500

17,125,000

Polymer Group, Inc., Company Guarantee, 9.00%, 7/1/2007

13,785,625

Principal
Amount

Value

CORPORATE BONDS--continued

Chemicals & Plastics--continued

6,825,000

Sterling Chemicals Holdings, Inc., Sr. Secured Disc. Note, 0/13.50%, 8/15/2008

2,764,125

500,000

Sterling Chemicals, Inc., Sr. Sub. Note, 11.25%, 4/1/2007

387,500

2,700,000

Sterling Chemicals, Inc., Sr. Sub. Note, 11.75%, 8/15/2006

2,038,500

6,450,000

Texas Petrochemicals Corp., Sr. Sub. Note, 11.125%, 7/1/2006

5,514,750

TOTAL

90,334,725

Clothing & Textiles--0.8%

4,575,000

Collins & Aikman Floorcoverings, Inc., Sr. Sub. Note, 10.00%, 1/15/2007

4,517,812

6,025,000

^{1, 4}

Dyersburg Corp., Company Guarantee, 9.75%, 9/1/2007

451,875

8,975,000

GFSI, Inc., Sr. Sub. Note, 9.625%, 3/1/2007

6,776,125

7,075,000

^{1, 4}

Glenoit Corp., Sr. Sub. Note, 11.00%, 4/15/2007

1,025,875

5,700,000

Pillowtex Corp., Company Guarantee, 9.00%, 12/15/2007

1,054,500

6,500,000

Pillowtex Corp., Sr. Sub. Note, 10.00%, 11/15/2006

1,202,500

TOTAL

15,028,687

Conglomerates--0.5%

11,950,000

Eagle Picher Industries, Inc., Sr. Sub. Note, 9.375%, 3/1/2008

9,978,250

Consumer Products--4.6%

13,500,000

Albecca, Inc., Company Guarantee, 10.75%, 8/15/2008

12,285,000

3,900,000

American Safety Razor Co., Sr. Note, 9.875%, 8/1/2005

3,744,000

6,550,000

Amscan Holdings, Inc., Sr. Sub. Note, 9.875%, 12/15/2007

5,338,250

2,958,000

Boyds Collection, Ltd., Sr. Sub. Note (Series B), 9.00%, 5/15/2008

2,824,890

9,250,000

Chattem, Inc., Sr. Sub. Note, 8.875%, 4/1/2008

7,446,250

2,375,000

Diamond Brands, Inc., Sr. Disc. Deb., 0/12.875%, 4/15/2009

273,125

1,400,000

Diamond Brands Operating Corp., Sr. Sub. Note, 10.125%, 4/15/2008

497,000

6,825,000

^{1, 2}

Jostens, Inc., Unit, 12.75%, 5/1/2010

7,063,875

2,150,000

NBTY, Inc., Sr. Sub. Note, 8.625%, 9/15/2007

1,849,000

2,595,000

Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003

2,582,025

3,500,000

Revlon Consumer Products Corp., Sr. Note, 8.125%, 2/1/2006

2,607,500

24,025,000

Revlon Consumer Products Corp., Sr. Sub. Note, 8.625%, 2/1/2008

14,294,875

4,125,000

^{1, 2}

Scotts Co., Sr. Sub. Note, 8.625%, 1/15/2009

4,001,250

5,050,000

Sealy Mattress Co., Company Guarantee, Sr. Sub. Disc. Note, 0/10.875%, 12/15/2007

3,787,500

4,350,000

Sealy Mattress Co., Sr. Sub. Note, 9.875%, 12/15/2007

4,241,250

3,725,000

Sleepmaster LLC., Sr. Sub. Note (Series B), 11.00%, 5/15/2009

3,482,875

4,375,000

True Temper Sports, Inc., Sr. Sub. Note (Series B), 10.875%, 12/1/2008

4,287,500

5,025,000

United Industries Corp., Sr. Sub. Note, 9.875%, 4/1/2009

2,286,375

7,475,000

Volume Services America, Inc., Sr. Sub. Note, 11.25%, 3/1/2009

6,877,000

TOTAL

89,769,540

Principal
Amount

Value

CORPORATE BONDS--continued

Container & Glass Products--0.8%

4,800,000

^{1, 2}

Huntsman Packaging Corp., Unit, 13.00%, 6/1/2010

4,320,000

1,700,000

Owens-Illinois, Inc., Sr. Note, 7.15%, 5/15/2005

1,419,500

2,700,000

Owens-Illinois, Inc., Sr. Note, 7.85%, 5/15/2004

2,308,500

5,350,000

Russell Stanley Holdings, Inc., Sr. Sub. Note, 10.875%, 2/15/2009

2,541,250

4,925,000

^{1, 2}

Tekni-Plex, Inc., Sr. Sub. Note, 12.75%, 6/15/2010

4,875,750

1,000,000

^{1, 2}

U.S. Can Corp., Sr. Sub. Note, 12.375%, 10/1/2010

1,015,000

TOTAL

16,480,000

Ecological Services & Equipment--2.9%

28,800,000

Allied Waste North America, Inc., Company Guarantee, 7.875%, 1/1/2009

25,200,000

35,425,000

Allied Waste North America, Inc., Sr. Sub. Note, 10.00%, 8/1/2009

30,996,875

TOTAL

56,196,875

Electronics--2.0%

7,750,000

^{1, 2}

Exodus Communications, Inc., Sr. Note, 11.625%, 7/15/2010

7,827,500

3,525,000

Fairchild Semiconductor Corp., Sr. Sub. Note, 10.375%, 10/1/2007

3,577,875

3,450,000

^{1, 2}

Flextronics International Ltd., Sr. Sub. Note, 9.875%, 7/1/2010

3,588,000

3,608,000

SCG Holding Corp./Semiconductor Components Industries, LLC, Company Guarantee, 12.00%, 8/1/2009

