United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
811-2782
(Investment Company Act File Number)
Federated High Income Bond Fund, Inc.
_______________________________________________________________
(Exact Name of Registrant as Specified
in Charter)
Federated Investors Funds
4000 Ericsson Drive
Warrendale, Pennsylvania 15086-7561
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent
for Service)
Date of Fiscal Year End:
03/31/2013
Date of Reporting Period:
03/31/2013
Item 1. Reports to Stockholders
Annual Shareholder
Report
March 31, 2013
|
Share Class
|
Ticker
|
|
A
|
FHIIX
|
|
B
|
FHBBX
|
|
C
|
FHICX
|
Federated High Income Bond
Fund, Inc.
Fund Established
1977
Dear Valued
Shareholder,
I am pleased
to present the Annual Shareholder Report for your fund covering the period from April 1, 2012 through March 31, 2013. This report includes Management's Discussion of Fund Performance, a complete listing of your fund's
holdings, performance information and financial statements along with other important fund information.
In addition,
our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. We invite
you to register to take full advantage of its capabilities.
Thank you for
investing with Federated. I hope you find this information useful and look forward to keeping you informed.
Sincerely,
J.
Christopher Donahue, President
Not FDIC Insured • May Lose
Value • No Bank Guarantee
CONTENTS
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1
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5
|
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6
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24
|
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27
|
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28
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|
29
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30
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42
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43
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45
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50
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55
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55
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Management's Discussion of
Fund
Performance (unaudited)
The Fund's total return,
1
based on net asset value, for the 12-month reporting period ended March 31, 2013, was 11.42% for the Class A Shares, 10.59% for the Class B Shares and 10.60% for
the Class C Shares. The total return of the Barclays U.S. Corporate High Yield 2% Issuer Capped Index (BHY2%ICI),
2
the Fund's broad-based securities market index, was 13.08% during the same period. The Fund's total return during the reporting period reflected actual cash
flows, transaction costs and other expenses which were not reflected in the total return of the BHY2%ICI.
The following
discussion will focus on the performance of the Fund's Class A Shares.
MARKET OVERVIEW
The high-yield bond market
generated attractive returns over the 12-month reporting period. Perhaps the most significant driver of the attractive returns was what did not happen during the 12-month reporting period. The European debt crisis did
not careen out of control, the United States did not plunge over the “fiscal cliff” (simultaneous spending cuts and tax increases that were slated to occur at the end of 2012) and the fear of “
sequestration” (automatic form of spending cuts enacted to resolve a gap between budget goals and appropriations) did not cause an immediate collapse in the U.S. economy. In fact the U.S. economy continued to
exhibit modest economic growth aided by extremely stimulative monetary policies by central banks worldwide. Perhaps less talked about, but equally important, was the extremely strong credit fundamentals of high-yield
issuers buoyed by good earnings, strong cash flows and low financing rates. In fact, the calendar year 2012 saw the third consecutive year of high-yield default rates below 2%, according to the Altman & Kuehne
High-Yield Bond Default and Return Report. These positive events were illustrated by the narrowing of the yield spread between high-yield bonds and U.S. Treasury securities which, according to the Credit Suisse High
Yield Bond Index,
3
decreased from 621 basis points on March 31, 2012 to 508 basis points on March 31, 2013.
4
Within the
high-yield market,
5
major industry sectors that substantially outperformed the BHY2%ICI included: Wireless Telecommunications, Home Construction, Financial Institutions, Building
Materials and Paper. Major industry sectors that substantially underperformed the BHY2%ICI included: Aerospace/Defense, Media-Cable, Food & Beverage, Consumer Products and Retailers. From a ratings quality
perspective, the more credit sensitive “CCC”-rated sector led the way returning 15.76% followed by the “B”-rated sector, which returned 13.10%. The highest quality “BB”-rated sector
lagged behind the above rated sectors with a still respectable 11.82%.
Annual Shareholder Report
Fund Performance
The Fund underperformed the
BHY2%ICI for the 12-month reporting period. The Fund was negatively affected, relative to the BHY2%ICI, by its underweight in the strong performing Financial Institutions, Home Construction and Electric Utility
sectors. The Fund's performance was also hurt by its overweight to the underperforming Technology sector as well as poor security selection within this sector. Poor security selection in the Automotive, Chemicals,
Consumer Products, Financial Institution and Service sectors also negatively affected Fund performance. The Fund's shorter duration
6
relative to the BHY2%ICI also negatively affected performance. Specific Fund holdings that substantially underperformed the BHY2%ICI included: ATP Oil & Gas,
Altegrity, Allen Systems, Advanced Micro Devices and Long Pine Resources.
During the 12-month
reporting period, the Fund was positively affected, relative to the BHY2%ICI, by its underweights to the poor performing Energy, Media-Cable and Metals & Mining sectors. Strong security selection in the
Healthcare, Media-Non Cable and Packaging sectors also positively affected Fund performance. Specific Fund holdings that substantially outperformed the BHY2%ICI included: DJO Finance, Sprint, PSS World Medical,
Knowledge Learning and Norcraft Cos.
|
1
|
Includes the receipt by the Fund of a residual distribution from a regulatory settlement, this distribution contributed to the Fund's total return for the period by 0.24% for the Class A, Class B and Class C Shares.
See the notes to the enclosed financial statements for more information regarding this distribution.
|
|
2
|
The BHY2%ICI is the 2% Issuer Cap component of the Barclays U.S. Corporate High Yield Index (BHYI). The BHYI is an index that covers the universe of fixed-rate, noninvestment-grade debt. Pay-in-kind (PIK) bonds,
eurobonds and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (Securities and Exchange Commission registered) of issuers
in non-Emerging Market countries are included. Original issue zeroes, step-up coupon structures and 144As are also included. The index is unmanaged, and it is not possible to invest directly in an index.
|
|
3
|
Credit Suisse High Yield Bond Index serves as a benchmark to evaluate the performance of low-quality bonds. Low-quality is defined as those bonds in the range from “BB” to “CCC” and defaults.
The index is unmanaged, and it is not possible to invest directly in an index.
|
|
4
|
Bond prices are sensitive to changes in interest rates, and a rise in interest rates can cause a decline in their prices.
|
|
5
|
High-yield, lower-rated securities generally entail greater market, credit and liquidity risks than investment-grade securities and may include higher volatility and a higher risk of default.
|
|
6
|
Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.
|
Annual Shareholder Report
FUND PERFORMANCE AND GROWTH OF A
$10,000 INVESTMENT
The Average Annual Total Return
table below shows returns for each class averaged over the stated periods. The graphs below illustrate the hypothetical investment of $10,000
1
in the Federated High Income Bond Fund, Inc. (the “Fund”) from March 31, 2003 to March 31, 2013, compared to the Barclays U.S. Corporate High Yield 2%
Issuer Capped Index (BHY2%ICI)
2
and the Lipper High Current Yield Fund Average (LHCYFA).
2
Average Annual Total Returns
for the Period Ended 3/31/2013
(returns reflect all
applicable sales charges and contingent deferred sales charges as specified below in footnote #1)
|
Share Class
|
1 Year
|
5 Years
|
10 Years
|
|
Class A Shares
|
6.39%
|
9.20%
|
8.60%
|
|
Class B Shares
|
5.09%
|
9.10%
|
8.43%
|
|
Class C Shares
|
9.60%
|
9.36%
|
8.26%
|
Performance data quoted represents
past performance which 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. Mutual
fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedInvestors.com or call
1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank
and are not federally insured.
Growth of a $10,000
INVESTMENT
–
CLASS A SHARES
|
■
|
Total returns shown include the maximum sales charge of 4.50% ($10,000 investment minus $450 sales charge = $9,550).
|
Annual Shareholder Report
Growth of a $10,000
INVESTMENT
–
CLASS B SHARES
|
■
|
Total returns shown include the maximum contingent deferred sales charge of 5.50%, as applicable.
|
Growth of a $10,000
Investment
–
CLASS c SHARES
|
■
|
Total returns shown include the maximum contingent deferred sales charge of 1.00%, as applicable.
|
|
1
|
Represents a hypothetical investment of $10,000 in the Fund after deducting applicable sales charges: for Class A Shares, the maximum sales charge of 4.50% ($10,000 investment minus
$450 sales charge = $9,550); for Class B Shares, the maximum contingent deferred sales charge is 5.50% on any redemption less than one year from the purchase date; for Class C Shares, a 1.00% contingent deferred sales
charge would be applied on any redemption less than one year from the purchase date. The Fund's performance assumes the reinvestment of all dividends and distributions. The BHY2%ICI and the LHCYFA have been adjusted
to reflect reinvestment of dividends on securities in the index and average.
|
|
2
|
The BHY2%ICI is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission (SEC) requires to be reflected in the Fund's performance. The LHCYFA represents the average
of the total returns reported by all of the mutual funds designated by Lipper, Inc. as falling in the category indicated, 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 the Fund's performance. The index is unmanaged and, unlike the Fund, is not affected by cash flows. It is not possible to invest directly in an index
or an average.
|
Annual Shareholder Report
Portfolio of Investments Summary
Table (unaudited)
At March 31, 2013, the Fund's index
classification
1
was as follows:
|
Index Classification
|
Percentage of
Total Net Assets
|
|
Technology
|
13.7%
|
|
Health Care
|
9.7%
|
|
Energy
|
8.6%
|
|
Media—Non-Cable
|
6.4%
|
|
Automotive
|
5.7%
|
|
Food & Beverage
|
5.1%
|
|
Financial Institutions
|
4.7%
|
|
Retailers
|
4.7%
|
|
Packaging
|
4.3%
|
|
Consumer Products
|
4.0%
|
|
Building Materials
|
3.8%
|
|
Industrial—Other
|
3.6%
|
|
Wireless Communications
|
3.6%
|
|
Utility—Natural Gas
|
3.5%
|
|
Other
2
|
16.7%
|
|
Cash Equivalents
3
|
1.2%
|
|
Other Assets and Liabilities—Net
4
|
0.7%
|
|
TOTAL
|
100.0%
|
|
1
|
Index classifications are based upon, and individual portfolio securities are assigned to, the classifications and sub-classifications of the Barclays U.S. Corporate High Yield 2% Issuer Capped Index (BHY2%ICI).
Individual portfolio securities that are not included in the BHY2%ICI are assigned to an index classification by the Fund's Adviser.
|
|
2
|
For purposes of this table, index classifications which constitute less than 3.5% of the Fund's total net assets have been aggregated under the designation “Other.”
|
|
3
|
Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements.
|
|
4
|
Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.
|
Annual Shareholder Report
Portfolio of Investments
March 31, 2013
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—97.7%
|
|
|
|
|
Aerospace/Defense—0.8%
|
|
|
$
1,750,000
|
1
