1933 Act File No. 33-13388
1940 Act File No. 811-5114
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X
Pre-Effective Amendment No.
Post-Effective Amendment No. 11 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940 X
Amendment No. 16 X
LIBERTY UTILITY FUND, INC.
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)
on pursuant to paragraph (a) of Rule 485.
Registrant has filed with the Securities and Exchange
Commission a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940, and:
X filed the Notice required by that Rule on April 15, 1994;
or
intends to file the Notice required by that Rule on or
about ____________; or
during the most recent fiscal year did not sell any
securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940, and, pursuant to Rule 24f-2(b)(2), need
not file the Notice.
Copies to:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin,
L.L.P.
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of LIBERTY UTILITY
FUND, INC., consisting of three classes of shares: (a) Class A
Shares, (b) Class C Shares, and (c) Class B Shares, relates to the
Class B Shares, and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
Rule 404(c) Cross Reference)
Item 1. Cover Page (a, b, c) Cover Page.
Item 2. Synopsis (a, b, c) Summary of Fund
Expenses.
Item 3. Condensed Financial
Information (a & b) Financial Highlights
Item 4. General Description of
Registrant (a, b, c) Performance
Information; General
Information; Liberty Family of
Funds; Investment Information;
Investment Objectives;
Investment Policies; Investment
Risks; Investment Limitations;
(a, b) Liberty Family
Retirement Program.
Item 5. Management of the Fund (a, b, c) Fund Information;
Management of the Fund; (a)
Distribution of Class A Shares;
(b) Distribution of Class C
Shares; (c) Distribution of
Class B Shares; (a, b, c)
Administration of the Fund;
Brokerage Transactions; (a)
Expenses of the Fund and Class
A Shares; (b) Expenses of the
Fund and Class C Shares; (c)
Expenses of the Fund and Class
B Shares.
Item 6. Capital Stock and Other
Securities (a, b, c) Dividends; Capital
Gains; Shareholder Information;
Voting Rights; Tax Information;
Federal Income Tax;
Pennsylvania Corporate and
Personal Property Taxes; Other
Classes of Shares.
Item 7. Purchase of Securities Being
Offered (a, b, c) Net Asset Value; (a)
Investing in Class A Shares;
(b) Investing in Class C
Shares; (c) Investing in Class
B Shares; (a, b, c) Share
Purchases; Minimum Investment
Required; What Shares Cost; (a)
Reducing the Sales Charge; (c)
Conversion of Class B Shares;
(a, b, c) Systematic Investment
Program; Certificates and
Confirmations; Retirement
Plans; Exchange Privilege;
Requirements for Exchange; Tax
Consequences; Making an
Exchange (a) Reduced Sales
Charge.
Item 8. Redemption or Repurchase (a) Redeeming Class A Shares;
(b) Redeeming Class C Shares;
(c) Redeeming Class B Shares;
(b, c) Contingent Deferred
Sales Charge; (a, b, c) Through
a Financial Institution;
Directly from the Fund;
Systematic Withdrawal Program;
Accounts with Low Balances (c)
Reinvestment Privilege;
Elimination of Contingent
Deferred Sales Charge.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL
INFORMATION.
Item 10. Cover Page Cover Page.
Item 11. Table of Contents Table of Contents.
Item 12. General Information and
History General Information About the
Fund.
Item 13. Investment Objectives and
Policies Investment Objectives and
Policies.
Item 14. Management of the Fund Liberty Utility Fund, Inc.
Management.
Item 15. Control Persons and Principal
Holders of Securities Fund Ownership.
Item 16. Investment Advisory and Other
Services Investment Advisory Services;
Administrative Services.
Item 17. Brokerage Allocation Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered Purchasing Shares; Determining
Net Asset Value; Redeeming
Shares.
Item 20. Tax Status Tax Status.
Item 21. Underwriters Distribution and Shareholder
Services Plans.
Item 22. Calculation of Performance
Data Total Return; Yield;
Performance Comparisons.
Item 23. Financial Statements Included in Part B.
LIBERTY UTILITY FUND, INC.
CLASS B SHARES
PROSPECTUS
The Class B Shares of Liberty Utility Fund, Inc. (the "Fund") offered by this
prospectus represent interests in the Fund which is an open-end, diversified
management investment company (a mutual fund).
The Fund invests in a diversified portfolio comprised primarily of equity
securities of utility companies to achieve current income and long-term growth
of income. Capital appreciation is a secondary objective.
THE CLASS B SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE CLASS B SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Class B Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for Class
A Shares, Class B Shares, and Class C Shares dated September , 1994, with the
Securities and Exchange Commission. The information contained in the Combined
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Combined Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact your financial
institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated September , 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES--CLASS B SHARES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
LIBERTY FAMILY OF FUNDS 2
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objectives 3
Investment Policies 3
Repurchase Agreements 4
Lending of Portfolio Securities 4
Restricted and Illiquid Securities 4
When-Issued and Delayed
Delivery Transactions 5
Covered Call Options 5
Securities of Foreign Issuers 5
Investment Risks 5
Reducing Risks of Utility Securities 5
Investment Limitations 6
NET ASSET VALUE 7
- ------------------------------------------------------
INVESTING IN CLASS B SHARES 7
- ------------------------------------------------------
Share Purchases 7
Through a Financial Institution 7
Directly from the Distributor 8
Minimum Investment Required 8
What Shares Cost 8
Conversion of Class B Shares 8
Systematic Investment Program 9
Certificates and Confirmations 9
Dividends 9
Capital Gains 9
Retirement Plans 10
EXCHANGE PRIVILEGE 10
- ------------------------------------------------------
Requirements for Exchange 10
Tax Consequences 10
Making an Exchange 10
Telephone Instructions 11
REDEEMING CLASS B SHARES 11
- ------------------------------------------------------
Through a Financial Institution 11
Directly from the Fund 11
By Telephone 11
By Mail 12
Signatures 12
Contingent Deferred Sales Charge 12
Elimination of Contingent Deferred
Sales Charge 13
Systematic Withdrawal Program 14
Reinvestment Privilege 14
Accounts with Low Balances 14
FUND INFORMATION 15
- ------------------------------------------------------
Management of the Fund 15
Board of Directors 15
Investment Adviser 15
Advisory Fees 15
Adviser's Background 15
Distribution of Class B Shares 15
Distribution and Shareholder Services Plans 16
Other Payments to Financial Institutions 16
Administration of the Fund 17
Administrative Services 17
Custodian 17
Transfer Agent and
Dividend Disbursing Agent 17
Legal Counsel 17
Independent Auditors 17
Brokerage Transactions 17
Expenses of the Fund and Class B Shares 18
SHAREHOLDER INFORMATION 18
- ------------------------------------------------------
Voting Rights 18
TAX INFORMATION 19
- ------------------------------------------------------
Federal Income Tax 19
Pennsylvania Corporate and
Personal Property Taxes 19
PERFORMANCE INFORMATION 19
- ------------------------------------------------------
OTHER CLASSES OF SHARES 20
- ------------------------------------------------------
Financial Highlights--Class A Shares 21
- ------------------------------------------------------
Financial Highlights--Class C Shares 22
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)........ None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds as applicable)(1) ................................................................. 5.50%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................ None
Exchange Fee.................................................................................. None
ANNUAL CLASS B SHARES OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(2).............................................................. %
12b-1 Fee..................................................................................... %
Total Other Expenses.......................................................................... %
Shareholder Services Fee............................................................... %
Total Class B Shares Operating Expenses (3)(4).......................................... %
</TABLE>
(1) The contingent deferred sales charge is 5.50% in the first year, declining
to 1.00% in the sixth year, and 0.00% thereafter. (See "Contingent Deferred
Sales Charge.")
(2) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can terminate
this voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.75%.
(3) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.
(4) The Total Class B Shares Operating Expenses are estimated to be %
absent the anticipated voluntary waiver of a portion of the management fee.
*Total Class B Shares Operating Expenses are estimated based on average expenses
expected to be incurred during the period ending February 28, 1995. During the
course of this period, expenses may be more or less than the average amount
shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS B SHARES OF THE FUND WILL
BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE " INVESTING IN CLASS B SHARES" AND "FUND
INFORMATION." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales loads permitted under the rules of the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ----------------------------------------------------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each time period............. $ $
You would pay the following expenses on the same investment, assuming no
redemption....................................................................... $ $
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING FEBRUARY
28, 1995.
The information set forth in the foregoing table and example relates only to
Class B Shares of the Fund. The Fund also offers two additional classes of
shares called Class A Shares and Class C Shares. Class A Shares, Class B Shares,
and Class C Shares are subject to certain of the same expenses; however, Class A
Shares are subject to a maximum sales load of 4.50%, but are not subject to a
12b-1 fee or a contingent deferred sales charge. Class C Shares are subject to a
12b-1 fee of 0.75% and may be subject to a contingent deferred sales charge of
1.00%, but are not subject to a sales load. See "Other Classes of Shares."
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Fund was incorporated under the laws of the State of Maryland on April 20,
1987. The Fund's address is Liberty Center, Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. The Articles of Incorporation permit the
Fund to offer separate series of shares representing interests in separate
portfolios of securities. The shares in any one portfolio may be offered in
separate classes. With respect to the Fund, as of the date of this prospectus,
the Board of Directors (the "Directors") has established three classes of
shares, known as Class A Shares, Class B Shares, and Class C Shares. This
prospectus relates only to Class B Shares ("Shares") of the Fund.
Shares of the Fund are designed to give institutions and individuals a
convenient means of accumulating an interest in a professionally managed,
diversified portfolio comprised primarily of equity securities of utility
companies. A minimum initial investment of $1,500 is required, unless the
investment is in a retirement account, in which case the minimum investment is
$50.
Except as otherwise noted in this prospectus, Shares are sold at net asset value
and redeemed at net asset value. However, a contingent deferred sales charge is
imposed on certain Shares of the Fund which are redeemed within six full years
of the date of purchase.
The Fund's current net asset value can be found in the mutual funds section of
local newspapers under " ."
LIBERTY FAMILY OF FUNDS
- --------------------------------------------------------------------------------
This Fund is a member of a family of mutual funds, collectively known as the
Liberty Family of Funds. The other funds in the Liberty Family of Funds are:
- American Leaders Fund, Inc., providing growth of capital and income
through high-quality stocks;
- Capital Growth Fund, providing appreciation of capital primarily through
equity securities;
- Fund for U.S. Government Securities, Inc., providing current income
through long-term U.S. government securities;
- International Equity Fund, providing long-term capital growth and income
through international securities;
- International Income Fund, providing a high level of current income
consistent with prudent investment risk through high-quality debt
securities denominated primarily in foreign currencies;
- Liberty Equity Income Fund, Inc., providing above-average income and
capital appreciation through income-producing equity securities;
- Liberty High Income Bond Fund, Inc., providing high current income
through high-yielding, lower-rated corporate bonds;
- Liberty Municipal Securities Fund, Inc., providing a high level of
current income exempt from federal regular income tax through municipal
bonds;
- Liberty U.S. Government Money Market Trust, providing current income
consistent with stability of principal through high-quality U.S.
government securities;
- Limited Term Fund, providing a high level of current income consistent
with minimum fluctuation in principal value through investment-grade
securities;
- Limited Term Municipal Fund, providing a high level of current income
exempt from federal regular income tax consistent with the preservation
of principal, primarily limited to municipal securities;
- Michigan Intermediate Municipal Trust, providing current income exempt
from federal regular income tax and the personal income taxes imposed by
the state of Michigan and Michigan municipalities, primarily through
Michigan municipal securities;
- Pennsylvania Intermediate Municipal Trust, providing current income
exempt from federal regular income tax and the personal income taxes
imposed by the Commonwealth of Pennsylvania, primarily through
Pennsylvania municipal securities;
- Strategic Income Fund, providing a high level of current income,
primarily through domestic and foreign corporate debt obligations;
- Tax-Free Instruments Trust, providing current income consistent with
stability of principal and exempt from federal income tax through
high-quality, short-term municipal securities; and
- World Utility Fund, providing total return through securities issued by
domestic and foreign companies in the utilities industry.
Prospectuses for these funds are available by writing to Federated Securities
Corp.
Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.
The Liberty Family of Funds provides flexibility and diversification for an
investor's long-term investment planning. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give access to various investment vehicles and by providing the
investment services of proven, professional investment advisers.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The primary investment objectives of the Fund are current income and long-term
growth of income. Capital appreciation is a secondary objective. While there is
no assurance that the Fund will achieve its investment objectives, it endeavors
to do so by following the policies described in this prospectus. The investment
objectives cannot be changed without approval of shareholders.
INVESTMENT POLICIES
The Fund will seek to achieve its investment objectives by investing primarily
in common stocks, preferred stocks, units of participation in master limited
partnerships which are traded on national securities exchanges, securities
convertible into stock, and debt securities issued by companies in the utilities
industry. Under normal conditions, the Fund will invest at least 65% of its
total assets in
securities issued by companies in the utilities industry, which include
companies engaged in the production, transmission or distribution of electric
energy or gas, or in communications facilities such as telephone or telegraph
services.
Debt obligations in the portfolio, at the time they are purchased, shall be
limited to those which fall in one of the following categories: (i) rated
investment grade by either Moody's Investors Service, Inc. or Standard & Poor's
Corporation, or (ii) determined by the investment adviser to be of investment
grade and not rated by either of the aforementioned rating services, or (iii)
the subordinated debt of issuers whose senior debt obligations are deemed to be
investment grade by either of the aforementioned rating services.
For temporary, defensive purposes, the Fund may be primarily invested in
short-term money market instruments including certificates of deposit,
obligations issued or guaranteed by the United States government or its agencies
or instrumentalities, commercial paper rated not lower than A-1 by Standard &
Poor's Corporation or Prime-1 by Moody's Investors Service, Inc., or repurchase
agreements.
The investment policies described above cannot be changed without shareholder
approval.
Downgraded securities will be evaluated on a case by case basis by the
investment adviser. The investment adviser will determine whether or not the
security continues to be an acceptable investment. If not, the security will be
sold. The Directors do not consider this limitation to apply to debt securities
of an issuer convertible into stock of that issuer. The prices of fixed income
securities fluctuate inversely to the direction of interest rates.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such securities.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities, on a short-term or long-term basis, to
broker/dealers, banks, or other institutional borrowers of securities. The Fund
will limit the amount of portfolio securities it may lend to not more than
one-third of its total assets. The Fund will only enter into loan arrangements
with broker/dealers, banks, or other institutions which the investment adviser
has determined are creditworthy under guidelines established by the Directors
and will receive collateral in cash or United States government securities that
will be maintained in an amount equal to at least 100% of the current market
value of the securities loaned.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% of its total
assets in restricted securities. Restricted securities are any securities in
which the Fund may otherwise invest pursuant to its investment objectives and
policies but which are subject to restriction on resale under federal securities
law. To the extent these securities are deemed to be illiquid, the Fund will
limit its purchases together with other securities considered to be illiquid to
15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.
COVERED CALL OPTIONS. The Fund may also write call options on all or any portion
of its portfolio to generate income for the Fund. Call options written by the
Fund give the holder the right to buy the underlying securities of the Fund at
the stated exercise price. The Fund will write call options only on securities
either held in its portfolio, or for which it has the right to obtain without
payment of further consideration, or for which it has segregated cash in the
amount of any additional consideration. The call options which the Fund writes
and sells must be listed on a recognized options exchange. The Fund's investment
in call options shall not exceed 5% of the Fund's total assets.
SECURITIES OF FOREIGN ISSUERS. The Fund may purchase American Depository
Receipts ("ADRs") issued by U.S. Banks as a substitute for direct ownership of
securities of foreign companies in the utilities industry. ADRs are traded in
the United States on stock exchanges and in the over-the-counter markets like
stocks of domestic companies.
The Fund may also purchase securities of foreign issuers in the utilities
industry. While investment in foreign securities is intended to reduce risk by
providing further diversification, such investments involve sovereign risk in
addition to the credit and market risks normally associated with domestic
securities. Foreign investments may be affected favorably or unfavorably by
changes in currency rates and exchange control regulations. There may be less
publicly available information about a foreign company than about a U.S.
company, and foreign companies may not be subject to accounting, auditing, and
financial reporting standards and requirements comparable to those applicable to
U.S. companies. Securities of some foreign companies are less liquid or more
volatile than securities of U.S. companies, and foreign brokerage commissions
and custodian fees are generally higher than in the U.S. Investments in foreign
securities may also be subject to other risks different from those affecting
U.S. investments, including local political or economic developments,
expropriation or nationalization of assets, imposition of withholding taxes on
dividend or interest payments, and currency blockage (which would prevent cash
from being brought back to the U.S.). It may also be more difficult to enforce
contractual obligations or obtain court judgments abroad than would be the case
in the United States because of differences in the legal systems. These risks
are carefully considered by the Fund's adviser prior to the purchase of these
securities.
INVESTMENT RISKS
The Fund will attempt to meet its investment objectives by being at least 65%
invested in securities issued by companies in the utility industry. There exist
certain risks associated with the utility industry of which investors in the
Fund should be aware. These include difficulty in earning adequate returns on
investment despite frequent rate increases, restrictions on operations and
increased costs and delays due to governmental regulations, building or
construction delays, environmental regulations, difficulty of the capital
markets in absorbing utility debt and equity securities, and difficulties in
obtaining fuel at reasonable prices.
REDUCING RISKS OF UTILITY SECURITIES. The Fund's investment adviser believes
that the risks of investing in utility securities can be reduced. The
professional portfolio management techniques used
by the Fund to attempt to reduce these risks include credit research. The Fund's
investment adviser will perform its own credit analysis in addition to using
recognized rating agencies and other sources, including discussions with the
issuer's management, the judgment of other investment analysts, and its own
informed judgment. The investment adviser's credit analysis will consider the
issuer's financial soundness, its responsiveness to changes in interest rates
and business conditions, and its anticipated cash flow, interest or dividend
coverage, and earnings. In evaluating an issuer, the investment adviser places
special emphasis on the estimated current value of the issuer's assets rather
than historical costs.
INVESTMENT LIMITATIONS
The Fund will not change any of the investment limitations described below
without approval of shareholders. The Fund will not:
- invest more than 25% of its total assets (valued at time of investment)
in securities of companies engaged principally in any one industry other
than the utilities industry, except that this restriction does not apply
to cash or cash items and securities issued or guaranteed by the United
States government or its agencies or instrumentalities;
- invest more than 5% of the value of its total assets in securities of
companies, including their predecessors, which have been in operation for
less than three years;
- invest more than 5% of its total assets (valued at the time of
investment) in the securities of any one issuer, except that this
restriction does not apply to cash and cash items, repurchase agreements,
and securities issued or guaranteed by the United States government or
its agencies or instrumentalities;
- acquire more than 10% of the outstanding voting securities of any one
issuer (at the time of acquisition);
- borrow money, issue senior securities, or pledge assets, except that
under certain circumstances the Fund may borrow money and engage in
reverse repurchase transactions in amounts up to one-third of the value
of its net assets, including the amounts borrowed, and pledge up to 10%
of the value of those assets to secure such borrowings. The Fund will not
borrow money or engage in reverse repurchase agreements for investment
leverage, but rather as a temporary, extraordinary, or emergency measure
to facilitate management of the portfolio by enabling the Fund to meet
redemption requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous. The Fund will not purchase
any securities while any such borrowings are outstanding. However, during
the period any reverse repurchase agreements are outstanding, but only to
the extent necessary to assure completion of the reverse repurchase
agreements, the Fund will restrict the purchase of portfolio instruments
to money market instruments maturing on or before the expiration date of
the reverse repurchase agreements;
- lend any of its assets except portfolio securities up to one-third of the
value of its total assets. This shall not prevent the purchase or holding
of corporate bonds, debentures, notes, certificates of indebtedness or
other debt securities of an issuer, repurchase agreements, or other
transactions which are permitted by the Fund's investment objectives and
policies;
- write call options on securities unless the securities are held in the
Fund's portfolio or unless the Fund is entitled to them in deliverable
form without further payment or after segregating cash in
the amount of any further payment. The Fund's investment in put or call
options, straddles, spreads, or any combination thereof shall not exceed
5% of the Fund's total assets;
- invest more than 5% of its net assets in warrants, not more than 2% of
which can be warrants not listed on recognized exchanges; or
- invest more than 15% of total assets in securities of foreign issuers not
listed on recognized exchanges.
If a percentage restriction set forth above is adhered to at the time a
transaction is effected, later changes in percentage resulting from changes in
value or in the number of outstanding securities of an issuer will not be
considered a violation.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per Class B Share fluctuates. The net asset value for
Class B Shares is determined by adding the interest of the Class B Shares in the
market value of all securities and other assets of the Fund, subtracting the
interest of the Class B Shares in the liabilities of the Fund and those
attributable to the Class B Shares, and dividing the remainder by the total
number of Class B Shares outstanding. The net asset value for Class B Shares may
differ from that of Class A Shares and Class C Shares due to the variance in
daily net income realized by each class. Such variance will reflect only accrued
net income to which the shareholders of a particular class are entitled.
INVESTING IN CLASS B SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares may
be purchased through a financial institution which has a sales agreement with
the distributor or directly from the distributor, Federated Securities Corp.,
once an account has been established. In connection with the sale of Shares,
Federated Securities Corp. may, from time to time, offer certain items of
nominal value to any shareholder or investor. The Fund reserves the right to
reject any purchase request.
Orders for $250,000 or more of Class B Shares will normally be invested in Class
A Shares. (See "Other Classes of Shares.")
THROUGH A FINANCIAL INSTITUTION. Investors may call their financial institution
(such as a bank or an investment dealer) to place an order to purchase Shares.
Orders placed through a financial institution are considered received when the
Fund is notified of the purchase order or when converted into federal funds. It
is the financial institution's responsibility to transmit orders promptly.
Purchase orders through a registered broker/dealer must be received by the
broker before 4:00 p.m. (Eastern time) and must be transmitted by the broker to
the Fund before 5:00 p.m. (Eastern time) in order for Shares to be purchased at
that day's price. Purchase orders through other financial institutions must be
received by the financial institution and transmitted to the Fund before 4:00
p.m. (Eastern time) in order for Shares to be purchased at that day's price.
The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge (see "Contingent
Deferred Sales Charge"). In addition, advance payments made to financial
institutions may be subject to reclaim by the distributor for accounts
transferred to financial institutions which do not maintain investor accounts on
a fully disclosed basis and do not account for share ownership periods (see
"Other Payments to Financial Institutions").