3,833,500

21,250,000

Telecommunications Techniques Co., LLC, Sr. Sub. Note, 9.75%, 5/15/2008

20,081,250

TOTAL

38,908,125

Farming & Agriculture--0.2%

4,250,000

Royster-Clark, Inc., 1st Mtg. Note, 10.25%, 4/1/2009

3,208,750

Food & Drug Retailers--0.4%

4,750,000

Community Distributors, Inc., Sr. Note, 10.25%, 10/15/2004

3,728,750

4,500,000

Del Monte Foods Co., Sr. Disc. Note, 0/12.50%, 12/15/2007

3,397,500

9,525,000

⁴

Jitney-Jungle Stores of America, Inc., Sr. Sub. Note, 10.375%, 9/15/2007

119,062

TOTAL

7,245,312

Food Products--1.2%

11,925,000

Agrilink Foods, Inc., Company Guarantee, 11.875%, 11/1/2008

9,122,625

7,025,000

Eagle Family Foods, Inc., Company Guarantee, 8.75%, 1/15/2008

3,723,250

10,125,000

Triarc Consumer Products Group, LLC, Sr. Sub. Note, 10.25%, 2/15/2009

11,238,750

TOTAL

24,084,625

Food Services--0.8%

5,200,000

Advantica Restaurant Group, Sr. Note, 11.25%, 1/15/2008

2,782,000

4,325,000

CKE Restaurants, Inc., Company Guarantee, 9.125%, 5/1/2009

2,703,125

6,350,000

Carrols Corp., Sr. Sub. Note, 9.50%, 12/1/2008

5,524,500

Principal
Amount

Value

CORPORATE BONDS--continued

Food Services--continued

4,725,000

Domino's, Inc., Company Guarantee, 10.375%, 1/15/2009

4,524,187

4,965,000

^{3, 4}

Nebco Evans Holding Co., Sr. Disc. Note, 0/12.375%, 7/15/2007

TOTAL

15,533,812

Forest Products--0.9%

4,250,000

Container Corp. of America, Sr. Note, 11.25%, 5/1/2004

4,324,375

9,150,000

Stone Container Corp., Sr. Note, 11.50%, 10/1/2004

9,424,500

2,675,000

Stone Container Corp., Sr. Note, 12.58%, 8/1/2016

2,782,000

1,000,000

Stone Container Corp., Unit, 12.25%, 4/1/2002

1,012,500

TOTAL

17,543,375

Health Care--4.8%

10,225,000

CONMED Corp., Sr. Sub. Note, 9.00%, 3/15/2008

8,640,125

1,800,000

Columbia/HCA Healthcare Corp., Sr. Note, 6.91%, 6/15/2005

1,706,580

9,050,000

Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006

2,941,250

6,875,000

Everest Healthcare Services Corp., Sr. Sub. Note, 9.75%, 5/1/2008

6,290,625

2,750,000

⁴

Genesis Health Ventures, Inc., Sr. Sub. Note, 9.25%, 10/1/2006

261,250

1,300,000

⁴

Genesis Health Ventures, Inc., Sr. Sub. Note, 9.75%, 6/15/2005

123,500

4,350,000

⁴

Genesis Health Ventures, Inc., Sr. Sub. Note, 9.875%, 1/15/2009

413,250

5,725,000

HCA - The Healthcare Corp., Note, 8.75%, 9/1/2010

5,830,397

5,475,000

Hanger Orthopedic Group, Inc., Sr. Sub. Note, 11.25%, 6/15/2009

4,927,500

5,315,000

Hudson Respiratory Care, Inc., Sr. Sub. Note, 9.125%, 4/15/2008

3,481,325

12,950,000

Kinetic Concepts, Inc., Company Guarantee, 9.625%, 11/1/2007

10,036,250

2,000,000

Tenet Healthcare Corp., Sr. Note, 7.625%, 6/1/2008

1,910,000

12,625,000

Tenet Healthcare Corp., Sr. Note, 8.00%, 1/15/2005

12,498,750

9,275,000

^{1, 2}

Tenet Healthcare Corp., Sr. Note, 9.25%, 9/1/2010

9,646,000

11,950,000

Tenet Healthcare Corp., Sr. Sub. Note, 8.125%, 12/1/2008

11,531,750

13,300,000

Tenet Healthcare Corp., Sr. Sub. Note, 8.625%, 1/15/2007

13,233,500

TOTAL

93,472,052

Hotels, Motels, Inns & Casinos--2.4%

4,550,000

Courtyard by Marriott II LP, Sr. Note, 10.75%, 2/1/2008

4,572,750

14,250,000

Florida Panthers Holdings, Inc., Company Guarantee, 9.875%, 4/15/2009

13,751,250

1,000,000

HMH Properties, Inc., Sr. Note (Series A), 7.875%, 8/1/2005

943,750

19,625,000

HMH Properties, Inc., Sr. Note (Series B), 7.875%, 8/1/2008

18,153,125

9,750,000

HMH Properties, Inc., Sr. Note (Series C), 8.45%, 12/1/2008

9,262,500

TOTAL

46,683,375

Principal
Amount

Value

CORPORATE BONDS--continued

Industrial Products & Equipment--3.7%

4,845,000

Amphenol Corp., Sr. Sub. Note, 9.875%, 5/15/2007

4,941,900

4,325,000

Blount, Inc., Sr. Sub. Note, 13.00%, 8/1/2009

4,443,937

6,650,000

Cabot Safety Acquisition Corp., Sr. Sub. Note, 12.50%, 7/15/2005

6,783,000

6,895,000

Continental Global Group, Inc., Sr. Note, 11.00%, 4/1/2007

2,309,825

8,000,000

Euramax International PLC, Sr. Sub. Note, 11.25%, 10/1/2006

6,960,000

3,175,000

Hexcel Corp., Sr. Sub. Note, 9.75%, 1/15/2009

2,968,625

4,275,000

ISG Resources, Inc., Sr. Sub. Note, 10.00%, 4/15/2008

3,569,625

3,350,000

International Utility Structures, Inc., Sr. Sub. Note, 10.75%, 2/1/2008

2,428,750

11,325,000

MMI Products, Inc., Sr. Sub. Note, 11.25%, 4/15/2007

11,126,813

7,400,000

Neenah Corp., Sr. Sub. Note (Series B), 11.125%, 5/1/2007

5,772,000

3,000,000

Neenah Corp., Sr. Sub. Note (Series F), 11.125%, 5/1/2007

2,340,000

6,375,000

Unifrax Investment Corp., Sr. Note, 10.50%, 11/1/2003

5,896,875

14,075,000

WESCO Distribution, Inc., Sr. Sub. Note, 9.125%, 6/1/2008

13,300,875

TOTAL

72,842,225

Leisure & Entertainment--1.9%

10,502,000

AMF Bowling Worldwide, Sr. Disc. Note (Series B), 0/12.25%, 3/15/2006

2,047,890

2,450,000

⁴

AMF Bowling Worldwide, Company Guarantee (Series B), 10.875%, 3/15/2006

551,250

18,625,000

Premier Parks, Inc., Sr. Disc. Note, 0/10.00%, 4/1/2008

12,711,563

2,650,000

Premier Parks, Inc., Sr. Note, 9.25%, 4/1/2006

2,504,250

16,950,000

Premier Parks, Inc., Sr. Note, 9.75%, 6/15/2007

16,272,000

18,950,000

Regal Cinemas, Inc., Sr. Sub. Note, 9.50%, 6/1/2008

2,368,750

TOTAL

36,455,703

Machinery & Equipment--2.6%

8,375,000

^{1, 4}

Clark Material Handling Corp., Company Guarantee, 10.75%, 11/15/2006

1,298,125

5,150,000

Columbus McKinnon Corp., Sr. Sub. Note, 8.50%, 4/1/2008

4,557,750

8,200,000

Fairchild Corp., Sr. Sub. Note, 10.75%, 4/15/2009

6,683,000

1,900,000

National Equipment Services, Inc., Company Guarantee (Series D) 10.00%, 11/30/2004