|
Altegrity, Inc., Company Guarantee, Series 144A, 11.75%, 5/1/2016
|
$
1,242,500
|
|
2,275,000
|
|
B/E Aerospace, Inc., Sr. Unsecd. Note, 5.25%, 4/1/2022
|
2,357,469
|
|
5,350,000
|
|
TransDigm, Inc., Company Guarantee, 7.75%, 12/15/2018
|
5,898,375
|
|
900,000
|
1,2
|
TransDigm, Inc., Series 144A, 5.50%, 10/15/2020
|
942,750
|
|
|
|
TOTAL
|
10,441,094
|
|
|
|
Automotive—5.6%
|
|
|
3,575,000
|
|
Affinia Group, Inc., Company Guarantee, 9.00%, 11/30/2014
|
3,592,911
|
|
1,000,000
|
1,2
|
Affinia Group, Inc., Sr. Secd. Note, Series 144A, 10.75%, 8/15/2016
|
1,087,500
|
|
2,675,000
|
1,2
|
Allison Transmission, Inc., Sr. Unsecd. Note, Series 144A, 7.125%, 5/15/2019
|
2,892,344
|
|
1,675,000
|
|
American Axle & Manufacturing Holdings, Inc., 6.25%, 3/15/2021
|
1,725,250
|
|
2,050,000
|
|
American Axle & Manufacturing Holdings, Inc., Sr. Note, 6.625%, 10/15/2022
|
2,132,000
|
|
3,300,000
|
|
American Axle & Manufacturing Holdings, Inc., Sr. Note, 7.75%, 11/15/2019
|
3,663,000
|
|
3,350,000
|
|
Chrysler Group LLC, Note, Series WI, 8.25%, 6/15/2021
|
3,756,187
|
|
1,775,000
|
|
Cooper-Standard Automotive, Inc., Company Guarantee, 8.50%, 5/1/2018
|
1,943,625
|
|
1,400,000
|
|
Delphi Corp., 5.00%, 2/15/2023
|
1,487,500
|
|
5,025,000
|
|
Exide Technologies, Sr. Secd. Note, 8.625%, 2/1/2018
|
4,340,344
|
|
2,650,000
|
1,2
|
IDQ Holdings, Inc., Sr. Secd. Note, Series 144A, 11.50%, 4/1/2017
|
2,928,250
|
|
4,725,000
|
1,2
|
International Automotive Components, Sr. Secd. Note, Series 144A, 9.125%, 6/1/2018
|
4,701,375
|
|
950,000
|
1,2
|
Jaguar Land Rover PLC, Series 144A, 5.625%, 2/1/2023
|
991,563
|
|
4,475,000
|
1,2
|
Jaguar Land Rover PLC, Sr. Unsecd. Note, Series 144A, 8.125%, 5/15/2021
|
5,056,750
|
|
625,000
|
1,2
|
Lear Corp., Sr. Unsecd. Note, Series 144A, 4.75%, 1/15/2023
|
612,500
|
|
4,025,000
|
1,2
|
Pittsburgh Glass Works, LLC, Sr. Secd. Note, Series 144A, 8.50%, 4/15/2016
|
4,115,562
|
|
725,000
|
1,2
|
Schaeffler AG, Series 144A, 7.75%, 2/15/2017
|
820,156
|
|
5,025,000
|
1,2
|
Schaeffler AG, Series 144A, 8.50%, 2/15/2019
|
5,741,062
|
|
2,750,000
|
1,2
|
Stoneridge, Inc., Sr. Secd. Note, Series 144A, 9.50%, 10/15/2017
|
2,970,000
|
|
1,975,000
|
|
Tenneco Automotive, Inc., Company Guarantee, 6.875%, 12/15/2020
|
2,179,906
|
|
750,000
|
|
Tenneco Automotive, Inc., Company Guarantee, 7.75%, 8/15/2018
|
828,750
|
|
2,622,000
|
|
Tomkins LLC/Tomkins, Inc., Term Loan—2nd Lien, 9.00%, 10/1/2018
|
2,933,363
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Automotive—continued
|
|
|
$
2,400,000
|
1,2
|
Tower Automotive, Inc., Sr. Secd. Note, Series 144A, 10.625%, 9/1/2017
|
$
2,688,000
|
|
6,700,000
|
|
United Components, Inc., Company Guarantee, Series WI, 8.625%, 2/15/2019
|
6,968,000
|
|
|
|
TOTAL
|
70,155,898
|
|
|
|
Building Materials—3.8%
|
|
|
2,325,000
|
|
Anixter International, Inc., 5.625%, 5/1/2019
|
2,481,937
|
|
950,000
|
1,2
|
Building Materials Corp. of America, Bond, Series 144A, 6.75%, 5/1/2021
|
1,040,250
|
|
1,275,000
|
1,2
|
Building Materials Corp. of America, Sr. Note, Series 144A, 7.50%, 3/15/2020
|
1,399,313
|
|
325,000
|
|
HD Supply, Inc., Sr. Sub., 10.50%, 1/15/2021
|
339,219
|
|
2,175,000
|
|
Interline Brands, Inc., Company Guarantee, 7.50%, 11/15/2018
|
2,370,750
|
|
4,000,000
|
1,2
|
Interline Brands, Inc., Sr. Note, Series 144A, 10.00%, 11/15/2018
|
4,450,000
|
|
4,175,000
|
1,2
|
Masonite International Corp., Sr. Note, Series 144A, 8.25%, 4/15/2021
|
4,655,125
|
|
5,025,000
|
|
Norcraft Cos. L.P., Sr. Secd. Note, Series WI, 10.50%, 12/15/2015
|
5,269,969
|
|
1,350,000
|
1,2
|
Nortek Holdings, Inc., Sr. Note, Series 144A, 8.50%, 4/15/2021
|
1,501,875
|
|
4,150,000
|
|
Nortek Holdings, Inc., Sr. Unsecd. Note, Series WI, 8.50%, 4/15/2021
|
4,627,250
|
|
1,700,000
|
|
Nortek Holdings, Inc., Sr. Unsecd. Note, Series WI, 10.00%, 12/1/2018
|
1,912,500
|
|
1,150,000
|
|
Ply Gem Industries, Inc., Series WI, 9.375%, 4/15/2017
|
1,270,750
|
|
4,175,000
|
|
Ply Gem Industries, Inc., Sr. Secd. Note, Series WI, 8.25%, 2/15/2018
|
4,566,406
|
|
1,725,000
|
1,2
|
RSI Home Products, Inc., Series 144A, 6.875%, 3/1/2018
|
1,759,500
|
|
3,900,000
|
1,2
|
Rexel, Inc., Series 144A, 6.125%, 12/15/2019
|
4,124,250
|
|
3,125,000
|
1,2
|
Rexel, Inc., Sr. Note, Series 144A, 5.25%, 6/15/2020
|
3,179,687
|
|
2,800,000
|
1,2
|
Roofing Supply Group, Series 144A, 10.00%, 6/1/2020
|
3,178,000
|
|
|
|
TOTAL
|
48,126,781
|
|
|
|
Chemicals—2.8%
|
|
|
725,000
|
1,2
|
Ashland, Inc., Series 144A, 3.875%, 4/15/2018
|
736,781
|
|
600,000
|
1,2
|
Ashland, Inc., Series 144A, 4.75%, 8/15/2022
|
612,000
|
|
1,200,000
|
|
Celanese US Holdings LLC, 4.625%, 11/15/2022
|
1,209,000
|
|
1,225,000
|
|
Compass Minerals International, Inc., Company Guarantee, 8.00%, 6/1/2019
|
1,335,250
|
|
3,950,000
|
1,2
|
Dupont Performance Coatings, Series 144A, 7.375%, 5/1/2021
|
4,172,187
|
|
1,200,000
|
|
Ferro Corp., Sr. Note, 7.875%, 8/15/2018
|
1,257,000
|
|
450,000
|
1,2
|
Georgia Gulf Corp., 4.875%, 5/15/2023
|
459,563
|
|
750,000
|
1,2
|
Georgia Gulf Corp., Series 144A, 4.625%, 2/15/2021
|
765,938
|
|
2,500,000
|
1,2
|
Hexion U.S. Finance Corp., Series 144A, 6.625%, 4/15/2020
|
2,518,750
|
|
3,500,000
|
|
Hexion U.S. Finance Corp., Sr. Secd. Note, 8.875%, 2/1/2018
|
3,640,000
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Chemicals—continued
|
|
|
$
2,550,000
|
|
Hexion U.S. Finance Corp., Sr. Secd. Note, Series WI, 9.00%, 11/15/2020
|
$
2,435,250
|
|
1,875,000
|
|
Huntsman International LLC, Company Guarantee, Series WI, 8.625%, 3/15/2020
|
2,104,688
|
|
375,000
|
1,2
|
Huntsman International LLC, Sr. Unsecd. Note, Series 144A, 4.875%, 11/15/2020
|
379,219
|
|
1,675,000
|
|
Koppers Holdings, Inc., Company Guarantee, Series WI, 7.875%, 12/1/2019
|
1,850,875
|
|
2,500,000
|
|
Momentive Performance Materials, Inc., Series WI, 10.00%, 10/15/2020
|
2,512,500
|
|
950,000
|
|
Momentive Performance Materials, Inc., Sr. Note, Series WI, 9.00%, 1/15/2021
|
717,250
|
|
3,900,000
|
|
Omnova Solutions, Inc., Company Guarantee, 7.875%, 11/1/2018
|
4,173,000
|
|
2,550,000
|
1,2
|
Oxea Finance, Sr. Secd. Note, Series 144A, 9.50%, 7/15/2017
|
2,785,875
|
|
1,175,000
|
|
Union Carbide Corp., Sr. Deb., 7.875%, 4/1/2023
|
1,477,857
|
|
|
|
TOTAL
|
35,142,983
|
|
|
|
Construction Machinery—0.7%
|
|
|
1,325,000
|
|
RSC Equipment Rental, Inc., Sr. Note, Series WI, 10.25%, 11/15/2019
|
1,546,937
|
|
625,000
|
|
United Rentals, Inc., Series WI, 5.75%, 7/15/2018
|
680,469
|
|
625,000
|
|
United Rentals, Inc., Series WI, 7.375%, 5/15/2020
|
696,875
|
|
625,000
|
|
United Rentals, Inc., Series WI, 7.625%, 4/15/2022
|
701,563
|
|
4,125,000
|
|
United Rentals, Inc., Sr. Sub. Note, 8.375%, 9/15/2020
|
4,620,000
|
|
|
|
TOTAL
|
8,245,844
|
|
|
|
Consumer Products—4.0%
|
|
|
4,575,000
|
1,2
|
AOT Bedding Super Holdings LLC, Series 144A, 8.125%, 10/1/2020
|
4,775,156
|
|
1,100,000
|
1,2
|
Apex Tool Group, Sr. Unsecd. Note, Series 144A, 7.00%, 2/1/2021
|
1,168,750
|
|
3,375,000
|
1,2
|
Freedom Group, Inc., Series 144A, 7.875%, 5/1/2020
|
3,560,625
|
|
4,175,000
|
|
Jarden Corp., Sr. Sub. Note, 7.50%, 5/1/2017
|
4,743,844
|
|
3,575,000
|
|
Libbey Glass, Inc., Series WI, 6.875%, 5/15/2020
|
3,874,406
|
|
3,000,000
|
|
Prestige Brands Holdings, Inc., Company Guarantee, 8.25%, 4/1/2018
|
3,285,000
|
|
1,100,000
|
|
Prestige Brands Holdings, Inc., Series WI, 8.125%, 2/1/2020
|
1,247,125
|
|
868,000
|
1,2
|
Sealy Mattress Co., Sr. Secd. Note, Series 144A, 10.875%, 4/15/2016
|
919,004
|
|
3,125,000
|
|
Sealy Mattress Co., Sr. Sub. Note, 8.25%, 6/15/2014
|
3,140,656
|
|
3,725,000
|
1,2
|
ServiceMaster Co., Series 144A, 7.00%, 8/15/2020
|
3,874,000
|
|
1,750,000
|
|
ServiceMaster Co., Sr. Unsecd. Note, 7.10%, 3/1/2018
|
1,730,312
|
|
700,000
|
|
ServiceMaster Co., Sr. Unsecd. Note, 7.45%, 8/15/2027
|
609,000
|
|
3,550,000
|
|
ServiceMaster Co., Sr. Unsecd. Note, 8.00%, 2/15/2020
|
3,825,125
|
|
575,000
|
|
Spectrum Brands Holdings, Inc., Sr. Secd. Note, 9.50%, 6/15/2018
|
654,063
|
|
4,025,000
|
|
Spectrum Brands, Inc., Sr. Unsecd. Note, 6.75%, 3/15/2020
|
4,362,094
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Consumer Products—continued
|
|
|
$
7,125,000
|
|
Visant Corp., Company Guarantee, Series WI, 10.00%, 10/1/2017
|
$
6,537,187
|
|
1,075,000
|
1,2
|
Wolverine World Wide, Inc., Sr. Unsecd. Note, Series 144A, 6.125%, 10/15/2020
|
1,146,219
|
|
|
|
TOTAL
|
49,452,566
|
|
|
|
Energy—8.6%
|
|
|
2,975,000
|
3,4
|
ATP Oil & Gas Corp., Sr. Secd. 2nd Priority Note, Series WI, 11.875%, 5/1/2015
|
223,125
|
|
4,775,000
|
1,2
|
Antero Resources Corp., 6.00%, 12/1/2020
|
5,013,750
|
|
1,275,000
|
|
Basic Energy Services, Inc., Company Guarantee, Series WI, 7.75%, 2/15/2019
|
1,310,062
|
|
1,700,000
|
|
Basic Energy Services, Inc., Series WI, 7.75%, 10/15/2022
|
1,759,500
|
|
1,125,000
|
|
Berry Petroleum Co., Sr. Unsecd. Note, 6.375%, 9/15/2022
|
1,200,938
|
|
625,000
|
|
Berry Petroleum Co., Sr. Unsecd. Note, 6.75%, 11/1/2020
|
678,125
|
|
1,200,000
|
|
Carrizo Oil & Gas, Inc., Sr. Unsecd. Note, 7.50%, 9/15/2020
|
1,287,000
|
|
3,675,000
|
|
Chaparral Energy, Inc., Company Guarantee, 9.875%, 10/1/2020
|
4,263,000
|
|
800,000
|
|
Chaparral Energy, Inc., Series WI, 7.625%, 11/15/2022
|
878,000
|
|
650,000
|
|
Chesapeake Energy Corp., 5.375%, 6/15/2021
|
654,063
|
|
750,000
|
|
Chesapeake Energy Corp., 5.75%, 3/15/2023
|
762,188
|
|
4,175,000
|
|
Chesapeake Energy Corp., Sr. Note, 6.875%, 11/15/2020
|
4,571,625
|
|
2,375,000
|
|
Chesapeake Energy Corp., Sr. Unsecd. Note, 6.775%, 3/15/2019
|
2,481,875
|
|
3,175,000
|
1,2
|
Chesapeake Oilfield Services Co., Sr. Note, Series 144A, 6.625%, 11/15/2019
|
3,286,125
|
|
1,525,000
|
|
Compagnie Generale de Geophysique Veritas, Company Guarantee, 9.50%, 5/15/2016
|
1,608,875
|
|
2,000,000
|
|
Compagnie Generale de Geophysique Veritas, Sr. Unsecd. Note, 6.50%, 6/1/2021
|
2,110,000
|
|
2,100,000
|
|
Compagnie Generale de Geophysique Veritas, Sr. Unsecd. Note, 7.75%, 5/15/2017
|
2,173,500
|
|
2,200,000
|
|
Comstock Resources, Inc., Company Guarantee, 7.75%, 4/1/2019
|
2,332,000
|
|
625,000
|
|
Comstock Resources, Inc., Sr. Secd. Note, 9.50%, 6/15/2020
|
687,500
|
|
1,200,000
|
|
Concho Resources, Inc., 5.50%, 4/1/2023
|
1,251,000
|
|
2,075,000
|
|
Concho Resources, Inc., Sr. Note, 7.00%, 1/15/2021
|
2,292,875
|
|
950,000
|
|
EP Energy/EP Finance, Inc., Series WI, 6.875%, 5/1/2019
|
1,045,000
|
|
4,575,000
|
|
EP Energy/EP Finance, Inc., Series WI, 9.375%, 5/1/2020
|
5,307,000
|
|
1,600,000
|
1,2
|
EP Energy/EP Finance, Inc., Sr. PIK Deb., Series 144A, 8.125%, 12/15/2017
|
1,684,000
|
|
625,000
|
|
Energy XXI Gulf Coast, Inc., 7.75%, 6/15/2019
|
673,438
|
|
3,075,000
|
|
Energy XXI Gulf Coast, Inc., 9.25%, 12/15/2017
|
3,490,125
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Energy—continued
|
|
|
$
3,025,000
|
|
Forbes Energy Services Ltd., Company Guarantee, Series WI, 9.00%, 6/15/2019
|
$
2,949,375
|
|
1,500,000
|
1,2
|
Forest Oil Corp., Series 144A, 7.50%, 9/15/2020
|
1,590,000
|
|
4,425,000
|
|
Forest Oil Corp., Sr. Note, 7.25%, 6/15/2019
|
4,447,125
|
|
1,950,000
|
1,2
|
Halcon Resources Corp., Sr. Note, Series 144A, 8.875%, 5/15/2021
|
2,110,875
|
|
3,225,000
|
1,2
|
Halcon Resources Corp., Sr. Unsecd. Note, Series 144A, 9.75%, 7/15/2020
|
3,579,750
|
|
775,000
|
1,2
|
Kodiak Oil & Gas Corp., Series 144A, 5.50%, 1/15/2021
|
812,781
|
|
2,325,000
|
|
Linn Energy LLC, Company Guarantee, 7.75%, 2/1/2021
|
2,505,187
|
|
375,000
|
|
Linn Energy LLC, Series WI, 6.50%, 5/15/2019
|
394,219
|
|
3,000,000
|
|
Linn Energy LLC, Sr. Unsecd. Note, 8.625%, 4/15/2020
|
3,322,500
|
|
1,625,000
|
|
Lone Pine Resources Canada Ltd., Series WI, 10.375%, 2/15/2017
|
1,470,625
|
|
3,450,000
|
|
Newfield Exploration Co., Sr. Unsecd. Note, 5.625%, 7/1/2024
|
3,570,750
|
|
2,125,000
|
|
Oasis Petroleum, Inc., 6.875%, 1/15/2023
|
2,348,125
|
|
2,350,000
|
|
Oasis Petroleum, Inc., Company Guarantee, 6.50%, 11/1/2021
|
2,573,250
|
|
1,325,000
|
1,2
|
Ocean Rig Norway AS, Sr. Secd. Note, Series 144A, 6.50%, 10/1/2017
|
1,344,875
|
|
3,475,000
|
|
PHI, Inc., Company Guarantee, Series WI, 8.625%, 10/15/2018
|
3,796,437
|
|
1,725,000
|
|
Plains Exploration & Production Co., 6.75%, 2/1/2022
|
1,929,844
|
|
475,000
|
|
Plains Exploration & Production Co., Sr. Note, 6.125%, 6/15/2019
|
522,500
|
|
1,125,000
|
1,2
|