DIRECTLY FROM THE DISTRIBUTOR. An investor may place an order to purchase Shares
directly from the distributor once an account has been established. To do so:
- complete and sign the new account form available from the Fund;
- enclose a check made payable to Liberty Utility Fund, Inc.--Class B
Shares; and
- mail both to the Fund's transfer agent, Federated Services Company, c/o
State Street Bank and Trust Company, P.O. Box 8604, Boston, MA
02266-8604.
Orders by mail are considered received after payment by check is converted by
the transfer agent's bank, State Street Bank and Trust Company ("State Street
Bank"), into federal funds. This is generally the next business day after State
Street Bank receives the check.
To purchase Shares directly from the distributor by wire once an account has
been established, call the Fund. All information needed will be taken over the
telephone, and the order is considered received when State Street Bank receives
payment by wire. Federal funds should be wired as follows: Federated Services
Company, c/o State Street Bank and Trust Company, Boston, Massachusetts 02105;
Attention: Mutual Fund Servicing Division; For Credit to: Liberty Utility Fund,
Inc.--Class B Shares; Title or Name of Account; Wire Order Number; and Account
Number. Shares cannot be purchased by wire on days on which the New York Stock
Exchange is closed and on federal holidays restricting wire transfers.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $1,500 unless the investment is in a
retirement account, in which case the minimum initial investment is $50.
Subsequent investments must be in amounts of at least $100, except for
retirement accounts, which must be in amounts of at least $50.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. The net asset value is determined at 4:00 p.m. (Eastern time), Monday
through Friday, except on: (i) days on which there are not sufficient changes in
the value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Under certain circumstances described under "Redeeming Class B Shares,"
shareholders may be charged a contingent deferred sales charge by the
distributor as the Shares are redeemed.
CONVERSION OF CLASS B SHARES
Class B Shares will automatically convert into Class A Shares on the fifteenth
day following the month eight years after the purchase date, except as noted
below, and will no longer be subject to a
distribution fee. (See "Other Classes of Shares.") Such conversion will be on
the basis of the relative net asset values per share, without the imposition of
any sales load, fee, or other charge. Class B Shares acquired by exchange from
Class B Shares of another fund in the Liberty Family of Funds will convert into
Class A Shares based on the time of the initial purchase. For purposes of
conversion to Class A Shares, Shares purchased through the reinvestment of
dividends and distributions paid on Class B Shares will be considered to be held
in a separate sub-account. Each time any Class B Shares in the shareholder's
account (other than those in the sub-account) convert to Class A Shares, an
equal pro rata portion of the Class B Shares in the sub-account will also
convert to Class A Shares. The availability of the conversion feature is subject
to the granting of an exemptive order by the Securities and Exchange Commission
or the adoption of a rule permitting such conversion. In the event that the
exemptive order or rule ultimately issued by the Securities and Exchange
Commission requires any conditions additional to those described in this
prospectus, shareholders will be notified. The conversion of Class B Shares to
Class A Shares is subject to the continuing availability of a ruling from the
Internal Revenue Service or an opinion of counsel that such conversions will not
constitute taxable events for federal tax purposes. There can be no assurance
that such ruling or opinion will be available, and the conversion of Class B
Shares to Class A Shares will not occur if such ruling or opinion is not
available. In such event, Class B Shares would continue to be subject to higher
expenses than Class A Shares for an indefinite period.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by the Fund. Shareholders may apply for participation in this program
through their financial institution or directly through the Fund.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a Share
account for each shareholder. Share certificates are not issued unless requested
in writing to the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Quarterly confirmations are sent to report dividends paid during
that quarter.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Unless shareholders request cash payments on the new
account form or by writing to the Fund, dividends are automatically reinvested
in additional Shares on payment dates at the ex-dividend date net asset value.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every twelve months.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, including prototype retirement plans, contact
the Fund and consult a tax adviser.
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
In order to provide greater flexibility to Fund shareholders whose investment
objectives have changed, Class B shareholders may exchange all or some of their
Shares for Class B Shares of other funds in the Liberty Family of Funds at net
asset value without being assessed a contingent deferred sales charge on the
exchanged Shares. (Not all funds in the Liberty Family of Funds currently offer
Class B Shares. Contact your financial institution regarding the availability of
other Class B Shares in the Liberty Family of Funds.) To the extent that a
shareholder exchanges Shares for Class B Shares in other funds in the Liberty
Family of Funds, the time for which the exchanged-for shares were held will be
added, or tacked, to the time for which the exchanged-from shares were held for
purposes of satisfying the applicable holding period.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
the fund into which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested, in Class B Shares of the other fund. The exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of the modification or termination of the exchange privilege.
Further information on the exchange privilege and prospectuses for the Liberty
Family of Funds or certain Federated Funds are available by contacting the Fund.
TAX CONSEQUENCES
An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a short-term or long-term capital
gain or loss may be realized.
MAKING AN EXCHANGE
Instructions for exchanges for the Liberty Family of Funds or certain Federated
Funds may be given in writing or by telephone. Written instructions may require
a signature guarantee. Shareholders of the Fund may have difficulty in making
exchanges by telephone through brokers and other financial institutions during
times of drastic economic or market changes. If shareholders cannot contact
their broker or financial institution by telephone, it is recommended that an
exchange request be made in writing and sent by overnight mail to Federated
Services Company, c/o State Street Bank and Trust Company, P.O. Box 8604,
Boston, Massachusetts 02266-8604.
TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form completed by the investor is
on file with the Fund. If the instructions are given by a broker, a telephone
authorization form completed by the broker must be on file with the Fund. Shares
may be exchanged between two funds by telephone only if the two funds have
identical shareholder registrations.
Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, c/o State Street Bank and Trust
Company, P.O. Box 8604, Boston, Massachusetts 02266-8604, and deposited to the
shareholder's account before being exchanged. Telephone exchange instructions
may be recorded. Such instructions will be processed as of 4:00 p.m. (Eastern
time) and must be received by the Fund before that time for Shares to be
exchanged that day. Shareholders exchanging into a fund will not receive any
dividend that is payable to shareholders of record on that date. This privilege
may be modified or terminated at any time. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
REDEEMING CLASS B SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request, less any applicable contingent deferred sales
charge. (See "Contingent Deferred Sales Charge.") Redemptions will be made on
days on which the Fund computes its net asset value. Redemptions can be made
through a financial institution or directly from the Fund. Redemption requests
must be received in proper form.
THROUGH A FINANCIAL INSTITUTION
Shareholders may redeem Shares by calling their financial institution (such as a
bank or an investment dealer) to request the redemption. Shares will be redeemed
at their net asset value, less any applicable contingent deferred sales charge,
next determined after the Fund receives the redemption request from the
financial institution. Redemption requests through a registered broker/dealer
must be received by the broker before 4:00 p.m. (Eastern time) and must be
transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. Redemption requests
through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for Shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service.
DIRECTLY FROM THE FUND
BY TELEPHONE. Shareholders who have not purchased through a financial
institution may redeem their Shares by telephoning the Fund. The proceeds will
be mailed to the shareholder's address of record or wire transferred to the
shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System, normally within one business day, but in no event longer
than seven days after the request. The minimum amount for a wire transfer is
$1,000. If at any time the Fund shall
determine it necessary to terminate or modify this method of redemption,
shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as redeeming by mail, should be considered.
BY MAIL. Any shareholder may redeem Shares by sending a written request to
Federated Services Company, c/o State Street Bank and Trust Company, P.O. Box
8604, Boston, Massachusetts 02266-8604. The written request should include the
shareholder's name, the Fund name and class designation, the account number, and
the Share or dollar amount requested, and should be signed exactly as the Shares
are registered.
If Share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders should call the Fund for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
CONTINGENT DEFERRED SALES CHARGE
Shareholders redeeming Shares from their Fund accounts within six full years of
the purchase date of those Shares will be charged a contingent deferred sales
charge by the Fund's distributor. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the
redeemed Shares at the time of purchase or the net asset value of the redeemed
Shares at the time of redemption in accordance with the following schedule:
<TABLE>
<CAPTION>
YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
--------------------------------------------- --------------------
<S> <C>
First........................................ 5.50%
Second....................................... 4.75%
Third........................................ 4.00%
Fourth....................................... 3.00%
Fifth........................................ 2.00%
Sixth........................................ 1.00%
Seventh and thereafter....................... 0.00%
</TABLE>
The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and/or (2) Shares held for more than
six full years from the date of purchase. Redemptions will be processed in a
manner intended to maximize the amount of redemption which will not be subject
to a contingent deferred sales charge. In computing the amount of the applicable
contingent deferred sales charge, redemptions are deemed to have occurred in the
following order: (1) Shares acquired through the reinvestment of dividends and
long-term capital gains; (2) Shares held for more than six full years from the
date of purchase; and (3) Shares held for fewer than six years on a first-in,
first-out basis.
A contingent deferred sales charge is not assessed in connection with an
exchange of Fund Shares for shares of other Class B Shares of funds in the
Liberty Family of Funds. (See "Exchange Privilege.") Any contingent deferred
sales charge imposed at the time the exchanged-for shares are redeemed is
calculated as if the shareholder had held the shares from the date on which the
investor became a shareholder of the exchanged-from shares. Moreover, the
contingent deferred sales charge will be eliminated with respect to certain
redemptions. (See "Elimination of Contingent Deferred Sales Charge.")
ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE
The contingent deferred sales charge will be eliminated with respect to the
following redemptions: (1) redemptions following the death or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986, of a
shareholder; (2) redemptions representing minimum required distributions from an
Individual Retirement Account or other qualified retirement plan to a
shareholder who has attained the age of 70- 1/2; and (3) involuntary redemptions
by the Fund of Shares in shareholder accounts that do not comply with the
minimum balance requirements. In addition, to the extent that the distributor
does not make advance payments to certain financial institutions for purchases
made by their clients, no contingent deferred sales charge will be imposed on
redemptions of Shares held by Directors, employees and sales representatives of
the Fund, the distributor, or affiliates of the Fund or distributor; employees
of any financial institution that sells Shares of the Fund pursuant to a sales
agreement with the distributor; and spouses and children under the age of 21 of
the aforementioned persons. Finally, no contingent deferred sales charge will be
imposed on the redemption of Shares
originally purchased through a bank trust department, an investment adviser
registered under the Investment Advisers Act of 1940, as amended, or a
retirement plan where the third-party administrator has entered into certain
arrangements with Federated Securities Corp. or its affiliates, or any other
financial institution, to the extent that no payments were advanced for
purchases made through or by such entities.
The Directors reserve the right to discontinue elimination of the contingent
deferred sales charge. Shareholders will be notified of such elimination. Any
Shares purchased prior to the termination of such waiver would have the
contingent deferred sales charge eliminated as provided in the Fund's prospectus
at the time of the purchase of the Shares. If a shareholder making a redemption
qualifies for an elimination of the contingent deferred sales charge, the
shareholder must notify Federated Securities Corp. or the Fund in writing that
said shareholder is entitled to such elimination.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal Program. Under this
program, Shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions with
respect to Shares, and the fluctuation of the net asset value of Shares redeemed
under this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in Shares. For this reason, payments under this program
should not be considered as yield or income on the shareholder's investment in
Shares. To be eligible to participate in this program, a shareholder must have
an account value of at least $10,000. Shareholders may apply for participation
in this program through their financial institution. A contingent deferred sales
charge will be imposed on Shares redeemed within six full years of their
purchase date. (See "Contingent Deferred Sales Charge.")
REINVESTMENT PRIVILEGE
If Shares have been redeemed, the shareholder has a one-time right, within 120
days, to reinvest the redemption proceeds into Class A Shares at the next
determined net asset value without a sales load. (See "Other Classes of
Shares.") Federated Securities Corp. must be notified by the shareholder in
writing or by his or her financial institution of the reinvestment in order to
receive this privilege. If the shareholder redeems his or her Shares, there may
be tax consequences.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,500. This requirement does not apply, however, if the balance falls below
$1,500 because of changes in the Fund's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS. The Fund is managed by a Board of Directors. The Directors
are responsible for managing the Fund's business affairs and for exercising all
the Fund's powers except those reserved for the shareholders. An Executive
Committee of the Board of Directors handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Passport
Research, Ltd., the Fund's investment adviser (the "Adviser"), subject to
direction by the Directors. The Adviser continually conducts investment research
and supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee equal
to .75 of 1% of the Fund's average daily net assets. The fee paid by the
Fund, while higher than the advisory fee paid by other mutual funds in
general, is comparable to fees paid by many mutual funds with similar
objectives and policies. The Adviser may voluntarily choose to waive a
portion of its fee or reimburse the Fund for certain operating expenses.
The Adviser can terminate this voluntary waiver or reimbursement at any
time at its sole discretion. The Adviser has also undertaken to reimburse
the Fund for operating expenses in excess of limitations established by
certain states.
ADVISER'S BACKGROUND. Passport Research, Ltd. is a Pennsylvania limited
partnership organized in 1981. Federated Advisers is the general partner of
the Adviser and has a 50.5% interest in the Adviser. Federated Advisers is
a subsidiary of Federated Investors. Edward D. Jones & Co. is the limited
partner of the investment Adviser and has a 49.5% interest in the Adviser.
Passport Research, Ltd. has also acted as investment adviser for Edward D.
Jones & Co. Daily Passport Cash Trust since 1982. Employees of the Adviser
are also employees of other advisers which are affiliates of Federated
Investors.
Federated Investors, which was founded in 1956 as Federated Investors,
Inc., develops and manages mutual funds primarily for the financial
industry. Federated Investors' track record of competitive performance and
its disciplined, risk averse investment philosophy serve approximately
3,500 client institutions nationwide. Through these same client
institutions, individual shareholders also have access to this same level
of investment expertise.
Christopher H. Wiles has been the Fund's portfolio manager since May, 1990.
Mr. Wiles joined Federated Investors in 1990, and has been a Vice President
of the Adviser since 1992. Mr. Wiles served as Assistant Vice President of
the Adviser from 1990 until 1992. Mr. Wiles was a portfolio manager at
Mellon Bank from 1986 until 1990. Mr. Wiles is a Chartered Financial
Analyst and received his M.B.A. in Finance from Cleveland State University.
DISTRIBUTION OF CLASS B SHARES
Federated Securities Corp. is the principal distributor for Shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
The distributor will pay financial institutions an amount equal to 5.50% of the
net asset value of Shares purchased by their clients or customers. These
payments will be made directly by the distributor from its assets, and will not
be made from the assets of the Fund.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Class B Shares will pay to the distributor an amount, computed at an annual
rate of 0.75 of 1% of the average daily net assets of Class B Shares, to finance
any activity which is principally intended to result in the sale of Shares
subject to the Distribution Plan. Because distribution fees to be paid by the
Fund to the distributor may not exceed an annual rate of 0.75 of 1% of the
Shares' average daily net assets, it will take the distributor a number of years
to recoup the expenses it has incurred for its distribution and
distribution-related services pursuant to the Distribution Plan.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Class
B Shares under the Distribution Plan.
In addition, the Fund has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25 of 1% of the average daily
net asset value of Class B Shares to obtain certain personal services for
shareholders and for the maintenance of shareholder accounts ("shareholder
services"). The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon Shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined, from time to time, by the Fund and Federated
Shareholder Services.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the capacities described above or should
Congress relax current restrictions on depository institutions, the Directors
will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state laws.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Distribution Plan.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may offer to pay a fee
from its own assets to financial institutions as financial assistance for
providing substantial marketing and sales support. The support may include
sponsoring sales, educational and training seminars at recreational-type
facilities, providing sales literature, and engineering computer software
programs that emphasize
the attributes of the Fund. Such assistance will be predicated upon the amount
of Shares the financial institution sells or may sell, and/or upon the nature
and type of sales or marketing support furnished by the financial institution.
Any payments made by the distributor may be reimbursed by the Fund's investment
adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
------------------------------------- -------------------------------------
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for shares of the Fund and dividend
disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P., Washington,
D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young,
Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the Adviser may give consideration to those
firms which have sold or are selling Shares of the Fund and other funds
distributed by Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Directors.
EXPENSES OF THE FUND AND CLASS B SHARES
Holders of Shares pay their allocable portion of Fund expenses.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Fund and continuing
its existence; registering the Fund with federal and state securities
authorities; investment advisory services; taxes and commissions; custodian
fees; insurance premiums; Directors' fees; auditors' fees; the cost of meetings
of Directors; legal fees of the Fund; association membership dues; and such
non-recurring and extraordinary items as may arise from time to time.
At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Fund's Services and Distribution Plans. However,
the Directors reserve the right to allocate certain other expenses to holders of
Shares as they deem appropriate ("Class Expenses"). In any case, Class Expenses
would be limited to: distribution fees; transfer agent fees as identified by the
transfer agent as attributable to holders of Shares; fees under the Fund's
Services Plan; printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and proxies to
current shareholders; registration fees paid to the Securities and Exchange
Commission and state securities commissions; expenses related to administrative
personnel and services as required to support holders of Shares; legal fees
relating solely to Shares; and Directors' fees incurred as a result of issues
relating solely to Shares.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share gives the shareholder one vote in Director elections and other
matters submitted to shareholders for vote. All shares of each portfolio or
class in the Fund have equal voting rights, except that in matters affecting
only a particular portfolio or class, only shares of that portfolio or class are
entitled to vote.
As a Maryland corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's operation and for the election of Directors under certain circumstances.
Directors may be removed by a two-thirds vote of the number of Directors prior
to such removal or by a two-thirds vote of the shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors upon
the written request of shareholders owning at least 10% of the Fund's
outstanding shares of all series entitled to vote.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares. No federal income tax is due on any
dividends earned in an IRA or qualified retirement plan until distributed.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Fund:
- the Fund is subject to Pennsylvania corporate franchise taxes; and
- Fund Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises the total return and yield for Class B
Shares.
Total return represents the change, over a specific period of time, in the value
of an investment in Class B Shares after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of Class B Shares is calculated by dividing the net investment income
per Share (as defined by the Securities and Exchange Commission) earned by Class
B Shares over a thirty-day period by the maximum offering price per Share on the
last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
Class B Shares and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of non-recurring charges such as
the contingent deferred sales charge, which, if excluded, would increase the
total return and yield.
Total return and yield will be calculated separately for Class A Shares, Class B
Shares, and Class C Shares. Because Class B Shares and Class C Shares are
subject to a Rule 12b-1 fee, the yield for Class A Shares, for the same period,
may exceed that of Class B Shares and Class C Shares. Because Class A Shares are
subject to a front-end sales load, the total return for Class B Shares and Class
C Shares, for the same period, may exceed that of Class A Shares. Depending on
the dollar amount invested and the
time period for which any class of shares is held, the total return for any
particular class may exceed that of another.
From time to time, the Fund may advertise the performance of Class B Shares
using certain financial publications and/or compare the performance of Class B
Shares to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Class A Shares are sold to customers of financial institutions subject to a
front-end sales load of up to 4.50%. Under certain circumstances, investors may
qualify for reduced sales loads on purchases of Class A Shares. Class A Shares
are subject to a Services Plan fee of up to 0.25 of 1% of the Class A Shares'
average daily net assets and are subject to a minimum initial investment of
$500, unless the investment is in a retirement account, in which case the
minimum investment is $50.
Class C Shares are sold primarily to customers of financial institutions at net
asset value with no initial sales load. Class C Shares are distributed pursuant
to a Distribution Plan adopted by the Fund whereby the distributor is paid a fee
of up to 0.75 of 1%, in addition to a Services Plan fee of up to 0.25 of 1%, of
the Class C Shares' average daily net assets. In addition, Class C Shares may be
subject to certain contingent deferred sales charges. Investments in Class C
Shares are subject to a minimum initial investment of $1,500, unless the
investment is in a retirement account, in which case the minimum investment is
$50.
The amount of dividends payable to Class A Shares will generally exceed that
payable to Class B Shares and Class C Shares by the difference between Class
Expenses and distribution and shareholder service expenses borne by shares of
each respective class.
The stated advisory fee is the same for all classes of shares.
LIBERTY UTILITY FUND, INC.
CLASS A SHARES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Ernst & Young, the Fund's independent
auditors. Their report dated April 13, 1994, on the Fund's Financial Statements
for the year ended February 28, 1994, is included in the Combined Statement of
Additional Information. This table should be read in conjunction with the Fund's
Financial Statements and notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28, OR 29
------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988*
-------- -------- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $12.29 $11.03 $10.13 $9.82 $9.15 $9.15 $9.30
- -------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------
Net investment income 0.60 0.58 0.68 0.71 0.71 0.72 0.55
- -------------------------------------
Net realized and unrealized gain
(loss) on investments -- 1.44 0.92 0.43 0.79 (0.02) (0.31)
- ------------------------------------- ------- ------- ------- ------- ------ ------- ------
Total from investment operations 0.60 2.02 1.60 1.14 1.50 0.70 0.24
- -------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------
Dividends to shareholders from net
investment income (0.61) (0.66) (0.64) (0.70) (0.76) (0.70) (0.39)
- -------------------------------------
Distributions to shareholders from
net realized gain on investment
transactions (0.04) (0.10) (0.06) (0.13) (0.07) -- --
- ------------------------------------- ------- ------- ------- ------- ------ ------- ------
Total distributions (0.65) (0.76) (0.70) (0.83) (0.83) (0.70) (0.39)
- ------------------------------------- ------- ------- ------- ------- ------ ------- ------
NET ASSET VALUE, END OF PERIOD $12.24 $12.29 $11.03 $10.13 $9.82 $9.15 $9.15
- ------------------------------------- ------- ------- ------- ------- ------ ------- ------
TOTAL RETURN** 4.93% 19.26% 16.48% 12.41% 16.72% 8.00% 3.25%
- -------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------
Expenses 1.12% 1.04% 1.05% 1.02% 1.02% 1.00% 1.56%(b)
- -------------------------------------
Net investment income 4.81% 5.98% 6.31% 7.41% 7.17% 8.04% 8.24%(b)
- -------------------------------------
Expense waiver/reimbursement(a) 0.17% 0.01% 0.19% 0.51% 0.74% 0.40% 0.38%(b)
- -------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------
Net assets, end of period (000
omitted) $877,513 $739,511 $375,656 $125,599 $48,050 $410,575 $52,947
- -------------------------------------
Portfolio turnover rate 24% 18% 35% 45% 37% 34% 17%
- -------------------------------------
</TABLE>
* Reflects operations for the period from June 5, 1987 through February 29,
1988. For the period from the start of business, May 28, 1987 to June 4,
1987, net investment income aggregating $0.012 per share ($124) was
distributed to the Fund's Investment Adviser.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended February 28, 1994, which can be obtained
free of charge.
LIBERTY UTILITY FUND, INC.