1,434,500

3,350,000

National Equipment Services, Inc., Sr. Sub. Note (Series B), 10.00%, 11/30/2004

2,529,250

7,700,000

NationsRent, Inc., Company Guarantee, 10.375%, 12/15/2008

5,736,500

2,250,000

Simonds Industries, Inc., Company Guarantee, 10.25%, 7/1/2008

1,811,250

13,200,000

United Rentals, Inc., Company Guarantee, 9.25%, 1/15/2009

11,880,000

11,450,000

United Rentals, Inc., Company Guarantee (Series B), 9.00%, 4/1/2009

10,133,250

5,125,000

WEC Co., Sr. Note, 12.00%, 7/15/2009

3,818,125

TOTAL

49,881,750

Principal
Amount

Value

CORPORATE BONDS--continued

Metals & Mining--0.2%

8,625,000

^{1, 2}

AEI Holding Co., Inc., Sr. Note, 10.50%, 12/15/2005

1,509,375

11,475,000

^{1, 2}

AEI Resources, Inc., Sr. Sub. Note, 11.50%, 12/15/2006

860,625

1,950,000

Murrin Murrin Holdings Pty Ltd., Sr. Secd. Note, 9.375%, 8/31/2007

1,686,750

TOTAL

4,056,750

Oil & Gas--2.7%

1,975,000

Comstock Resources, Inc., Sr. Note, 11.25%, 5/1/2007

2,073,750

10,250,000

Continental Resources, Inc., Sr. Sub. Note, 10.25%, 8/1/2008

9,481,250

2,975,000

Forest Oil Corp., Sr. Sub. Note, 10.50%, 1/15/2006

3,064,250

3,275,000

Grey Wolf, Inc., Sr. Note, 8.875%, 7/1/2007

3,209,500

7,150,000

Pogo Producing Co., Sr. Sub. Note, 10.375%, 2/15/2009

7,507,500

2,725,000

Pride Petroleum Services, Inc., Sr. Note, 9.375%, 5/1/2007

2,799,938

7,125,000

R&B Falcon Corp., Sr. Note, 12.25%, 3/15/2006

8,514,375

2,500,000

RBF Finance Co., Company Guarantee, 11.00%, 3/15/2006

2,900,000

5,025,000

RBF Finance Co., Sr. Secured Note, 11.375%, 3/15/2009

5,829,000

2,275,000

Triton Energy Corp., Sr. Note, 8.75%, 4/15/2002

2,297,750

4,500,000

^{1, 2}

Triton Energy Ltd., Sr. Note, 8.875%, 10/1/2007

4,522,500

TOTAL

52,199,813

Printing & Publishing--1.1%

4,225,000

Garden State Newspapers, Inc., Sr. Sub. Note, 8.75%, 10/1/2009

3,971,500

5,050,000

Hollinger International Publishing, Inc., Sr. Sub. Note, 9.25%, 2/1/2006

5,068,937

2,900,000

Hollinger International Publishing, Inc., Sr. Sub. Note, 9.25%, 3/15/2007

2,929,000

750,000

K-III Communications Corp., Company Guarantee (Series B), 8.50%, 2/1/2006

727,500

4,800,000

Primedia, Inc., Sr. Note, 7.625%, 4/1/2008

4,392,000

4,250,000

^{1, 2}

Ziff Davis Media, Inc., Sr. Sub. Note, 12.00%, 7/15/2010

4,228,750

TOTAL

21,317,687

Real Estate--0.2%

4,371,000

Trizec Finance Ltd., Sr. Note, 10.875%, 10/15/2005

4,458,420

Services--2.9%

7,600,000

Coinmach Corp., Sr. Note, 11.75%, 11/15/2005

7,638,000

23,150,000

Crown Castle International Corp., Sr. Disc. Note, 0/10.375%, 5/15/2011

15,047,500

9,800,000

Crown Castle International Corp., Sr. Disc. Note, 0/11.25%, 8/1/2011

6,419,000

1,775,000

Crown Castle International Corp., Sr. Note, 10.75%, 8/1/2011

1,801,625

3,100,000

Metricom, Inc., Company Guarantee, 13.00%, 2/15/2010

1,875,500

6,200,000

^{1, 2}

Orius Capital Corp., Sr. Sub. Note, 12.75%, 2/1/2010

6,603,000

5,150,000

SITEL Corp., Sr. Sub. Note, 9.25%, 3/15/2006

4,557,750

Principal
Amount

Value

CORPORATE BONDS--continued

Services--continued

9,050,000

SpectraSite Holdings, Inc., Sr. Disc. Note, 0/12.875%, 3/15/2010

4,751,250

8,025,000

URS Corp., Sr. Sub. Note (Series B), 12.25%, 5/1/2009

8,305,875

TOTAL

56,999,500

Steel--0.5%

750,000

AK Steel Corp., Sr. Note, 9.125%, 12/15/2006

748,125

6,075,000

Metals USA, Inc., Company Guarantee, 8.625%, 2/15/2008

4,647,375

2,375,000

National Steel Corp., 1st Mtg. Bond, 9.875%, 3/1/2009

1,436,875

6,200,000

Republic Technologies International, Inc., 13.75%, 7/15/2009

1,271,000

1,000,000

Ryerson Tull, Inc., Note, 9.125%, 7/15/2006

957,370

TOTAL

9,060,745

Surface Transportation--1.9%

5,800,000

Allied Holdings, Inc., Company Guarantee, 8.625%, 10/1/2007

4,959,000

6,975,000

^{1, 4}