Range Resources Corp., Sr. Sub. Note, Series 144A, 5.00%, 3/15/2023
|
1,153,125
|
|
1,200,000
|
|
Sandridge Energy, Inc., 7.50%, 3/15/2021
|
1,254,000
|
|
650,000
|
|
Sandridge Energy, Inc., Series WI, 7.50%, 2/15/2023
|
677,625
|
|
3,650,000
|
|
Sandridge Energy, Inc., Series WI, 8.125%, 10/15/2022
|
3,914,625
|
|
1,600,000
|
|
Sesi LLC, Series WI, 7.125%, 12/15/2021
|
1,798,000
|
|
1,000,000
|
|
Sesi LLC, Sr. Note, Series WI, 6.375%, 5/1/2019
|
1,080,000
|
|
5,275,000
|
|
W&T Offshore, Inc., Sr. Unsecd. Note, Series WI, 8.50%, 6/15/2019
|
5,762,937
|
|
|
|
TOTAL
|
107,933,219
|
|
|
|
Entertainment—1.1%
|
|
|
3,050,000
|
|
Cedar Fair LP, Company Guarantee, 9.125%, 8/1/2018
|
3,431,250
|
|
375,000
|
1,2
|
Cedar Fair LP, Sr. Unsecd. Note, Series 144A, 5.25%, 3/15/2021
|
374,062
|
|
3,525,000
|
|
Cinemark USA, Inc., Company Guarantee, 8.625%, 6/15/2019
|
3,908,344
|
|
750,000
|
|
Cinemark USA, Inc., Company Guarantee, Series WI, 7.375%, 6/15/2021
|
841,875
|
|
350,000
|
1,2
|
Cinemark USA, Inc., Series 144A, 5.125%, 12/15/2022
|
353,500
|
|
3,325,000
|
1,3,4,5,6
|
Hard Rock Park Operations LLC, Sr. Secd. Note, Series 144A, 0.00%, 4/1/2012
|
0
|
|
1,100,000
|
|
Regal Cinemas, Inc., Company Guarantee, 8.625%, 7/15/2019
|
1,225,125
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Entertainment—continued
|
|
|
$
3,200,000
|
1,2
|
Six Flags Entertainment Corp., Sr. Note, Series 144A, 5.25%, 1/15/2021
|
$
3,212,000
|
|
|
|
TOTAL
|
13,346,156
|
|
|
|
Environmental—0.2%
|
|
|
2,625,000
|
1,2
|
ADS Waste Escrow, Sr. Unsecd. Note, Series 144A, 8.25%, 10/1/2020
|
2,841,563
|
|
|
|
Financial Institutions—4.7%
|
|
|
2,025,000
|
|
Ally Financial, Inc., Company Guarantee, 7.50%, 9/15/2020
|
2,478,094
|
|
1,050,000
|
|
Ally Financial, Inc., Company Guarantee, 8.00%, 3/15/2020
|
1,309,875
|
|
2,300,000
|
|
Ally Financial, Inc., Company Guarantee, 8.00%, 11/1/2031
|
2,921,000
|
|
5,900,000
|
|
Ally Financial, Inc., Company Guarantee, 8.30%, 2/12/2015
|
6,563,750
|
|
3,925,000
|
|
Ally Financial, Inc., Company Guarantee, Series WI, 6.25%, 12/1/2017
|
4,405,848
|
|
1,225,000
|
|
Ally Financial, Inc., Sr. Unsecd. Note, 5.50%, 2/15/2017
|
1,331,391
|
|
1,425,000
|
|
CIT Group, Inc., 5.00%, 5/15/2017
|
1,535,438
|
|
4,750,000
|
|
CIT Group, Inc., 5.25%, 3/15/2018
|
5,153,750
|
|
400,000
|
|
CIT Group, Inc., 5.375%, 5/15/2020
|
441,000
|
|
700,000
|
1,2
|
CIT Group, Inc., Series 144A, 4.75%, 2/15/2015
|
735,000
|
|
1,700,000
|
1,2
|
CIT Group, Inc., Sr. 2nd Priority Note, Series 144A, 6.625%, 4/1/2018
|
1,946,500
|
|
2,400,000
|
|
CIT Group, Inc., Sr. Note, 4.25%, 8/15/2017
|
2,520,000
|
|
2,000,000
|
|
International Lease Finance Corp., 4.625%, 4/15/2021
|
1,998,750
|
|
2,775,000
|
|
International Lease Finance Corp., 5.875%, 8/15/2022
|
2,998,310
|
|
825,000
|
|
International Lease Finance Corp., Sr. Unsecd. Note, 5.75%, 5/15/2016
|
895,202
|
|
750,000
|
|
International Lease Finance Corp., Sr. Unsecd. Note, 6.25%, 5/15/2019
|
825,000
|
|
1,400,000
|
|
International Lease Finance Corp., Sr. Unsecd. Note, 8.25%, 12/15/2020
|
1,718,500
|
|
1,975,000
|
|
International Lease Finance Corp., Sr. Unsecd. Note, 8.625%, 9/15/2015
|
2,253,969
|
|
6,350,000
|
|
International Lease Finance Corp., Sr. Unsecd. Note, 8.75%, 3/15/2017
|
7,500,937
|
|
1,975,000
|
1,2
|
Neuberger Berman, Inc., Series 144A, 5.875%, 3/15/2022
|
2,098,437
|
|
950,000
|
1,2
|
Neuberger Berman, Inc., Sr. Note, Series 144A, 5.625%, 3/15/2020
|
999,875
|
|
5,425,000
|
1,2
|
Nuveen Investments, Sr. Unsecd. Note, Series 144A, 9.50%, 10/15/2020
|
5,696,250
|
|
|
|
TOTAL
|
58,326,876
|
|
|
|
Food & Beverage—5.1%
|
|
|
3,075,000
|
1,2
|
Aramark Corp., Sr. Unsecd. Note, Series 144A, 5.75%, 3/15/2020
|
3,159,563
|
|
900,000
|
|
B&G Foods, Inc., Sr. Note, 7.625%, 1/15/2018
|
965,250
|
|
2,875,000
|
|
Dean Foods Co., Company Guarantee, 7.00%, 6/1/2016
|
3,198,437
|
|
3,325,000
|
|
Dean Foods Co., Sr. Note, Series WI, 9.75%, 12/15/2018
|
3,865,312
|
|
7,150,000
|
|
Del Monte Foods Co., Sr. Unsecd. Note, 7.625%, 2/15/2019
|
7,453,875
|
|
7,575,000
|
1,2
|
H.J. Heinz Co., 4.25%, 10/15/2020
|
7,593,937
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Food & Beverage—continued
|
|
|
$
7,500,000
|
|
Michael Foods, Inc., Company Guarantee, Series WI, 9.75%, 7/15/2018
|
$
8,381,250
|
|
4,525,000
|
1,2
|
Michael Foods, Inc., Series 144A, 8.50%, 7/15/2018
|
4,683,375
|
|
2,325,000
|
|
Pinnacle Foods Finance LLC/Pinnacle Foods Finance Corp., Company Guarantee, 8.25%, 9/1/2017
|
2,509,547
|
|
2,760,000
|
|
Pinnacle Foods Finance LLC/Pinnacle Foods Finance Corp., Company Guarantee, 9.25%, 4/1/2015
|
2,773,800
|
|
2,150,000
|
1,2
|
Shearer's Foods, Inc., Sr. Secd. Note, Series 144A, 9.00%, 11/1/2019
|
2,365,000
|
|
2,950,000
|
|
Smithfield Foods, Inc., 6.625%, 8/15/2022
|
3,222,875
|
|
1,550,000
|
|
Smithfield Foods, Inc., Sr. Note, 7.75%, 7/1/2017
|
1,803,813
|
|
11,000,000
|
1,2
|
U.S. Foodservice, Inc., Sr. Unsecd. Note, Series 144A, 8.50%, 6/30/2019
|
11,728,750
|
|
|
|
TOTAL
|
63,704,784
|
|
|
|
Gaming—3.1%
|
|
|
3,725,000
|
1,2
|
Affinity Gaming LLC, Sr. Unsecd. Note, Series 144A, 9.00%, 5/15/2018
|
3,995,062
|
|
3,624,000
|
|
American Casino & Entertainment, Sr. Secd. Note, 11.00%, 6/15/2014
|
3,680,625
|
|
2,150,000
|
|
Ameristar Casinos, Inc., Sr. Unsecd. Note, Series WI, 7.50%, 4/15/2021
|
2,367,688
|
|
1,000,000
|
|
Caesars Entertainment, Inc., Series WI, 8.50%, 2/15/2020
|
990,625
|
|
2,125,000
|
1,2
|
Chester Downs & Marina, Series 144A, 9.25%, 2/1/2020
|
2,040,000
|
|
4,050,000
|
|
Harrah's Operating Co., Inc., Sr. Secd. Note, 11.25%, 6/1/2017
|
4,328,437
|
|
2,050,000
|
|
MGM Mirage, Inc., 7.75%, 3/15/2022
|
2,285,750
|
|
3,650,000
|
|
MGM Mirage, Inc., Sr. Note, 7.50%, 6/1/2016
|
4,060,625
|
|
1,300,000
|
|
MGM Mirage, Inc., Sr. Unsecd. Note, 8.625%, 2/1/2019
|
1,521,000
|
|
900,000
|
1,2
|
MGM Mirage, Inc., Sr. Unsecd. Note, Series 144A, 6.75%, 10/1/2020
|
956,250
|
|
3,075,000
|
1,2
|
Rivers Pittsburgh LP, Sr. Secd. Note, Series 144A, 9.50%, 6/15/2019
|
3,374,813
|
|
3,965,000
|
1,2
|
Seminole Tribe of Florida, Bond, Series 144A, 7.804%, 10/1/2020
|
4,009,923
|
|
625,000
|
1,2
|
Seminole Tribe of Florida, Note, Series 144A, 7.75%, 10/1/2017
|
678,125
|
|
2,375,000
|
1,2
|
Station Casinos, Inc., Sr. Note, Series 144A, 7.50%, 3/1/2021
|
2,452,188
|
|
2,150,000
|
1,2
|
Sugarhouse HSP Gaming Finance Corp., Sr. Secd. Note, Series 144A, 8.625%, 4/15/2016
|
2,311,250
|
|
|
|
TOTAL
|
39,052,361
|
|
|
|
Health Care—9.7%
|
|
|
4,075,000
|
1,2
|
Biomet, Inc., Series 144A, 6.50%, 10/1/2020
|
4,209,984
|
|
4,725,000
|
1,2
|
Biomet, Inc., Sr. Note, Series 144A, 6.50%, 8/1/2020
|
5,032,125
|
|
4,225,000
|
1,2
|
CDRT Holding Corp., Sr. Unsecd. Note, Series 144A, 9.25%, 10/1/2017
|
4,404,562
|
|
2,050,000
|
|
CRC Health Corp., Sr. Sub. Note, 10.75%, 2/1/2016
|
2,080,750
|
|
4,050,000
|
|
DJO Finance LLC, Company Guarantee, Series WI, 7.75%, 4/15/2018
|
4,151,250
|
|
1,025,000
|
|
DJO Finance LLC, Company Guarantee, Series WI, 9.75%, 10/15/2017
|
1,073,688
|
|
900,000
|
|
DJO Finance LLC, Series WI, 8.75%, 3/15/2018
|
1,008,000
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Health Care—continued
|
|
|
$
2,950,000
|
|
DJO Finance LLC, Series WI, 9.875%, 4/15/2018
|
$
3,252,375
|
|
2,925,000
|
|
DaVita HealthCare Partners, Inc., 5.75%, 8/15/2022
|
3,052,969
|
|
6,425,000
|
|
Emergency Medical Services Corp., Company Guarantee, Series WI, 8.125%, 6/1/2019
|
7,083,562
|
|
4,100,000
|
|
Grifols, Inc., Sr. Note, Series WI, 8.25%, 2/1/2018
|
4,530,500
|
|
5,875,000
|
|
HCA Holdings, Inc., Sr. Unsecd. Note, Series WI, 7.75%, 5/15/2021
|
6,557,969
|
|
1,650,000
|
|
HCA, Inc., 6.25%, 2/15/2021
|
1,763,438
|
|
1,000,000
|
|
HCA, Inc., Revolver—1st Lien, 5.875%, 3/15/2022
|
1,080,000
|
|
2,400,000
|
|
HCA, Inc., Series 1, 5.875%, 5/1/2023
|
2,502,000
|
|
3,100,000
|
|
HCA, Inc., Sr. Note, 7.50%, 11/6/2033
|
3,177,500
|
|
1,000,000
|
|
HCA, Inc., Sr. Secd. Note, 6.50%, 2/15/2020
|
1,130,625
|
|
2,775,000
|
|
HCA, Inc., Sr. Secd. Note, 8.50%, 4/15/2019
|
3,069,844
|
|
8,475,000
|
|
HCA, Inc., Sr. Unsecd. Note, 7.50%, 2/15/2022
|
9,767,437
|
|
2,150,000
|
|
Hologic, Inc., 6.25%, 8/1/2020
|
2,297,813
|
|
5,825,000
|
|
Iasis Healthcare, Sr. Unsecd. Note, 8.375%, 5/15/2019
|
6,161,102
|
|
2,150,000
|
1,2
|
Jaguar Holding Co., Series 144A, 9.375%, 10/15/2017
|
2,319,313
|
|
4,300,000
|
1,2
|
Jaguar Holding Co., Sr. Note, 9.50%, 12/1/2019
|
4,955,750
|
|
6,425,000
|
1,2
|
Multiplan, Inc., Company Guarantee, Series 144A, 9.875%, 9/1/2018
|
7,171,906
|
|
2,200,000
|
|
Omnicare, Inc., Sr. Sub., 7.75%, 6/1/2020
|
2,447,500
|
|
975,000
|
1,2
|
Physiotherapy, Inc., Series 144A, 11.875%, 5/1/2019
|
943,313
|
|
1,900,000
|
1,2
|
Tenet Healthcare Corp., Sr. Secd. Note, Series 144A, 4.50%, 4/1/2021
|
1,866,750
|
|
3,600,000
|
|
United Surgical Partners International, Inc., Series WI, 9.00%, 4/1/2020
|
4,095,000
|
|
1,600,000
|
1,2
|
Universal Hospital Service Holdco, Inc., Series 144A, 7.625%, 8/15/2020
|
1,728,000
|
|
2,350,000
|
|
Universal Hospital Service Holdco, Inc., Series WI, 7.625%, 8/15/2020
|
2,540,937
|
|
6,650,000
|
1,2
|
VWR Funding, Inc., Series 144A, 7.25%, 9/15/2017
|
7,073,937
|
|
5,575,000
|
|
Vanguard Health Holdings II, Company Guarantee, 8.00%, 2/1/2018
|
5,965,250
|
|
2,900,000
|
1,2
|
Wolverine Healthcare, Sr. Note, Series 144A, 10.625%, 6/1/2020
|
3,320,500
|
|
|
|
TOTAL
|
121,815,649
|
|
|
|
Industrial - Other—3.6%
|
|
|
750,000
|
1,2
|
Amsted Industries, Inc., Sr. Note, Series 144A, 8.125%, 3/15/2018
|
810,000
|
|
3,375,000
|
1,2
|
Belden CDT, Inc., Series 144A, 5.50%, 9/1/2022
|
3,476,250
|
|
2,200,000
|
1,2
|
Cleaver-Brooks, Inc., Series 144A, 8.75%, 12/15/2019
|
2,378,750
|
|
3,350,000
|
|
Dynacast International LLC, Series WI, 9.25%, 7/15/2019
|
3,685,000
|
|
2,575,000
|
1,2
|
General Cable Corp., Sr. Unsecd. Note, Series 144A, 5.75%, 10/1/2022
|
2,639,375
|
|
2,025,000
|
1,2
|
Hamilton Sundstrand Corp., Series 144A, 7.75%, 12/15/2020
|
2,166,750
|
|
1,025,000
|
1,2
|
Hillman Group, Inc., Series 144A, 10.875%, 6/1/2018
|
1,132,625
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Industrial - Other—continued
|
|
|
$
3,225,000
|
1,2
|
J.B. Poindexter, Inc., Series 144A, 9.00%, 4/1/2022
|
$
3,386,250
|
|
2,175,000
|
1,2
|
Knowledge Learning Corp., Sr. Sub. Note, Series 144A, 7.75%, 2/1/2015
|
2,153,250
|
|
1,125,000
|
1,2
|
MMI International Ltd., Series 144A, 8.00%, 3/1/2017
|
1,158,750
|
|
1,075,000
|
|
Mastec, Inc., 4.875%, 3/15/2023
|
1,066,938
|
|
2,425,000
|
1,2
|
Maxim Finance Corp., Sr. Secd. Note, Series 144A, 12.25%, 4/15/2015
|
2,552,312
|
|
775,000
|
1,2
|
Milacron LLC, Series 144A, 7.75%, 2/15/2021
|
805,031
|
|
1,325,000
|
1,2
|
Milacron LLC, Series 144A, 8.375%, 5/15/2019
|
1,470,750
|
|
1,850,000
|
1,2
|
Mirror Bidco/Dematic, Series 144A, 7.75%, 12/15/2020
|
1,933,250
|
|
1,020,000
|
|
Mueller Water Products, Inc., Company Guarantee, 8.75%, 9/1/2020
|
1,165,350
|
|
3,375,000
|
|
Mueller Water Products, Inc., Sr. Sub. Note, Series WI, 7.375%, 6/1/2017
|
3,488,906
|
|
3,600,000
|
|
Rexnord, Inc., Company Guarantee, 8.50%, 5/1/2018
|
3,964,500
|
|
3,775,000
|
|
The Hillman Group, Inc., Sr. Unsecd. Note, 10.875%, 6/1/2018
|
4,171,375
|
|
828,000
|
|
Thermon Industries, Inc., Sr. Secd. Note, Series WI, 9.50%, 5/1/2017
|
923,220
|
|
1,100,000
|
1,2
|
Unifrax Investment Corp., Series 144A, 7.50%, 2/15/2019
|
1,138,500
|
|
|
|
TOTAL
|
45,667,132
|
|
|
|
Lodging—0.3%
|
|
|
800,000
|
|
Choice Hotels International, Inc., 5.75%, 7/1/2022
|
892,000
|
|
1,117,000
|
|
Host Marriott LP, Note, Series Q, 6.75%, 6/1/2016
|
1,143,529
|
|
1,275,000
|
|
Royal Caribbean Cruises Ltd., Sr. Note, 5.25%, 11/15/2022
|
1,297,312
|
|
|
|
TOTAL
|
3,332,841
|
|
|
|
Media - Cable—1.7%
|
|
|
1,375,000
|
1,2
|
Cequel Communications Holdings, Series 144A, 6.375%, 9/15/2020
|
1,433,437
|
|
900,000
|
|
Charter Communications Holdings II, 5.125%, 2/15/2023
|
877,500
|
|
1,050,000
|
|
Charter Communications Holdings II, 6.625%, 1/31/2022
|
1,131,375
|
|
725,000
|
|
Charter Communications Holdings II, 7.375%, 6/1/2020
|
807,469
|
|
1,075,000
|
|
Charter Communications Holdings II, Company Guarantee, 7.25%, 10/30/2017
|
1,162,344
|
|
625,000
|
|
Charter Communications Holdings II, Company Guarantee, Series WI, 7.875%, 4/30/2018
|
666,406
|
|
475,000
|
|