CLASS C SHARES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Ernst & Young, the Fund's independent
auditors. Their report dated April 13, 1994, on the Fund's Financial Statements
for the year ended February 28, 1994, is included in the Combined Statement of
Additional Information. This table should be read in conjunction with the Fund's
Financial Statements and notes thereto, which may be obtained from the Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
FEBRUARY 28, 1994*
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.27
- ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------
Net investment income 0.48
- ------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.07)
- ------------------------------------------------------------------------------------ -----------------
Total from investment operations 0.41
- ------------------------------------------------------------------------------------ -----------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.41)
- ------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions (0.04)
- ------------------------------------------------------------------------------------ -----------------
Total distributions (0.45)
- ------------------------------------------------------------------------------------ -----------------
NET ASSET VALUE, END OF PERIOD $ 12.23
- ------------------------------------------------------------------------------------ -----------------
TOTAL RETURN** 3.28%
- ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------------
Expenses 1.87%(b)
- ------------------------------------------------------------------------------------
Net investment income 4.02%(b)
- ------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.17%(b)
- ------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $64,409
- ------------------------------------------------------------------------------------
Portfolio turnover rate 24%
- ------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from April 30, 1993 (date of initial
public offering) to February 28, 1994.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
annual report for the fiscal year ended February 28, 1994, which can be obtained
free of charge.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Liberty Utility Fund, Inc. Federated Investors Tower
Class B Shares Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Passport Research, Ltd. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-8604
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, PA 15219
- ------------------------------------------------------------------------------------------------
</TABLE>
LIBERTY UTILITY FUND, INC.
CLASS B SHARES
PROSPECTUS
An Open-End, Diversified
Management Investment Company
September , 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
00111201A-B (9/94)
LIBERTY UTILITY FUND, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
COMBINED STATEMENT OF ADDITIONAL INFORMATION
This Combined Statement of Additional Information should be read with the
respective prospectuses of the Class A Shares and Class C Shares of Liberty
Utility Fund, Inc. (the "Fund") dated April 30, 1994, and the Class B Shares of
the Fund dated September , 1994. This Statement is not a prospectus itself. To
receive a copy of any of the prospectuses, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated September , 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES 1
- ---------------------------------------------------------------
Temporary Investments 1
Units of Master Limited Partnerships 1
Convertible Securities 1
Repurchase Agreements 2
Lending of Portfolio Securities 2
Restricted Securities 2
When-Issued and Delayed Delivery
Transactions 2
Reverse Repurchase Agreements 3
Covered Call Options 3
Portfolio Turnover 3
Investment Limitations 3
LIBERTY UTILITY FUND, INC., MANAGEMENT 5
- ---------------------------------------------------------------
The Funds 8
Fund Ownership 8
INVESTMENT ADVISORY SERVICES 8
- ---------------------------------------------------------------
Adviser to the Fund 8
Advisory Fees 9
ADMINISTRATIVE SERVICES 9
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 9
- ---------------------------------------------------------------
PURCHASING SHARES 9
- ---------------------------------------------------------------
Distribution and Shareholder Services Plans 10
Conversion to Federal Funds 10
Purchases by Sales Representatives,
Fund Directors, and Employees 10
DETERMINING NET ASSET VALUE 10
- ---------------------------------------------------------------
Determining Market Value of Securities 10
REDEEMING SHARES 11
- ---------------------------------------------------------------
Redemption in Kind
TAX STATUS 11
- ---------------------------------------------------------------
The Fund's Tax Status 11
Shareholders' Tax Status 11
TOTAL RETURN 11
- ---------------------------------------------------------------
YIELD 12
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 12
- ---------------------------------------------------------------
FINANCIAL STATEMENTS 13
- ---------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS 22
- ---------------------------------------------------------------
APPENDIX 23
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund was incorporated under the laws of the State of Maryland on April 20,
1987. It is qualified to do business as a foreign corporation in Pennsylvania.
Shareholders of the Fund, at a meeting held January 18, 1990, approved the
Fund's name change from "Progressive Income Equity Fund, Inc." to "Liberty
Utility Fund, Inc."
Shares of the Fund are offered in three classes, known as Class A Shares, Class
B Shares, and Class C Shares (individually and collectively referred to as
"Shares," as the context may require). This Combined Statement of Additional
Information relates to all classes of the above mentioned Shares.
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The primary investment objectives of the Fund are current income and long-term
growth of income. Capital appreciation is a secondary objective. The Fund will
seek to achieve its investment objectives by investing in a diversified
portfolio comprised primarily of equity securities. The investment objectives
cannot be changed without approval of shareholders.
The Fund's investment approach is based on the conviction that over the long
term the economy will continue to expand and develop and that this economic
growth will be reflected in the growth of the revenues and earnings of utility
companies.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments from time to time for
defensive purposes.
MONEY MARKET INSTRUMENTS
The Fund may invest in the following money market instruments:
- instruments of domestic and foreign banks and savings and loans if they
have capital, surplus, and undivided profits of over $100,000,000, or
if the principal amount of the instrument is insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC"), or the Savings Association Insurance
Fund ("SAIF"), which is administered by the FDIC; and
- prime commercial paper (rated A-1 by Standard and Poor's Corporation,
Prime-1 by Moody's Investors Service, Inc., or F-1 by Fitch Investors
Service).
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are
backed by:
- the full faith and credit of the U.S. Treasury;
- the issuer's right to borrow from the U.S. Treasury;
- the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
- the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the
U.S. government are:
- Federal Land Banks;
- Central Bank for Cooperatives;
- Federal Intermediate Credit Banks;
- Federal Home Loan Banks;
- Farmers Home Administration; and
- Federal National Mortgage Association.
UNITS OF MASTER LIMITED PARTNERSHIPS
The Fund may invest in units of participation in master limited partnerships.
Master limited partnerships are generally partnerships with a large number of
limited partners whose ownership interests are publicly traded. The Fund will
not invest in partnerships investing in real estate or real estate investments.
The Fund will invest only in units of participation in master limited
partnerships that are traded on a national securities exchange.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities. A convertible security is a fixed
income security (a bond or preferred stock) which may be converted at a stated
price within a specified period of time into a certain quantity of common stock
of the same or a different issuer. Convertible securities are senior to common
stocks in a corporation's capital structure,
- --------------------------------------------------------------------------------
but are usually subordinated to similar nonconvertible securities. While
providing a fixed income stream (generally higher in yield than the income
derivable from a common stock but lower than that afforded by a similar
nonconvertible security), a convertible security also affords an investor the
opportunity, through its conversion feature, to participate in the capital
appreciation attendant upon a market price advance in the convertible security's
underlying common stock.
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities subject to
repurchase agreements, and these securities are marked to market daily. To the
extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are deemed by the Fund's adviser to be
creditworthy pursuant to guidelines established by the Board of Directors (the
"Directors").
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
RESTRICTED SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) paper is restricted as to disposition under federal securities law, and is
generally sold to institutional investors, such as the Fund, who agree that they
are purchasing the paper for investment purposes and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper is normally resold to other institutional investors like the
Fund through or with the assistance of the issuer or investment dealers who make
a market in Section 4(2) paper, thus providing liquidity.
The ability of the Directors to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission staff
position set forth in the adopting release for Rule 144A under the Securities
Act of 1933 (the "Rule"). The Rule is a non-exclusive, safe-harbor for certain
secondary market transactions involving securities subject to restrictions on
resale under federal securities laws. The Rule provides an exemption from
registration for resales of otherwise restricted securities to qualified
institutional buyers. The Rule was expected to further enhance the liquidity of
the secondary market for securities eligible for resale under Rule 144A. The
Fund believes that the staff of the Securities and Exchange Commission has left
the question of determining the liquidity of all restricted securities (eligible
for resale under Rule 144A) for determination by the Directors. The Directors
consider the following criteria in determining the liquidity of certain
restricted securities:
- - the frequency of trades and quotes for the security;
- - the number of dealers willing to purchase or sell the security and the number
of potential buyers;
- - dealer undertakings to make a market in the security; and
- - the nature of the security and the nature of the marketplace trades.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases or sells
securities with payment and delivery scheduled for a future time. The Fund
engages in when-issued and delayed delivery transactions only for the purpose of
acquiring portfolio securities consistent with the Fund's investment objectives
and policies, and not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. The Fund may engage in these
transactions to an extent that would cause the segregation of an amount up to
20% of the total value of its assets.
- --------------------------------------------------------------------------------
No fees or other expenses, other than normal transactions costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated on the Fund's records at the trade date. These
securities are marked to market daily and maintained until the transaction is
settled.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement the Fund transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on the Fund's records at the trade date. These securities are
marked to market daily and maintained until the transaction is settled.
COVERED CALL OPTIONS
The Fund will receive a premium for writing a call option which increases the
Fund's return in the event the option expires unexercised or is closed out at a
profit. The amount of the premium will reflect, among other things, the
relationship of the market price of the underlying security to the exercise
price of the option, the term of the option and the volatility of the market
price of the underlying security. By writing a call option, the Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option.
The Fund may terminate a call option it has written prior to expiration of the
option by entering into a closing purchase transaction in which it purchases an
option having the same terms as the option written. The Fund will realize a gain
or loss from such transaction if the cost of such transaction is less or more
than the premium received from writing the option. Because increases in the
market price of a call option will generally reflect increases in the market
price of the underlying security, any loss resulting from repurchase of a call
option is likely to be offset in whole or in part by the unrealized appreciation
of the underlying security owned by the Fund.
PORTFOLIO TURNOVER
For the fiscal years ended February 28, 1994 and 1993, the portfolio turnover
rates were 24% and 18%, respectively.
The Fund's investment adviser does not anticipate that portfolio turnover will
result in adverse tax consequences. However, relatively high portfolio turnover
may result in high transaction costs to the Fund.
INVESTMENT LIMITATIONS
The Fund will not change any of the investment limitations described below
without approval of shareholders.
CONCENTRATION OF INVESTMENTS
The Fund will not invest more than 25% of its total assets (valued at the
time of investment) in securities of companies engaged principally in any
one industry other than the utilities industry, except that this
restriction does not apply to cash or cash items and securities issued or
guaranteed by the United States government or its agencies or
instrumentalities.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not purchase securities on margin, or make short sales of
securities, except for the use of short-term credit necessary for the
clearance of purchases and sales of portfolio securities.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not borrow money, issue senior securities, or pledge
assets, except that under certain circumstances the Fund may borrow money
and engage in reverse repurchase transactions in amounts up to one-third
of the value of its net assets, including the amounts borrowed, and
pledge up to 10% of the value of those assets to secure such borrowings.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. The
Fund will not purchase any securities while any such borrowings
(including reverse repurchase agreements) are outstanding. The Fund will
not purchase any securities while any such borrowings are outstanding.
However, during the period any reverse repurchase agreements are
outstanding, but only to the
- --------------------------------------------------------------------------------
extent necessary to assure completion of the reverse repurchase
agreements, the Fund will restrict the purchase of portfolio instruments
to money market instruments maturing on or before the expiration date of
the reverse repurchase agreements.
PLEDGING ASSETS
The Fund will not pledge, mortgage, or hypothecate its assets, except to
secure permitted borrowings. In those cases, it may pledge, mortgage, or
hypothecate up to 10% of the value of assets to secure such borrowings.
The preceding limitations regarding buying on margin, borrowing money, and
pledging assets do not apply to intra-day cash advances made by the Fund's
custodian, or the grant of a security interest in securities by the Fund to its
custodian to collateralize such intra-day cash advances in order to enable the
Fund to settle securities purchases or to redeem shares of the Fund.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of companies, including their predecessors, which have been in
operation for less than three years.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of restricted securities which the Fund may
purchase pursuant to its investment objectives, policies, and
limitations.
DIVERSIFICATION OF INVESTMENTS
The Fund will not purchase the securities of any issuer (other than the
U.S. government, its agencies, or instrumentalities or instruments
secured by securities of such issuers, such as repurchase agreements) if,
as a result, more than 5% of the value of its total assets would be
invested in the securities of such issuer or acquire more than 10% of any
class of voting securities of any issuer. For these purposes, the Fund
takes all common stock and all preferred stock of an issuer each as a
single class, regardless of priorities, series, designations, or other
differences.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities up
to one-third of the value of its total assets. This shall not prevent the
purchase or holding of corporate bonds, debentures, notes, certificates
of indebtedness or other debt securities of an issuer, repurchase
agreements, or other transactions which are permitted by the Fund's
investment objectives and policies.
RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under federal securities law (except
for commercial paper issued under Section 4(2) of the Securities Act of
1933).
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the securities
are held in the Fund's portfolio or unless the Fund is entitled to them
in deliverable form without further payment or after segregating cash in
the amount of any further payment. The Fund's investment in put or call
options, straddles, spreads, or any combination thereof shall not exceed
5% of the Fund's total assets.
INVESTING IN WARRANTS
The Fund will limit its investment in warrants to 5% of net assets, not
more than 2% of which can be warrants not listed on recognized exchanges.
INVESTING IN SECURITIES OF FOREIGN ISSUERS
The Fund will limit its ability to purchase securities of foreign issuers
to not more than 15% of total assets in securities of foreign issuers not
listed on recognized exchanges.
INVESTING IN ILLIQUID SECURITIES
The Fund will limit its investment in illiquid securities, including
repurchase agreements providing for settlement in more than seven days
after notice, to not more than 15% of net assets.
- --------------------------------------------------------------------------------
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND DIRECTORS OF
THE FUND
The Fund will not purchase or retain the securities of any issuer if the
officers and Directors of the Fund or its investment adviser owning
individually 1/2 of 1% of the issuer's securities together own more than
5% of the issuer's securities.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or mineral exploration
or development programs, except it may purchase the securities of issuers
which invest in or sponsor such programs.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate or any interest therein,
except that the Fund may invest in securities secured by real estate or
interests therein, such as mortgage pass-throughs, pay-throughs,
collateralized mortgage obligations, and securities issued by companies
that invest in real estate or interests therein. The Fund will not invest
in limited partnerships investing in real estate or real estate
investments.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase or retain shares of any open-end investment
company (exclusive of shares acquired as a result of merger,
consolidation, or other plan of reorganization).
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not invest for the purpose of exercising control over or
management of any company.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities or commodity contracts.
In addition, in order to comply with certain state restrictions, the Fund will
not invest in oil, gas, or mineral leases. If state requirements change, this
limitation may be amended without notice to shareholders.
The Fund will not purchase any securities while borrowings in excess of 5% of
the value of its total assets are outstanding.
For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings and loan having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items."
LIBERTY UTILITY FUND, INC., MANAGEMENT
- --------------------------------------------------------------------------------
Officers and Directors are listed with their addresses, principal occupations,
and present positions.
John F. Donahue*+
Federated Investors Tower
Pittsburgh, PA
Chairman and Director of the Fund
Chairman and Trustee, Federated Investors; Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue, Vice
President and Director of the Fund.
- --------------------------------------------------------------------------------
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Director of the Fund
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds; formerly,
President, Naples Property Management, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
William J. Copeland
One PNC Plaza-23rd Floor
Pittsburgh, PA
Director of the Fund
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
- --------------------------------------------------------------------------------
James E. Dowd
571 Hayward Mill Road
Concord, MA.
Director of the Fund
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Director, Blue Cross of
Massachusetts, Inc.
- --------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.
3471 Fifth Avenue Suite 1111
Pittsburgh, PA
Director of the Fund
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore Hospitals;
Professor of Medicine and Trustee, University of Pittsburgh; Director of
Corporate Health, University of Pittsburgh Medical Center; Director, Trustee, or
Managing General Partner of the Funds.
- --------------------------------------------------------------------------------
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
President and Director of the Fund
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President or
Vice President of some of the Funds; Director or Trustee of some of the Funds.
- --------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+
5916 Penn Mall
Pittsburgh, PA
Director of the Fund
Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park Restaurants,
Inc., and Statewide Settlement Agency, Inc.; Director, Trustee, or Managing
General Partner of the Funds; formerly, Counsel, Horizon Financial, F.A.,
Western Region.
- --------------------------------------------------------------------------------
Peter E. Madden
225 Franklin Street
Boston, MA
Director of the Fund
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation and Trustee,
Lahey Clinic Foundation, Inc.
- --------------------------------------------------------------------------------
Gregor F. Meyer
5916 Penn Mall
Pittsburgh, PA
Director of the Fund
Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing General
Partner of the Funds; formerly, Vice Chairman, Horizon Financial, F.A.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Director of the Fund
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie Endowment
for International Peace, RAND Corporation, Online Computer Library Center, Inc.,
and U.S. Space Foundation; Chairman, Czecho Slovak Management Center; Director,
Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; formerly, Chairman, National Advisory Council for
Environmental Policy and Technology.
- --------------------------------------------------------------------------------
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Director of the Fund
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
- --------------------------------------------------------------------------------
Daniel A. Burkhardt
201 Progress Parkway
Maryland Heights, MO
Vice President of the Fund
Director, Essex County Gas Company, Amesbury, Massachusetts; Galaxy Cablevision
Management, Sikeston, Missouri; Dial Real Estate Investment Trust, Omaha,
Nebraska; St. Joseph Light & Power Company, St. Joseph, Missouri; Chairman,
Community Service Radio, Peoria, Illinois; Chairman and President of Community
Investment Partners, L.P., St. Louis, Missouri.
- --------------------------------------------------------------------------------
J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA
Vice President of the Fund
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services; Federated Services Company, and Federated Shareholder Services;
President or Vice President of the Funds; Director, Trustee, or Managing General
Partner of some of the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Director of the Fund.
- --------------------------------------------------------------------------------
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer of the Fund
Vice President, Treasurer, and Trustee, Federated Investors; Vice President and
Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Services
Company and Federated Shareholder Services; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of some of the Funds;
Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary of the Fund
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee, Federated Administrative
Services; Trustee and Secretary, Federated Shareholder Services; Director and
Executive Vice President, Federated Securities Corp.; Vice President and
Secretary of the Funds.
- --------------------------------------------------------------------------------
* This Director is deemed to be an "interested person" of the Fund as defined in
the Investment Company Act of 1940.
+ Members of the Fund's Executive Committee. The Executive Committee of the
Board handles the responsibilities of the Board between meetings of the Board.
- --------------------------------------------------------------------------------
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series, Inc.; Cash Trust Series II; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash Trust; Insight Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty Term Trust, Inc.-1999; Liberty U.S. Government Money Market Trust;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain
Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Directors own less than 1% of the Fund's outstanding Shares.
As of July 8, 1994, the following shareholder of record owned 5% or more of the
outstanding Class A Shares of the Fund: Merrill Lynch, Pierce, Fenner & Smith
(as record owner holding Class A Shares for its clients), Jacksonville, Florida,
owned approximately 5,874,985 Shares (8.11%).
As of July 8, 1994, the following shareholder of record owned 5% or more of the
outstanding Class C Shares of the Fund: Merrill Lynch, Pierce, Fenner & Smith
(as record owner holding Class C Shares for its clients), Jacksonville, Florida,
owned approximately 2,540,078 Shares (44.93%).
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser, Passport Research, Ltd. (the "Adviser"), was
organized as a Pennsylvania limited partnership in 1981. Federated Advisers is
the general partner of the Adviser and has a 50.5% interest in the Adviser. The
limited partner of the Adviser is Edward D. Jones & Co., which owns a 49.5%
interest in the adviser. Federated Advisers is owned by FII Holdings, Inc., a
subsidiary of Federated Investors. All of the voting securities of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue, his
wife, and his son J. Christopher Donahue. For information regarding those
persons who are affiliated with the Fund and who are also affiliated with the
investment adviser, see "Officers and Directors."
At any time, Edward D. Jones & Co. can require Federated Investors to repurchase
all of its partnership interest in the Adviser at the then current book value.
Edward D. Jones & Co. cannot transfer, sell, or assign its partnership interest
in the Adviser without first offering it to Federated Investors.
As long as Edward D. Jones & Co. owns a partnership interest in the Adviser, it
cannot acquire, organize, or cause the organization of any other money market
mutual fund or enter into arrangements with an investment adviser or underwriter
of any other money market mutual fund in which Edward D. Jones & Co. will offer
the shares of the other money market mutual fund. Edward D. Jones & Co. has
agreed not to solicit proxies in opposition to management of the Fund unless a
court of competent jurisdiction finds the conduct of a majority of the Board of
Directors constitutes willful misfeasance, bad faith, gross negligence, or
reckless disregard of its duties.
All of the officers of the Fund, except Daniel A. Burkhardt, are officers of the
Adviser. The relationships are described under 'Fund Management--Officers and
Directors.'
The Adviser shall not be liable to the Fund or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Fund.
- --------------------------------------------------------------------------------
ADVISORY FEES
For its advisory services, Passport Research, Ltd. receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended
February 28, 1994, and 1993, and February 29, 1992, the Adviser earned
$6,774,071, $4,017,913, and $1,741,765, respectively, which were reduced by
$1,510,782, $22,320, and $437,123, respectively.
STATE EXPENSE LIMITATION
The Adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1 1/2% per
year of the remaining average net assets, the Adviser will reimburse the
Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Fund's administrator.
For the fiscal years ended February 28, 1994 and 1993, and February 29, 1992,
Federated Administrative Services, Inc., earned $959,288, $576,939, and
$345,896, respectively. Dr. Henry J. Gailliot, an officer of the Adviser to the
Fund, holds approximately 20% of the outstanding common stock and serves as a
director of Commercial Data Services, Inc., a company which provides computer
processing services to Federated Administrative Services.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include:
- - advice as to the advisability of investing in securities;
- - security analysis and reports;
- - economic studies;
- - industry studies;
- - receipt of quotations for portfolio evaluations; and
- - similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relation to the value of the brokerage and
research services provided. The Fund anticipates that Edward D. Jones & Co.,
which is the limited partner of the Adviser, may upon occasion, subject to
certain restrictions, act as broker or dealer in connection with portfolio
transactions for the Fund.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising certain other accounts. To the
extent that receipt of these services may supplant services for which the
Adviser or its affiliates might otherwise have paid, it would tend to reduce
their expenses.
For the fiscal years ended February 28, 1994 and 1993, and February 29, 1992,
the Fund paid $636,925, $540,200, and $384,799, respectively, in brokerage
commissions on brokerage transactions.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Except under certain circumstances described in the respective prospectuses,
Shares are sold at their net asset value (plus a sales load on Class A Shares
only) on days the New York Stock Exchange is open for business. The procedure
for purchasing Shares of the Fund is explained in the respective prospectuses
under "Investing in Class A Shares," "Investing in Class B Shares" or "Investing
in Class C Shares."