AmeriTruck Distribution Corp., Sr. Sub. Note, 12.25%, 11/15/2005

104,625

7,350,000

Gearbulk Holding Ltd., Sr. Note, 11.25%, 12/1/2004

7,423,500

4,400,000

Holt Group, Inc., Company Guarantee, 9.75%, 1/15/2006

550,000

4,875,000

Railworks Corp., Company Guarantee, 11.50%, 4/15/2009

1,730,625

6,450,000

Stena AB, Sr. Note, 8.75%, 6/15/2007

5,579,250

13,700,000

Stena AB, Sr. Note, 10.50%, 12/15/2005

13,289,000

6,000,000

Stena Line AB, Sr. Note, 10.625%, 6/1/2008

3,390,000

TOTAL

37,026,000

Telecommunications & Cellular--23.0%

9,125,000

AirGate PCS, Inc., Sr. Sub. Disc. Note, 0/13.50%, 10/1/2009

5,520,625

8,950,000

Alamosa PCS Holdings, Inc., Company Guarantee, 0/12.875%, 2/15/2010

4,810,625

18,725,000

Call-Net Enterprises, Inc., Sr. Disc. Note, 0/8.94%, 8/15/2008

6,647,375

12,375,000

Call-Net Enterprises, Inc., Sr. Disc. Note, 0/9.27%, 8/15/2007

5,011,875

12,375,000

Call-Net Enterprises, Inc., Sr. Disc. Note, 0/10.80%, 5/15/2009

3,526,875

12,150,000

Dolphin Telecom PLC, Sr. Disc. Note, 0/14.00%, 5/15/2009

2,490,750

1,500,000

Global Crossing Holdings Ltd., Sr. Note, 9.125%, 11/15/2006

1,492,500

28,050,000

Global Crossing Holdings Ltd., Sr. Note, 9.50%, 11/15/2009

27,979,875

6,900,000

Hermes Europe Railtel B.V., Sr. Note, 10.375%, 1/15/2009

3,139,500

16,125,000

Hermes Europe Railtel B.V., Sr. Note, 11.50%, 8/15/2007

7,659,375

3,300,000

Intermedia Communications, Inc., Sr. Disc. Note, 0/11.25%, 7/15/2007

2,755,500

18,300,000

Intermedia Communications, Inc., Sr. Disc. Note, 0/12.50%, 5/15/2006

17,202,000

12,650,000

Intermedia Communications, Inc., Sr. Disc. Note (Series B), 0/12.25%, 3/1/2009

8,285,750

5,950,000

Intermedia Communications, Inc., Sr. Note, 8.60%, 6/1/2008

5,682,250

4,500,000

Intermedia Communications, Inc., Sr. Note, 8.875%, 11/1/2007

4,297,500

Principal
Amount

Value

CORPORATE BONDS--continued

Telecommunications & Cellular--continued

40,225,000

Level 3 Communications, Inc., Sr. Disc. Note, 0/10.50%, 12/1/2008

23,632,188

33,450,000

Level 3 Communications, Inc., Sr. Note, 9.125%, 5/1/2008

29,059,687

16,025,000

McLeodUSA, Inc., Sr. Disc. Note, 0/10.50%, 3/1/2007

13,380,875

2,725,000

McLeodUSA, Inc., Sr. Note, 8.125%, 2/15/2009

2,398,000

3,000,000

McLeodUSA, Inc., Sr. Note, 8.375%, 3/15/2008

2,715,000

4,725,000

McLeodUSA, Inc., Sr. Note, 9.25%, 7/15/2007

4,488,750

5,850,000

McLeodUSA, Inc., Sr. Note, 9.50%, 11/1/2008

5,528,250

9,875,000

Metromedia Fiber Network, Inc., Sr. Note, 10.00%, 12/15/2009

9,233,125

17,275,000

Millicom International Cellular S.A., Sr. Disc. Note, 0/13.50%, 6/1/2006

14,942,875

36,300,000

NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.95%, 2/15/2008

28,132,500

13,950,000

NEXTEL Communications, Inc., Sr. Disc. Note, 0/10.65%, 9/15/2007

11,508,750

9,425,000

NEXTEL Communications, Inc., Sr. Note, 9.375%, 11/15/2009

9,283,625

6,750,000

Nextel International, Inc., Sr. Disc. Note, 0/12.125%, 4/15/2008

4,353,750

4,355,000

Nextel Partners, Inc., Sr. Disc. Note, 0/14.00%, 2/1/2009

3,081,163

7,950,000

NEXTLINK Communications, Inc., Sr. Disc. Note, 0/9.45%, 4/15/2008

4,750,125

14,150,000

NEXTLINK Communications, Inc., Sr. Disc. Note, 0/12.125%, 12/1/2009

7,428,750

28,800,000

NEXTLINK Communications, Inc., Sr. Disc. Note, 0/12.25%, 6/1/2009

16,488,000

2,675,000

NEXTLINK Communications, Inc., Sr. Note, 9.00%, 3/15/2008

2,313,875

12,475,000

NEXTLINK Communications, Inc., Sr. Note, 10.75%, 6/1/2009

11,601,750

4,400,000

Northpoint Communications Group, Inc., Sr. Note, 12.875%, 2/15/2010

4,422,000

12,025,000

PsiNet, Inc., Sr. Note, 10.00%, 2/15/2005

7,876,375

6,475,000

PsiNet, Inc., Sr. Note, 11.00%, 8/1/2009

4,241,125

4,750,000

PsiNet, Inc., Sr. Note, 11.50%, 11/1/2008

3,206,250