Charter Communications Holdings II, Company Guarantee, Series WI, 8.125%, 4/30/2020
|
533,188
|
|
2,125,000
|
1,2
|
Charter Communications Holdings II, Series 144A, 5.75%, 9/1/2023
|
2,140,937
|
|
3,575,000
|
|
Charter Communications Holdings II, Sr. Note, 7.00%, 1/15/2019
|
3,869,937
|
|
525,000
|
|
DISH DBS Corporation, Series WI, 4.625%, 7/15/2017
|
547,313
|
|
5,200,000
|
|
DISH DBS Corporation, Series WI, 5.875%, 7/15/2022
|
5,479,500
|
|
775,000
|
1,2
|
LYNX II Corporation, Series 144A, 6.375%, 4/15/2023
|
815,688
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Media - Cable—continued
|
|
|
$
2,150,000
|
|
Virgin Media, Inc., Sr. Unsecd. Note, 4.875%, 2/15/2022
|
$
2,187,625
|
|
|
|
TOTAL
|
21,652,719
|
|
|
|
Media - Non-Cable—6.4%
|
|
|
1,925,000
|
|
AMC Networks, Inc., Series WI, 7.75%, 7/15/2021
|
2,189,688
|
|
1,650,000
|
|
AMC Networks, Inc., Sr. Unsecd. Note, 4.75%, 12/15/2022
|
1,650,000
|
|
6,050,000
|
|
Clear Channel Communications, Inc., Company Guarantee, 9.00%, 3/1/2021
|
5,679,437
|
|
1,225,000
|
1,2
|
Clear Channel Communications, Inc., Series 144A, 11.25%, 3/1/2021
|
1,261,750
|
|
2,175,000
|
1,2
|
Clear Channel Worldwide, 6.50%, 11/15/2022
|
2,305,500
|
|
825,000
|
|
Clear Channel Worldwide, 7.625%, 3/15/2020
|
856,969
|
|
825,000
|
1,2
|
Clear Channel Worldwide, Series 144A, 6.50%, 11/15/2022
|
864,188
|
|
5,750,000
|
|
Clear Channel Worldwide, Series B, 7.625%, 3/15/2020
|
6,030,312
|
|
6,025,000
|
|
Crown Media Holdings, Inc., Company Guarantee, 10.50%, 7/15/2019
|
6,823,312
|
|
3,825,000
|
|
Cumulus Media, Inc., Sr. Unsecd. Note, Series WI, 7.75%, 5/1/2019
|
3,949,312
|
|
3,800,000
|
|
Entercom Radio LLC, Sr. Sub. Note, Series WI, 10.50%, 12/1/2019
|
4,389,000
|
|
2,805,000
|
|
Entravision Communications Corp., Sr. Secd. Note, 8.75%, 8/1/2017
|
3,050,437
|
|
2,675,000
|
1,2
|
Intelsat (Luxembourg) S.A., Sr. Unsecd. Note, Series 144A, 7.75%, 6/1/2021
|
2,728,500
|
|
2,700,000
|
1,2
|
Intelsat (Luxembourg) S.A., Sr. Unsecd. Note, Series 144A, 8.125%, 6/1/2023
|
2,754,000
|
|
825,000
|
|
Intelsat Jackson Holdings S.A., 7.25%, 10/15/2020
|
909,563
|
|
2,575,000
|
|
Intelsat Jackson Holdings S.A., Company Guarantee, 8.50%, 11/1/2019
|
2,893,656
|
|
1,200,000
|
1,2
|
Intelsat Jackson Holdings S.A., Series 144A, 6.625%, 12/15/2022
|
1,275,000
|
|
1,575,000
|
|
Intelsat Jackson Holdings S.A., Sr. Unsecd. Note, Series WI, 7.25%, 4/1/2019
|
1,728,563
|
|
1,700,000
|
|
Intelsat Jackson Holdings S.A., Sr. Unsecd. Note, Series WI, 7.50%, 4/1/2021
|
1,899,750
|
|
750,000
|
|
Lamar Media Corp., Company Guarantee, 7.875%, 4/15/2018
|
820,313
|
|
1,825,000
|
|
Lamar Media Corp., Series WI, 5.00%, 5/1/2023
|
1,834,125
|
|
1,000,000
|
|
Lamar Media Corp., Series WI, 5.875%, 2/1/2022
|
1,087,500
|
|
1,075,000
|
|
Nielsen Finance LLC/Nielsen Finance Co., Company Guarantee, 7.75%, 10/15/2018
|
1,198,625
|
|
2,075,000
|
1,2
|
Nielsen Finance LLC/Nielsen Finance Co., Series 144A, 4.50%, 10/1/2020
|
2,082,781
|
|
5,100,000
|
|
SSI Investments II Ltd., Company Guarantee, 11.125%, 6/1/2018
|
5,686,500
|
|
1,100,000
|
1,2
|
Sirius XM Radio, Inc., Series 144A, 5.25%, 8/15/2022
|
1,130,250
|
|
1,675,000
|
1,2
|
Sirius XM Radio, Inc., Sr. Note, Series 144A, 8.75%, 4/1/2015
|
1,871,812
|
|
4,525,000
|
1,2
|
Southern Graphics Systems, Inc., Series 144A, 8.375%, 10/15/2020
|
4,706,000
|
|
3,250,000
|
1,2
|
Townsquare Radio LLC, Series 144A, 9.00%, 4/1/2019
|
3,566,875
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Media - Non-Cable—continued
|
|
|
$
2,725,000
|
1,2
|
XM Satellite Radio, Inc., Sr. Unsecd. Note, Series 144A, 7.625%, 11/1/2018
|
$
3,021,344
|
|
|
|
TOTAL
|
80,245,062
|
|
|
|
Metals & Mining—0.0%
|
|
|
2,975,000
|
3,4,5
|
Aleris International, Inc., Company Guarantee, 9.00%, 12/15/2014
|
298
|
|
2,400,000
|
3,4,5
|
Aleris International, Inc., Sr. Sub. Note, 10.00%, 12/15/2016
|
0
|
|
425,000
|
1,2
|
Steel Dynamics, Inc., Sr. Note, Series 144A, 5.25%, 4/15/2023
|
431,906
|
|
|
|
TOTAL
|
432,204
|
|
|
|
Packaging—4.3%
|
|
|
4,875,000
|
1,2
|
Ardagh Packaging Finance PLC, Company Guarantee, Series 144A, 9.125%, 10/15/2020
|
5,423,437
|
|
1,200,000
|
1,2
|
Ardagh Packaging Finance PLC, Series 144A, 7.00%, 11/15/2020
|
1,236,000
|
|
1,925,000
|
1,2
|
Ardagh Packaging Finance PLC, Sr. Unsecd. Note, 9.125%, 10/15/2020
|
2,131,938
|
|
1,850,000
|
|
Berry Plastics Corp., Sr. Secd. Note, 9.50%, 5/15/2018
|
2,074,313
|
|
1,575,000
|
|
Bway Holding Co., Company Guarantee, Series WI, 10.00%, 6/15/2018
|
1,771,875
|
|
3,050,000
|
1,2
|
Bway Holding Co., Series 144A, 9.50%, 11/1/2017
|
3,297,813
|
|
775,000
|
|
Crown Americas, LLC, Company Guarantee, 6.25%, 2/1/2021
|
850,563
|
|
750,000
|
1,2
|
Crown Americas, LLC, Series 144A, 4.50%, 1/15/2023
|
731,250
|
|
1,150,000
|
|
Greif, Inc., Sr. Unsecd. Note, 7.75%, 8/1/2019
|
1,345,500
|
|
3,400,000
|
1,2
|
Packaging Dynamics Corp., Sr. Secd. Note, Series 144A, 8.75%, 2/1/2016
|
3,565,750
|
|
7,175,000
|
|
Reynolds Group, Series WI, 8.25%, 2/15/2021
|
7,417,156
|
|
2,800,000
|
|
Reynolds Group, Series WI, 8.50%, 5/15/2018
|
2,957,500
|
|
3,575,000
|
|
Reynolds Group, Series WI, 9.00%, 4/15/2019
|
3,798,437
|
|
3,450,000
|
|
Reynolds Group, Series WI, 9.875%, 8/15/2019
|
3,790,687
|
|
1,400,000
|
|
Reynolds Group, Sr. Secd. Note, Series WI, 7.125%, 4/15/2019
|
1,510,250
|
|
900,000
|
|
Reynolds Group, Sr. Unsecd. Note, 7.95%, 12/15/2025
|
859,500
|
|
5,000,000
|
|
Reynolds GRP ISS/Reynold, Series WI, 5.75%, 10/15/2020
|
5,106,250
|
|
475,000
|
1,2
|
Sealed Air Corp., Series 144A, 6.50%, 12/1/2020
|
522,500
|
|
5,175,000
|
1,2
|
Sealed Air Corp., Sr. Unsecd. Note, Series 144A, 8.375%, 9/15/2021
|
5,951,250
|
|
|
|
TOTAL
|
54,341,969
|
|
|
|
Paper—0.4%
|
|
|
1,075,000
|
1,2
|
Clearwater Paper Corp., Sr. Note, Series 144A, 4.50%, 2/1/2023
|
1,058,875
|
|
600,000
|
|
Graphic Packaging International Corp., Sr. Note, 7.875%, 10/1/2018
|
664,500
|
|
2,550,000
|
1,2
|
Longview Fibre Co., Sr. Secd. Note, Series 144A, 8.00%, 6/1/2016
|
2,677,500
|
|
|
|
TOTAL
|
4,400,875
|
|
|
|
Restaurants—1.3%
|
|
|
6,850,000
|
|
DineEquity, Inc., Company Guarantee, Series WI, 9.50%, 10/30/2018
|
7,843,250
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Restaurants—continued
|
|
|
$
5,050,000
|
|
NPC International/OPER Co., A&B, Inc., Series WI, 10.50%, 1/15/2020
|
$
5,908,500
|
|
3,025,000
|
1,2
|
Seminole Hard Rock Entertainment, Inc./Seminole Hard Rock International LLC, Sr. Secd. Note, Series 144A, 2.780%, 3/15/2014
|
3,021,219
|
|
|
|
TOTAL
|
16,772,969
|
|
|
|
Retailers—4.7%
|
|
|
2,825,000
|
1,2
|
Academy Finance Corp., Series 144A, 8.00%, 6/15/2018
|
2,938,000
|
|
4,125,000
|
1,2
|
Academy Finance Corp., Series 144A, 9.25%, 8/1/2019
|
4,671,562
|
|
1,075,000
|
1,2
|
Claire's Stores, Inc., Series 144A, 6.125%, 3/15/2020
|
1,107,250
|
|
925,000
|
|
Express, LLC, Company Guarantee, 8.75%, 3/1/2018
|
1,012,875
|
|
2,950,000
|
|
Gymboree Corp., Sr. Unsecd. Note, 9.125%, 12/1/2018
|
2,791,438
|
|
3,325,000
|
1,2
|
Jo-Ann Stores, Inc., Series 144A, 9.75%, 10/15/2019
|
3,507,875
|
|
7,025,000
|
1,2
|
Jo-Ann Stores, Inc., Sr. Unsecd. Note, Series 144A, 8.125%, 3/15/2019
|
7,376,250
|
|
1,500,000
|
|
Limited Brands, Inc., Company Guarantee, 8.50%, 6/15/2019
|
1,848,750
|
|
700,000
|
|
Limited Brands, Inc., Sr. Unsecd. Note, 5.625%, 2/15/2022
|
745,500
|
|
4,925,000
|
|
Michaels Stores, Inc., Company Guarantee, 7.75%, 11/1/2018
|
5,405,187
|
|
4,800,000
|
1,2
|
PETCO Animal Supplies, Inc., Series 144A, 8.50%, 10/15/2017
|
4,974,000
|
|
5,175,000
|
1,2
|
PETCO Animal Supplies, Inc., Sr. Note, Series 144A, 9.25%, 12/1/2018
|
5,731,312
|
|
1,725,000
|
1,2
|
Party City Holdings, Inc., Sr. Note, Series 144A, 8.875%, 8/1/2020
|
1,901,813
|
|
950,000
|
|
Sally Beauty Holdings, Inc., 5.75%, 6/1/2022
|
996,313
|
|
2,650,000
|
|
Sally Holdings. LLC/Sally Cap, Inc., Series WI, 6.875%, 11/15/2019
|
2,948,125
|
|
6,625,000
|
|
The Yankee Candle Co., Inc., Sr. Sub. Note, Series B, 9.75%, 2/15/2017
|
6,890,066
|
|
1,275,000
|
1,2
|
United Auto Group, Inc., Series 144A, 5.75%, 10/1/2022
|
1,335,563
|
|
3,000,000
|
|
YCC Holdings LLC, Sr. Unsecd. Note, 10.25%, 2/15/2016
|
3,108,750
|
|
|
|
TOTAL
|
59,290,629
|
|
|
|
Services—1.3%
|
|
|
2,050,000
|
1,2
|
Carlson Wagonlit Travel, Sr. Secd. Note, Series 144A, 6.875%, 6/15/2019
|
2,147,375
|
|
4,650,000
|
1,2
|
Garda World Security Corp., Sr. Unsecd. Note, Series 144A, 9.75%, 3/15/2017
|
5,033,625
|
|
2,625,000
|
|
Monitronics International, Inc., Series WI, 9.125%, 4/1/2020
|
2,789,062
|
|
3,025,000
|
1,2
|
Reliance Intermediate Holdings LP, Sr. Unsecd. Note, Series 144A, 9.50%, 12/15/2019
|
3,388,000
|
|
850,000
|
|
West Corp., Company Guarantee, 7.875%, 1/15/2019
|
909,500
|
|
1,725,000
|
|
West Corp., Company Guarantee, 11.00%, 10/15/2016
|
1,802,625
|
|
|
|
TOTAL
|
16,070,187
|
|
|
|
Technology—13.7%
|
|
|
1,250,000
|
1,2
|
Advanced Micro Devices, Inc., Series 144A, 7.50%, 8/15/2022
|
1,140,625
|
|
2,625,000
|
|
Advanced Micro Devices, Inc., Sr. Unsecd. Note, 7.75%, 8/1/2020
|
2,428,125
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Technology—continued
|
|
|
$
1,950,000
|
1
|
Allen Systems Group, Inc., Sr. Secd. 2nd Priority Note, Series 144A, 10.50%, 11/15/2016
|
$
1,257,750
|
|
2,525,000
|
|
Aspect Software, Inc., Sr. Note, Series WI, 10.625%, 5/15/2017
|
2,550,250
|
|
1,425,000
|
|
CDW LLC/ CDW Finance, Company Guarantee, 12.535%, 10/12/2017
|
1,537,219
|
|
7,400,000
|
|
CDW LLC/ CDW Finance, Sr. Unsecd. Note, Series WI, 8.50%, 4/1/2019
|
8,297,250
|
|
5,400,000
|
1,2
|
CommScope, Inc., Sr. Note, Series 144A, 8.25%, 1/15/2019
|
5,886,000
|
|
4,425,000
|
|
CoreLogic, Inc., Sr. Unsecd. Note, Series WI, 7.25%, 6/1/2021
|
4,911,750
|
|
6,575,000
|
1,2
|
DataTel, Inc., Series 144A, 9.75%, 1/15/2019
|
7,364,000
|
|
4,400,000
|
|
Emdeon, Inc., 11.00%, 12/31/2019
|
5,093,000
|
|
6,225,000
|
|
Epicor Software Corp., 8.625%, 5/1/2019
|
6,769,687
|
|
1,575,000
|
1,2
|
First Data Corp., Series 144A, 11.25%, 1/15/2021
|
1,645,875
|
|
1,825,000
|
1,2
|
First Data Corp., Sr. Secd. 2nd Priority Note, Series 144A, 8.25%, 1/15/2021
|
1,907,125
|
|
11,275,000
|
1,2
|
First Data Corp., Sr. Secd. 2nd Priority Note, Series 144A, 8.75%, 1/15/2022
|
11,979,687
|
|
1,300,000
|
1,2
|
Flextronics International Ltd., Series 144A, 4.625%, 2/15/2020
|
1,319,500
|
|
1,275,000
|
1,2
|
Flextronics International Ltd., Series 144A, 5.00%, 2/15/2023
|
1,278,188
|
|
2,250,000
|
|
Freescale Semiconductor, Inc., Company Guarantee, 10.75%, 8/1/2020
|
2,565,000
|
|
3,750,000
|
1,2
|
Freescale Semiconductor, Inc., Sr. Secd. Note, Series 144A, 9.25%, 4/15/2018
|
4,134,375
|
|
1,875,000
|
1,2
|
IAC Interactive Corp., Series 144A, 4.75%, 12/15/2022
|
1,842,188
|
|
4,025,000
|
|
IGATE Capital Corp., Sr. Unsecd. Note, Series WI, 9.00%, 5/1/2016
|
4,402,344
|
|
3,750,000
|
1,2
|
Igloo Holdings Corp., Sr. Note, Series 144A, 8.25%, 12/15/2017
|
3,890,625
|
|
3,625,000
|
|
Interactive Data Corp., Company Guarantee, 10.25%, 8/1/2018
|
4,141,562
|
|
1,300,000
|
|
Iron Mountain, Inc., 5.75%, 8/15/2024
|
1,304,875
|
|
2,200,000
|
|
Iron Mountain, Inc., Sr. Sub. Note, 7.75%, 10/1/2019
|
2,455,750
|
|
5,175,000
|
|
Kemet Corp., Sr. Note, 10.50%, 5/1/2018
|
5,420,812
|
|
4,200,000
|
|
Lawson Software, Inc., Series WI, 9.375%, 4/1/2019
|
4,782,750
|
|
6,625,000
|
|
Lawson Software, Inc., Series WI, 11.50%, 7/15/2018
|
7,817,500
|
|
4,900,000
|
|
Lender Processing Services, 5.75%, 4/15/2023
|
5,132,750
|
|
3,650,000
|
|
MagnaChip Semiconductor S.A., Sr. Note, Series WI, 10.50%, 4/15/2018
|
4,088,000
|
|
2,775,000
|
1,2
|
Mmodal, Inc., Series 144A, 10.75%, 8/15/2020
|
2,428,125
|
|
1,425,000
|
1,2
|
NCR Corp., Series 144A, 4.625%, 2/15/2021
|
1,425,000
|
|
2,000,000
|
1,2
|
NCR Corp., Series 144A, 5.00%, 7/15/2022
|
2,015,000
|
|
900,000
|
1,2
|
NXP BV/NXP Funding LLC, Series 144A, 5.75%, 2/15/2021
|
938,250
|
|
725,000
|
1,2
|
NXP BV/NXP Funding LLC, Series 144A, 5.75%, 3/15/2023
|
741,313
|
|
3,800,000
|
1,2
|
Nuance Communications, Inc., 5.375%, 8/15/2020
|
3,866,500
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Technology—continued
|
|
|
$
1,750,000
|
|
SERENA Software, Inc., Sr. Sub. Note, 10.375%, 3/15/2016
|
$
1,785,000
|
|
2,450,000
|
|
Seagate Technology HDD Holdings, Company Guarantee, 7.75%, 12/15/2018
|
2,698,062
|
|
1,075,000
|
|