- --------------------------------------------------------------------------------
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to simulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
By adopting the Distribution Plan (Class B and Class C Shares only), the
Directors expect that the Fund will be able to achieve a more predictable flow
of cash for investment purposes and to meet redemptions. This will facilitate
more efficient portfolio management and assist the Fund in pursuing its
investment objectives. By identifying potential investors whose needs are served
by the Fund's objectives, and properly servicing these accounts, it may be
possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
During the fiscal year ended February 28, 1994, payments in the amount of
$230,438 were made pursuant to the Distribution Plan, all of which was paid to
financial institutions. In addition, for the fiscal year ended February 28,
1994, payments in the amount of $2,256,405 were made pursuant to the Shareholder
Services Plan.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. Federated Services Company acts as the shareholder's agent in
depositing checks and converting them to federal funds.
PURCHASES BY SALES REPRESENTATIVES, FUND DIRECTORS, AND EMPLOYEES
Directors, employees, and sales representatives of the Fund, Federated Advisers,
and Federated Securities Corp. or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp., and their spouses and
children under 21, may buy Shares at net asset value without a sales load and
are not subject to a contingent deferred sales charge (Class B Shares and Class
C Shares only) to the extent the financial institution through which the Shares
are sold agrees to waive any initial payment to which it might otherwise be
entitled. Shares may also be sold without sales charges to trusts or pension of
profit-sharing plans for these persons and to persons who elect to sweep into
the Fund (i.e., directly invest) the dividends payable on shares of common and
preferred stock, unit investment trusts, and closed-end investment companies,
owned directly or indirectly of such persons.
These sales are made with the purchaser's written assurance that the purchase is
for investment purposes and that the securities will not be resold except
through redemption by the Fund.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the respective prospectuses.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
- - according to the last sale price on a national securities exchange, if
available;
- - in the absence of recorded sales for equity securities, according to the mean
between the last closing bid and asked prices, and for bonds and other fixed
income securities as determined by an independent pricing service; or
- - for short-term obligations, according to the prices as furnished by an
independent pricing service or for short-term obligations with remaining
maturities of 60 days or less at the time of purchase, at amortized cost, or
at fair value as determined in good faith by the Directors.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider yield, quality, coupon
rate, maturity, type of issue, trading characteristics, and other market data.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Shareholder redemptions of Class B Shares and
Class C Shares may be subject to a contingent deferred sales charge. Redemption
procedures are explained in the respective prospectuses under "Redeeming Class A
Shares," "Redeeming Class B Shares" or "Redeeming Class C Shares."
REDEMPTION IN KIND
Although the Fund intends to redeem Shares in cash, it reserves the right under
certain circumstances to pay the redemption price, in whole or in part, by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Directors determine to be fair and equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund is obligated to redeem Shares for any shareholder
in cash up to the lesser of $250,000 or 1% of a class of Shares' net asset value
during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- - derive less than 30% of its gross income from gains on the sale of securities
held less than three months;
- - invest in securities within certain statutory limits; and
- - distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional Shares. Only a nominal portion of any income
dividend paid by the Fund is expected to be eligible for the dividends received
deduction available to corporations. These dividends, and any short-term capital
gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
Fund Shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The Fund's average annual total returns for Class A Shares for the one-year
period ended February 28, 1994, and for the period from May 27, 1988 (effective
date) to February 28, 1994, were 0.21% and 13.14%, respectively.
The Fund's cumulative total return for Class C Shares for the period from April
30, 1993 (effective date) to February 28, 1994 was 2.27%.
The average annual total return for all classes of Shares of the Fund is the
average compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of Shares owned at the
end of the period by the offering price per Share at the end of the period. The
number of Shares owned at the end of the period is based on the number of Shares
purchased at the beginning of the period with $1,000, less any applicable sales
load, adjusted over the period by any additional Shares, assuming the quarterly
reinvestment of all dividends and distributions. Any applicable contingent
deferred sales charge is deducted from the ending value of the investments based
on the lesser of the original purchase price or the offering price of Shares
redeemed.
YIELD
- --------------------------------------------------------------------------------
The Fund's yields for Class A Shares and Class C Shares were 4.82% and 4.31%,
respectively, for the thirty-day period ended February 28, 1994.
The yield for all classes of Shares of the Fund is determined by dividing the
net investment income per Share (as defined by the Securities and Exchange
Commission) earned by any class of Shares over a thirty-day period by the
maximum offering price per Share of any class of Shares on the last day of the
period. This value is then annualized using semi-annual compounding. This means
that the amount of income generated during the thirty-day period is assumed to
be generated each month over a 12-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by any
class of Shares because of certain adjustments required by the SEC and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in any class
of Shares the performance will be reduced for those shareholders paying those
fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance of each class of Shares depends upon such variables as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates and market value of portfolio securities;
- - changes in the Fund's or a class of Shares' expenses; and
- - various other factors.
A class of Shares' performance fluctuates on a daily basis largely because net
earnings and offering price per Share fluctuate daily. Both net earnings and
offering price per Share are factors in the computation of yield and total
return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
- - LIPPER ANALYTICAL SERVICES, INC., for example, makes comparative calculations
for one month, three month, one year, and five year periods which assume the
reinvestment of all capital gains distributions and income dividends.
- - DOW JONES INDUSTRIAL AVERAGE ('DJIA') represents share prices of selected blue
chip industrial corporations as well as public utility and transportation
companies. The DJIA indicates daily changes in the average price of stocks in
any of its categories. It also reports total sales for each group of
industries. Because it represents the top corporations of America, the DJIA is
a leading economic indicator for the stock market as a whole.
- - STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a composite
index of common stocks in industry, transportation, financial, and public
utility companies, compares total returns of funds whose portfolios are
invested primarily in common stocks. In addition, the Standard & Poor's index
assumes reinvestment of all dividends paid by stocks listed on its index.
Taxes due on any of these distributions are not included, nor are brokerage or
other fees calculated in Standard & Poor's figures.
- - STANDARD & POOR'S UTILITY INDEX is an unmanaged index of common stocks from
forty different utilities. This index indicates daily changes in the price of
the stocks. The index also provides figures for changes in price from the
beginning of the year to date, and for a twelve month period.
- - DOW JONES UTILITY INDEX is an unmanaged index comprised of fifteen utility
stocks that tracks changes in price daily and over a six month period. The
index also provides the highs and lows for each of the past five years.
- - MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Advertisements and other sales literature for any class of Shares may quote
total returns which are calculated on nonstandardized base periods. These total
returns also represent the historic change in the value of an investment in any
class of Shares based on quarterly reinvestment of dividends over a specified
period of time.
From time to time, the Fund may advertise the performance of any class of Shares
using charts, graphs and descriptions, compared to federally insured bank
products including certificates of deposit and time deposits and to money market
funds using the Lipper Analytical Services money market instruments average.
Advertisements may quote performance information which does not reflect the
effect of a sales load or contingent deferred sales charge, as applicable.
LIBERTY UTILITY FUND, INC.
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- -------------------------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--64.6%
- --------------------------------------------------------------------------------------------------
UTILITIES--58.3%
--------------------------------------------------------------------------------
500,000 Allegheny Power Systems, Inc. $ 12,062,500
--------------------------------------------------------------------------------
129,000 American Electric Power Co., Inc. 4,273,125
--------------------------------------------------------------------------------
525,000 Baltimore Gas & Electric Co. 12,206,250
--------------------------------------------------------------------------------
800,000 BCE, Inc. 28,900,000
--------------------------------------------------------------------------------
625,000 British Telecommunications ADR 18,734,375
--------------------------------------------------------------------------------
600,000 Carolina Power & Light Co. 16,350,000
--------------------------------------------------------------------------------
200,000 Cilcorp, Inc. 6,775,000
--------------------------------------------------------------------------------
500,000 Cincinnati Gas & Electric Co. 12,250,000
--------------------------------------------------------------------------------
450,000 CMS Energy Corp. 10,293,750
--------------------------------------------------------------------------------
418,000 Consolidated Edison Co. 12,383,250
--------------------------------------------------------------------------------
500,000 Detroit Edison Co. 14,062,500
--------------------------------------------------------------------------------
650,000 DPL, Inc. 12,918,750
--------------------------------------------------------------------------------
500,000 DQE, Inc. 15,875,000
--------------------------------------------------------------------------------
300,000 Duke Power Co. 11,587,500
--------------------------------------------------------------------------------
390,600 Entergy Corp. 12,987,450
--------------------------------------------------------------------------------
400,000 Florida Progress Corp. 11,850,000
--------------------------------------------------------------------------------
650,000 General Public Utilities 18,606,250
--------------------------------------------------------------------------------
475,000 GTE Corp. 15,496,875
--------------------------------------------------------------------------------
300,000 Hong Kong Telecommunications ADR 17,062,500
--------------------------------------------------------------------------------
325,000 Ipalco Enterprises, Inc. 10,603,125
--------------------------------------------------------------------------------
600,000 Long Island Lighting Co. 13,875,000
--------------------------------------------------------------------------------
310,000 MCN Corp. 11,935,000
--------------------------------------------------------------------------------
66,000 Niagara Mohawk Power Corp. 1,237,500
--------------------------------------------------------------------------------
630,000 Nipsco Industries, Inc. 19,057,500
--------------------------------------------------------------------------------
625,000 Northeast Utilities Co. 14,609,375
--------------------------------------------------------------------------------
500,000 NYNEX Corp. 18,625,000
--------------------------------------------------------------------------------
800,000 Pacific Enterprises 17,000,000
--------------------------------------------------------------------------------
1,000,000 Pacificorp 18,000,000
--------------------------------------------------------------------------------
700,000 Peco Energy Co. 18,812,500
--------------------------------------------------------------------------------
273,000 Peoples Energy Corp. 8,155,875
--------------------------------------------------------------------------------
600,000 Pinnacle West Capital Corp. 12,825,000
--------------------------------------------------------------------------------
400,000 PSI Resources, Inc. 9,600,000
--------------------------------------------------------------------------------
600,000 Public Service Enterprises Group, Inc. 18,225,000
--------------------------------------------------------------------------------
750,000 Sonat, Inc. 22,781,250
--------------------------------------------------------------------------------
375,000 Southern Co. 15,421,875
--------------------------------------------------------------------------------
401,400 Southern New England Telecommunications Corp. 12,694,275
--------------------------------------------------------------------------------
420,000 UGI Corp. New 9,660,000
--------------------------------------------------------------------------------
</TABLE>
LIBERTY UTILITY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- -------------------------------------------------------------------------------- ------------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
500,000 Utilicorp, Inc. $ 14,625,000
--------------------------------------------------------------------------------
550,000 Western Resources, Inc. 16,706,250
-------------------------------------------------------------------------------- ------------
Total 549,124,600
-------------------------------------------------------------------------------- ------------
CONSUMER SERVICES--2.2%
--------------------------------------------------------------------------------
275,000 CBL & Associate Properties, Inc. 5,431,250
--------------------------------------------------------------------------------
586,000 Simon Property Group, Inc. 15,089,500
-------------------------------------------------------------------------------- ------------
Total 20,520,750
-------------------------------------------------------------------------------- ------------
ENERGY--1.7%
--------------------------------------------------------------------------------
255,000 Texaco, Inc. 16,543,125
-------------------------------------------------------------------------------- ------------
HEALTH CARE--1.9%
--------------------------------------------------------------------------------
525,000 Meditrust REIT 17,521,875
-------------------------------------------------------------------------------- ------------
CONSUMER DURABLE--0.5%
--------------------------------------------------------------------------------
335,000 Southwestern Properties REIT 4,438,750
-------------------------------------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $567,147,006) 608,149,100
-------------------------------------------------------------------------------- ------------
PREFERRED STOCKS--28.9%
- --------------------------------------------------------------------------------------------------
ADJUSTABLE RATE PREFERRED STOCKS--6.2%
--------------------------------------------------------------------------------
162,600 Enserch Corp., ARPS 16,422,600
--------------------------------------------------------------------------------
180,000 Illinois Power Co., Pfd. B, ARPS 9,022,500
--------------------------------------------------------------------------------
335,000 Niagara Mohawk Power Corp., C, ARPS 8,542,500
--------------------------------------------------------------------------------
100,000 Texas Utilities Electric Co., A, ARPS 9,700,000
--------------------------------------------------------------------------------
52,000 Texas Utilities Electric Co., Pfd. B, ARPS 5,252,000
--------------------------------------------------------------------------------
255,050 Toledo Edison Co., Pfd. B, ARPS 6,440,013
--------------------------------------------------------------------------------
66,508 USX Marathon Group Corp., ARPS 3,333,714
-------------------------------------------------------------------------------- ------------
Total 58,713,327
-------------------------------------------------------------------------------- ------------
CONVERTIBLE PREFERRED STOCKS--22.0%
--------------------------------------------------------------------------------
1,025,000 Citicorp, Conv. Pfd., Series P, 8.25% 20,500,000
--------------------------------------------------------------------------------
185,000 * Cointel/Telefonica De Argentina Prides, Conv. Pfd., 7.00% 13,220,100
--------------------------------------------------------------------------------
200,000 Freeport McMoran, Inc., Conv. Pfd., $4.375 10,025,000
--------------------------------------------------------------------------------
230,000 Kaufman and Broad Home Corp., Conv. Pfd., Series B, 8.75% 4,830,000
--------------------------------------------------------------------------------
400,000 * Occidental Petroleum, Conv. Pfd., 7.75% 20,800,000
--------------------------------------------------------------------------------
450,000 * Phillipine Long Distance, Conv. Pfd., 5.75% 19,068,750
--------------------------------------------------------------------------------
200,000 Reynolds Metals Co., Conv. Pfd., 7.00% 10,450,000
--------------------------------------------------------------------------------
2,500,000 RJR Nabisco Holdings, Conv. Pfd., 8.25% 17,812,500
--------------------------------------------------------------------------------
475,000 Sears Roebuck & Co., Conv. Pfd., Series A, $3.75 25,650,000
--------------------------------------------------------------------------------
300,000 Sun America, Inc., Conv. Pfd., Series D, $2.78 11,550,000
--------------------------------------------------------------------------------
653,400 Sun America, Inc., Conv. Pfd., Series P, $8.50 11,516,175
--------------------------------------------------------------------------------
450,000 Tenneco, Inc., Conv. Pfd., 9.50% 18,843,750
--------------------------------------------------------------------------------
365,000 Unisys Corp., Conv. Pfd., $3.75 18,341,250
--------------------------------------------------------------------------------
144,000 Utilicorp, Inc., Conv. Pfd. $1.78 4,068,000
-------------------------------------------------------------------------------- ------------
Total 206,675,525
-------------------------------------------------------------------------------- ------------
</TABLE>
LIBERTY UTILITY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ----------- -------------------------------------------------------------------------------- ------------
<C> <C> <S> <C>
PREFERRED STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
PREFERRED INVERSE FLOATING STOCKS--0.7%
--------------------------------------------------------------------------------
54 * Potomac Electric Power Co., Pfd. Inv., Series 1991B $ 6,385,500
-------------------------------------------------------------------------------- ------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST, $244,455,019) 271,774,352
-------------------------------------------------------------------------------- ------------
CONVERTIBLE CORPORATE BONDS--3.9%
- --------------------------------------------------------------------------------------------------
BROADCASTING--1.9%
--------------------------------------------------------------------------------
$44,000,000 Turner Broadcasting System, Inc., LYON, 7.25%, accrual 2/13/2007 17,985,000
-------------------------------------------------------------------------------- ------------
UTILITIES--2.0%
--------------------------------------------------------------------------------
10,000,000 * National Power, 6.25% Conv. Bonds, 9/23/2008 18,817,803
-------------------------------------------------------------------------------- ------------
TOTAL CONVERTIBLE CORPORATE BONDS (IDENTIFIED COST, $33,601,473) 36,802,803
-------------------------------------------------------------------------------- ------------
**REPURCHASE AGREEMENT--2.5%
- --------------------------------------------------------------------------------------------------
23,675,000 J.P. Morgan Securities, Inc., 3.49%, dated 2/28/94, due 3/1/94
(at amortized cost) (Note 2B) 23,675,000
-------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST, $868,878,498) $940,401,255+
-------------------------------------------------------------------------------- ------------
</TABLE>
* Restricted securities--Investment in securities not registered under the
Securities Act of 1933. At the end of the period, these securities amounted
to 8.3% of net assets (Note 2G).
** The repurchase agreement is fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio. The investment in the
repurchase agreement is through participation in a joint account with other
Federated Funds.
+ The cost of investments for federal tax purposes amounts to $868,878,498 at
February 28, 1994. The net unrealized appreciation on a federal tax basis
amounts to $71,522,757, which is comprised of $89,061,458 appreciation and
$17,538,701 depreciation, at February 28, 1994.
Note: The categories of investments are shown as a percentage of net assets
($941,922,323) at February 28, 1994.
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
ADR -- American Depository Receipts
ARPS -- Adjustable Rate Preferred Stock
LYON -- Liquid Yield Option Note
REIT -- Real Estate Investment Trust
</TABLE>
(See Notes which are an integral part of the Financial Statements)
LIBERTY UTILITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B) (identified and tax cost, $868,878,498) $940,401,255
- -----------------------------------------------------------------------------------------------
Cash 47,700
- -----------------------------------------------------------------------------------------------
Receivable for investments sold 11,260,624
- -----------------------------------------------------------------------------------------------
Dividends and interest receivable 5,906,640
- -----------------------------------------------------------------------------------------------
Receivable for capital stock sold 2,322,591
- ----------------------------------------------------------------------------------------------- ------------
Total assets 959,938,810
- -----------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Payable for investments purchased $13,320,000
- ---------------------------------------------------------------------------------
Payable for capital stock redeemed 3,900,138
- ---------------------------------------------------------------------------------
Accrued expenses and other liabilities 796,349
- --------------------------------------------------------------------------------- -----------
Total liabilities 18,016,487
- ----------------------------------------------------------------------------------------------- ------------
NET ASSETS for 76,940,337 shares of capital stock outstanding $941,922,323
- ----------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------
Paid-in capital $846,626,193
- -----------------------------------------------------------------------------------------------
Unrealized appreciation of investments 71,522,757
- -----------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain on investments 9,475,267
- -----------------------------------------------------------------------------------------------
Undistributed net investment income 14,298,106
- ----------------------------------------------------------------------------------------------- ------------
Total $941,922,323
- ----------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE PER SHARE:
- -----------------------------------------------------------------------------------------------
Class A Shares (net assets of $877,512,912 / 71,672,469 shares of capital stock outstanding) $ 12.24
- ----------------------------------------------------------------------------------------------- ------------
Class C Shares (net assets of $64,409,411 / 5,267,868 shares of capital stock outstanding) $ 12.23
- ----------------------------------------------------------------------------------------------- ------------
OFFERING PRICE PER SHARE:
- -----------------------------------------------------------------------------------------------
Class A Shares (100/95.5 of $12.24) $ 12.82*
- ----------------------------------------------------------------------------------------------- ------------
Class C Shares $ 12.23
- ----------------------------------------------------------------------------------------------- ------------
REDEMPTION PROCEEDS PER SHARE:
- -----------------------------------------------------------------------------------------------
Class A Shares $ 12.24
- ----------------------------------------------------------------------------------------------- ------------
Class C Shares (99/100 of $12.23) $ 12.11**
- ----------------------------------------------------------------------------------------------- ------------
</TABLE>
* See "What Shares Cost" in the prospectus.
** See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
LIBERTY UTILITY FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------------------
Dividends (Note 2C) $ 48,595,296
- -----------------------------------------------------------------------------------------------
Interest (Note 2C) 4,878,009
- ----------------------------------------------------------------------------------------------- ------------
Total income 53,473,305
- -----------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 6,774,071
- ---------------------------------------------------------------------------------
Directors' fees 20,491
- ---------------------------------------------------------------------------------
Administrative personnel and services (Note 5) 959,288
- ---------------------------------------------------------------------------------
Custodian and recordkeeper fees 213,407
- ---------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 5) 802,987
- ---------------------------------------------------------------------------------
Shareholder servicing fee (Note 5) 2,256,405
- ---------------------------------------------------------------------------------
Distribution services fee (Note 5) 230,438
- ---------------------------------------------------------------------------------
Capital stock registration fees 207,404
- ---------------------------------------------------------------------------------
Auditing fees 30,269
- ---------------------------------------------------------------------------------
Legal fees 25,337
- ---------------------------------------------------------------------------------
Printing and postage 171,243
- ---------------------------------------------------------------------------------
Taxes 87,078
- ---------------------------------------------------------------------------------
Insurance premiums 19,600
- ---------------------------------------------------------------------------------
Miscellaneous 10,936
- --------------------------------------------------------------------------------- -----------
Total expenses 11,808,954
- ---------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 5) 1,510,782
- --------------------------------------------------------------------------------- -----------
Net expenses 10,298,172
- ----------------------------------------------------------------------------------------------- ------------
Net investment income 43,175,133
- ----------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) 12,441,016
- -----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (18,342,651)
- ----------------------------------------------------------------------------------------------- ------------
Net realized and unrealized loss on investments (5,901,635)
- ----------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 37,273,498
- ----------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
LIBERTY UTILITY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
-----------------------------
1994 1993
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------------
Net investment income $ 43,175,133 $ 31,948,020
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments ($11,416,757 net gain and $2,500,511
net gain, respectively, as computed for federal income tax purposes) 12,441,016 1,476,253
- -------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (18,342,651) 68,494,526
- ------------------------------------------------------------------------------- ------------- ------------
Change in net assets resulting from operations 37,273,498 101,918,799
- ------------------------------------------------------------------------------- ------------- ------------
NET EQUALIZATION (DEBITS)/CREDITS (Note 2F) 1,150,284 3,599,572
- ------------------------------------------------------------------------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (Note 3)--
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment income
- -------------------------------------------------------------------------------
Class A Shares (41,477,441) (29,470,349)
- -------------------------------------------------------------------------------
Class C Shares (965,765) --
- -------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investments
- -------------------------------------------------------------------------------
Class A Shares (2,715,075) (4,381,113)
- -------------------------------------------------------------------------------
Class C Shares (101,609) --
- ------------------------------------------------------------------------------- ------------- ------------
Change in net assets from distributions to shareholders (45,259,890) (33,851,462)
- ------------------------------------------------------------------------------- ------------- ------------
CAPITAL STOCK TRANSACTIONS (NOTE 4)--
- -------------------------------------------------------------------------------
Proceeds from sale of shares 327,197,815 327,761,325
- -------------------------------------------------------------------------------
Net asset value of shares issued to shareholders electing to receive
payment of distributions in capital stock 31,818,829 22,789,102
- -------------------------------------------------------------------------------
Cost of shares redeemed (149,769,576) (58,362,219)
- ------------------------------------------------------------------------------- ------------- ------------
Change in net assets from capital stock transactions 209,247,068 292,188,208
- ------------------------------------------------------------------------------- ------------- ------------
Change in net assets 202,410,960 363,855,117
- -------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------
Beginning of period 739,511,363 375,656,246
- ------------------------------------------------------------------------------- ------------- ------------
End of period (including undistributed net investment income of $14,298,106 and
$12,415,895, respectively) $ 941,922,323 $739,511,363
- ------------------------------------------------------------------------------- ------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
LIBERTY UTILITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Effective April 30, 1993 (the effective date for the Class C Shares), Liberty
Utility Fund, Inc. (the "Fund") provides two classes of shares Class A Shares
and Class C Shares. Class A Shares and Class C Shares are identical in all
respects except that Class A Shares are subject to a sales load, and Class C
Shares are sold pursuant to a distribution plan ("Plan") adopted in accordance
with Investment Company Act Rule 12b-1. Under the Plan, the Fund may pay
Federated Securities Corp. (the "distributor") a fee at an annual rate of up to
.75 of 1% of the average daily net asset value of Class C Shares to finance any
activity which is principally intended to result in the sale of Class C Shares.