7,525,000

Qwest Communications International, Inc., Sr. Disc. Note, 0/8.29%, 2/1/2008

6,189,237

7,000,000

Qwest Communications International, Inc., Sr. Disc. Note, 0/9.47%, 10/15/2007

6,103,230

6,000,000

Rhythms NetConnections, Inc., Sr. Note, 14.00%, 2/15/2010

3,990,000

11,050,000

Rogers Cantel Mobile, Inc., Sr. Sub. Note, 8.80%, 10/1/2007

11,160,500

7,625,000

Telesystem International Wireless, Inc., Sr. Disc. Note, 0/10.50%, 11/1/2007

4,079,375

15,000,000

Telesystem International Wireless, Inc., Sr. Disc. Note, 0/13.25%, 6/30/2007

9,525,000

13,775,000

Teligent AB, Sr. Disc. Note, 0/11.50%, 3/1/2008

3,443,750

10,675,000

Teligent AB, Sr. Note, 11.50%, 12/1/2007

4,643,625

4,000,000

Tritel PCS, Inc., Sr. Sub. Disc. Note, 0/12.75%, 5/15/2009

2,720,000

18,450,000

Triton PCS, Inc., Sr. Disc. Note, 0/11.00%, 5/1/2008

13,975,875

6,675,000

US Unwired, Inc., Company Guarantee (Series B), 0/13.375%, 11/1/2009

3,571,125

2,825,000

USA Mobile Communications, Inc., Sr. Note, 9.50%, 2/1/2004

2,048,125

4,050,000

Viatel, Inc., Sr. Note, 11.50%, 3/15/2009

2,207,250

9,875,000

Viatel, Inc., Unit, 0/12.50%, 4/15/2008

3,209,375

Principal
Amount
or Shares

Value

CORPORATE BONDS--continued

Telecommunications & Cellular--continued

7,775,000

Viatel, Inc., Unit, 11.25%, 4/15/2008

4,159,625

26,725,000

VoiceStream Wireless Corp., Sr. Disc. Note, 0/11.875%, 11/15/2009

19,509,250

2,875,000

VoiceStream Wireless Corp., Sr. Note, 10.375%, 11/15/2009

3,119,375

3,375,000

Williams Communications Group, Inc., Sr. Note, 10.875%, 10/1/2009

3,121,875

24,101,000

^{1, 2, 3}

WinStar Communications, Inc., Sr. Sub. Defd. Deb., 0/14.75%, 4/15/2010

8,073,835

3,854,000

^{1, 2}

WinStar Communications, Inc., Sr. Sub. Defd. Deb., 12.75%, 4/15/2010

2,832,690

TOTAL

448,252,280

Utilities--1.5%

10,925,000

AES Corp., Sr. Note, 9.375%, 9/15/2010

11,098,598

1,500,000

^{1, 2}

AES Drax Energy Ltd., Sr. Secd. Note, 11.50%, 8/30/2010

1,594,695

3,500,000

CMS Energy Corp., Sr. Note, 7.50%, 1/15/2009

3,139,290

3,500,000

Caithness Coso Funding Corp., Sr. Secd. Note, 9.05%, 12/15/2009

3,552,500

7,975,000

El Paso Electric Co., 1st Mtg. Note, 9.40%, 5/1/2011

8,424,870

2,100,000

Niagara Mohawk Power Corp., Sr. Disc. Note (Series H), 0/8.50%, 7/1/2010

1,696,002

TOTAL

29,505,955

TOTAL CORPORATE BONDS (IDENTIFIED COST $2,170,098,268)

1,802,188,091

COMMON STOCKS--0.3%

3,184

^{1, 2, 4}

Australis Holdings Property Ltd., Warrants

2,400

^{1, 2, 4}

Bar Technologies, Inc., Warrants

136

^{1, 2}

CS Wireless Systems, Inc.

4,850

^{1, 2, 4}

Electronic Retailing Systems International, Inc., Warrants

4,850

353

⁴

MAFCO Acquisition, Warrants

7,500

⁴

Medianews Group, Inc.

1,125,000

4,900

⁴

Metricom, Inc., Warrants

99,225

6,650

^{1, 2, 4}

MetroNet Communications Corp., Warrants

532,000

1,750

^{1, 2}

Motels of America, Inc.

438

4,425

^{1, 2, 4}

R&B Falcon Corp., Warrants

2,913,553

6,200

⁴

Republic Technologies International, Inc., Warrants

237,797

^{1, 4}

Royal Oak Mines, Inc.

713

6,325

⁴

Sterling Chemicals Holdings, Inc., Warrants

26,881

⁴

Sullivan Graphics, Inc.

14,150

⁴

UIH Australia/Pacific, Warrants

428,038

6,750

⁴

XM Satellite Radio, Inc., Warrants

946,688

TOTAL COMMON STOCKS (IDENTIFIED COST $3,886,046)

6,077,491

Shares

Value

PREFERRED STOCKS--4.1%

Banking--0.1%

120,000

California Federal Preferred Capital Corp., REIT Perpetual Pfd. Stock (Series A), $2.28

2,715,000

Broadcast Radio & TV--0.7%

5,350

Benedek Communications Corp., Sr. Exchangeable PIK

2,969,250

119,150

Sinclair Broadcast Group, Inc., Cumulative Pfd., $11.63

11,497,975

TOTAL

14,467,225

Business Equipment & Services--0.0%

2,538

Electronic Retailing Systems International, Inc., Conv. Pfd.