Seagate Technology HDD Holdings, Sr. Note, 6.80%, 10/1/2016
|
1,220,125
|
|
1,200,000
|
|
Seagate Technology HDD Holdings, Sr. Unsecd. Note, Series WI, 7.00%, 11/1/2021
|
1,308,000
|
|
4,850,000
|
1,2
|
Solera Holdings, Inc., Company Guarantee, Series 144A, 6.75%, 6/15/2018
|
5,225,875
|
|
4,775,000
|
|
Spansion, Inc., Sr. Unsecd. Note, Series WI, 7.875%, 11/15/2017
|
5,061,500
|
|
1,200,000
|
|
Stream Global Services, Inc., Sr. Secd. Note, 11.25%, 10/1/2014
|
1,248,000
|
|
1,975,000
|
|
SunGard Data Systems, Inc., Company Guarantee, 7.375%, 11/15/2018
|
2,123,125
|
|
1,375,000
|
1,2
|
SunGard Data Systems, Inc., Series 144A, 6.625%, 11/1/2019
|
1,426,563
|
|
1,000,000
|
|
SunGard Data Systems, Inc., Sr. Unsecd. Note, 7.625%, 11/15/2020
|
1,088,750
|
|
6,275,000
|
|
Syniverse Holdings, Inc., Company Guarantee, 9.125%, 1/15/2019
|
6,918,187
|
|
1,350,000
|
|
Trans Union LLC, Company Guarantee, Series 144A, 11.375%, 6/15/2018
|
1,559,250
|
|
2,325,000
|
1,2
|
TransUnion Holding Co., Inc., Series 144A, 8.125%, 6/15/2018
|
2,493,563
|
|
4,300,000
|
|
TransUnion Holding Co., Inc., Sr. Unsecd. Note, Series WI, 9.625%, 6/15/2018
|
4,697,750
|
|
3,250,000
|
1,2
|
Viasystems, Inc., Sr. Secd. Note, Series 144A, 7.875%, 5/1/2019
|
3,412,500
|
|
|
|
TOTAL
|
171,025,000
|
|
|
|
Textile—0.1%
|
|
|
750,000
|
|
Phillips Van Heusen Corp., Sr. Note, 4.50%, 12/15/2022
|
744,375
|
|
|
|
Transportation—0.4%
|
|
|
1,000,000
|
|
HDTFS, Inc., Series WI, 6.25%, 10/15/2022
|
1,090,000
|
|
2,150,000
|
|
Hertz Corp., Company Guarantee, 6.75%, 4/15/2019
|
2,356,938
|
|
1,025,000
|
|
Hertz Corp., Series WI, 5.875%, 10/15/2020
|
1,086,500
|
|
|
|
TOTAL
|
4,533,438
|
|
|
|
Utility - Electric—1.5%
|
|
|
3,150,000
|
1,2
|
Calpine Corp., Sr. Secd. Note, Series 144A, 7.50%, 2/15/2021
|
3,472,875
|
|
1,725,000
|
1,2
|
Energy Future Intermediate Holding Company LLC, Series 144A, 6.875%, 8/15/2017
|
1,824,188
|
|
2,575,000
|
1,2
|
Energy Future Intermediate Holding Company LLC, Sr. Secd. 2nd Priority Note, Series 144A, 11.75%, 3/1/2022
|
2,974,125
|
|
1,575,000
|
|
Energy Future Intermediate Holding Company LLC, Sr. Secd. Note, 10.00%, 12/1/2020
|
1,793,531
|
|
663,995
|
1
|
FPL Energy National Wind, Note, Series 144A, 6.125%, 3/25/2019
|
585,634
|
|
2,375,000
|
|
NRG Energy, Inc., Company Guarantee, Series WI, 7.625%, 1/15/2018
|
2,713,437
|
|
1,250,000
|
|
NRG Energy, Inc., Sr. Unsecd. Note, 7.875%, 5/15/2021
|
1,396,875
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Utility - Electric—continued
|
|
|
$
900,000
|
1,2
|
NRG Energy, Inc., Sr. Unsecd. Note, Series 144A, 6.625%, 3/15/2023
|
$
958,500
|
|
2,375,000
|
|
NRG Energy, Inc., Sr. Unsecd. Note, Series WI, 7.625%, 5/15/2019
|
2,576,875
|
|
|
|
TOTAL
|
18,296,040
|
|
|
|
Utility - Natural Gas—3.5%
|
|
|
3,600,000
|
|
Access Midstream Partners LP, Sr. Note, 4.875%, 5/15/2023
|
3,559,500
|
|
1,900,000
|
|
Chesapeake Midstream Partners LP, Sr. Unsecd. Note, Series WI, 6.125%, 7/15/2022
|
2,047,250
|
|
2,225,000
|
|
Copano Energy LLC, Company Guarantee, 7.125%, 4/1/2021
|
2,581,000
|
|
1,975,000
|
|
Crosstex Energy, Inc., Company Guarantee, 8.875%, 2/15/2018
|
2,147,812
|
|
2,800,000
|
|
El Paso Corp., Sr. Unsecd. Note, 6.50%, 9/15/2020
|
3,109,109
|
|
875,000
|
|
El Paso Corp., Sr. Unsecd. Note, 7.25%, 6/1/2018
|
1,008,760
|
|
6,450,000
|
|
Energy Transfer Equity LP, Sr. Unsecd. Note, 7.50%, 10/15/2020
|
7,465,875
|
|
1,825,000
|
1,2
|
Holly Energy Partners LP, Series 144A, 6.50%, 3/1/2020
|
1,948,187
|
|
1,600,000
|
1,2
|
Inergy Midstream LP, Sr. Unsecd. Note, Series 144A, 6.00%, 12/15/2020
|
1,672,000
|
|
2,000,000
|
|
MarkWest Energy Partners LP, 5.50%, 2/15/2023
|
2,105,000
|
|
1,475,000
|
|
MarkWest Energy Partners LP, Sr. Unsecd. Note, 4.50%, 7/15/2023
|
1,445,500
|
|
650,000
|
|
MarkWest Energy Partners LP, Sr. Unsecd. Note, 6.25%, 6/15/2022
|
703,625
|
|
650,000
|
|
Regency Energy Partners LP, 5.50%, 4/15/2023
|
698,750
|
|
796,000
|
|
Regency Energy Partners LP, Company Guarantee, 9.375%, 6/1/2016
|
847,740
|
|
1,875,000
|
|
Regency Energy Partners LP, Sr. Note, 6.875%, 12/1/2018
|
2,053,125
|
|
1,000,000
|
1,2
|
Sabine Pass LNG LP, Series 144A, 5.625%, 2/1/2021
|
1,038,750
|
|
3,275,000
|
|
Southern Star Central Corp., Sr. Note, 6.75%, 3/1/2016
|
3,324,125
|
|
3,504,000
|
|
Suburban Propane Partners LP, Series WI, 7.375%, 8/1/2021
|
3,880,680
|
|
575,000
|
|
Targa Resources, Inc., 6.875%, 2/1/2021
|
632,500
|
|
950,000
|
1,2
|
Tesoro Logistics LP, Sr. Unsecd. Note, Series 144A, 5.875%, 10/1/2020
|
1,007,000
|
|
|
|
TOTAL
|
43,276,288
|
|
|
|
Wireless Communications—3.6%
|
|
|
2,450,000
|
1,2
|
Digicel Ltd., Series 144A, 6.00%, 4/15/2021
|
2,443,875
|
|
775,000
|
1,2
|
Digicel Ltd., Sr. Note, Series 144A, 8.25%, 9/1/2017
|
827,313
|
|
450,000
|
1,2
|
Digicel Ltd., Sr. Note, Series 144A, 10.50%, 4/15/2018
|
505,125
|
|
8,550,000
|
1,2
|
Digicel Ltd., Sr. Unsecd. Note, Series 144A, 8.25%, 9/30/2020
|
9,105,750
|
|
4,750,000
|
|
MetroPCS Wireless, Inc., Sr. Note, 6.625%, 11/15/2020
|
4,981,562
|
|
1,050,000
|
|
MetroPCS Wireless, Inc., Sr. Note, 7.875%, 9/1/2018
|
1,152,375
|
|
2,150,000
|
1,2
|
MetroPCS Wireless, Inc., Sr. Note, Series 144A, 6.625%, 4/1/2023
|
2,201,062
|
|
4,425,000
|
|
Sprint Capital Corp., Company Guarantee, 6.875%, 11/15/2028
|
4,546,687
|
|
9,950,000
|
|
Sprint Capital Corp., Company Guarantee, 6.90%, 5/1/2019
|
10,969,875
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
Corporate Bonds—
continued
|
|
|
|
|
Wireless Communications—continued
|
|
|
$
4,075,000
|
1,2
|
Sprint Capital Corp., Gtd. Note, Series 144A, 9.00%, 11/15/2018
|
$
5,047,906
|
|
1,325,000
|
1,2
|
Sprint Nextel Corp., Series 144A, 7.00%, 3/1/2020
|
1,546,938
|
|
1,825,000
|
|
Sprint Nextel Corp., Sr. Unsecd. Note, 6.00%, 11/15/2022
|
1,884,313
|
|
|
|
TOTAL
|
45,212,781
|
|
|
|
Wireline Communications—0.7%
|
|
|
1,950,000
|
1,2
|
Level 3 Financing, Inc., Series 144A, 7.00%, 6/1/2020
|
2,049,937
|
|
700,000
|
1,2
|
Level 3 Financing, Inc., Series 144A, 8.875%, 6/1/2019
|
767,375
|
|
1,425,000
|
|
Level 3 Financing, Inc., Series WI, 8.625%, 7/15/2020
|
1,594,219
|
|
3,775,000
|
|
Level 3 Financing, Inc., Sr. Unsecd. Note, Series WI, 8.125%, 7/1/2019
|
4,171,375
|
|
|
|
TOTAL
|
8,582,906
|
|
|
|
TOTAL CORPORATE BONDS
(IDENTIFIED COST $1,153,914,339)
|
1,222,463,189
|
|
|
|
COMMON STOCKS—0.1%
|
|
|
|
|
Automotive—0.1%
|
|
|
38,576
|
3
|
General Motors Co.
|
1,073,185
|
|
9,684
|
3
|
Motors Liquidation Co.
|
261,468
|
|
|
|
TOTAL
|
1,334,653
|
|
|
|
Lodging—0.0%
|
|
|
1,750
|
1,3,5
|
Motels of America, Inc.
|
0
|
|
|
|
Media - Non-Cable—0.0%
|
|
|
5,725,000
|
3
|
Idearc, Inc., Company Guarantee, (Litigation Trust Interests)
|
7,156
|
|
46
|
3,5
|
Sullivan Graphics, Inc.
|
0
|
|
|
|
TOTAL
|
7,156
|
|
|
|
Metals & Mining—0.0%
|
|
|
3,064
|
1,3,5
|
Royal Oak Ventures, Inc.
|
0
|
|
|
|
Other—0.0%
|
|
|
746
|
1,3,5
|
CVC Claims Litigation LLC
|
0
|
|
|
|
TOTAL COMMON STOCKS
(IDENTIFIED COST $11,367,801)
|
1,341,809
|
|
|
|
Preferred Stock—0.3%
|
|
|
|
|
Finance - Commercial—0.3%
|
|
|
3,265
|
1,2
|
Ally Financial, Inc., Pfd., Series 144A, Annual Dividend 7.00%
(IDENTIFIED COST $1,009,780)
|
3,229,085
|
|
|
|
WARRANT—0.0%
|
|
|
|
|
Automotive—0.0%
|
|
|
35,069
|
3
|
General Motors Co., Warrants
(IDENTIFIED COST $1,761,587)
|
413,463
|
Annual Shareholder Report
Principal
Amount
or Shares
|
|
|
Value
|
|
|
|
MUTUAL FUND—1.2%
|
|
|
15,438,376
|
7,8
|
Federated Prime Value Obligations Fund, Institutional Shares, 0.12%
(AT NET ASSET VALUE)
|
$
15,438,376
|
|
|
|
TOTAL INVESTMENTS—99.3%
(IDENTIFIED COST $1,183,491,883)
9
|
1,242,885,922
|
|
|
|
OTHER ASSETS AND LIABILITIES - NET—0.7%
10
|
8,121,795
|
|
|
|
TOTAL NET ASSETS—100%
|
$1,251,007,717
|
|
1
|
Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933;
or (b) is subject to a contractual restriction on public sales. At March 31, 2013, these restricted securities amounted to $465,305,443, which represented 37.2% of total net assets.
|
|
2
|
Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be
liquid under criteria established by the Fund's Board of Directors (the “Directors”). At March 31, 2013, these liquid restricted securities amounted to $462,219,559, which represented 36.9% of total net
assets.
|
|
3
|
Non-income producing security.
|
|
4
|
Issuer in default.
|
|
5
|
Market quotations and price evaluations are not available. Fair value determined in accordance with procedures established by and under the general supervision of the Directors.
|
|
6
|
Principal amount and interest were not paid upon final maturity.
|
|
7
|
Affiliated holding.
|
|
8
|
7-day net yield.
|
|
9
|
The cost of investments for federal tax purposes amounts to $1,186,466,113.
|
|
10
|
Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities.
|
Note: The categories of investments
are shown as a percentage of total net assets at March 31, 2013.
Various inputs are used in
determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1—
quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2—
other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3—
significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for
valuing securities are not an indication of the risk associated with investing in those securities.
Annual Shareholder Report
The following is a summary of the
inputs used, as of March 31, 2013, in valuing the Fund's assets carried at fair value:
|
Valuation Inputs
|
|
|
Level 1—
Quoted
Prices and
Investments in
Mutual Funds
|
Level 2—
Other
Significant
Observable
Inputs
|
Level 3—
Significant
Unobservable
Inputs
|
Total
|
|
Debt Securities:
|
|
|
|
|
|
Corporate Bonds
|
$—
|
$1,222,462,891
|
$298
|
$1,222,463,189
|
|
Equity Securities:
|
|
|
|
|
|
Common Stocks
|
|
|
|
|
|
Domestic
|
1,334,653
|
—
|
7,156
1
|
1,341,809
|
|
International
|
—
|
—
|
0
|
0
|
|
Preferred Stock
|
|
|
|
|
|
Domestic
|
—
|
3,229,085
|
—
|
3,229,085
|
|
Warrant
|
413,463
|
—
|
—
|
413,463
|
|
Mutual Fund
|
15,438,376
|
—
|
—
|
15,438,376
|
|
TOTAL SECURITIES
|
$17,186,492
|
$1,225,691,976
|
$7,454
|
$1,242,885,922
|
|
1
|
Includes $157,438 of a domestic common stock security transferred from Level 2 to Level 3 because the Adviser determined, based on an analysis of the valuation inputs, that this security more appropriately meets the
definition of Level 3. This transfer represents the value of the security at the beginning of the period.
|
The following acronym is used
throughout this portfolio:
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Financial Highlights
–
Class A Shares
(For a Share Outstanding
Throughout Each Period)
|
Year Ended March 31
|
2013
|
2012
|
2011
|
2010
|
2009
|
|
Net Asset Value, Beginning of Period
|
$7.62
|
$7.71
|
$7.35
|
$5.39
|
$7.32
|
|
Income From Investment Operations:
|
|
|
|
|
|
|
Net investment income
|
0.51
1
|
0.55
1
|
0.58
|
0.57
|
0.60
|
|
Net realized and unrealized gain (loss) on investments and foreign currency transactions
|
0.31
|
(0.07)
|
0.36
|
1.96
|
(1.93)
|
|
TOTAL FROM INVESTMENT OPERATIONS
|
0.82
|
0.48
|
0.94
|
2.53
|
(1.33)
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions from net investment income
|
(0.55)
|
(0.57)
|
(0.58)
|
(0.57)
|
(0.60)
|
|
Redemption Fees
|
0.00
2
|
0.00
2
|
0.00
2
|
0.00
2
|
0.00
2
|
|
Regulatory Settlement Proceeds
|
0.02
3
|
—
|
—
|
—
|
—
|
|
Net Asset Value, End of Period
|
$7.91
|
$7.62
|
$7.71
|
$7.35
|
$5.39
|
|
Total Return
4
|
11.42%
3
|
6.66%
|
13.42%
|
48.58%
|
(18.87)%
|
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
Net expenses
|
1.23%
|
1.23%
|
1.23%
|
1.23%
|
1.23%
|
|
Net investment income
|
6.53%
|
7.37%
|
7.66%
|
8.68%
|
9.45%
|
|
Expense waiver/reimbursement
5
|
0.00%
6
|
0.01%
|
0.01%
|
0.02%
|
0.03%
|
|
Supplemental Data:
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$951,934
|
$880,629
|
$833,523
|
$764,171
|
$481,308
|
|
Portfolio turnover
|
38%
|
35%
|
41%
|
35%
|
19%
|
|
1
|
Per share numbers have been calculated using the average shares method.
|
|
2
|
Represents less than $0.01.
|
|
3
|
On June 12, 2012, the Fund received a residual distribution from a regulatory settlement which had an impact of 0.24% on the total return.
|
|
4
|
Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
|
|
5
|
This expense decrease is reflected in both the net expense and the net investment income ratios shown above.
|
|
6
|
Represents less than 0.01%.