(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. The
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--Equity securities listed on the New York Stock Exchange or any other national
securities exchange are valued at the last sale price or, if there has been no sale on that day, at the
mean between bid and asked prices. Unlisted equity securities are valued at the latest mean prices.
Bonds and other fixed income portfolio securities (which may trade on a national securities exchange
and/or over the counter) are valued at the last sale price on a national securities exchange on that
day, if available; otherwise they shall be valued on the basis of prices provided by an independent
pricing service, when such prices are believed to reflect the fair market value of such securities.
Short-term obligations shall ordinarily be valued at the mean between bid and asked prices as furnished
by an independent pricing service. However, short-term obligations with maturities of 60 days or less
are valued at amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to monitor, on a daily basis,
the market value of each repurchase agreement's underlying securities to ensure the existence of a
proper level of collateral.
The Fund will only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are deemed by the Fund's adviser to be creditworthy pursuant
to guidelines established by the Directors. Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.
C. INCOME--Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. Interest income includes interest, and discount earned (net of premium) on short-term
obligations, and interest earned on all other debt securities including original issue discount as
required by the Internal Revenue Code, as amended. Dividends to shareholders and capital gain
distributions, if any, are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Internal Revenue Code, as
amended, applicable to regulated investment companies and to distribute to shareholders each year all of
its taxable income. Accordingly, no provision for federal tax is necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or delayed delivery
transactions. To the extent the Fund engages in such transactions, it will do so for the purpose of
acquiring portfolio securities consistent with its investment objective and policies and not for the
purpose of investment leverage. The Fund will record a when-issued security and the related liability on
the trade date. Until the securities are received and paid for, the Fund will maintain 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.
F. EQUALIZATION--The Fund follows the accounting practice known as equalization by which a portion of the
proceeds from sales and costs of redemptions of capital stock equivalent on a per share basis to the
amount of undistributed net investment income on the date of the transaction, is credited or charged to
undistributed net investment income. As a result, undistributed net investment income per share is
unaffected by sales or redemptions of capital stock.
G. RESTRICTED SECURITIES--The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the public if the securities are
registered. Disposal of these securities may involve time-consuming negotiations and expenses, and
prompt sale at an acceptable price may be difficult. Additional information on each restricted security
held at February 28, 1994, is as follows:
</TABLE>
LIBERTY UTILITY FUND, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACQUISITION
COST
SECURITY ACQUISITION DATE PER UNIT
------------------------------------------------------- -------------------- ------------
<S> <C> <C>
Cointel/Telefonica De Argentina Prides 2/24/94 $ 72
-------------------------------------------------------
National Power 10/4/93 163
-------------------------------------------------------
Occidental Petroleum 2/11/93 50
-------------------------------------------------------
Phillipine Long Distance 10/9/92 25
-------------------------------------------------------
Potomac Electric Power Co. 10/15/91 and 8/3/92 110,630
-------------------------------------------------------
H. OTHER--Investment transactions are accounted for on the trade date of the transaction.
</TABLE>
(3) DIVIDENDS
Dividends are declared and paid quarterly, and the Fund intends to distribute
net realized capitals gains, if any, at least annually. Shareholders may elect
to have all distributions of dividends and capital gains automatically
reinvested in additional shares of the Fund.
(4) CAPITAL STOCK
At February 28, 1994, there were 1,000,000,000 shares of $.001 par value stock
authorized. Of these shares, 375,000,000 have been designated Class A Shares of
the Fund and 375,000,000 as Class C Shares of the Fund. Transactions in capital
stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
-----------------------------------------------------------
1994 1993
---------------------------- --------------------------
SHARES DOLLARS SHARES DOLLARS
- ---------------------------------------------------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Class A Shares:
- ----------------------------------------------------
Shares outstanding, beginning of period 60,148,409 $ 637,379,125 34,048,199 $345,190,917
- ----------------------------------------------------
Shares sold 20,606,339 255,156,993 29,234,867 327,761,325
- ----------------------------------------------------
Shares issued to shareholders in payment
of dividends declared 2,539,366 31,371,725 2,064,175 22,789,102
- ----------------------------------------------------
Shares redeemed (11,621,645) (143,855,060) (5,198,832) (58,362,219)
- ---------------------------------------------------- ----------- ------------- ---------- ------------
Shares outstanding, end of period 71,672,469 $ 780,052,783 60,148,409 $637,379,125
- ---------------------------------------------------- ----------- ------------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
---------------------------------------------------------
1994 1993
-------------------------- --------------------------
SHARES DOLLARS SHARES DOLLARS
- ---------------------------------------------------- --------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Class C Shares:
- ----------------------------------------------------
Shares outstanding, beginning of period -- -- -- --
- ----------------------------------------------------
Shares sold 5,706,191 $72,040,822 -- --
- ----------------------------------------------------
Shares issued to shareholders in payment
of dividends declared 35,769 447,104 -- --
- ----------------------------------------------------
Shares redeemed (474,092) (5,914,516) -- --
- ---------------------------------------------------- --------- -----------
Shares outstanding, end of period 5,267,868 $66,573,410 -- --
- ---------------------------------------------------- --------- -----------
</TABLE>
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Passport Research, Ltd., the Fund's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to .75 of 1% of the
Fund's average daily net assets. The Adviser has voluntarily agreed to waive a
portion of its fee. The Adviser can modify or terminate this voluntary waiver of
expense at any time at its sole discretion. For the year ended February 28,
1994, the advisory fee amounted to $6,774,071 of which $1,510,782 was
voluntarily waived.
LIBERTY UTILITY FUND, INC.
- --------------------------------------------------------------------------------
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Class C Shares of the Fund, to finance activities intended to result in the sale
of the Fund's Class C Shares. The Plan provides that the Fund may incur
distribution expenses of up to .75 of 1% of the average daily net assets of the
Class C Shares, annually, to compensate FSC. For the year ended February 28,
1994, the Fund paid distribution service fees of $230,438.
Under the terms of a shareholder service agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS a fee to obtain certain personal
services for shareholders and the maintenance of shareholder accounts. The fee
is based on the level of average net assets for the period.
Administrative personnel and services were provided at approximate cost by
Federated Administrative Services, Inc. Effective March 1, 1994, Federated
Administrative Services, ("FAS") will provide administrative personnel and
services. The fee is based on the level of average aggregate net assets of the
total Federated Funds for the period. The administrative fee received during any
fiscal year shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
Certain of the officers and Directors of the Fund are officers and Directors of
the above corporations.
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term obligations) for the
year ended February 28, 1994, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------
PURCHASES $403,461,899
- -------------------------------------------------------------------------------------------- ------------
SALES $212,389,251
- -------------------------------------------------------------------------------------------- ------------
</TABLE>
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
LIBERTY UTILITY FUND, INC.:
We have audited the accompanying statement of assets and liabilities of Liberty
Utility Fund, Inc. including the portfolio of investments, as of February 28,
1994, 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 (see the respective prospectuses for Class A
Shares and Class C Shares) for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
February 28, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Liberty Utility Fund, Inc. at February 28, 1994, 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 periods
indicated therein, in conformity with generally accepted accounting principles.
ERNST & YOUNG
Pittsburgh, PA
April 13, 1994
APPENDIX
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer.
Consequently, the Adviser believes that the quality of fixed income securities
in which the Fund invests should be continuously reviewed and that individual
analysts give different weightings to the various factors involved in credit
analysis. A rating is not a recommendation to purchase, sell, or hold a
security, because it does not take into account market value or suitability for
a particular investor. When a security has received a rating from more than one
service, each rating is evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating services from
other sources that they consider reliable. Ratings may be changed, suspended, or
withdrawn as a result of changes in or unavailability of such information, or
for other reasons.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATING DEFINITIONS
AAA--Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated BAA are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
STANDARD AND POOR'S CORPORATION LONG TERM DEBT RATING DEFINITIONS
AAA--Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
- - Leading market positions in well established industries.
- - High rates of return on funds employed.
- - Conservative capitalization structure with moderate reliance on debt and ample
asset protection.
- - Broad margins in earning coverage of fixed financial charges and high internal
cash generation.
- - Well-established access to a range of financial markets and assured sources of
alternate liquidity.
STANDARD & POOR'S CORPORATION COMMERCIAL PAPER RATING DEFINITIONS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
011102B (4/94)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part B)
(b) Exhibits:
(1) Copy of Amended and Restated Articles of
Incorporation of the Registrant (3.);
(i) Copy of Articles of Incorporation, as
amended (5.);
(2) Copy of By-Laws of the Registrant (1.);
(3) Not applicable;
(4) Copies of Specimen Certificates for Shares of
Capital Stock for Class A Shares, Class B
Shares, and Class C Shares of the
Registrant;+
(5) Copy of Investment Advisory Contract of the
Registrant (5.);
(6) (i) Conformed copy of
Distributor's Contract of the
Registrant, through and including
Exhibits A and B;+
(ii) Form of Exhibit C to
Distributor's Contract of the Registrant
adding Class B Shares to the existing
Distributor's Contract;+
(7) Not applicable;
(8) Conformed copy of Custodian Contract of the
Registrant;+
___________________
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's
Initial Registration Statement on Form N-2 filed April 16,
1987 (File Nos. 33-13388 and 811-5114).
2. Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 3 on Form N-2 filed May 19, 1987
(File Nos. 33-13388 and 811-5114)
3. Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed May 18, 1988
(File Nos. 33-13388 and 811-5114).
4. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 2 on Form N-1A filed April 24, 1989.
(File No. 33-13388)
5. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 3 on Form N-1A filed February 21,
1990 (File Nos. 33-13388 and 811-5114).
6. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 5 on Form N-1A filed April 20, 1990
(File Nos. 33-13388 and 811-5114).
7. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 7 on Form N-1A filed April 22, 1992
(File Nos. 33-13388 and 811-5114).
8. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 9 on Form N-1A filed April 23, 1993
(File Nos. 33-13388 and 811-5114).
(9) (i) Conformed copy of the Agreement for Fund
Accounting, Shareholder Recordkeeping,
and Custody Services Procurement of the
Registrant;+
(ii) Conformed copy of the Shareholder
Services Plan of the Registrant;+
(iii) Conformed copy of Administrative
Services Agreement of the Registrant;+
(iv) Conformed copy of Shareholder
Services Agreement of the Registrant;+
(10) Not applicable;
(11) Conformed copy of Consent of Independent
Auditors;+
(12) Not applicable;
(13) Not applicable;
(14) Not applicable;
(15) (i) Conformed copy of Rule 12b-1 Plan of the
Registrant, through and including
Exhibit A;+
(ii) Form of Exhibit B to the Rule 12b-1 Plan
of the Registrant adding Class B Shares
to the existing Rule 12b-1 Plan;+
(16) Paper copy of Schedule for Computation
of Fund Performance Data (4.);
(17) Paper copy of Power of Attorney (7.);
(18) Not applicable.
___________________
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's
Initial Registration Statement on Form N-2 filed April 16,
1987 (File Nos. 33-13388 and 811-5114).
2. Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 3 on Form N-2 filed May 19, 1987
(File Nos. 33-13388 and 811-5114)
3. Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed May 18, 1988
(File Nos. 33-13388 and 811-5114).
4. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 2 on Form N-1A filed April 24, 1989.
(File No. 33-13388)
5. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 3 on Form N-1A filed February 21,
1990 (File Nos. 33-13388 and 811-5114).
6. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 5 on Form N-1A filed April 20, 1990
(File Nos. 33-13388 and 811-5114).
7. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 7 on Form N-1A filed April 22, 1992
(File Nos. 33-13388 and 811-5114).
8. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 9 on Form N-1A filed April 23, 1993
(File Nos. 33-13388 and 811-5114).
Item 25. Persons Controlled by or Under Common Control with
Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of July 8, 1994
Shares of capital stock
($0.001 per Share par value)
Class A Shares 62,685
Class C Shares 2,755
Item 27. Indemnification: (1)
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of
the investment adviser, see the section entitled "Fund
Information - Management of the Fund" in Part A. The
affiliations with the Registrant of five of the Officers of
the investment adviser are included in Part B of this
Registration Statement under "Liberty Utility Fund, Inc.
Management - Officers and Directors."
The remaining Officers of the investment
adviser are: William D. Dawson, J. Thomas Madden, Mark L.
Mallon, Executive Vice Presidents; Henry J. Gailliot, Senior
Vice President-Economist; Peter R. Anderson, Gary J.
Madich, J. Alan Minteer, Senior Vice Presidents; Randall A.
Bauer, Jonathan C. Conley, Deborah A. Cunningham, Mark E.
Durbiano, Kathleen M. Foody-Malus, Thomas M. Franks, Edward
C. Gonzales, Jeff A. Kozemchak, Marian R. Marinach, John W.
McGonigle, Gregory M. Melvin, Susan M. Nason, Mary Jo
Ochson, Robert J. Ostrowski, Charles A. Ritter, Christopher
H. Wiles, Vice Presidents; J. Scott Albrecht, Joseph
Balestrino, Michael P. Donnelly, Linda Anne Duessel, Susan
R. Hill, Timothy Keefe, Frederick L. Plautz, Jr., James D.
Roberge, Paige Wilhelm, Thomas F. Woodhouse, Assistant Vice
Presidents; John W. McGonigle, Secretary; Edward C.
Gonzales, Treasurer; The business address of each of the
Officers of the investment adviser is Federated Investors
Tower, Pittsburgh, PA 15222-3779. These individuals are
also officers of a majority of the investment advisers to
the Funds listed in Part B of this Registration Statement
under "The Funds."
_____________________
1. Response is incorporated by reference to Registrant's
Initial Registration Statement on Form N-1A filed March
31, 1988 (File Nos. 33-13388 and 811-5114).
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares
of the Registrant, also acts as principal underwriter
for the following open-end investment companies:
Alexander Hamilton Funds; American Leaders Fund, Inc.;
Annuity Management Series; Automated Cash Management
Trust; Automated Government Money Trust; BayFunds; The
Biltmore Funds; The Biltmore Municipal Funds; The
Boulevard Funds; California Municipal Cash Trust;
Cambridge Series Trust; Cash Trust Series, Inc.; Cash
Trust Series II; DG Investor Series; Edward D. Jones &
Co. Daily Passport Cash Trust; Federated ARMs Fund;
Federated Exchange Fund, Ltd.; Federated GNMA Trust;
Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust;
Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated
Short-Intermediate Government Trust; Federated Short-
Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government
Bond Fund; First Priority Funds; First Union Funds;
Fixed Income Securities, Inc.; Fortress Adjustable Rate
U.S. Government Fund, Inc.; Fortress Municipal Income
Fund, Inc.; Fortress Utility Fund, Inc.; Fountain
Square Funds; Fund for U.S. Government Securities,
Inc.; Government Income Securities, Inc.; High Yield
Cash Trust; Independence One Mutual Funds; Insight
Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International
Series Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust;
Mark Twain Funds; Marshall Funds, Inc.; Money Market
Management, Inc.; Money Market Obligations Trust; Money
Market Trust; The Monitor Funds; Municipal Securities
Income Trust; New York Municipal Cash Trust; 111
Corcoran Funds; Peachtree Funds; The Planters Funds;
Portage Funds; RIMCO Monument Funds; The Shawmut Funds;
Short-Term Municipal Trust; Signet Select Funds;
SouthTrust Vulcan Funds; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund,
Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Tower Mutual Funds; Trademark Funds;
Trust for Financial Institutions; Trust for Government
Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; Vision
Fiduciary Funds, Inc.; Vision Group of Funds, Inc.; and
World Investment Series, Inc.
Federated Securities Corp. also acts as principal
underwriter for the following closed-end investment
company: Liberty Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief President and
Federated Investors Tower Executive Officer, Chief Director
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Vice President and
Federated Investors Tower President, and Treasurer, Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John A. Staley, IV Executive Vice President --
Federated Investors Tower and Assistant Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James R. Ball Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promugated thereunder are maintained at one of
the following locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors
Tower
("Transfer Agent and Dividend Pittsburgh, PA 15222-
3779
Disbursing Agent")
Federated Administrative Services Federated Investors
Tower
("Administrator") Pittsburgh, PA 15222-
3779
Passport Research, Ltd. Federated Investors
Tower
("Adviser") Pittsburgh, PA 15222-
3779
State Street Bank and Trust Co. P.O. Box 8604
("Custodian") Boston, MA 02266-8604
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to furnish each person to
whom a
prospectus is delivered with a copy of the Registrant's
latest
annual report to shareholders, upon request and without
charge.
Registrant hereby undertakes to comply with the
provisions of Section 16(c) of the 1940 Act with
respect to the removal of Trustees and the calling
of special shareholder meetings by shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant,
LIBERTY UTILITY FUND, INC., has duly caused this Amendment
to its Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, all in the City
of Pittsburgh and Commonwealth of Pennsylvania, on the 29th
day of July, 1994.
LIBERTY UTILITY FUND, INC.
BY: /s/Charles H. Field
Charles H. Field, Assistant Secretary
Attorney in Fact for John F. Donahue
July 29, 1994
Pursuant to the requirements of the Securities Act of
1933, this Amendment to its Registration Statement has been
signed below by the following person in the capacity and on
the date indicated:
NAME TITLE
DATE
By: /s/Charles H. Field
Charles H. Field Attorney In Fact July 29,
1994
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Director
(Chief Executive Officer)
Richard B. Fisher* President and Director
Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)
John T. Conroy, Jr.* Director
William J. Copeland* Director
James E. Dowd* Director
Lawrence D. Ellis, M.D.* Director
Edward L. Flaherty, Jr.* Director
Peter E. Madden* Director
Gregor F. Meyer* Director
Wesley W. Posvar* Director
Marjorie P. Smuts* Director
* By Power of Attorney
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights" and "Independent Auditors" and to the
use of our report dated April 13, 1994, in Post-Effective
Amendment Number 11 to the Registration Statement (Form N-1A
No. 33-13388) and the related Prospectus of Class B Shares of
Liberty Utility Fund, Inc.
/s/ ERNST & YOUNG
Ernst & Young
July 28, 1994
Exhibit (4) under Form N-1A
Exhibit 3(c) under 601/Reg. S-K
LIBERTY UTILITY FUND, INC.
(Class A Shares)
PORTFOLIO
Number Shares
_____ _____
Account No. Incorporated Under the LawsSee Reverse Side For
of the State of Maryland Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP 531545 10 1
Fully Paid and Non-Assessable Shares of Common Stock, of
LIBERTY UTILITY FUND, INC. (Class A Shares) hereafter called
the "Company," transferable on the books of the Company by
the owner, in person or by duly authorized attorney, upon
surrender of this Certificate properly endorsed.
The shares represented hereby are issued and shall be
held subject to the provisions of the Articles of
Incorporation and By-Laws of the Company, and all amendments
thereto, to all of which the holder by acceptance hereof
assents.
This Certificate is not valid unless countersigned by
the Transfer Agent.
IN WITNESS WHEREOF, the Company has caused this
Certificate to be signed in its name by its proper officers
and to be sealed with its Seal.
Dated: LIBERTY UTILITY FUND, INC.
Corporate Seal
1987
Maryland
/s/ Edward C. Gonzales /s/ John F.
Donahue
Vice President and Treasurer Chairman
Countersigned: Federated
Services Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on
the face of this Certificate, shall be construed as though
they were written out in full according to applicable laws
or regulations;
TEN COM - as tenants in common
UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the
entirety (Cust) (Minors)
JT TEN - as joint tenants with
right of under Uniform Gifts to
survivorship and not as Minors Act
tenants in common (State)
Additional abbreviations may also be used though not in
the above list.
For value received__________ hereby sell, assign, and
transfer unto
The Company will furnish to any stockholder, on request
and without charge, a full statement of designations and any
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications,
and terms and conditions of redemption of the stock of each
class which the corporation is authorized to issue.
Please insert social security or other
identifying number of assignee
______________________________________
____________________________________________________________
____________
(Please print or typewrite name and address, including zip
code, of assignee)
____________________________________________________________
____________
____________________________________________________________
____________
____________________________________________________________
_____ shares
of common stock represented by the within Certificate, and
do hereby irrevocably constitute and appoint
____________________________________________________________
______________________________________________ Attorney
to transfer the said shares on the books of the within named
Company with full power of substitution in the premises.
Dated______________________ NOTICE:_______________________
______
The signature to this
assignment must correspond
with the name as written upon
the face of the certificate in
every particular, without
alteration or enlargement or
any change whatever.
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half
inch border.
B. The number in the upper left-hand corner and the
number of shares in the upper right-hand corner are
outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the
page is boxed.
D. The Maryland corporate seal appears in the bottom
middle of the page.
Page Two
The social security or other identifying number of
the assignee appears in a box in the top-third upper-left
area of the page.
Exhibit (4) under Form N-1A
Exhibit 3(c) under 601/Reg. S-K
LIBERTY UTILITY FUND, INC.
(Class B Shares)
PORTFOLIO
Number Shares
_____ _____
Account No. Incorporated Under the LawsSee Reverse Side For
of the State of Maryland Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP (to be applied for)
Fully Paid and Non-Assessable Shares of Common Stock, of
LIBERTY UTILITY FUND, INC. (Class B Shares) hereafter called
the "Company," transferable on the books of the Company by
the owner, in person or by duly authorized attorney, upon
surrender of this Certificate properly endorsed.
The shares represented hereby are issued and shall be
held subject to the provisions of the Articles of
Incorporation and By-Laws of the Company, and all amendments
thereto, to all of which the holder by acceptance hereof
assents.