Cable Television--0.6%

11,133

Pegasus Communications Corp., Cumulative PIK Pfd. (Series A), 12.75%

11,634,201

Food Services--0.0%

54,676

⁴

Nebco Evans Holding Co., Exchangeable Pfd. Stock

34,172

Health Care--0.1%

21,560

River Holding Corp., Sr. Exchangeable PIK

1,412,180

Industrial Products & Equipment--0.2%

3,575

Fairfield Manufacturing Co., Inc., Cumulative Exchangeable Pfd. Stock

2,913,625

168

^{1, 2}

International Utility Structures, Inc., Unit

106,260

475

^{1, 2}

International Utility Structures, Inc., Unit, $13.00

333,688

TOTAL

3,353,573

Oil & Gas--0.8%

12,565

R&B Falcon Corp., PIK Pfd., 13.875%

16,146,508

Printing & Publishing--1.0%

13,675

Primedia, Inc., Cumulative Pfd. (Series D), $10.00

1,285,450

128,025

Primedia, Inc., Exchangeable Pfd. Stock (Series H), $2.16

11,010,150

72,500

Primedia, Inc., Pfd., $9.20

6,488,750

TOTAL

18,784,350

Telecommunications & Cellular--0.6%

2,629

Broadwing Communications, Cumulative Pfd. (Series B)

2,661,862

4,794

NEXTEL Communications, Inc., Cumulative PIK Pfd. (Series D), 13.00%

5,129,580

4,181

NEXTEL Communications, Inc., Exchangeable Pfd. Stock (Series E)

4,118,285

TOTAL

11,909,727

TOTAL PREFERRED STOCKS (IDENTIFIED COST $88,163,942)

80,456,961

Shares

Value

MUTUAL FUNDS--1.1%⁵

22,057,322

Prime Value Obligations Fund (IS Shares) (at net asset value)

22,057,322

TOTAL INVESTMENTS (IDENTIFIED COST $2,284,205,578)⁶

1,910,779,865

1 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. At September 30, 2000, these securities amounted to $106,541,390 which represents 5.5% of net assets. Included in these amounts, securities which have been deemed liquid amounted to $103,660,177 which represents 5.3% of net assets.

2 Denotes a restricted security that has been deemed liquid by criteria approved by the fund's Board of Directors.

3 Denotes a zero coupon bond with effective rate at time of purchase.

4 Non-income producing security.

5 Pursuant to an Exemptive Order, the fund may invest in Prime Value Obligations Fund which is managed by Federated Investment Management Company, the fund's adviser. The adviser has agreed to reimburse certain investment adviser fees as a result of these transactions.

6 The cost of investments for federal tax purposes amounts to $2,284,205,578. The net unrealized depreciation of investments on a federal tax basis amounts to $373,425,713 which is comprised of $23,715,576 appreciation and $397,141,289 depreciation at September 30, 2000.

Note: The categories of investments are shown as a percentage of net assets ($1,951,225,257) at September 30, 2000.

The following acronyms are used throughout this portfolio:

PIK	--Payment in Kind
REIT	--Real Estate Investment Trust

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

September 30, 2000 (unaudited)

Assets:

Total investments in securities, at value (identified and tax cost $2,284,205,578)

1,910,779,865

Income receivable

45,261,796

Receivable for investments sold

388,230

Receivable for shares sold

3,230,045

TOTAL ASSETS

1,959,659,936

Liabilities:

Payable for investments purchased

5,500,000

Payable for shares redeemed

1,936,460

Accrued expenses

998,219

TOTAL LIABILITIES

8,434,679

Net assets for 206,335,723 shares outstanding

1,951,225,257

Net Assets Consist of:

Paid in capital

2,399,704,685

Net unrealized depreciation of investments

(373,425,713

)

Accumulated net realized loss on investments

(78,033,954

)

Undistributed net investment income

2,980,239

TOTAL NET ASSETS

1,951,225,257

Net Asset Value, Offering Price and Redemption Proceeds Per Share:

Class A Shares:

Net Asset Value Per Share ($699,252,671 ÷ 73,917,039 shares outstanding)

$9.46

Offering Price Per Share (100/95.50 of $9.46)¹

$9.91

Redemption Proceeds Per Share

$9.46

Class B Shares:

Net Asset Value Per Share ($1,045,143,168 ÷ 110,542,338 shares outstanding)

$9.45

Offering Price Per Share

$9.45

Redemption Proceeds Per Share (94.50/100 of $9.45)¹

$8.93

Class C Shares:

Net Asset Value Per Share ($206,829,418 ÷ 21,876,346 shares outstanding)

$9.45

Offering Price Per Share

$9.45

Redemption Proceeds Per Share (99.00/100 of $9.45)¹

$9.36

1 See "What Do Shares Cost?" in the Prospectus.

See Notes which are an integral part of the Financial Statements

Statement of Operations

Six Months Ended September 30, 2000 (unaudited)

Investment Income:

Dividends

4,378,506

Interest

110,250,044

TOTAL INCOME

114,628,550

Expenses:

Investment adviser fee

7,562,551

Administrative personnel and services fee

759,280

Custodian fees

67,648

Transfer and dividend disbursing agent fees and expenses

1,159,232

Directors'/Trustees' fees

13,788

Auditing fees

8,746

Legal fees

6,039

Portfolio accounting fees

89,006

Distribution services fee--Class B Shares

4,043,612

Distribution services fee--Class C Shares

805,865

Shareholder services fee--Class A Shares

904,358

Shareholder services fee--Class B Shares

1,347,871

Shareholder services fee--Class C Shares

268,622

Share registration costs

44,072

Printing and postage

134,244

Insurance premiums

2,357

Taxes

46,021

Miscellaneous

18,161

TOTAL EXPENSES

17,281,473

Expense Reduction:

Reimbursement of investment adviser fee

(1,384

)

Net expenses

17,280,089

Net investment income

97,348,461

Realized and Unrealized Loss on Investments:

Net realized loss on investments

(23,784,744

)

Net change in unrealized depreciation of investments

(49,080,563

)

Net realized and unrealized loss on investments

(72,865,307

)