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Financial Highlights
–
Class B Shares
(For a Share Outstanding
Throughout Each Period)
|
Year Ended March 31
|
2013
|
2012
|
2011
|
2010
|
2009
|
|
Net Asset Value, Beginning of Period
|
$7.61
|
$7.69
|
$7.34
|
$5.38
|
$7.31
|
|
Income From Investment Operations:
|
|
|
|
|
|
|
Net investment income
|
0.45
1
|
0.49
1
|
0.54
|
0.52
|
0.56
|
|
Net realized and unrealized gain (loss) on investments and foreign currency transactions
|
0.31
|
(0.06)
|
0.34
|
1.96
|
(1.94)
|
|
TOTAL FROM INVESTMENT OPERATIONS
|
0.76
|
0.43
|
0.88
|
2.48
|
(1.38)
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions from net investment income
|
(0.49)
|
(0.51)
|
(0.53)
|
(0.52)
|
(0.55)
|
|
Redemption Fees
|
0.00
2
|
0.00
2
|
0.00
2
|
0.00
2
|
0.00
2
|
|
Regulatory Settlement Proceeds
|
0.02
3
|
—
|
—
|
—
|
—
|
|
Net Asset Value, End of Period
|
$7.90
|
$7.61
|
$7.69
|
$7.34
|
$5.38
|
|
Total Return
4
|
10.59%
3
|
6.00%
|
12.44%
|
47.55%
|
(19.51)%
|
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
Net expenses
|
1.98%
|
1.98%
|
1.99%
|
1.99%
|
1.99%
|
|
Net investment income
|
5.78%
|
6.59%
|
6.92%
|
7.93%
|
8.51%
|
|
Expense waiver/reimbursement
5
|
0.00%
6
|
0.01%
|
0.00%
6
|
0.01%
|
0.03%
|
|
Supplemental Data:
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$78,132
|
$74,958
|
$114,006
|
$150,115
|
$139,686
|
|
Portfolio turnover
|
38%
|
35%
|
41%
|
35%
|
19%
|
|
1
|
Per share numbers have been calculated using the average shares method.
|
|
2
|
Represents less than $0.01.
|
|
3
|
On June 12, 2012, the Fund received a residual distribution from a regulatory settlement which had an impact of 0.24% on the total return.
|
|
4
|
Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
|
|
5
|
This expense decrease is reflected in both the net expense and the net investment income ratios shown above.
|
|
6
|
Represents less than 0.01%.
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Financial Highlights
–
Class C Shares
(For a Share Outstanding
Throughout Each Period)
|
Year Ended March 31
|
2013
|
2012
|
2011
|
2010
|
2009
|
|
Net Asset Value, Beginning of Period
|
$7.60
|
$7.69
|
$7.34
|
$5.38
|
$7.31
|
|
Income From Investment Operations:
|
|
|
|
|
|
|
Net investment income
|
0.45
1
|
0.49
1
|
0.53
|
0.52
|
0.55
|
|
Net realized and unrealized gain (loss) on investments and foreign currency transactions
|
0.31
|
(0.07)
|
0.35
|
1.96
|
(1.93)
|
|
TOTAL FROM INVESTMENT OPERATIONS
|
0.76
|
0.42
|
0.88
|
2.48
|
(1.38)
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions from net investment income
|
(0.49)
|
(0.51)
|
(0.53)
|
(0.52)
|
(0.55)
|
|
Redemption Fees
|
0.00
2
|
0.00
2
|
0.00
2
|
0.00
2
|
0.00
2
|
|
Regulatory Settlement Proceeds
|
0.02
3
|
—
|
—
|
—
|
—
|
|
Net Asset Value, End of Period
|
$7.89
|
$7.60
|
$7.69
|
$7.34
|
$5.38
|
|
Total Return
4
|
10.60%
3
|
5.87%
|
12.44%
|
47.55%
|
(19.50)%
|
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
Net expenses
|
1.98%
|
1.98%
|
1.99%
|
1.99%
|
1.98%
|
|
Net investment income
|
5.78%
|
6.62%
|
6.90%
|
7.93%
|
8.67%
|
|
Expense waiver/reimbursement
5
|
0.00%
6
|
0.01%
|
0.00%
6
|
0.01%
|
0.04%
|
|
Supplemental Data:
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$220,942
|
$183,362
|
$169,501
|
$152,335
|
$87,576
|
|
Portfolio turnover
|
38%
|
35%
|
41%
|
35%
|
19%
|
|
1
|
Per share numbers have been calculated using the average shares method.
|
|
2
|
Represents less than $0.01.
|
|
3
|
On June 12, 2012, the Fund received a residual distribution from a regulatory settlement which had an impact of 0.24% on the total return.
|
|
4
|
Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable.
|
|
5
|
This expense decrease is reflected in both the net expense and the net investment income ratios shown above.
|
|
6
|
Represents less than 0.01%.
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Statement of Assets and Liabilities
March 31, 2013
|
Assets:
|
|
|
|
Total investment in securities, at value including $15,438,376 of investment in an affiliated holding (Note 5) (identified cost
$1,183,491,883)
|
|
$1,242,885,922
|
|
Income receivable
|
|
26,357,192
|
|
Receivable for investments sold
|
|
962,486
|
|
Receivable for shares sold
|
|
2,573,965
|
|
TOTAL ASSETS
|
|
1,272,779,565
|
|
Liabilities:
|
|
|
|
Payable for investments purchased
|
$17,872,406
|
|
|
Payable for shares redeemed
|
3,013,172
|
|
|
Payable for Directors'/Trustees' fees (Note 5)
|
1,021
|
|
|
Payable for distribution services fee (Note 5)
|
189,717
|
|
|
Payable for shareholder services fee (Note 5)
|
400,936
|
|
|
Accrued expenses (Note 5)
|
294,596
|
|
|
TOTAL LIABILITIES
|
|
21,771,848
|
|
Net assets for 158,232,715 shares outstanding
|
|
$1,251,007,717
|
|
Net Assets Consist of:
|
|
|
|
Paid-in capital
|
|
$1,281,647,588
|
|
Net unrealized appreciation of investments
|
|
59,394,039
|
|
Accumulated net realized loss on investments and foreign currency transactions
|
|
(91,733,004)
|
|
Undistributed net investment income
|
|
1,699,094
|
|
TOTAL NET ASSETS
|
|
$1,251,007,717
|
|
Net Asset Value, Offering Price and Redemption Proceeds Per Share
|
|
|
|
Class A Shares:
|
|
|
|
Net asset value per share ($951,933,871 ÷ 120,348,012 shares outstanding), $0.001 par value, 4,000,000,000 shares authorized
|
|
$7.91
|
|
Offering price per share (100/95.50 of $7.91)
|
|
$8.28
|
|
Redemption proceeds per share (98.00/100 of $7.91)
|
|
$7.75
|
|
Class B Shares:
|
|
|
|
Net asset value per share ($78,132,127 ÷ 9,895,396 shares outstanding), $0.001 par value, 2,000,000,000 shares authorized
|
|
$7.90
|
|
Offering price per share
|
|
$7.90
|
|
Redemption proceeds per share (92.50/100 of $7.90)
|
|
$7.31
|
|
Class C Shares:
|
|
|
|
Net asset value per share ($220,941,719 ÷ 27,989,307 shares outstanding), $0.001 par value, 4,000,000,000 shares authorized
|
|
$7.89
|
|
Offering price per share
|
|
$7.89
|
|
Redemption proceeds per share (97.00/100 of $7.89)
|
|
$7.65
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Statement of Operations
Year Ended March 31, 2013
|
Investment Income:
|
|
|
|
|
Interest
|
|
|
$
93,095,623
|
Dividends (including $31,079 received from an affiliated
holding (Note 5))
|
|
|
259,629
|
|
TOTAL INCOME
|
|
|
93,355,252
|
|
Expenses:
|
|
|
|
|
Investment adviser fee (Note 5)
|
|
$
9,020,418
|
|
|
Administrative fee (Note 5)
|
|
938,440
|
|
|
Custodian fees
|
|
48,662
|
|
|
Transfer and dividend disbursing agent fees and expenses
|
|
1,255,290
|
|
|
Directors'/Trustees' fees (Note 5)
|
|
13,587
|
|
|
Auditing fees
|
|
30,700
|
|
|
Legal fees
|
|
6,788
|
|
|
Portfolio accounting fees
|
|
196,585
|
|
|
Distribution services fee (Note 5)
|
|
2,085,519
|
|
|
Shareholder services fee (Note 5)
|
|
2,996,531
|
|
|
Account administration fee (Note 2)
|
|
900
|
|
|
Share registration costs
|
|
96,332
|
|
|
Printing and postage
|
|
86,795
|
|
|
Insurance premiums (Note 5)
|
|
6,136
|
|
|
Taxes
|
|
91,795
|
|
|
Miscellaneous (Note 5)
|
|
15,250
|
|
|
TOTAL EXPENSES
|
|
16,889,728
|
|
|
Reimbursement and Waiver (Note 5):
|
|
|
|
|
Reimbursement of investment adviser fee
|
$(20,854)
|
|
|
|
Waiver of administrative fee
|
(9,373)
|
|
|
|
TOTAL REIMBURSEMENT AND WAIVER
|
|
(30,227)
|
|
|
Net expenses
|
|
|
16,859,501
|
|
Net investment income
|
|
|
76,495,751
|
|
Realized and Unrealized Gain on Investments:
|
|
|
|
|
Net realized gain on investments
|
|
|
20,186,161
|
|
Net change in unrealized appreciation of investments
|
|
|
29,035,850
|
|
Net realized and unrealized gain on investments
|
|
|
49,222,011
|
|
Change in net assets resulting from operations
|
|
|
$125,717,762
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Statement of Changes in Net Assets
|
Year Ended March 31
|
2013
|
2012
|
|
Increase (Decrease) in Net Assets
|
|
|
|
Operations:
|
|
|
|
Net investment income
|
$
76,495,751
|
$
76,808,593
|
|
Net realized gain on investments
|
20,186,161
|
17,367,830
|
|
Net change in unrealized appreciation/depreciation of investments
|
29,035,850
|
(27,099,817)
|
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
|
125,717,762
|
67,076,606
|
|
Distributions to Shareholders:
|
|
|
|
Distributions from net investment income
|
|
|
|
Class A Shares
|
(65,259,626)
|
(62,029,188)
|
|
Class B Shares
|
(4,781,243)
|
(5,821,168)
|
|
Class C Shares
|
(12,739,756)
|
(11,275,363)
|
|
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS
|
(82,780,625)
|
(79,125,719)
|
|
Share Transactions:
|
|
|
|
Proceeds from sale of shares
|
303,272,622
|
266,823,152
|
|
Net asset value of shares issued to shareholders in payment of distributions declared
|
71,837,045
|
67,421,503
|
|
Cost of shares redeemed
|
(308,815,287)
|
(300,376,212)
|
|
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
|
66,294,380
|
33,868,443
|
|
Redemption Fees
|
107,436
|
99,624
|
|
Regulatory Settlement Proceeds:
|
|
|
|
Net increase from regulatory settlement (Note 9)
|
2,719,464
|
—
|
|
Change in net assets
|
112,058,417
|
21,918,954
|
|
Net Assets:
|
|
|
|
Beginning of period
|
1,138,949,300
|
1,117,030,346
|
|
End of period (including undistributed net investment income of $1,699,094 and $1,572,251, respectively)
|
$1,251,007,717
|
$1,138,949,300
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Notes to Financial Statements
March 31, 2013
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. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to seek high
current income.
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 U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value
(NAV), the Fund generally values investments as follows:
|
■
|
Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Directors.
|
|
■
|
Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
|
|
■
|
Shares of other mutual funds are valued based upon their reported NAVs.
|
|
■
|
Equity securities listed on an exchange or traded through a regulated market system are valued at their last reported sale price or official closing price in their principal exchange or market.
|
|
■
|
Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
|
|
■
|
Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Directors.
|
|
■
|
For securities that are fair valued in accordance with procedures established by and under the general supervision of the Directors, certain factors may be considered such as: the purchase price of the security,
information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the
movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
|
If the Fund cannot obtain a price or
price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one
or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, or if the Fund cannot obtain price evaluations from a pricing service or from
more than one dealer for an investment within a reasonable time (for example, within five business days after a new security is delivered to the Fund), the Fund uses the fair value of the investment determined in
accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Annual Shareholder Report
Fair Valuation and Significant
Events Procedures
The Directors have appointed a
Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and the Adviser's affiliated companies to determine fair value of securities and in overseeing the
calculation of the NAV. The Directors have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes
of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing service evaluations including periodic reviews of third-party pricing services' policies, procedures and
valuation methods (including key inputs and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market
activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the
Directors. The Directors periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
Factors considered by
pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions,
indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation).
Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid
evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts.
In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Directors.
The Directors also
have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which
the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will
change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is
traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
|
■
|
With respect to securities traded in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures contracts;
|
|
■
|
Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
|
|
■
|
Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the
issuer's industry.
|
Annual Shareholder Report
The Directors have approved the use
of a pricing service to determine the fair value of equity securities traded principally in foreign markets when the Adviser determines that there has been a significant trend in the U.S. equity markets or in index
futures trading. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the
Fund will determine the fair value of the investment using another method approved by the Directors.
Repurchase Agreements
The Fund may invest in repurchase
agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund's custodian or sub-custodian eligible securities or cash with a
market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which
the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value
of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be
transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.
The insolvency of the
other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase
agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.
The Fund may enter
into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund's Adviser
and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of
proceeds from any repurchase or other disposition of such securities.
Annual Shareholder Report
Investment Income, Gains and
Losses, Expenses and Distributions
Investment transactions are
accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions
to shareholders are recorded on the ex-dividend date. Foreign dividends are recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions of net investment income are declared
and paid monthly. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each
class based on relative average daily net assets, except that Class A Shares, Class B Shares and Class C Shares may bear distribution services fees, shareholder services fees and account administration fees unique to
those classes. For the year ended March 31, 2013, account administration fees for the Fund were as follows:
|
|
Account
Administration
Fees Incurred
|
|
Class A Shares
|
$692
|
|
Class C Shares
|
208
|
|
TOTAL
|
$900
|
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.
Premium and Discount
Amortization
All premiums and discounts on
fixed-income securities are amortized/accreted using the effective interest rate method.
Federal Taxes
It is the Fund's policy to comply
with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is
necessary. As of and during the year ended March 31, 2013, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income
tax expense in the Statement of Operations. As of March 31, 2013, tax years 2010 through 2013 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America, the state
of Maryland and the Commonwealth of Pennsylvania.
Other Taxes
As an open-end management investment
company incorporated in the state of Maryland but domiciled in the Commonwealth of Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund,
as represented by average net assets for the tax year.
Annual Shareholder Report
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
The Fund may purchase securities
which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from
registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the
issuer of the restricted security 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
such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the 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 in accordance with procedures established by and under the general supervision of the Directors.
Additional
information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Directors, if applicable, held at March 31, 2013, is as follows:
|
Security
|
Acquisition Date
|
Cost
|
Market Value
|
|
Allen Systems Group, Inc., Sr. Secd. 2nd Priority Note, Series 144A, 10.50%, 11/15/2016
|
11/12/2010
–
2/28/2012
|
$2,015,563
|
$1,257,750
|
|
Altegrity, Inc., Company Guarantee, Series 144A, 11.75%, 5/1/2016
|
10/19/2007
–
6/10/2009
|
$1,618,372
|
$1,242,500
|
|
CVC Claims Litigation LLC
|
3/26/1997
–
6/18/1997
|
$7,280,944
|
$
0
|
|
FPL Energy National Wind, Note, Series 144A, 6.125%, 3/25/2019
|
2/16/2005
|
$
663,995
|
$
585,634
|
|
Hard Rock Park Operations LLC, Sr. Secd. Note, Series 144A, 0.00%, 4/1/2012
|
3/23/2006
|
$3,283,529
|
$
0
|
|
Motels of America, Inc.
|
8/30/1994
|
$
117,506
|
$
0
|
|
Royal Oak Mines, Inc.
|
2/24/1999
|
$
26,419
|
$
0
|
Other
The preparation of financial
statements in conformity with GAAP 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.