This Certificate is not valid unless countersigned by
the Transfer Agent.
IN WITNESS WHEREOF, the Company has caused this
Certificate to be signed in its name by its proper officers
and to be sealed with its Seal.
Dated: LIBERTY UTILITY FUND, INC.
Corporate Seal
1987
Maryland
/s/ Edward C. Gonzales /s/ John F.
Donahue
Vice President and Treasurer Chairman
Countersigned: Federated
Services Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on
the face of this Certificate, shall be construed as though
they were written out in full according to applicable laws
or regulations;
TEN COM - as tenants in common
UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the
entirety (Cust) (Minors)
JT TEN - as joint tenants with
right of under Uniform Gifts to
survivorship and not as Minors Act
tenants in common (State)
Additional abbreviations may also be used though not in
the above list.
For value received__________ hereby sell, assign, and
transfer unto
The Company will furnish to any stockholder, on request
and without charge, a full statement of designations and any
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications,
and terms and conditions of redemption of the stock of each
class which the corporation is authorized to issue.
Please insert social security or other
identifying number of assignee
______________________________________
____________________________________________________________
____________
(Please print or typewrite name and address, including zip
code, of assignee)
____________________________________________________________
____________
____________________________________________________________
____________
____________________________________________________________
_____ shares
of common stock represented by the within Certificate, and
do hereby irrevocably constitute and appoint
____________________________________________________________
______________________________________________ Attorney
to transfer the said shares on the books of the within named
Company with full power of substitution in the premises.
Dated______________________ NOTICE:_______________________
______
The signature to this
assignment must correspond
with the name as written upon
the face of the certificate in
every particular, without
alteration or enlargement or
any change whatever.
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half
inch border.
B. The number in the upper left-hand corner and the
number of shares in the upper right-hand corner are
outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the
page is boxed.
D. The Maryland corporate seal appears in the bottom
middle of the page.
Page Two
The social security or other identifying number of
the assignee appears in a box in the top-third upper-left
area of the page.
Exhibit (4) under Form N-1A
Exhibit 3(c) under 601/Reg. S-K
LIBERTY UTILITY FUND, INC.
(Class C Shares)
PORTFOLIO
Number Shares
_____ _____
Account No. Incorporated Under the LawsSee Reverse Side For
of the State of Maryland Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP 531545 20 0
Fully Paid and Non-Assessable Shares of Common Stock, of
LIBERTY UTILITY FUND, INC. (Class C Shares) hereafter called
the "Company," transferable on the books of the Company by
the owner, in person or by duly authorized attorney, upon
surrender of this Certificate properly endorsed.
The shares represented hereby are issued and shall be
held subject to the provisions of the Articles of
Incorporation and By-Laws of the Company, and all amendments
thereto, to all of which the holder by acceptance hereof
assents.
This Certificate is not valid unless countersigned by
the Transfer Agent.
IN WITNESS WHEREOF, the Company has caused this
Certificate to be signed in its name by its proper officers
and to be sealed with its Seal.
Dated: LIBERTY UTILITY FUND, INC.
Corporate Seal
1987
Maryland
/s/ Edward C. Gonzales /s/ John F.
Donahue
Vice President and Treasurer Chairman
Countersigned: Federated
Services Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on
the face of this Certificate, shall be construed as though
they were written out in full according to applicable laws
or regulations;
TEN COM - as tenants in common
UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the
entirety (Cust) (Minors)
JT TEN - as joint tenants with
right of under Uniform Gifts to
survivorship and not as Minors Act
tenants in common (State)
Additional abbreviations may also be used though not in
the above list.
For value received__________ hereby sell, assign, and
transfer unto
The Company will furnish to any stockholder, on request
and without charge, a full statement of designations and any
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications,
and terms and conditions of redemption of the stock of each
class which the corporation is authorized to issue.
Please insert social security or other
identifying number of assignee
______________________________________
____________________________________________________________
____________
(Please print or typewrite name and address, including zip
code, of assignee)
____________________________________________________________
____________
____________________________________________________________
____________
____________________________________________________________
_____ shares
of common stock represented by the within Certificate, and
do hereby irrevocably constitute and appoint
____________________________________________________________
______________________________________________ Attorney
to transfer the said shares on the books of the within named
Company with full power of substitution in the premises.
Dated______________________ NOTICE:_______________________
______
The signature to this
assignment must correspond
with the name as written upon
the face of the certificate in
every particular, without
alteration or enlargement or
any change whatever.
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half
inch border.
B. The number in the upper left-hand corner and the
number of shares in the upper right-hand corner are
outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the
page is boxed.
D. The Maryland corporate seal appears in the bottom
middle of the page.
Page Two
The social security or other identifying number of
the assignee appears in a box in the top-third upper-left
area of the page.
Exhibit 6(i) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
LIBERTY UTILITY FUND, INC.
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 1st day of March, 1993, by and
between Liberty Utility Fund, Inc. (the "Corporation"), a
Maryland Corporation, and FEDERATED SECURITIES CORP.
("FSC"), a Pennsylvania Corporation.
In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties
hereto as follows:
1. The Corporation hereby appoints FSC as its agent
to sell and distribute shares of the Corporation which may
be offered in one or more series (the "Funds") consisting of
one or more classes (the "Classes") of shares (the
"Shares"), as described and set forth on one or more
exhibits to this Agreement, at the current offering price
thereof as described and set forth in the current
Prospectuses of the Corporation. FSC hereby accepts such
appointment and agrees to provide such other services for
the Corporation, if any, and accept such compensation from
the Corporation, if any, as set forth in the applicable
exhibit to this Agreement.
2. The sale of any Shares may be suspended without
prior notice whenever in the judgment of the Corporation it
is in its best interest to do so.
3. Neither FSC nor any other person is authorized by
the Corporation to give any information or to make any
representation relative to any Shares other than those
contained in the Registration Statement, Prospectuses, or
Statements of Additional Information ("SAIs") filed with the
Securities and Exchange Commission, as the same may be
amended from time to time, or in any supplemental
information to said Prospectuses or SAIs approved by the
Corporation. FSC agrees that any other information or
representations other than those specified above which it or
any dealer or other person who purchases Shares through FSC
may make in connection with the offer or sale of Shares,
shall be made entirely without liability on the part of the
Corporation. No person or dealer, other than FSC, is
authorized to act as agent for the Corporation for any
purpose. FSC agrees that in offering or selling Shares as
agent of the Corporation, it will, in all respects, duly
conform to all applicable state and federal laws and the
rules and regulations of the National Association of
Securities Dealers, Inc., including its Rules of Fair
Practice. FSC will submit to the Corporation copies of all
sales literature before using the same and will not use such
sales literature if disapproved by the Corporation.
4. This Agreement is effective with respect to each
Class as of the date of execution of the applicable exhibit
and shall continue in effect with respect to each Class
presently set forth on an exhibit and any subsequent Classes
added pursuant to an exhibit during the initial term of this
Agreement for one year from the date set forth above, and
thereafter for successive periods of one year if such
continuance is approved at least annually by the Directors
of the Corporation including a majority of the members of
the Board of Directors of the Corporation who are not
interested persons of the Corporation and have no direct or
indirect financial interest in the operation of any
Distribution Plan relating to the Corporation or in any
related documents to such Plan ("Disinterested Directors")
cast in person at a meeting called for that purpose. If a
Class is added after the first annual approval by the
Directors as described above, this Agreement will be
effective as to that Class upon execution of the applicable
exhibit and will continue in effect until the next annual
approval of this Agreement by the Directors and thereafter
for successive periods of one year, subject to approval as
described above.
5. This Agreement may be terminated with regard to a
particular Fund or Class at any time, without the payment of
any penalty, by the vote of a majority of the Disinterested
Directors or by a majority of the outstanding voting
securities of the particular Fund or Class on not more than
sixty (60) days' written notice to any other party to this
Agreement. This Agreement may be terminated with regard to
a particular Fund or Class by FSC on sixty (60) days'
written notice to the Corporation.
6. This Agreement may not be assigned by FSC and
shall automatically terminate in the event of an assignment
by FSC as defined in the Investment Company Act of 1940, as
amended, provided, however, that FSC may employ such other
person, persons, corporation or corporations as it shall
determine in order to assist it in carrying out its duties
under this Agreement.
7. FSC shall not be liable to the Corporation for
anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties imposed by this
Agreement.
8. This Agreement may be amended at any time by
mutual agreement in writing of all the parties hereto,
provided that such amendment is approved by the Directors of
the Corporation including a majority of the Disinterested
Directors of the Corporation cast in person at a meeting
called for that purpose.
9. This Agreement shall be construed in accordance
with and governed by the laws of the Commonwealth of
Pennsylvania.
10. (a) Subject to the conditions set forth below,
the Corporation agrees to indemnify and hold harmless FSC
and each person, if any, who controls FSC within the meaning
of Section 15 of the Securities Act of 1933 and Section 20
of the Securities Act of 1934, as amended, against any and
all loss, liability, claim, damage and expense whatsoever
(including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing
or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based
upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, any
Prospectuses or SAIs (as from time to time amended and
supplemented) or the omission or alleged omission therefrom
of a material fact required to be stated therein or
necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon
and in conformity with written information furnished to the
Corporation about FSC by or on behalf of FSC expressly for
use in the Registration Statement, any Prospectuses and SAIs
or any amendment or supplement thereof.
If any action is brought against FSC or any
controlling person thereof with respect to which indemnity
may be sought against the Corporation pursuant to the
foregoing paragraph, FSC shall promptly notify the
Corporation in writing of the institution of such action and
the Corporation shall assume the defense of such action,
including the employment of counsel selected by the
Corporation and payment of expenses. FSC or any such
controlling person thereof shall have the right to employ
separate counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of FSC or such
controlling person unless the employment of such counsel
shall have been authorized in writing by the Corporation in
connection with the defense of such action or the
Corporation shall not have employed counsel to have charge
of the defense of such action, in any of which events such
fees and expenses shall be borne by the Corporation.
Anything in this paragraph to the contrary notwithstanding,
the Corporation shall not be liable for any settlement of
any such claim of action effected without its written
consent. The Corporation agrees promptly to notify FSC of
the commencement of any litigation or proceedings against
the Corporation or any of its officers or Directors or
controlling persons in connection with the issue and sale of
Shares or in connection with the Registration Statement,
Prospectuses, or SAIs.
(b) FSC agrees to indemnify and hold harmless the
Corporation, each of its Directors, each of its officers who
have signed the Registration Statement and each other
person, if any, who controls the Corporation within the
meaning of Section 15 of the Securities Act of 1933, but
only with respect to statements or omissions, if any, made
in the Registration Statement or any Prospectus, SAI, or any
amendment or supplement thereof in reliance upon, and in
conformity with, information furnished to the Corporation
about FSC by or on behalf of FSC expressly for use in the
Registration Statement or any Prospectus, SAI, or any
amendment or supplement thereof. In case any action shall
be brought against the Corporation or any other person so
indemnified based on the Registration Statement or any
Prospectus, SAI, or any amendment or supplement thereof, and
with respect to which indemnity may be sought against FSC,
FSC shall have the rights and duties given to the
Corporation, and the Corporation and each other person so
indemnified shall have the rights and duties given to FSC by
the provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to
protect any person against liability to the Corporation or
its shareholders to which such person would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the duties of such person
or by reason of the reckless disregard by such person of the
obligations and duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities
may be permitted pursuant to Section 17 of the Investment
Company Act of 1940, as amended, for Directors, officers,
FSC and controlling persons of the Corporation by the
Corporation pursuant to this Agreement, the Corporation is
aware of the position of the Securities and Exchange
Commission as set forth in the Investment Company Act
Release No. IC-11330. Therefore, the Corporation undertakes
that in addition to complying with the applicable provisions
of this Agreement, in the absence of a final decision on the
merits by a court or other body before which the proceeding
was brought, that an indemnification payment will not be
made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by
a majority vote of a quorum of non-party Disinterested
Directors, or (ii) by independent legal counsel in a written
opinion that the indemnitee was not liable for an act of
willful misfeasance, bad faith, gross negligence or reckless
disregard of duties. The Corporation further undertakes
that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is
ultimately determined that indemnification is appropriate)
against an officer, Trustee/Director, FSC or controlling
person of the Corporation will not be made absent the
fulfillment of at least one of the following conditions: (i)
the indemnitee provides security for his undertaking; (ii)
the Corporation is insured against losses arising by reason
of any lawful advances; or (iii) a majority of a quorum of
non-party Disinterested Directors or independent legal
counsel in a written opinion makes a factual determination
that there is reason to believe the indemnitee will be
entitled to indemnification.
11. If at any time the Shares of any Fund are offered
in two or more Classes, FSC agrees to adopt compliance
standards as to when a class of shares may be sold to
particular investors.
12. This Agreement will become binding on the parties
hereto upon the execution of the attached exhibits to the
Agreement.
Exhibit A
to the
Distributor's Contract
Liberty Utility Fund, Inc.
Class A Shares
In consideration of the mutual covenants set forth in
the Distributor's Contract dated March 1, 1993, between
Liberty Utility Fund, Inc. and Federated Securities Corp.,
Liberty Utility Fund, Inc. executes and delivers this
Exhibit on behalf of the Funds, and with respect to the
separate Classes of Shares thereof, first set forth in this
Exhibit.
Witness the due execution hereof this 1st day of March,
1993.
ATTEST: LIBERTY UTILITY FUND, INC.
/s/ John W. McGonigle By: /s/ Richard B. Fisher
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By: /s/ John A. Staley, IV
Secretary President
(SEAL)
Exhibit B
to the
Distributor's Contract
Liberty Utility Fund, Inc.
Class C Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated the 1st day of
March, 1993, between Liberty Utility Fund, Inc. and
Federated Securities Corp. with respect to Classes of the
Funds set forth above.
1. The Corporation hereby appoints FSC to engage in
activities principally intended to result in the sale of
shares of the above-listed Classes ("Shares"). Pursuant to
this appointment, FSC is authorized to select a group of
brokers ("Brokers") to sell Shares at the current offering
price thereof as described and set forth in the respective
prospectuses of the Corporation, and to render
administrative support services to the Corporation and its
shareholders. In addition, FSC is authorized to select a
group of administrators ("Administrators") to render
administrative support services to the Corporation and its
shareholders.
2. Administrative support services may include, but
are not limited to, the following functions: 1) account
openings: the Broker or Administrator communicates account
openings via computer terminals located on the Broker's or
Administrator's premises; 2) account closings: the Broker
or Administrator communicates account closings via computer
terminals; 3) enter purchase transactions: purchase
transactions are entered through the Broker's or
Administrator's own personal computer or through the use of
a toll-free telephone number; 4) enter redemption
transactions: Broker or Administrator enters redemption
transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges
to provide accounting support for all transactions. Broker
or Administrator also wires funds and receives funds for
Corporation share purchases and redemptions, confirms and
reconciles all transactions, reviews the activity in the
Corporation's accounts, and provides training and
supervision of its personnel; 6) interest posting: Broker
or Administrator posts and reinvests dividends to the
Corporation's accounts; 7) prospectus and shareholder
reports: Broker or Administrator maintains and distributes
current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously
advertises the availability of its services and products; 9)
customer lists: the Broker or Administrator continuously
provides names of potential customers; 10) design services:
the Broker or Administrator continuously designs material to
send to customers and develops methods of making such
materials accessible to customers; and 11) consultation
services: the Broker or Administrator continuously provides
information about the product needs of customers.
3. During the term of this Agreement, the Corporation
will pay FSC for services pursuant to this Agreement, a
monthly fee computed at the annual rate of .75 of 1.00% of
the average aggregate net asset value of the Class C Shares
held during the month. For the month in which this
Agreement becomes effective or terminates, there shall be an
appropriate proration of any fee payable on the basis of the
number of days that the Agreement is in effect during the
month.
4. FSC may from time-to-time and for such periods as
it deems appropriate reduce its compensation to the extent
any Classes' expenses exceed such lower expense limitation
as FSC may, by notice to the Corporation, voluntarily
declare to be effective.
5. FSC will enter into separate written agreements
with various firms to provide certain of the services set
forth in Paragraph 1 herein. FSC, in its sole discretion,
may pay Brokers and Administrators a periodic fee in respect
of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon
which such fees will be paid shall be determined from time
to time by FSC in its sole discretion.
6. FSC will prepare reports to the Board of Directors
of the Corporation on a quarterly basis showing amounts
expended hereunder including amounts paid to Brokers and
Administrators and the purpose for such payments.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated March 1, 1993, between
Liberty Utility Fund, Inc. and Federated Securities Corp.,
Liberty Utility Fund, Inc. executes and delivers this
Exhibit on behalf of the Funds, and with respect to the
separate Classes of Shares thereof, first set forth in this
Exhibit.
Witness the due execution hereof this 4th day of May,
1993.
ATTEST: LIBERTY UTILITY FUND, INC.
/s/ John W. McGonigle By: /s/ Richard B. Fisher
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By: /s/ John A. Staley, IV
Secretary President
(SEAL)
Exhibit 6(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit C
to the
Distributor's Contract
Liberty Utility Fund, Inc.
Class B Shares
The following provisions are hereby incorporated and
made part of the Distributor's Contract dated the 1st day of
March, 1993, between Liberty Utility Fund, Inc. and
Federated Securities Corp. with respect to Classes of the
Funds set forth above.
1. The Corporation hereby appoints FSC to engage in
activities principally intended to result in the sale of
shares of the above-listed Classes ("Shares"). Pursuant to
this appointment, FSC is authorized to select a group of
brokers ("Brokers") to sell Shares at the current offering
price thereof as described and set forth in the respective
prospectuses of the Corporation, and to render
administrative support services to the Corporation and its
shareholders. In addition, FSC is authorized to select a
group of administrators ("Administrators") to render
administrative support services to the Corporation and its
shareholders.
2. Administrative support services may include, but
are not limited to, the following functions: 1) account
openings: the Broker or Administrator communicates account
openings via computer terminals located on the Broker's or
Administrator's premises; 2) account closings: the Broker
or Administrator communicates account closings via computer
terminals; 3) enter purchase transactions: purchase
transactions are entered through the Broker's or
Administrator's own personal computer or through the use of
a toll-free telephone number; 4) enter redemption
transactions: Broker or Administrator enters redemption
transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges
to provide accounting support for all transactions. Broker
or Administrator also wires funds and receives funds for
Corporation share purchases and redemptions, confirms and
reconciles all transactions, reviews the activity in the
Corporation's accounts, and provides training and
supervision of its personnel; 6) interest posting: Broker
or Administrator posts and reinvests dividends to the
Corporation's accounts; 7) prospectus and shareholder
reports: Broker or Administrator maintains and distributes
current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously
advertises the availability of its services and products; 9)
customer lists: the Broker or Administrator continuously
provides names of potential customers; 10) design services:
the Broker or Administrator continuously designs material to
send to customers and develops methods of making such
materials accessible to customers; and 11) consultation
services: the Broker or Administrator continuously provides
information about the product needs of customers.
3. During the term of this Agreement, the Corporation
will pay FSC for services pursuant to this Agreement, a
monthly fee computed at the annual rate of .75 of 1.00% of
the average aggregate net asset value of the Class B Shares
held during the month. For the month in which this
Agreement becomes effective or terminates, there shall be an
appropriate proration of any fee payable on the basis of the
number of days that the Agreement is in effect during the
month.
4. FSC may from time-to-time and for such periods as
it deems appropriate reduce its compensation to the extent
any Classes' expenses exceed such lower expense limitation
as FSC may, by notice to the Corporation, voluntarily
declare to be effective.
5. FSC will enter into separate written agreements
with various firms to provide certain of the services set
forth in Paragraph 1 herein. FSC, in its sole discretion,
may pay Brokers and Administrators a periodic fee in respect
of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon
which such fees will be paid shall be determined from time
to time by FSC in its sole discretion.
6. FSC will prepare reports to the Board of Directors
of the Corporation on a quarterly basis showing amounts
expended hereunder including amounts paid to Brokers and
Administrators and the purpose for such payments.
In consideration of the mutual covenants set forth in
the Distributor's Contract dated March 1, 1993, between
Liberty Utility Fund, Inc. and Federated Securities Corp.,
Liberty Utility Fund, Inc. executes and delivers this
Exhibit on behalf of the Funds, and with respect to the
separate Classes of Shares thereof, first set forth in this
Exhibit.
Witness the due execution hereof this ___ day of
__________, 1994.
ATTEST: LIBERTY UTILITY FUND, INC.
By:
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
By:
Secretary President
(SEAL)
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODIAN CONTRACT
Between
FEDERATED INVESTMENT COMPANIES
and
STATE STREET BANK AND TRUST COMPANY
and
FEDERATED SERVICES COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It1
2. Duties of the Custodian With Respect to Property
of the Funds Held by the Custodian 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 5
2.4 Bank Accounts 6
2.5 Payments for Shares 7
2.6 Availability of Federal Funds 7
2.7 Collection of Income 7
2.8 Payment of Fund Moneys 8
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased. 9
2.10 Payments for Repurchases or Redemptions
of Shares of a Fund 9
2.11 Appointment of Agents 10
2.12 Deposit of Fund Assets in Securities
System 10
2.13 Segregated Account 12
2.14 Joint Repurchase Agreements 13
2.15 Ownership Certificates for Tax Purposes 13
2.16 Proxies 13
2.17Communications Relating to Fund Portfolio
Securities 13
2.18 Proper Instructions 14
2.19 Actions Permitted Without Express
Authority 14
2.20 Evidence of Authority 15
2.21Notice to Trust by Custodian Regarding
Cash Movement. 15
3. Duties of Custodian With Respect to the Books of
Account and
Calculation of Net Asset Value and Net Income 15
4. Records 16
5. Opinion of Funds' Independent Public
Accountants/Auditors 16
6. Reports to Trust by Independent Public
Accountants/Auditors 17
7. Compensation of Custodian 17
8. Responsibility of Custodian 17
9. Effective Period, Termination and Amendment 19
10. Successor Custodian 20
11. Interpretive and Additional Provisions 21
12. Massachusetts Law to Apply 22
13. Notices 22
14. Counterparts 22
15. Limitations of Liability 22
CUSTODIAN CONTRACT
This Contract between those INVESTMENT COMPANIES listed on
Exhibit 1, as it may be amended from time to time, (the
"Trust"), which may be Massachusetts business trusts or
Maryland corporations or have such other form of
organization as may be indicated, on behalf of the
portfolios (hereinafter collectively called the "Funds" and
individually referred to as a "Fund") of the Trust, having
its principal place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania, 15222-3779, and STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust
company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian", and FEDERATED SERVICES COMPANY, a
Delaware Business trust company, having its principal place
of business at Federated Investors Tower, Pittsburgh,
Pennsylvania, 15222-3779, hereinafter called ("Company").