Change in net assets resulting from operations

24,483,154

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Six Months
Ended
(unaudited)
9/30/2000

Year Ended
3/31/2000

Increase (Decrease) in Net Assets

Operations:

Net investment income

97,348,461

206,334,525

Net realized loss on investments ($(23,784,744) and $(8,021,454), respectively, as computed for federal tax purposes)

(23,784,744

)

(32,954,277

)

Net change in unrealized depreciation of investments

(49,080,563

)

(291,266,891

)

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

24,483,154

(117,886,643

)

Distributions to Shareholders:

Distributions from net investment income

Class A Shares

(37,071,157

)

(77,804,443

)

Class B Shares

(51,194,496

)

(105,331,838

)

Class C Shares

(10,201,396

)

(21,139,465

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

(98,467,049

)

(204,275,746

)

Share Transactions:

Proceeds from sale of shares

286,661,905

864,174,256

Net asset value of shares issued to shareholders in payment of distributions declared

54,271,096

110,427,058

Cost of shares redeemed

(348,395,520

)

(920,271,233

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

(7,462,519

)

54,330,081

Change in net assets

(81,446,414

)

(267,832,308

)

Net Assets:

Beginning of period

2,032,671,671

2,300,503,979

End of period (including undistributed net investment income of $2,980,239 and $4,098,827, respectively)

1,951,225,257

2,032,671,671

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class A Shares

(For a Share Outstanding Throughout Each Period)

Six Months
Ended
(unaudited)

Year Ended March 31,

9/30/2000

2000

1999

1998

1997

1996

Net Asset Value, Beginning of Period

$ 9.82

$11.30

$12.10

$11.31

$11.08

$10.54

Income From Investment Operations:

Net investment income

0.49

0.99

1.01

1.00

1.04

1.00

Net realized and unrealized gain (loss) on investments

(0.35

)

(1.48

)

(0.81

)

0.79

0.22

0.55

TOTAL FROM INVESTMENT OPERATIONS

0.14

(0.49

)

0.20

1.79

1.26

1.55

Less Distributions:

Distributions from net investment income

(0.50

)

(0.99

)

(1.00

)

(1.00

)

(1.03

)

(1.00

)

Distributions in excess of net investment income²

(0.01

)

TOTAL DISTRIBUTIONS

(0.50

)

(0.99

)

(1.00

)

(1.00

)

(1.03

)

(1.01

)

Net Asset Value, End of Period

$ 9.46

$ 9.82

$11.30

$12.10

$11.31

$11.08

Total Return³

1.38

(4.65%

)

1.94

16.48

11.88

15.24

Ratios to Average Net Assets:

Expenses

1.23

%⁴

1.23

1.19

1.21

1.22

Net investment income

10.14

%⁴

9.35

8.79

8.46

9.19

9.07

Expense waiver/reimbursement⁵

0.00

%^4,6

0.01

0.03

0.06

Supplemental Data:

Net assets, end of period (000 omitted)

$699,253

$722,375

$829,982

$748,294

$599,736

$530,203

Portfolio turnover

1 For the year ended March 31, 2000, the fund was audited by Ernst & Young LLP. Each of the previous years was audited by other auditors.

2 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.

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

4 Computed on an annualized basis.

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

6 Less than 0.01%.

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class B Shares

(For a Share Outstanding Throughout Each Period)

Six Months
Ended
(unaudited)

Year Ended March 31,

9/30/2000

2000

1999

1998

1997

1996

Net Asset Value, Beginning of Period

$ 9.81

$11.29

$12.09

$11.31

$11.08

$10.54

Income From Investment Operations:

Net investment income

0.45

0.91

0.92

0.91

0.96

0.95

Net realized and unrealized gain (loss) on investments

(0.35

)

(1.48

)

(0.80

)

0.78

0.21

0.51

TOTAL FROM INVESTMENT OPERATIONS

0.10

(0.57

)

0.12

1.69

1.17

1.46

Less Distributions:

Distributions from net investment income

(0.46

)

(0.91

)

(0.92

)

(0.91

)

(0.94

)

(0.91

)

Distributions in excess of net investment income²

(0.01

)

TOTAL DISTRIBUTIONS

(0.46

)

(0.91

)

(0.92

)

(0.91

)

(0.94

)

(0.92

)

Net Asset Value, End of Period

$ 9.45

$ 9.81

$11.29

$12.09

$11.31

$11.08

Total Return³

1.00

(5.37%

)

1.18

15.52

10.99

14.31

Ratios to Average Net Assets:

Expenses

1.98

%⁴

1.98

1.94

1.97

1.99

2.03

Net investment income

9.39

%⁴

8.60

8.05

7.76

8.39

8.29

Expense waiver/reimbursement⁵

0.00

%^4,6

0.01

Supplemental Data:

Net assets, end of period (000 omitted)

$1,045,143

$1,091,630

$1,239,882

$980,125

$513,169

$238,055

Portfolio turnover

1 For the year ended March 31, 2000, the fund was audited by Ernst & Young LLP. Each of the previous years was audited by other auditors.

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

4 Computed on an annualized basis.

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

6 Less than 0.01%.

See Notes which are an integral part of the Financial Statements

Financial Highlights--Class C Shares

(For a Share Outstanding Throughout Each Period)

Six Months
Ended
(unaudited)

Year Ended March 31,

9/30/2000

2000

1999

1998

1997

1996

Net Asset Value, Beginning of Period

$ 9.81

$11.30

$12.09

$11.31

$11.08

$10.54

Income From Investment Operations:

Net investment income

0.45

0.92

0.91

0.95

0.92

Net realized and unrealized gain (loss) on investments

(0.35

)

(1.50

)

(0.79

)

0.78

0.22

0.54

TOTAL FROM INVESTMENT OPERATIONS

0.10

(0.58

)

0.13

1.69

1.17

1.46

Less Distributions:

Distributions from net investment income

(0.46

)

(0.91

)

(0.92

)

(0.91

)

(0.94

)

(0.91

)

Distributions in excess of net investment income²

(0.01

)

TOTAL DISTRIBUTIONS

(0.46

)

(0.91

)

(0.92

)

(0.91

)

(0.94

)

(0.92

)

Net Asset Value, End of Period

$ 9.45

$ 9.81

$11.30

$12.09

$11.31

$11.08

Total Return³

1.01

(5.46

1.26

15.51

11.00

14.35

Ratios to Average Net Assets:

Expenses

1.98

%⁴

1.98

1.94

1.97

1.99

2.00

Net investment income

9.39

%⁴

8.61

8.05

7.74

8.38

8.30

Expense waiver/reimbursement⁵

0.00

%^4,6

0.03

Supplemental Data:

Net assets, end of period (000 omitted)

$206,829

$218,667

$230,640

$190,480

$105,095

$57,422

Portfolio turnover

1 For the year ended March 31, 2000, the fund was audited by Ernst & Young LLP. Each of the previous years was audited by other auditors.