Annual Shareholder Report
3. CAPITAL STOCK
The following tables summarize
capital stock activity:
|
Year Ended March 31
|
2013
|
2012
|
|
Class A Shares:
|
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares sold
|
28,721,226
|
$
221,953,354
|
27,691,046
|
$
207,407,950
|
|
Shares issued to shareholders in payment of distributions declared
|
7,351,174
|
56,710,616
|
7,119,081
|
52,968,115
|
|
Shares redeemed
|
(31,319,281)
|
(242,650,779)
|
(27,375,432)
|
(204,656,918)
|
NET CHANGE RESULTING FROM
CLASS A SHARE TRANSACTIONS
|
4,753,119
|
$
36,013,191
|
7,434,695
|
$
55,719,147
|
|
Year Ended March 31
|
2013
|
2012
|
|
Class B Shares:
|
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares sold
|
2,988,720
|
$
23,094,082
|
2,032,479
|
$
15,194,106
|
|
Shares issued to shareholders in payment of distributions declared
|
512,847
|
3,950,980
|
635,422
|
4,731,769
|
|
Shares redeemed
|
(3,462,128)
|
(26,763,693)
|
(7,629,369)
|
(57,316,888)
|
NET CHANGE RESULTING FROM
CLASS B SHARE TRANSACTIONS
|
39,439
|
$
281,369
|
(4,961,468)
|
$(37,391,013)
|
|
Year Ended March 31
|
2013
|
2012
|
|
Class C Shares:
|
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares sold
|
7,540,975
|
$
58,225,186
|
5,925,214
|
$
44,221,096
|
|
Shares issued to shareholders in payment of distributions declared
|
1,450,146
|
11,175,449
|
1,308,312
|
9,721,619
|
|
Shares redeemed
|
(5,116,788)
|
(39,400,815)
|
(5,153,788)
|
(38,402,406)
|
NET CHANGE RESULTING FROM
CLASS C SHARE TRANSACTIONS
|
3,874,333
|
$
29,999,820
|
2,079,738
|
$
15,540,309
|
NET CHANGE RESULTING FROM
TOTAL FUND SHARE TRANSACTIONS
|
8,666,891
|
$
66,294,380
|
4,552,965
|
$
33,868,443
|
Redemption Fees
The Fund imposes a 2.00% redemption
fee to shareholders of the Fund's Class A Shares, Class B Shares and Class C Shares who redeem shares held for 90 days or less. Shares acquired by reinvestment of dividends or distributions of the Fund, or purchased
pursuant to the Systematic Investment Program or withdrawn pursuant to the Systematic Withdrawal Program, will not be subject to the redemption fee. All redemption fees are recorded by the Fund as additions to paid-in
capital. For the year ended March 31, 2013, the redemption fees for Class A Shares, Class B Shares and Class C Shares amounted to $82,536, $6,774 and $18,126, respectively. For the year ended March 31, 2012, the
redemption fees for Class A Shares, Class B Shares and Class C Shares amounted to $76,412, $7,865 and $15,347, respectively.
Annual Shareholder Report
4. FEDERAL TAX INFORMATION
The timing and character of income
and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. These differences are due in part to differing treatments for discount accretion/premium
amortization on debt securities, reversal of a tender payment, regulatory settlement proceeds and defaulted securities.
For the year ended
March 31, 2013, permanent differences identified and reclassified among the components of net assets were as follows:
|
Increase (Decrease)
|
|
Paid-In Capital
|
Undistributed
Net Investment
Income (Loss)
|
Accumulated
Net Realized
Gain (Loss)
|
|
$(2,719,464)
|
$6,411,717
|
$(3,692,253)
|
Net investment income (loss), net
realized gains (losses), and net assets were not affected by this reclassification.
The tax character of
distributions as reported on the Statement of Changes in Net Assets for the years ended March 31, 2013 and 2012, was as follows:
|
|
2013
|
2012
|
|
Ordinary income
|
$82,780,625
|
$79,125,719
|
As of March 31, 2013, the components
of distributable earnings on a tax basis were as follows:
|
Undistributed ordinary income
|
$
1,852,273
|
|
Net unrealized appreciation
|
$
56,419,809
|
|
Capital loss carryforwards
|
$(88,911,953)
|
The difference between book-basis
and tax-basis net unrealized appreciation/depreciation is attributable in part to differing treatments for discount accretion/premium amortization on debt securities and defaulted securities and the deferral of losses
on wash sales.
At March 31, 2013,
the cost of investments for federal tax purposes was $1,186,466,113. The net unrealized appreciation of investments for federal tax purposes was $56,419,809. This consists of net unrealized appreciation from
investments for those securities having an excess of value over cost of $84,377,880 and net unrealized depreciation from investments for those securities having an excess of cost over value of $27,958,071.
At March 31, 2013,
the Fund had a capital loss carryforward of $88,911,953 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code, thereby reducing
the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, a net capital loss incurred in taxable years beginning
on or before December 22, 2010, is characterized as short-term and may be carried forward for a maximum of eight tax years (“Carryforward Limit”), whereas a net capital loss incurred in taxable years
beginning after December 22, 2010, retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit.
Annual Shareholder Report
The following
schedule summarizes the Fund's capital loss carryforwards and expiration years:
|
Expiration Year
|
Short-Term
|
Long-Term
|
Total
|
|
2015
|
$
4,599,324
|
NA
|
$
4,599,324
|
|
2016
|
$
2,637,413
|
NA
|
$
2,637,413
|
|
2017
|
$
9,669,785
|
NA
|
$
9,669,785
|
|
2018
|
$42,203,221
|
NA
|
$42,203,221
|
|
2019
|
$29,802,210
|
NA
|
$29,802,210
|
The Fund used capital loss
carryforwards of $119,053 to offset capital gains realized during the year ended March 31, 2013.
5. INVESTMENT ADVISER FEE AND
OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The advisory agreement between the
Fund and the Adviser provides for an annual fee equal to 0.75% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
Administrative Fee
Federated Administrative Services
(FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is
defined as all of the Federated Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below, plus
certain out-of-pocket expenses:
|
Administrative Fee
|
Average Daily Net Assets
of the Investment Complex
|
|
0.150%
|
on the first $5 billion
|
|
0.125%
|
on the next $5 billion
|
|
0.100%
|
on the next $10 billion
|
|
0.075%
|
on assets in excess of $20 billion
|
Prior to September 1, 2012, the
administrative fee received during any fiscal year was at least $150,000 per portfolio and $40,000 per each additional class of Shares. FAS may voluntarily choose to waive any portion of its fee. FAS can modify or
terminate this voluntary waiver at any time at its sole discretion. For the year ended March 31, 2013, FAS waived $9,373 of its fee. The net fee paid to FAS was 0.077% of average daily net assets of the Fund.
Annual Shareholder Report
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 daily net assets of the
Fund's Class B Shares and Class C Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentages of average
daily net assets 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%
|
For the year ended March 31, 2013,
distribution services fees for the Fund were as follows:
|
|
Distribution Services
Fees Incurred
|
|
Class B Shares
|
$
570,299
|
|
Class C Shares
|
1,515,220
|
|
TOTAL
|
$2,085,519
|
When FSC receives fees, it may pay
some or all of them to financial intermediaries whose customers purchase shares. FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole
discretion. For the year ended March 31, 2013, FSC retained $524,040 of fees paid by the Fund.
Sales Charges
Front-end sales charges and
contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as
applicable. For the year ended March 31, 2013, FSC retained $261,305 in sales charges from the sale of Class A Shares. FSC also retained $3,093 of CDSC relating to redemptions of Class A Shares, $127,767 relating to
redemptions of Class B Shares and $26,619 relating to redemptions of Class C Shares.
Annual Shareholder Report
Shareholder Services Fee
The Fund may pay fees (“
Service Fees”) up to 0.25% of the average daily net assets of the Fund's Class A Shares, Class B Shares and Class C Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for
providing services to shareholders and maintaining shareholder accounts. Financial intermediaries may include a company affiliated with management of Federated Investors, Inc. A financial intermediary affiliated with
management of Federated Investors, Inc. received $1,083 of Service Fees for the year ended March 31, 2013. FSSC may voluntarily reimburse the Fund for Service Fees. This voluntary reimbursement can be modified or
terminated at any time. For the year ended March 31, 2013, Service Fees for the Fund were as follows:
|
|
Service Fees
Incurred
|
|
Class A Shares
|
$2,301,565
|
|
Class B Shares
|
190,100
|
|
Class C Shares
|
504,866
|
|
TOTAL
|
$2,996,531
|
For the year ended March 31, 2013,
FSSC received $178,565 of fees paid by the Fund.
Interfund Transactions
During the year ended March 31,
2013, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale
transactions complied with Rule 17a-7 under the Act and amounted to $0 and $3,352,750, respectively.
General
Certain Officers and Trustees of the
Fund are Officers and Directors or Trustees of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees and other
miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund.
Annual Shareholder Report
Transactions Involving Affiliated
Holdings
Affiliated holdings are mutual funds
which are managed by the Adviser or an affiliate of the Adviser. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated mutual funds. For the
year ended March 31, 2013, the Adviser reimbursed $20,854. Transactions involving the affiliated holding during the year ended March 31, 2013, were as follows:
|
|
Federated
Prime Value
Obligations Fund,
Institutional Shares
|
|
Balance of Shares Held 3/31/2012
|
11,227,945
|
|
Purchases/Additions
|
302,713,867
|
|
Sales/Reductions
|
298,503,436
|
|
Balance of Shares Held 3/31/2013
|
15,438,376
|
|
Value
|
$
15,438,376
|
|
Dividend Income
|
$
31,079
|
6. Investment TRANSACTIONS
Purchases and sales of investments,
excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the year ended March 31, 2013, were as follows:
|
Purchases
|
$471,518,589
|
|
Sales
|
$405,841,686
|
7. LINE OF CREDIT
The Fund participates in a
$100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings
are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of March 31, 2013, there were no outstanding loans. During the year ended March 31, 2013, the Fund did not utilize the
LOC.
8. INTERFUND LENDING
Pursuant to an Exemptive Order
issued by the Securities and Exchange Commission (SEC), the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an
alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of March 31, 2013, there were no outstanding loans. During the year ended March 31, 2013, the program was not
utilized.
9. REGULATORY SETTLEMENT
PROCEEDS
On June 12, 2012, the SEC approved
the distribution of $2,719,464 to the Fund, representing a residual distribution from the settlement of administrative proceedings involving findings by the SEC of alleged market timing and/or late trading in several
Federated Funds including the Fund. This distribution was recorded as an increase to paid-in capital.
Annual Shareholder Report
10. FEDERAL TAX INFORMATION
(UNAUDITED)
For the fiscal year ended March 31,
2013, 0.28% of total ordinary dividends paid by the Fund are qualifying dividends which may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Act of 2003. Complete information
is reported in conjunction with the reporting of your distributions on Form 1099-DIV.
Of the ordinary
income distributions made by the Fund during the year ended March 31, 2013, 0.28% qualify for the dividend received deduction available to corporate shareholders.
Annual Shareholder Report
Report of Independent Registered
Public
Accounting Firm
TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF Federated HIGH INCOME BOND FUND, INC.:
We have audited the accompanying
statement of assets and liabilities of Federated High Income Bond Fund, Inc. (the “Fund”), including the portfolio of investments, as of March 31, 2013, 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 each of the five years in the period then ended. 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 standards of the Public Company Accounting Oversight Board (United States). 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. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial
highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned
as of March 31, 2013, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. 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. at March 31, 2013, 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 the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
Boston, Massachusetts
May 23, 2013
Annual Shareholder Report
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you
incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments and redemption/exchange fees; and (2) ongoing costs, including management fees and to the extent
applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from October 1, 2012 to
March 31, 2013.
ACTUAL EXPENSES
The first section of the table
below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to
estimate
the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR
COMPARISON PURPOSES
The second section of the table
below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed
rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should
not
use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided
to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the
other funds.
Annual Shareholder Report
Please note that the
expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments, or redemption/exchange fees.
Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative
total
costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
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|
Beginning
Account Value
10/1/2012
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Ending
Account Value
3/1/2013
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Expenses Paid
During Period
1
|
|
Actual:
|
|
|
|
|
Class A Shares
|
$1,000
|
$1,053.00
|
$6.30
|
|
Class B Shares
|
$1,000
|
$1,049.10
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$10.12
|
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Class C Shares
|
$1,000
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$1,047.80
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$10.11
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Hypothetical (assuming a 5% return
before expenses):
|
|
|
|
|
Class A Shares
|
$1,000
|
$1,018.80
|
$6.19
|
|
Class B Shares
|
$1,000
|
$1,015.06
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$9.95
|
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Class C Shares
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$1,000
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$1,015.06
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$9.95
|
|
1
|
Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half-year period). The annualized net expense ratios
are as follows:
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Class A Shares
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1.23%
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Class B Shares
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1.98%
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Class C Shares
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1.98%
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Annual Shareholder Report
Board of Directors and Fund
Officers
The Board of Directors is
responsible for managing the Fund's business affairs and for exercising all the Fund's powers except those reserved for the shareholders. The following tables give information about each Director and the senior
officers of the Fund. Where required, the tables separately list Directors who are “interested persons” of the Fund (i.e., “Interested” Directors) and those who are not (i.e., “
Independent” Directors). Unless otherwise noted, the address of each person listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222. The address of all Independent Directors listed is 4000
Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2012, the Fund comprised one portfolio(s), and the Federated Fund Family consisted of 42 investment companies (comprising 137
portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Director oversees all portfolios in the Federated Fund Family and serves for an indefinite term. The Fund's Statement
of Additional Information includes additional information about Fund Directors and is available, without charge and upon request, by calling 1-800-341-7400.
Interested DIRECTORS
Background
Name
Birth Date
Positions Held with Fund
Date Service Began
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Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s)
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John F. Donahue*
Birth Date: July 28, 1924
Director
Began serving: September 1975
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Principal Occupations
: Director or Trustee of the Federated Fund Family; Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund Family's Executive Committee.
Previous Positions
: Chairman of the Federated Fund Family; Trustee, Federated Investment Management Company; Chairman and Director, Federated Investment Counseling.
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J. Christopher Donahue*
Birth Date: April 11, 1949
President and Director
Began serving: July 1987
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Principal Occupations
: Principal Executive Officer and President of certain of the Funds in the Federated Fund Family; Director or Trustee of certain of the Funds in the Federated Fund Family; President, Chief
Executive Officer and Director, Federated Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment
Management Corp.; Chairman, Federated Equity Management Company of Pennsylvania and Passport Research, Ltd. (investment advisory subsidiary of Federated); Trustee, Federated Shareholder Services Company; Director,
Federated Services Company.
Previous Positions
: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport
Research, Ltd.
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*
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Family relationships and reasons for “interested” status: John F. Donahue is the father of J. Christopher Donahue; both are “interested” due to their beneficial ownership of shares of
Federated Investors, Inc. and the positions they hold with Federated and its subsidiaries.
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Annual Shareholder Report
INDEPENDENT DIRECTORS
Background
Name
Birth Date
Positions Held with Fund
Date Service Began
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Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications
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John F. Cunningham
Birth Date: March 5, 1943
Director
Began serving: January 1999
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Principal Occupation
: Director or Trustee of the Federated Fund Family.
Other Directorships Held
: Chairman, President and Chief Executive Officer, Cunningham & Co., Inc. (strategic business consulting); Trustee Associate, Boston College.
Previous Positions
: President and Chief Operating Officer, Wang Laboratories; Chairman of the Board and Chief Executive Officer, Computer Consoles, Inc.; Director, First National Bank of Boston; Director,
EMC Corporation (computer storage systems); Director, Apollo Computer, Inc.; Director, Redgate Communications.
Qualifications
: Business management and director experience.
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Maureen Lally-Green
Birth Date: July 5, 1949
Director
Began serving: August 2009
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Principal Occupations
: Director or Trustee of the Federated Fund Family; Director, Office of Church Relations, and Associate General Secretary, Diocese of Pittsburgh; Adjunct Professor of Law, Duquesne
University School of Law.
Other Directorships Held
: Director, Auberle; Member, Pennsylvania State Board of Education; Director, Saint Vincent College; Director, Ireland Institute of Pittsburgh; Chair and Director, UPMC Mercy Hospital;
Regent, St. Vincent Seminary; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Saint Thomas More Society, Allegheny County; Director, Our Campaign for the Church Alive, Inc.
Previous Position
: Pennsylvania Superior Court Judge.
Qualifications
: Legal and director experience.
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Peter E. Madden
Birth Date: March 16, 1942
Director
Began serving: August 1991
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Principal Occupation
: Director or Trustee, and Chairman of the Board of Directors or Trustees, of the Federated Fund Family.
Previous Positions
: Representative, Commonwealth of Massachusetts General Court; President, Chief Operating Officer and Director, State Street Bank and Trust Company and State Street Corporation (retired);
Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange.
Qualifications
: Business management, mutual fund services and director experience.
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Annual Shareholder Report
Name
Birth Date
Positions Held with Fund
Date Service Began
|
Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications
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Charles F. Mansfield, Jr.
Birth Date: April 10, 1945
Director
Began serving: January 1999
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Principal Occupations
: Director or Trustee of the Federated Fund Family; Management Consultant.
Previous Positions
: Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank;
Senior Vice President, HSBC Bank USA (formerly Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University; Executive Vice
President, DVC Group, Inc. (marketing, communications and technology).
Qualifications
: Banking, business management, education and director experience.