WITNESSETH: That in consideration of the mutual covenants a
nd agreements hereinafter contained, the parties hereto
agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian
of the assets of each of the Funds of the Trust. Except
as otherwise expressly provided herein, the securities
and other assets of each of the Funds shall be segregated
from the assets of each of the other Funds and from all
other persons and entities. The Trust will deliver to
the Custodian all securities and cash owned by the Funds
and all payments of income, payments of principal or
capital distributions received by them with respect to
all securities owned by the Funds from time to time, and
the cash consideration received by them for shares
("Shares") of beneficial interest/capital stock of the
Funds as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of
the Funds held or received by the Funds and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning
of Section 2.18), the Custodian shall from time to time
employ one or more sub-custodians upon the terms
specified in the Proper Instructions, provided that the
Custodian shall have no more or less responsibility or
liability to the Trust or any of the Funds on account of
any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian.
2.Duties of the Custodian With Respect to Property of the Fu
nds Held by the Custodian
2.1Holding Securities. The Custodian shall hold and phys
ically segregate for the account of each Fund all non-
cash property, including all securities owned by each
Fund, other than securities which are maintained
pursuant to Section 2.12 in a clearing agency which
acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the
Treasury, collectively referred to herein as
"Securities System", or securities which are subject
to a joint repurchase agreement with affiliated funds
pursuant to Section 2.14. The Custodian shall
maintain records of all receipts, deliveries and
locations of such securities, together with a current
inventory thereof, and shall conduct periodic
physical inspections of certificates representing
stocks, bonds and other securities held by it under
this Contract in such manner as the Custodian shall
determine from time to time to be advisable in order
to verify the accuracy of such inventory. With
respect to securities held by any agent appointed
pursuant to Section 2.11 hereof, and with respect to
securities held by any sub-custodian appointed
pursuant to Section 1 hereof, the Custodian may rely
upon certificates from such agent as to the holdings
of such agent and from such sub-custodian as to the
holdings of such sub-custodian, it being understood
that such reliance in no way relieves the Custodian
of its responsibilities under this Contract. The
Custodian will promptly report to the Trust the
results of such inspections, indicating any shortages
or discrepancies uncovered thereby, and take
appropriate action to remedy any such shortages or
discrepancies.
2.2Delivery of Securities. The Custodian shall release a
nd deliver securities owned by a Fund held by the
Custodian or in a Securities System account of the
Custodian only upon receipt of Proper Instructions,
which may be continuing instructions when deemed
appropriate by the parties, and only in the following
cases:
(1)Upon sale of such securities for the account of a
Fund and receipt of payment therefor;
(2)Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Trust;
(3)In the case of a sale effected through a Securitie
s System, in accordance with the provisions of
Section 2.12 hereof;
(4)To the depository agent in connection with tender
or other similar offers for portfolio securities
of a Fund, in accordance with the provisions of
Section 2.17 hereof;
(5)To the issuer thereof or its agent when such secur
ities are called, redeemed, retired or otherwise
become payable; provided that, in any such case,
the cash or other consideration is to be
delivered to the Custodian;
(6)To the issuer thereof, or its agent, for transfer
into the name of a Fund or into the name of any
nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed
pursuant to Section 2.11 or into the name or
nominee name of any sub-custodian appointed
pursuant to Section 1; or for exchange for a
different number of bonds, certificates or other
evidence representing the same aggregate face
amount or number of units; provided that, in any
such case, the new securities are to be delivered
to the Custodian;
(7)Upon the sale of such securities for the account o
f a Fund, to the broker or its clearing agent,
against a receipt, for examination in accordance
with "street delivery custom"; provided that in
any such case, the Custodian shall have no
responsibility or liability for any loss arising
from the delivery of such securities prior to
receiving payment for such securities except as
may arise from the Custodian's own failure to act
in accordance with the standard of reasonable
care or any higher standard of care imposed upon
the Custodian by any applicable law or regulation
if such above-stated standard of reasonable care
were not part of this Contract;
(8)For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities
of the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new
securities and cash, if any, are to be delivered
to the Custodian;
(9)In the case of warrants, rights or similar securit
ies, the surrender thereof in the exercise of
such warrants, rights or similar securities or
the surrender of interim receipts or temporary
securities for definitive securities; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the
Custodian;
(10)For delivery in connection with any loans of port
folio securities of a Fund, but only against
receipt of adequate collateral in the form of (a)
cash, in an amount specified by the Trust, (b)
certificated securities of a description
specified by the Trust, registered in the name of
the Fund or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in
proper form for transfer, or (c) securities of a
description specified by the Trust, transferred
through a Securities System in accordance with
Section 2.12 hereof;
(11)For delivery as security in connection with any b
orrowings requiring a pledge of assets by a Fund,
but only against receipt of amounts borrowed,
except that in cases where additional collateral
is required to secure a borrowing already made,
further securities may be released for the
purpose;
(12)For delivery in accordance with the provisions of
any agreement among the Trust or a Fund, the
Custodian and a broker-dealer registered under
the Securities Exchange Act of 1934, as amended,
(the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The
Options Clearing Corporation and of any
registered national securities exchange, or of
any similar organization or organizations,
regarding escrow or other arrangements in
connection with transactions for a Fund;
(13)For delivery in accordance with the provisions of
any agreement among the Trust or a Fund, the
Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act,
relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or
organizations, regarding account deposits in
connection with transaction for a Fund;
(14)Upon receipt of instructions from the transfer ag
ent ("Transfer Agent") for a Fund, for delivery
to such Transfer Agent or to the holders of
shares in connection with distributions in kind,
in satisfaction of requests by holders of Shares
for repurchase or redemption; and
(15)For any other proper corporate purpose, but only
upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of
the Executive Committee of the Trust on behalf of
a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant
Secretary, specifying the securities to be
delivered, setting forth the purpose for which
such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of
such securities shall be made.
2.3 Registration of Securities. Securities held by the C
ustodian (other than bearer securities) shall be
registered in the name of a particular Fund or in the
name of any nominee of the Fund or of any nominee of
the Custodian which nominee shall be assigned
exclusively to the Fund, unless the Trust has
authorized in writing the appointment of a nominee to
be used in common with other registered investment
companies affiliated with the Fund, or in the name or
nominee name of any agent appointed pursuant to
Section 2.11 or in the name or nominee name of any
sub-custodian appointed pursuant to Section 1. All
securities accepted by the Custodian on behalf of a
Fund under the terms of this Contract shall be in
"street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain
a separate bank account or accounts in the name of
each Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received
by it from or for the account of each Fund, other
than cash maintained in a joint repurchase account
with other affiliated funds pursuant to Section 2.14
of this Contract or by a particular Fund in a bank
account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940,
as amended, (the "1940 Act"). Funds held by the
Custodian for a Fund may be deposited by it to its
credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies
as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or
trust company shall be qualified to act as a
custodian under the 1940 Act and that each such bank
or trust company and the funds to be deposited with
each such bank or trust company shall be approved by
vote of a majority of the Board of Trustees/Directors
("Board") of the Trust. Such funds shall be
deposited by the Custodian in its capacity as
Custodian for the Fund and shall be withdrawable by
the Custodian only in that capacity. If requested by
the Trust, the Custodian shall furnish the Trust, not
later than twenty (20) days after the last business
day of each month, an internal reconciliation of the
closing balance as of that day in all accounts
described in this section to the balance shown on the
daily cash report for that day rendered to the Trust.
2.5Payments for Shares. The Custodian shall make such ar
rangements with the Transfer Agent of each Fund, as
will enable the Custodian to receive the cash
consideration due to each Fund and will deposit into
each Fund's account such payments as are received
from the Transfer Agent. The Custodian will provide
timely notification to the Trust and the Transfer
Agent of any receipt by it of payments for Shares of
the respective Fund.
2.6Availability of Federal Funds. Upon mutual agreement
between the Trust and the Custodian, the Custodian
shall make federal funds available to the Funds as of
specified times agreed upon from time to time by the
Trust and the Custodian in the amount of checks,
clearing house funds, and other non-federal funds
received in payment for Shares of the Funds which are
deposited into the Funds' accounts.
2.7 Collection of Income.
(1)The Custodian shall collect on a timely basis all
income and other payments with respect to
registered securities held hereunder to which
each Fund shall be entitled either by law or
pursuant to custom in the securities business,
and shall collect on a timely basis all income
and other payments with respect to bearer
securities if, on the date of payment by the
issuer, such securities are held by the Custodian
or its agent thereof and shall credit such
income, as collected, to each Fund's custodian
account. Without limiting the generality of the
foregoing, the Custodian shall detach and present
for payment all coupons and other income items
requiring presentation as and when they become
due and shall collect interest when due on
securities held hereunder. The collection of
income due the Funds on securities loaned
pursuant to the provisions of Section 2.2 (10)
shall be the responsibility of the Trust. The
Custodian will have no duty or responsibility in
connection therewith, other than to provide the
Trust with such information or data as may be
necessary to assist the Trust in arranging for
the timely delivery to the Custodian of the
income to which each Fund is properly entitled.
(2)The Custodian shall promptly notify the Trust when
ever income due on securities is not collected in
due course and will provide the Trust with
monthly reports of the status of past due income
unless the parties otherwise agree.
2.8Payment of Fund Moneys. Upon receipt of Proper Instru
ctions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian
shall pay out moneys of each Fund in the following
cases only:
(1)Upon the purchase of securities, futures contracts
or options on futures contracts for the account
of a Fund but only (a) against the delivery of
such securities, or evidence of title to futures
contracts, to the Custodian (or any bank, banking
firm or trust company doing business in the
United States or abroad which is qualified under
the 1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this
purpose) registered in the name of the Fund or in
the name of a nominee of the Custodian referred
to in Section 2.3 hereof or in proper form for
transfer, (b) in the case of a purchase effected
through a Securities System, in accordance with
the conditions set forth in Section 2.12 hereof
or (c) in the case of repurchase agreements
entered into between the Trust and any other
party, (i) against delivery of the securities
either in certificate form or through an entry
crediting the Custodian's account at the Federal
Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase for
the account of the Fund of securities owned by
the Custodian along with written evidence of the
agreement by the Custodian to repurchase such
securities from the Fund;
(2)In connection with conversion, exchange or surrend
er of securities owned by a Fund as set forth in
Section 2.2 hereof;
(3)For the redemption or repurchase of Shares of a Fu
nd issued by the Trust as set forth in Section
2.10 hereof;
(4)For the payment of any expense or liability incurr
ed by a Fund, including but not limited to the
following payments for the account of the Fund:
interest; taxes; management, accounting, transfer
agent and legal fees; and operating expenses of
the Fund, whether or not such expenses are to be
in whole or part capitalized or treated as
deferred expenses;
(5)For the payment of any dividends on Shares of a Fu
nd declared pursuant to the governing documents
of the Trust;
(6)For payment of the amount of dividends received in
respect of securities sold short;
(7)For any other proper purpose, but only upon receip
t of, in addition to Proper Instructions, a
certified copy of a resolution of the Executive
Committee of the Trust on behalf of a Fund
signed by an officer of the Trust and certified
by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting
forth the purpose for which such payment is to be
made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom
such payment is to be made.
2.9Liability for Payment in Advance of Receipt of Securit
ies Purchased. In any and every case where payment
for purchase of securities for the account of a Fund
is made by the Custodian in advance of receipt of the
securities purchased, in the absence of specific
written instructions from the Trust to so pay in
advance, the Custodian shall be absolutely liable to
the Fund for such securities to the same extent as if
the securities had been received by the Custodian.
2.10Payments for Repurchases or Redemptions of Shares of
a Fund. From such funds as may be available for the
purpose of repurchasing or redeeming Shares of a
Fund, but subject to the limitations of the
Declaration of Trust/Articles of Incorporation and
any applicable votes of the Board of the Trust
pursuant thereto, the Custodian shall, upon receipt
of instructions from the Transfer Agent, make funds
available for payment to holders of shares of such
Fund who have delivered to the Transfer Agent a
request for redemption or repurchase of their shares
including without limitation through bank drafts,
automated clearinghouse facilities, or by other
means. In connection with the redemption or
repurchase of Shares of the Funds, the Custodian is
authorized upon receipt of instructions from the
Transfer Agent to wire funds to or through a
commercial bank designated by the redeeming
shareholders.
2.11Appointment of Agents. The Custodian may at any time
or times in its discretion appoint (and may at any
time remove) any other bank or trust company which is
itself qualified under the 1940 Act and any
applicable state law or regulation, to act as a
custodian, as its agent to carry out such of the
provisions of this Section 2 as the Custodian may
from time to time direct; provided, however, that the
appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities
hereunder.
2.12Deposit of Fund Assets in Securities System. The Cus
todian may deposit and/or maintain securities owned
by the Funds in a clearing agency registered with the
Securities and Exchange Commission ("SEC") under
Section 17A of the Exchange Act, which acts as a
securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to
herein as "Securities System" in accordance with
applicable Federal Reserve Board and SEC rules and
regulations, if any, and subject to the following
provisions:
(1)The Custodian may keep securities of each Fund in a Securities System
provided that such securities are represented in an account
("Account")
of the Custodian in the Securities System which shall not include any
assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
(2)The records of the Custodian with respect to securities of the Funds
which are maintained in a Securities System shall identify by book-
entry those securities belonging to each Fund;
(3)The Custodian shall pay for securities purchased for the account
of each
Fund upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the
making of
an entry on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall transfer
securities sold for the account of a Fund upon (i) receipt of advice
from the Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the Securities
System
of transfers of securities for the account of a Fund shall
identify the
Fund, be maintained for the Fund by the Custodian and be provided to
the Trust at its request. Upon request, the Custodian shall furnish
the Trust confirmation of each transfer to or from the account of a
Fund in the form of a written advice or notice and shall furnish
to the
Trust copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of a Fund.
(4)The Custodian shall provide the Trust with any report obtained by the
Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited
in the Securities System;
(5)The Custodian shall have received the initial certificate, required by
Section 9 hereof;
(6)Anything to the contrary in this Contract notwithstanding, the
Custodian
shall be liable to the Trust for any loss or damage to a Fund
resulting
from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or of
any of its or their employees or from failure of the Custodian or any
such agent to enforce effectively such rights as it may have against
the Securities System; at the election of the Trust, it shall be
entitled to be subrogated to the rights of the Custodian with respect
to any claim against the Securities System or any other person which
the Custodian may have as a consequence of any such loss or damage if
and to the extent that a Fund has not been made whole for any such
loss or damage.
(7)The authorization contained in this Section 2.12 shall not relieve the
Custodian from using reasonable care and diligence in making use
of any Securities System.
2.13Segregated Account. The Custodian shall upon receipt
of Proper Instructions establish and maintain a
segregated account or accounts for and on behalf of
each Fund, into which account or accounts may be
transferred cash and/or securities, including
securities maintained in an account by the Custodian
pursuant to Section 2.12 hereof, (i) in accordance
with the provisions of any agreement among the Trust,
the Custodian and a broker-dealer registered under
the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with
the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the
Commodity Futures Trading Commission or any
registered contract market), or of any similar
organization or organizations, regarding escrow or
other arrangements in connection with transactions
for a Fund, (ii) for purpose of segregating cash or
government securities in connection with options
purchased, sold or written for a Fund or commodity
futures contracts or options thereon purchased or
sold for a Fund, (iii) for the purpose of compliance
by the Trust or a Fund with the procedures required
by any release or releases of the SEC relating to the
maintenance of segregated accounts by registered
investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause
(iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the
Board or of the Executive Committee signed by an
officer of the Trust and certified by the Secretary
or an Assistant Secretary, setting forth the purpose
or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.14Joint Repurchase Agreements. Upon the receipt of Pro
per Instructions, the Custodian shall deposit and/or
maintain any assets of a Fund and any affiliated
funds which are subject to joint repurchase
transactions in an account established solely for
such transactions for the Fund and its affiliated
funds. For purposes of this Section 2.14,
"affiliated funds" shall include all investment
companies and their portfolios for which subsidiaries
or affiliates of Federated Investors serve as
investment advisers, distributors or administrators
in accordance with applicable exemptive orders from
the SEC. The requirements of segregation set forth
in Section 2.1 shall be deemed to be waived with
respect to such assets.
2.15Ownership Certificates for Tax Purposes. The Custodi
an shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments
with respect to securities of a Fund held by it and
in connection with transfers of securities.
2.16Proxies. The Custodian shall, with respect to the se
curities held hereunder, cause to be promptly
executed by the registered holder of such securities,
if the securities are registered otherwise than in
the name of a Fund or a nominee of a Fund, all
proxies, without indication of the manner in which
such proxies are to be voted, and shall promptly
deliver to the Trust such proxies, all proxy
soliciting materials and all notices relating to such
securities.
2.17Communications Relating to Fund Portfolio Securities.
The Custodian shall transmit promptly to the Trust
all written information (including, without
limitation, pendency of calls and maturities of
securities and expirations of rights in connection
therewith and notices of exercise of call and put
options written by the Fund and the maturity of
futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the
securities being held for the Fund. With respect to
tender or exchange offers, the Custodian shall
transmit promptly to the Trust all written
information received by the Custodian from issuers of
the securities whose tender or exchange is sought and
from the party (or his agents) making the tender or
exchange offer. If the Trust desires to take action
with respect to any tender offer, exchange offer or
any other similar transaction, the Trust shall notify
the Custodian in writing at least three business days
prior to the date on which the Custodian is to take
such action. However, the Custodian shall
nevertheless exercise its best efforts to take such
action in the event that notification is received
three business days or less prior to the date on
which action is required.
2.18Proper Instructions. Proper Instructions as used thr
oughout this Section 2 means a writing signed or
initialed by one or more person or persons as the
Board shall have from time to time authorized. Each
such writing shall set forth the specific transaction
or type of transaction involved. Oral instructions
will be deemed to be Proper Instructions if (a) the
Custodian reasonably believes them to have been given
by a person previously authorized in Proper
Instructions to give such instructions with respect
to the transaction involved, and (b) the Trust
promptly causes such oral instructions to be
confirmed in writing. Upon receipt of a certificate
of the Secretary or an Assistant Secretary as to the
authorization by the Board of the Trust accompanied
by a detailed description of procedures approved by
the Board, Proper Instructions may include
communications effected directly between electro-
mechanical or electronic devices provided that the
Board and the Custodian are satisfied that such
procedures afford adequate safeguards for a Fund's
assets.
2.19Actions Permitted Without Express Authority. The Cus
todian may in its discretion, without express
authority from the Trust:
(1)make payments to itself or others for minor expens
es of handling securities or other similar items
relating to its duties under this Contract,
provided that all such payments shall be
accounted for to the Trust in such form that it
may be allocated to the affected Fund;
(2)surrender securities in temporary form for securit
ies in definitive form;
(3)endorse for collection, in the name of a Fund, che
cks, drafts and other negotiable instruments; and
(4)in general, attend to all non-discretionary detail
s in connection with the sale, exchange,
substitution, purchase, transfer and other
dealings with the securities and property of each
Fund except as otherwise directed by the Trust.
2.20Evidence of Authority. The Custodian shall be protec
ted in acting upon any instructions, notice, request,
consent, certificate or other instrument or paper
reasonably believed by it to be genuine and to have
been properly executed on behalf of a Fund. The
Custodian may receive and accept a certified copy of
a vote of the Board of the Trust as conclusive
evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination
of or any action by the Board pursuant to the
Declaration of Trust/Articles of Incorporation as
described in such vote, and such vote may be
considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
2.21Notice to Trust by Custodian Regarding Cash Movement.
The Custodian will provide timely notification to the
Trust of any receipt of cash, income or payments to
the Trust and the release of cash or payment by the
Trust.
3.Duties of Custodian With Respect to the Books of Account a
nd Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary info
rmation to the entity or entities appointed by the Board
of the Trust to keep the books of account of each Fund
and/or compute the net asset value per share of the
outstanding Shares of each Fund or, if directed in
writing to do so by the Trust, shall itself keep such
books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also
calculate daily the net income of a Fund as described in
the Fund's currently effective prospectus and Statement
of Additional Information ("Prospectus") and shall advise
the Trust and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing
by an officer of the Trust to do so, shall advise the
Transfer Agent periodically of the division of such net
income among its various components. The calculations of
the net asset value per share and the daily income of a
Fund shall be made at the time or times described from
time to time in the Fund's currently effective
Prospectus.
4. Records.
The Custodian shall create and maintain all records
relating to its activities and obligations under this
Contract in such manner as will meet the obligations of
the Trust and the Funds under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-
1 and 31a-2 thereunder, and specifically including
identified cost records used for tax purposes. All such
records shall be the property of the Trust and shall at
all times during the regular business hours of the
Custodian be open for inspection by duly authorized
officers, employees or agents of the Trust and employees
and agents of the SEC. In the event of termination of
this Contract, the Custodian will deliver all such
records to the Trust, to a successor Custodian, or to
such other person as the Trust may direct. The Custodian
shall supply daily to the Trust a tabulation of
securities owned by a Fund and held by the Custodian and
shall, when requested to do so by the Trust and for such
compensation as shall be agreed upon between the Trust
and the Custodian, include certificate numbers in such
tabulations.
5. Opinion of Funds' Independent Public
Accountants/Auditors.
The Custodian shall take all reasonable action, as the
Trust may from time to time request, to obtain from year
to year favorable opinions from each Fund's independent
public accountants/auditors with respect to its
activities hereunder in connection with the preparation
of the Fund's registration statement, periodic reports,
or any other reports to the SEC and with respect to any
other requirements of such Commission.
6. Reports to Trust by Independent Public
Accountants/Auditors.
The Custodian shall provide the Trust, at such times as
the Trust may reasonably require, with reports by
independent public accountants/auditors for each Fund on
the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts
and options on futures contracts, including securities
deposited and/or maintained in a Securities System,
relating to the services provided by the Custodian for
the Fund under this Contract; such reports shall be of
sufficient scope and in sufficient detail, as may
reasonably be required by the Trust, to provide
reasonable assurance that any material inadequacies would
be disclosed by such examination and, if there are no
such inadequacies, the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian,
as agreed upon from time to time between Company and the
Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable
care in carrying out the provisions of this Contract;
provided, however, that the Custodian shall be held to
any higher standard of care which would be imposed upon
the Custodian by any applicable law or regulation if such
above stated standard of reasonable care was not part of
this Contract. The Custodian shall be entitled to rely
on and may act upon advice of counsel (who may be counsel
for the Trust) on all matters, and shall be without
liability for any action reasonably taken or omitted
pursuant to such advice, provided that such action is not
in violation of applicable federal or state laws or
regulations, and is in good faith and without negligence.