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

4 Computed on an annualized basis.

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

6 Less than 0.01%.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

September 30, 2000 (unaudited)

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 professionally managed, diversified portfolio of fixed income securities.

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 Valuation

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. Investments in other open-end regulated investment companies are valued at net asset value. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 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.

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. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements.

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. Non-cash dividends included in dividend income, if any, are recorded at fair value. The Fund offers multiple classes of shares, which differ in their respective distribution and service fees. All shareholders bear the common expenses of the Fund based on average daily net assets of each class, without distinction between share classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

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 provision for federal tax is necessary.

At March 31, 2000, the Fund, for federal tax purposes, had a capital loss carryforward of $19,397,710 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 March 2008.

Additionally, net capital losses of $32,964,678 attributable to security transactions incurred after October 31, 1999, are treated as arising on April 1, 2000, the first day of the Fund's next taxable year.

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. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

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 September 30, 2000 is as follows:

Security	Acquisition Date	Acquisition Cost
Ameritruck Distribution Corp., Sr. Sub Note	11/10/1995 - 10/22/1997	$7,293,141

Clark Material Handling Corp., Company Guarantee	11/22/1996 - 3/20/1997	8,656,627

Dyersburg Corp., Company Guarantee	08/20/1997 - 10/20/1997	6,265,253

Glenoit Corp., Sr. Sub Note	03/26/1997 - 08/19/1997	7,309,047

Royal Oak Mines, Inc.	02/24/1999	26,419

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 a trade date basis.

CAPITAL STOCK

At September 30, 2000, par value shares ($0.01 per share) authorized were as follows:

Share Class Name		Number of Par Value Capital Stock Authorized
Class A Shares		4,000,000,000
Class B Shares		2,000,000,000
Class C Shares		4,000,000,000
TOTAL		10,000,000,000

Transactions in capital stock were as follows:

Six Months Ended
9/30/2000

Year Ended
3/31/2000

Class A Shares:

Shares

Amount

Shares

Amount

Shares sold

11,514,563

111,833,688

34,540,871

368,692,535

Shares issued to shareholders in payment of distributions declared

2,323,100

22,544,119

4,332,769

45,967,063

Shares redeemed

(13,514,771

)

(131,085,530

)

(38,729,565

)

(405,913,862

)

NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS

322,892

3,292,277

144,075

8,745,736

Six Months Ended
9/30/2000

Year Ended
3/31/2000

Class B Shares:

Shares

Amount

Shares

Amount

Shares sold

14,254,292

138,336,101

35,181,413

377,867,454

Shares issued to shareholders in payment of distributions declared

2,624,752

25,472,640

4,859,838

51,656,339

Shares redeemed

(17,613,560

)

(170,611,603

)

(38,549,362

)

(406,490,629

)

NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS

(734,516

)

(6,802,862

)

1,491,889

23,033,164

Six Months Ended
9/30/2000

Year Ended
3/31/2000

Class C Shares:

Shares

Amount

Shares

Amount

Shares sold

3,759,836

36,492,116

10,915,826

117,614,267

Shares issued to shareholders in payment of distributions declared

644,424

6,254,337

1,210,894

12,803,656

Shares redeemed

(4,816,641

)

(46,698,387

)

(10,254,521

)

(107,866,742

)

NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS

(412,381

)

(3,951,934

)

1,872,199

22,551,181

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

(824,005

)

(7,462,519

)

3,508,163

54,330,081

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser 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 a scale that ranges from 0.15% to 0.075% of the average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc., subject to a $125,000 minimum per portfolio and $30,000 per each additional class.

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.

Share Class Name

Percentage of Average
Daily Net 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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund Shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC 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 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 Fund are Officers and Directors or Trustees of the above companies.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities (and in-kind contributions), for the six months ended September 30, 2000, were as follows:

Purchases	$	164,852,158

Sales	$	198,047,858

Directors

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

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 and Secretary

RICHARD J. THOMAS

Treasurer

AMANDA J. REED

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 the 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.

Federated
World-Class Investment Manager
Federated High Income Bond Fund, Inc.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor

Cusip 314195108
Cusip 314195207
Cusip 314195306

8110103 (11/00)


                     FEDERATED AMERICAN LEADERS FUND, INC.
                                    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 below it. The "x" axis reflects  computation periods from 2/26/69
to 9/30/00.  The "y" axis is measured in increments of $225,000  ranging from $0
to  $900,000  and  indicates  that the ending  value of a  hypothetical  initial
investment of $32,000 in the fund's Class A Shares, assuming the reinvestment of
capital gains and dividends, would have grown to $859,059 on 9/30/00.

     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 2/26/69
to 9/30/00. The "y" axis is measured in increments of $50,000 ranging from $0 to
$400,000 and indicates that the ending value of hypothetical  yearly  investment
of $1,000 in the fund's  Class A Shares,  assuming the  reinvestment  of capital
gains and dividends, would have grown to $365,575 on 9/30/00.

     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 9/30/80
to 9/30/00. The "y" axis is measured in increments of $50,000 ranging from $0 to
$400,000  and  indicates  that  the  ending  value  of  a  hypothetical  initial
investment of $5,000 and subsequent monthly investments of $250 over 20 years in
the fund's Class A Shares would have grown to $369,336 on 9/30/00.