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Thomas M. O'Neill
Birth Date: June 14, 1951
Director
Began serving: October 2006
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Principal Occupations
: Director or Trustee, Vice Chairman of the Audit Committee of the Federated Fund Family; Sole Proprietor, Navigator Management Company (investment and strategic consulting).
Other Directorships Held
: Board of Overseers, Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College; Board of Directors, Medicines for Humanity; Board of Directors, The Golisano
Children's Museum of Naples, Florida.
Previous Positions
: Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.;
General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software
(investment order management software); Director, Midway Pacific (lumber).
Qualifications
: Business management, mutual fund, director and investment experience.
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John S. Walsh
Birth Date: November 28, 1957
Director
Began serving: January 1999
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Principal Occupations
: Director or Trustee, Chairman of the Audit Committee of the Federated Fund Family; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and
Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc.
Previous Position
: Vice President, Walsh & Kelly, Inc.
Qualifications
: Business management and director experience.
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Annual Shareholder Report
OFFICERS
Name
Birth Date
Address
Positions Held with Fund
Date Service Began
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Principal Occupation(s) for Past Five Years
and Previous Position(s)
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John W. McGonigle
Birth Date: October 26, 1938
EXECUTIVE VICE PRESIDENT AND SECRETARY
Officer since: September 1975
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Principal Occupations
: Executive Vice President and Secretary of the Federated Fund Family; Vice Chairman, Executive Vice President, Secretary and Director, Federated Investors, Inc.
Previous Positions
: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director, Federated Global Investment Management Corp., Federated Services Company and Federated
Securities Corp.
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Lori A. Hensler, CPA
Birth Date: January 6, 1967
TREASURER
Officer since: April 2013
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Principal Occupations
: Principal Financial Officer and Treasurer of the Federated Fund Family; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated
Securities Corp. and Edgewood Services, Inc.; and Assistant Treasurer, Federated Investors Trust Company.
Previous Positions
: Controller of Federated Investors, Inc.; Senior Vice President and Assistant Treasurer, Federated Investors Management Company; Treasurer, Federated Investors Trust Company; Assistant
Treasurer, Federated Administrative Services, Federated Administrative Services, Inc., Federated Securities Corp., Edgewood Services, Inc., Federated Advisory Services Company, Federated Equity Management Company of
Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, Passport Research, Ltd., and Federated MDTA, LLC; Financial and Operations
Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc.
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Peter J. Germain
Birth Date: September 3, 1959
CHIEF LEGAL OFFICER
Officer since: January 2005
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Principal Occupations
: Mr. Germain is Chief Legal Officer of the Federated Fund Family. He is General Counsel and Vice President, Federated Investors, Inc.; President, Federated Administrative Services and
Federated Administrative Services, Inc.; Vice President, Federated Securities Corp.; Secretary, Federated Private Asset Management, Inc.; and Secretary, Retirement Plan Service Company of America. Mr. Germain joined
Federated in 1984 and is a member of the Pennsylvania Bar Association.
Previous Positions
: Deputy General Counsel, Special Counsel, Managing Director of Mutual Fund Services, Federated Investors, Inc.; Senior Vice President, Federated Services Company; and Senior Corporate
Counsel, Federated Investors, Inc.
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Richard B. Fisher
Birth Date: May 17, 1923
VICE CHAIRMAN
Officer since: August 2002
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Principal Occupations
: Vice Chairman or Vice President of some of the Funds in the Federated Fund Family; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
Previous Positions
: President and Director or Trustee of some of the Funds in the Federated Fund Family; Executive Vice President, Federated Investors, Inc.; Director and Chief Executive Officer, Federated
Securities Corp.
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Annual Shareholder Report
Name
Birth Date
Address
Positions Held with Fund
Date Service Began
|
Principal Occupation(s) for Past Five Years
and Previous Position(s)
|
Brian P. Bouda
Birth Date: February 28, 1947
CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT
Officer since: August 2004
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Principal Occupations
: Senior Vice President and Chief Compliance Officer of the Federated Fund Family; Vice President and Chief Compliance Officer of Federated Investors, Inc. and Chief Compliance Officer of
its subsidiaries. Mr. Bouda joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.
Previous Positions
: Served in Senior Management positions with a large regional banking organization.
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Robert J. Ostrowski
Birth Date: April 26, 1963
Chief Investment Officer
Officer since: May 2004
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Principal Occupations:
Robert J. Ostrowski joined Federated in 1987 as an Investment Analyst and became a Portfolio Manager in 1990. He was named Chief Investment Officer of taxable fixed-income products in 2004
and also serves as a Senior Portfolio Manager. Mr. Ostrowski became an Executive Vice President of the Fund's Adviser in 2009 and served as a Senior Vice President of the Fund's Adviser from 1997 to 2009. Mr.
Ostrowski has received the Chartered Financial Analyst designation. He received his M.S. in Industrial Administration from Carnegie Mellon University.
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Mark E. Durbiano
Birth Date: September 21, 1959
VICE PRESIDENT
Officer since: November 1998
Portfolio Manager since: January 1987
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Principal Occupations
: Mark E. Durbiano has been the Fund's Portfolio Manager since January 1987. He is Vice President of the Corporation with respect to the Fund. Mr. Durbiano joined Federated in 1982 and has
been a Senior Portfolio Manager and a Senior Vice President of the Fund's Adviser since 1996. From 1988 through 1995, Mr. Durbiano was a Portfolio Manager and a Vice President of the Fund's Adviser. Mr. Durbiano has
received the Chartered Financial Analyst designation and an M.B.A. in Finance from the University of Pittsburgh.
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Annual Shareholder Report
Evaluation and Approval of
Advisory
Contract
–
May 2012
Federated High Income Bond Fund
(the “Fund”)
Following a review and
recommendation of approval by the Fund's independent directors, the Fund's Board reviewed and approved at its May 2012 meetings the Fund's investment advisory contract for an additional one-year term. The Board's
decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this connection,
the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior
Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval
of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The
Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
The Board is also
familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to
its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser to a fund and its shareholders, including the performance and expenses of the fund and of comparable funds; the
Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as a fund
grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders; any “fall-out financial benefits” that accrue to the Adviser because of its relationship with a
fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures, including a comparison of
fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees.
Consistent with these judicial decisions, the Board also considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like
services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
Annual Shareholder Report
The Board considered
and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by
independent legal counsel. Throughout the year, and in connection with its May meetings, the Board requested and received substantial and detailed information about the Fund and the Federated organization that was in
addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional substantial
information in connection with the May meeting at which the Board's formal review of the advisory contract occurred. At this May meeting, senior management of the Adviser also met with the independent directors and
their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the directors. Between regularly scheduled meetings, the Board also received information on particular matters
as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's
investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses,
as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the
Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due
regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the
advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders; the entrepreneurial risk assumed by the Adviser in
sponsoring the funds; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the
Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges;
compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised
therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the
emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.
Annual Shareholder Report
While mindful that
courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be
relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar mutual funds more heavily than non-mutual fund products or services because it is
believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of
investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in
the precise marketplace in which the Fund competes. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g.,
institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted
investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by
different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund
advisory contracts.
The Fund's ability
to deliver competitive performance when compared to its peer group was also deemed to be relevant by the Board as a useful indicator of how the Adviser is executing the Fund's investment program, which in turn
assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract.
The Senior Officer
reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to
fund peer groups are relevant in judging the reasonableness of proposed fees.
For the one-year,
three-year and five-year periods covered by the Evaluation, the Fund's performance was above the median of the relevant peer group.
The Board also
received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the
fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds'
administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact
that, in order for a fund to be
Annual Shareholder Report
competitive in the marketplace, Federated and its
affiliates frequently waived fees and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives
regular reporting as to the institution or elimination of these voluntary waivers.
Federated furnished
information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the
Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the
lack of consensus on how to allocate those costs may render such allocation information unreliable. The allocation information was considered in the analysis by the Board but was determined to be of limited use.
The Board and the
Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited
availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive.
The Senior Officer's
Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term
investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, shareholder services, compliance, internal audit, and risk management functions; and systems
technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable
regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund
advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory
services at this time.
It was noted in the
materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was above the median of the relevant peer group. The
Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive. The Board will continue to monitor advisory fees and other
expense born by the Fund.
Annual Shareholder Report
The Senior Officer
noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his
observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds was reasonable and that Federated appeared to provide appropriate advisory
and administrative services to the Fund for the fees paid. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.
In its decision to
continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a
decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with
the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have
effectively selected the Adviser by virtue of having invested in the Fund. The Board concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the
Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
The Board based its
decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified
above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its
determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Annual Shareholder Report
Voting Proxies on Fund Portfolio
Securities
A description of the policies and
procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “
Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information from the home
page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Literature and
Prospectuses” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.
Quarterly Portfolio Schedule
The Fund files with the SEC a
complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's website at www.sec.gov and may be
reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the “
Products” section of Federated's website at FederatedInvestors.com. From the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the
Fund Overview page. On the Fund Overview page, select the “Literature and Prospectuses” tab. At the bottom of that page, select “Form N-Q.”
Annual Shareholder Report
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 High Income Bond Fund,
Inc.
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp.,
Distributor
CUSIP 314195108
CUSIP 314195207
CUSIP 314195306
8042507 (5/13)
Federated is a registered trademark
of Federated Investors, Inc.
2013 ©Federated Investors, Inc.
Item 1. Reports to Stockholders
Item 2. Code of Ethics
(a) As of the end of the period covered by this report,
the registrant has adopted a code of ethics (the "Section 406 Standards for Investment Companies - Ethical Standards for Principal
Executive and Financial Officers") that applies to the registrant's Principal Executive Officer and Principal Financial Officer;
the registrant's Principal Financial Officer also serves as the Principal Accounting Officer.
(c) Not Applicable
(d) Not Applicable
(e) Not Applicable
(f)(3) The registrant hereby undertakes to provide
any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant
at 1-800-341-7400, and ask for a copy of the Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive
and Financial Officers.
Item 3. Audit Committee Financial Expert
The
registrant's Board has determined that each of the following members of the Board's Audit Committee is an “audit committee
financial expert,” and is "independent," for purposes of this Item: Charles F. Mansfield, Jr., Thomas
M. O'Neill and John S. Walsh.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees billed to the registrant
for the two most recent fiscal years:
Fiscal year ended 2013 - $30,700
Fiscal year ended 2012 - $28,700
(b) Audit-Related Fees billed to the registrant
for the two most recent fiscal years:
Fiscal year ended 2013 - $36
Fiscal year ended 2012 - $0
Travel to Audit Committee Meeting.
Amount requiring approval of the registrant’s
audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(c) Tax Fees billed to the registrant for the
two most recent fiscal years:
Fiscal year ended 2013 - $0
Fiscal year ended 2012 - $0
Amount requiring approval of the registrant’s
audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(d) All Other Fees billed to the registrant for
the two most recent fiscal years:
Fiscal year ended 2013 - $0
Fiscal year ended 2012 - $0
Amount requiring approval of the registrant’s
audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(e)(1) Audit Committee Policies regarding Pre-approval
of Services.
The Audit Committee is required
to pre-approve audit and non-audit services performed by the independent auditor in order to assure that the provision of such
services do not impair the auditor’s independence. Unless a type of service to be provided by the independent auditor has
received general pre-approval, it will require specific pre-approval by the Audit Committee. Any proposed services exceeding pre-approved
cost levels will require specific pre-approval by the Audit Committee.
Certain services have the general
pre-approval of the Audit Committee. The term of the general pre-approval is 12 months from the date of pre-approval, unless the
Audit Committee specifically provides for a different period. The Audit Committee will annually review the services that may be
provided by the independent auditor without obtaining specific pre-approval from the Audit Committee and may grant general pre-approval
for such services. The Audit Committee will revise the list of general pre-approved services from time to time, based on subsequent
determinations. The Audit Committee will not delegate its responsibilities to pre-approve services performed by the independent
auditor to management.
The Audit Committee has delegated
pre-approval authority to its Chairman. The Chairman will report any pre-approval decisions to the Audit Committee at its next
scheduled meeting. The Committee will designate another member with such pre-approval authority when the Chairman is unavailable.
AUDIT SERVICES
The annual Audit services engagement
terms and fees will be subject to the specific pre-approval of the Audit Committee. The Audit Committee must approve any changes
in terms, conditions and fees resulting from changes in audit scope, registered investment company (RIC) structure or other matters.
In addition to the annual Audit
services engagement specifically approved by the Audit Committee, the Audit Committee may grant general pre-approval for other
Audit Services, which are those services that only the independent auditor reasonably can provide. The Audit Committee has pre-approved
certain Audit services, all other Audit services must be specifically pre-approved by the Audit Committee.
AUDIT-RELATED SERVICES
Audit-related services are assurance
and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements
or that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of Audit-related
services does not impair the independence of the auditor, and has pre-approved certain Audit-related services, all other Audit-related
services must be specifically pre-approved by the Audit Committee.
TAX SERVICES
The Audit Committee believes that
the independent auditor can provide Tax services to the Company such as tax compliance, tax planning and tax advice without impairing
the auditor’s independence. However, the Audit Committee will not permit the retention of the independent auditor in connection
with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment
of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee has pre-approved certain
Tax services, all Tax services involving large and complex transactions must be specifically pre-approved by the Audit Committee.
ALL OTHER SERVICES
With respect to the provision
of services other than audit, review or attest services the pre-approval requirement is waived if:
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(1)
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The aggregate amount of all such services provided constitutes no
more than five percent of the total amount of revenues paid by the registrant, the registrant’s adviser (not including any
sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser),
and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to
the registrant to its accountant during the fiscal year in which the services are provided;
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(2)
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Such services were not recognized by the registrant, the registrant’s
adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant at the time of the engagement to be non-audit services; and
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(3)
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Such services are promptly brought to the attention of the Audit Committee
of the issuer and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee
who are members of the board of directors to whom authority to grant such approvals has been delegated by the Audit Committee.
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The Audit Committee may grant
general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and
recurring services, and would not impair the independence of the auditor.
The SEC’s rules and relevant
guidance should be consulted to determine the precise definitions of prohibited non-audit services and the applicability of exceptions
to certain of the prohibitions.
PRE-APPROVAL FEE LEVELS
Pre-approval fee levels for all
services to be provided by the independent auditor will be established annually by the Audit Committee. Any proposed services exceeding
these levels will require specific pre-approval by the Audit Committee.
PROCEDURES
Requests or applications to provide
services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the independent
auditor and the Principal Accounting Officer and/or Internal Auditor, and must include a joint statement as to whether, in their
view, the request or application is consistent with the SEC’s rules on auditor independence.
(e)(2) Percentage of services identified in items
4(b) through 4(d) that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation
S-X:
4(b)
Fiscal year ended 2013 – 0%
Fiscal year ended 2012 - 0%
Percentage of services provided to the registrants
investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X, 0% and 0% respectively.
4(c)
Fiscal year ended 2013
– 0%
Fiscal year ended 2012 – 0%
Percentage of services provided to the registrants
investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X, 0% and 0% respectively.
4(d)
Fiscal year ended 2013
– 0%
Fiscal year ended 2012 – 0%
Percentage of services provided to the registrants
investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X, 0% and 0% respectively.
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(g)
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Non-Audit Fees billed to the registrant, the registrant’s investment
adviser, and certain entities controlling, controlled by or under common control with the investment adviser:
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Fiscal year ended 2013
- $106,315
Fiscal year ended 2012 - $403,918
(h) The registrant’s Audit Committee has
considered that the provision of non-audit services that were rendered to the registrant’s adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal
accountant’s independence.
Item 5. Audit Committee of Listed Registrants
Not Applicable
Item 6. Schedule of Investments
(a) The registrant’s Schedule of Investments is included
as part of the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable; Fund had no divestments during the
reporting period covered since the previous Form N-CSR filing.
Item 7. Disclosure of
Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Item 8. Portfolio Managers
of Closed-End Management Investment Companies
Item 9. Purchases of Equity
Securities by Closed-End Management Investment Company and Affiliated Purchasers
Item 10. Submission of Matters to a Vote of Security
Holders
Not Applicable
Item 11. Controls and Procedures
(a) The registrant’s President and Treasurer have
concluded that the
registrant’s disclosure controls and procedures (as
defined in rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications
required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of
the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant’s internal
control over financial reporting (as defined in rule 30a-3(d) under the Act) during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control
over financial reporting.
Item 12. Exhibits
(a)(1) Code of Ethics- Not Applicable to this Report.
(a)(2) Certifications of Principal Executive Officer and
Principal Financial Officer.
(a)(3) Not Applicable.
(b) Certifications pursuant to 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Registrant
Federated High Income Bond Fund, Inc.
By
/S/ Lori A. Hensler
Lori A. Hensler, Principal Financial
Officer
Date
May 22, 2013
Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
By
/S/ J. Christopher Donahue
J. Christopher Donahue, Principal
Executive Officer
Date
May 22, 2013
By
/S/ Lori A. Hensler
Lori A. Hensler, Principal Financial
Officer
Date
May 22, 2013
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