Subject to the limitations set forth in Section 15
hereof, the Custodian shall be kept indemnified by the
Trust but only from the assets of the Fund involved in
the issue at hand and be without liability for any action
taken or thing done by it in carrying out the terms and
provisions of this Contract in accordance with the above
standards.
In order that the indemnification provisions contained in
this Section 8 shall apply, however, it is understood
that if in any case the Trust may be asked to indemnify
or save the Custodian harmless, the Trust shall be fully
and promptly advised of all pertinent facts concerning
the situation in question, and it is further understood
that the Custodian will use all reasonable care to
identify and notify the Trust promptly concerning any
situation which presents or appears likely to present the
probability of such a claim for indemnification. The
Trust shall have the option to defend the Custodian
against any claim which may be the subject of this
indemnification, and in the event that the Trust so
elects it will so notify the Custodian and thereupon the
Trust shall take over complete defense of the claim, and
the Custodian shall in such situation initiate no further
legal or other expenses for which it shall seek
indemnification under this Section. The Custodian shall
in no case confess any claim or make any compromise in
any case in which the Trust will be asked to indemnify
the Custodian except with the Trust's prior written
consent.
Notwithstanding the foregoing, the responsibility of the
Custodian with respect to redemptions effected by check
shall be in accordance with a separate Agreement entered
into between the Custodian and the Trust.
If the Trust requires the Custodian to take any action
with respect to securities, which action involves the
payment of money or which action may, in the reasonable
opinion of the Custodian, result in the Custodian or its
nominee assigned to a Fund being liable for the payment
of money or incurring liability of some other form, the
Custodian may request the Trust, as a prerequisite to
requiring the Custodian to take such action, to provide
indemnity to the Custodian in an amount and form
satisfactory to the Custodian.
Subject to the limitations set forth in Section 15
hereof, the Trust agrees to indemnify and hold harmless
the Custodian and its nominee from and against all taxes,
charges, expenses, assessments, claims and liabilities
(including counsel fees) (referred to herein as
authorized charges) incurred or assessed against it or
its nominee in connection with the performance of this
Contract, except such as may arise from it or its
nominee's own failure to act in accordance with the
standard of reasonable care or any higher standard of
care which would be imposed upon the Custodian by any
applicable law or regulation if such above-stated
standard of reasonable care were not part of this
Contract. To secure any authorized charges and any
advances of cash or securities made by the Custodian to
or for the benefit of a Fund for any purpose which
results in the Fund incurring an overdraft at the end of
any business day or for extraordinary or emergency
purposes during any business day, the Trust hereby grants
to the Custodian a security interest in and pledges to
the Custodian securities held for the Fund by the
Custodian, in an amount not to exceed 10 percent of the
Fund's gross assets, the specific securities to be
designated in writing from time to time by the Trust or
the Fund's investment adviser. Should the Trust fail to
make such designation, or should it instruct the
Custodian to make advances exceeding the percentage
amount set forth above and should the Custodian do so,
the Trust hereby agrees that the Custodian shall have a
security interest in all securities or other property
purchased for a Fund with the advances by the Custodian,
which securities or property shall be deemed to be
pledged to the Custodian, and the written instructions of
the Trust instructing their purchase shall be considered
the requisite description and designation of the property
so pledged for purposes of the requirements of the
Uniform Commercial Code. Should the Trust fail to cause
a Fund to repay promptly any authorized charges or
advances of cash or securities, subject to the provision
of the second paragraph of this Section 8 regarding
indemnification, the Custodian shall be entitled to use
available cash and to dispose of pledged securities and
property as is necessary to repay any such advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution,
shall continue in full force and effect until terminated
as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than sixty
(60) days after the date of such delivery or mailing;
provided, however that the Custodian shall not act under
Section 2.12 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant
Secretary that the Board of the Trust has approved the
initial use of a particular Securities System as required
in each case by Rule 17f-4 under the 1940 Act; provided
further, however, that the Trust shall not amend or
terminate this Contract in contravention of any
applicable federal or state regulations, or any provision
of the Declaration of Trust/Articles of Incorporation,
and further provided, that the Trust may at any time by
action of its Board (i) substitute another bank or trust
company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the
appropriate banking regulatory agency or upon the
happening of a like event at the direction of an
appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Trust shall pay to
the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the
Custodian for its costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board
of the Trust, the Custodian shall, upon termination,
deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer,
all securities then held by it hereunder for each Fund
and shall transfer to separate accounts of the successor
custodian all of each Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a
certified copy of a vote of the Board of the Trust,
deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with
such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the
Board shall have been delivered to the Custodian on or
before the date when such termination shall become
effective, then the Custodian shall have the right to
deliver to a bank or trust company, which is a "bank" as
defined in the 1940 Act, (delete "doing business ...
Massachusetts" unless SSBT is the Custodian) doing
business in Boston, Massachusetts, of its own selection,
having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not
less than $100,000,000, all securities, funds and other
properties held by the Custodian and all instruments held
by the Custodian relative thereto and all other property
held by it under this Contract for each Fund and to
transfer to separate accounts of such successor
custodian all of each Fund's securities held in any
Securities System. Thereafter, such bank or trust
company shall be the successor of the Custodian under
this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date
of termination hereof owing to failure of the Trust to
procure the certified copy of the vote referred to or of
the Board to appoint a successor custodian, the Custodian
shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of
such securities, funds and other properties and the
provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force
and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the
Custodian and the Trust may from time to time agree on
such provisions interpretive of or in addition to the
provisions of this Contract as may in their joint opinion
be consistent with the general tenor of this Contract.
Any such interpretive or additional provisions shall be
in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional
provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of
Trust/Articles of Incorporation. No interpretive or
additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this
Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of
The Commonwealth of Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices
and other writings delivered or mailed postage prepaid to
the Trust at Federated Investors Tower, Pittsburgh,
Pennsylvania, 15222-3779, or to the Custodian at address
for SSBT only: 225 Franklin Street, Boston,
Massachusetts, 02110, or to such other address as the
Trust or the Custodian may hereafter specify, shall be
deemed to have been properly delivered or given hereunder
to the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or
more counterparts, each of which shall be deemed an
original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the
limitation of liability as set forth in Article XI of the
Declaration of Trust of those Trusts which are business
trusts and agrees that the obligations and liabilities
assumed by the Trust and any Fund pursuant to this
Contract, including, without limitation, any obligation
or liability to indemnify the Custodian pursuant to
Section 8 hereof, shall be limited in any case to the
relevant Fund and its assets and that the Custodian shall
not seek satisfaction of any such obligation from the
shareholders of the relevant Fund, from any other Fund or
its shareholders or from the Trustees, Officers,
employees or agents of the Trust, or any of them. In
addition, in connection with the discharge and
satisfaction of any claim made by the Custodian against
the Trust, for whatever reasons, involving more than one
Fund, the Trust shall have the exclusive right to
determine the appropriate allocations of liability for
any such claim between or among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder
affixed effective as of the 1st day of December, 1993.
ATTEST: INVESTMENT COMPANIES (Except those
listed below)
/s/John W. McGonigle_________ By /s/John F. Donahue_____________
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/ Ed McKenzie______________ By /s/ F. J. Sidoti,
Jr._________________
(Assistant) Secretary Typed Name: Frank J. Sidoti, Jr.
Typed Name: Ed McKenzie Title: Vice President
ATTEST: FEDERATED SERVICES COMPANIY
/s/ Jeannette Fisher-Garber______ By /s/ James J.
Dolan________________
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
Liberty Utility Fund, Inc.
Exhibit 9(i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AGREEMENT
for
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
and
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of the 1st day of December, 1993, by and between
those investment companies listed on Exhibit 1 as may be amended from
time to time, having their principal office and place of business at
Federated Investors Tower, Pittsburgh, PA 15222-3779 (the "Trust"), on
behalf of the portfolios (individually referred to herein as a "Fund" and
collectively as "Funds") of the Trust, and FEDERATED SERVICES COMPANY, a
Delaware business trust, having its principal office and place of
business at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-
3779 (the "Company").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended
(the "1940 Act"), with authorized and issued shares of capital stock or
beneficial interest ("Shares"); and
WHEREAS, the Trust wishes to retain the Company to provide certain
pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes"), and the
Company is willing to furnish such services; and
WHEREAS, the Trust desires to appoint the Company as its transfer
agent, dividend disbursing agent, and agent in connection with certain
other activities, and the Company desires to accept such appointment; and
WHEREAS, the Trust desires to appoint the Company as its agent to
select, negotiate and subcontract for custodian services from an approved
list of qualified banks and the Company desires to accept such
appointment; and
WHEREAS, from time to time the Trust may desire and may instruct the
Company to subcontract for the performance of certain of its duties and
responsibilities hereunder to State Street Bank and Trust Company or
another agent (the "Agent"); and
WHEREAS, the words Trust and Fund may be used interchangeably for
those investment companies consisting of only one portfolio;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Trust hereby appoints the Company to provide certain pricing and
accounting services to the Funds, and/or the Classes, for the period and
on the terms set forth in this Agreement. The Company accepts such
appointment and agrees to furnish the services herein set forth in return
for the compensation as provided in Article 3 of this Section.
Article 2. The Company and Duties.
Subject to the supervision and control of the Trust's Board of
Trustees or Directors ("Board"), the Company will assist the Trust with
regard to fund accounting for the Trust, and/or the Funds, and/or the
Classes, and in connection therewith undertakes to perform the following
specific services;
A. Value the assets of the Funds and determine the net asset value per
share of each Fund and/or Class, at the time and in the manner from
time to time determined by the Board and as set forth in the
Prospectus and Statement of Additional Information ("Prospectus")
of each Fund;
B. Calculate the net income of each of the Funds, if any;
C. Calculate capital gains or losses of each of the Funds resulting
from sale or disposition of assets, if any;
D. Maintain the general ledger and other accounts, books and financial
records of the Trust, including for each Fund, and/or Class, as
required under Section 31(a) of the 1940 Act and the Rules
thereunder in connection with the services provided by the Company;
E. Preserve for the periods prescribed by Rule 31a-2 under the 1940
Act the records to be maintained by Rule 31a-1 under the 1940 Act
in connection with the services provided by the Company. The
Company further agrees that all such records it maintains for the
Trust are the property of the Trust and further agrees to surrender
promptly to the Trust such records upon the Trust's request;
F. At the request of the Trust, prepare various reports or other
financial documents required by federal, state and other applicable
laws and regulations; and
G. Such other similar services as may be reasonably requested by the
Trust.
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for its services rendered
pursuant to Section One of this Agreement in accordance with the
fees set forth on Fee Schedules A ("A1, A2, A3 etc..."), annexed
hereto and incorporated herein, as may be added or amended from
time to time. Such fees do not include out-of-pocket disbursements
of the Company for which the Funds shall reimburse the Company upon
receipt of a separate invoice. Out-of-pocket disbursements shall
include, but shall not be limited to, the items specified in
Schedules B ("B1, B2, B3, etc..."), annexed hereto and incorporated
herein, as may be added or amended from time to time. Schedules B
may be modified by the Company upon not less than thirty days'
prior written notice to the Trust.
B. The Fund and/or the Class, and not the Company, shall bear the cost
of: custodial expenses; membership dues in the Investment Company
Institute or any similar organization; transfer agency expenses;
investment advisory expenses; costs of printing and mailing stock
certificates, Prospectuses, reports and notices; administrative
expenses; interest on borrowed money; brokerage commissions; taxes
and fees payable to federal, state and other governmental agencies;
fees of Trustees or Directors of the Trust; independent auditors
expenses; Federated Administrative Services and/or Federated
Administrative Services, Inc. legal and audit department expenses
billed to Federated Services Company for work performed related to
the Trust, the Funds, or the Classes; law firm expenses; or other
expenses not specified in this Article 3 which may be properly
payable by the Funds and/or classes.
C. The Company will send an invoice to each of the Funds as soon as
practicable after the end of each month. Each invoice will provide
detailed information about the compensation and out-of-pocket
expenses in accordance with Schedules A and Schedules B. The Funds
and or the Classes will pay to the Company the amount of such
invoice within 30 days of receipt of the invoices.
D. Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedules A revised Schedules dated and signed
by a duly authorized officer of the Trust and/or the Funds and a
duly authorized officer of the Company.
E. The fee for the period from the effective date of this Agreement
with respect to a Fund or a Class to the end of the initial month
shall be prorated according to the proportion that such period
bears to the full month period. Upon any termination of this
Agreement before the end of any month, the fee for such period
shall be prorated according to the proportion which such period
bears to the full month period. For purposes of determining fees
payable to the Company, the value of the Fund's net assets shall be
computed at the time and in the manner specified in the Fund's
Prospectus.
F. The Company, in its sole discretion, may from time to time
subcontract to, employ or associate with itself such person or
persons as the Company may believe to be particularly suited to
assist it in performing services under this Section One. Such
person or persons may be third-party service providers, or they may
be officers and employees who are employed by both the Company and
the Funds. The compensation of such person or persons shall be
paid by the Company and no obligation shall be incurred on behalf
of the Trust, the Funds, or the Classes in such respect.
SECTION TWO: Shareholder Recordkeeping.
Article 4. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the
Trust hereby appoints the Company to act as, and the Company agrees to
act as, transfer agent and dividend disbursing agent for each Fund's
Shares, and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of any Fund
("Shareholder(s)"), including without limitation any periodic investment
plan or periodic withdrawal program.
As used throughout this Agreement, a "Proper Instruction" means a
writing signed or initialed by one or more person or persons as the Board
shall have from time to time authorized. Each such writing shall set
forth the specific transaction or type of transaction involved. Oral
instructions will be deemed to be Proper Instructions if (a) the Company
reasonably believes them to have been given by a person previously
authorized in Proper Instructions to give such instructions with respect
to the transaction involved, and (b) the Trust, or the Fund, and the
Company promptly cause such oral instructions to be confirmed in writing.
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Trust, or the
Fund, and the Company are satisfied that such procedures afford adequate
safeguards for the Fund's assets. Proper Instructions may only be
amended in writing.
Article 5. Duties of the Company.
The Company shall perform the following services in accordance with
Proper Instructions as may be provided from time to time by the Trust as
to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase
of shares and promptly deliver payment and appropriate
documentation therefore to the custodian of the relevant Fund,
(the "Custodian"). The Company shall notify the Fund and the
Custodian on a daily basis of the total amount of orders and
payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and
hold such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate
to the Shareholder at its address as set forth on the transfer
books of the Funds, and/or Classes, subject to any Proper
Instructions regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited to
its account upon receipt of the check or other order, promptly
mail a debit advice to the Shareholder, and notify the Fund
and/or Class of its action. In the event that the amount paid
for such Shares exceeds proceeds of the redemption of such
Shares plus the amount of any dividends paid with respect to
such Shares, the Fund and/the Class or its distributor will
reimburse the Company on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as
Dividend Disbursing Agent for the Funds in accordance with the
provisions of its governing document and the then-current
Prospectus of the Fund. The Company shall prepare and mail or
credit income, capital gain, or any other payments to
Shareholders. As the Dividend Disbursing Agent, the Company
shall, on or before the payment date of any such distribution,
notify the Custodian of the estimated amount required to pay
any portion of said distribution which is payable in cash and
request the Custodian to make available sufficient funds for
the cash amount to be paid out. The Company shall reconcile
the amounts so requested and the amounts actually received
with the Custodian on a daily basis. If a Shareholder is
entitled to receive additional Shares by virtue of any such
distribution or dividend, appropriate credits shall be made to
the Shareholder's account, for certificated Funds and/or
Classes, delivered where requested; and
(2) The Company shall maintain records of account for each Fund
and Class and advise the Trust, each Fund and Class and its
Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall
notify the Funds on a daily basis of the total amount of
redemption requests processed and monies paid to the Company
by the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds
from the Custodian with respect to any redemption, the Company
shall pay or cause to be paid the redemption proceeds in the
manner instructed by the redeeming Shareholders, pursuant to
procedures described in the then-current Prospectus of the
Fund.
(3) If any certificate returned for redemption or other request
for redemption does not comply with the procedures for
redemption approved by the Fund, the Company shall promptly
notify the Shareholder of such fact, together with the reason
therefor, and shall effect such redemption at the price
applicable to the date and time of receipt of documents
complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual
basis and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the
total number of Shares of the Fund and/or Class which are
authorized, based upon data provided to it by the Fund, and
issued and outstanding. The Company shall also provide the
Fund on a regular basis or upon reasonable request with the
total number of Shares which are authorized and issued and
outstanding, but shall have no obligation when recording the
issuance of Shares, except as otherwise set forth herein, to
monitor the issuance of such Shares or to take cognizance of
any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Trust or the Fund to include a record for each Shareholder's
account of the following:
(a) Name, address and tax identification number (and whether
such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application,
dividend address and correspondence relating to the
current maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to
perform the calculations contemplated or required by this
Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Company, and
such records may be inspected by the Fund at reasonable times.
The Company may, at its option at any time, and shall
forthwith upon the Fund's demand, turn over to the Fund and
cease to retain in the Company's files, records and documents
created and maintained by the Company pursuant to this
Agreement, which are no longer needed by the Company in
performance of its services or for its protection. If not so
turned over to the Fund, such records and documents will be
retained by the Company for six years from the year of
creation, during the first two of which such documents will be
in readily accessible form. At the end of the six year
period, such records and documents will either be turned over
to the Fund or destroyed in accordance with Proper
Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the
following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the
Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees,
or other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with
the Internal Revenue Service and appropriate state agencies,
and, if required, mail to Shareholders, such notices for
reporting dividends and distributions paid as are required to
be so filed and mailed and shall withhold such sums as are
required to be withheld under applicable federal and state
income tax laws, rules and regulations.
(3) In addition to and not in lieu of the services set forth
above, the Company shall:
(a) Perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant, agent
in connection with accumulation, open-account or similar
plans (including without limitation any periodic
investment plan or periodic withdrawal program),
including but not limited to: maintaining all
Shareholder accounts, mailing Shareholder reports and
Prospectuses to current Shareholders, withholding taxes
on accounts subject to back-up or other withholding
(including non-resident alien accounts), preparing and
filing reports on U.S. Treasury Department Form 1099 and
other appropriate forms required with respect to
dividends and distributions by federal authorities for
all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all
purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and
providing Shareholder account information; and
(b) provide a system which will enable the Fund to monitor
the total number of Shares of each Fund and/or Class sold
in each state ("blue sky reporting"). The Fund shall by
Proper Instructions (i) identify to the Company those
transactions and assets to be treated as exempt from the
blue sky reporting for each state and (ii) verify the
classification of transactions for each state on the
system prior to activation and thereafter monitor the
daily activity for each state. The responsibility of the
Company for each Fund's and/or Class's state blue sky
registration status is limited solely to the recording of
the initial classification of transactions or accounts
with regard to blue sky compliance and the reporting of
such transactions and accounts to the Fund as provided
above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence
as may from time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail
proxy cards and other material supplied to it by the Fund in
connection with Shareholder Meetings of each Fund; receive,
examine and tabulate returned proxies, and certify the vote of
the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check forms
and facsimile signature imprinting devices, if any; and for
the preparation or use, and for keeping account of, such
certificates, forms and devices.
Article 6. Duties of the Trust.
A. Compliance
The Trust or Fund assume full responsibility for the preparation,
contents and distribution of their own and/or their classes'
Prospectus and for complying with all applicable requirements of
the Securities Act of 1933, as amended (the "1933 Act"), the 1940
Act and any laws, rules and regulations of government authorities
having jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of
blank Share certificates and from time to time shall renew such
supply upon request of the Company. Such blank Share certificates
shall be properly signed, manually or by facsimile, if authorized
by the Trust and shall bear the seal of the Trust or facsimile
thereof; and notwithstanding the death, resignation or removal of
any officer of the Trust authorized to sign certificates, the
Company may continue to countersign certificates which bear the
manual or facsimile signature of such officer until otherwise
directed by the Trust.
C. Distributions
The Fund shall promptly inform the Company of the declaration of
any dividend or distribution on account of any Fund's shares.
Article 7. Compensation and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual maintenance fee for each Shareholder account as set out in
Schedules C ("C1, C2, C3 etc..."), attached hereto, as may be added
or amended from time to time. Such fees may be changed from time
to time subject to written agreement between the Trust and the
Company. Pursuant to information in the Fund Prospectus or other
information or instructions from the Fund, the Company may sub-
divide any Fund into Classes or other sub-components for
recordkeeping purposes. The Company will charge the Fund the fees
set forth on Schedule C for each such Class or sub-component the
same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust
and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items set out
in Schedules D ("D1, D2, D3 etc..."), attached hereto, as may be
added or amended from time to time. In addition, any other
expenses incurred by the Company at the request or with the consent
of the Trust and/or the Fund, will be reimbursed by the appropriate
Fund.
C. Payment
The Company shall send an invoice with respect to fees and
reimbursable expenses to the Trust or each of the Funds as soon as
practicable at the end of each month. Each invoice will provide
detailed information about the Compensation and out-of-pocket
expenses in accordance with Schedules C and Schedules D. The Trust
or the Funds will pay to the Company the amount of such invoice
within 30 days following the receipt of the invoices.
Article 8. Assignment of Shareholder Recordkeeping.
Except as provided below, no right or obligation under this Section
Two may be assigned by either party without the written consent of
the other party.
(1) This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and
assigns.
(2) The Company may without further consent on the part of the
Trust subcontract for the performance hereof with (A) State
Street Bank and its subsidiary, Boston Financial Data
Services, Inc., a Massachusetts Trust ("BFDS"), which is duly
registered as a transfer agent pursuant to Section 17A(c)(1)
of the Securities Exchange Act of 1934, as amended, or any
succeeding statute ("Section 17A(c)(1)"), or (B) a BFDS
subsidiary duly registered as a transfer agent pursuant to
Section 17A(c)(1), or (C) a BFDS affiliate, or (D) such other
provider of services duly registered as a transfer agent under
Section 17A(c)(1) as Company shall select; provided, however,
that the Company shall be as fully responsible to the Trust
for the acts and omissions of any subcontractor as it is for
its own acts and omissions; or
(3) The Company shall upon instruction from the Trust subcontract
for the performance hereof with an Agent selected by the
Trust, other than BFDS or a provider of services selected by
Company, as described in (2) above; provided, however, that
the Company shall in no way be responsible to the Trust for
the acts and omissions of the Agent.
SECTION THREE: Custody Services Procurement
Article 9. Appointment.
The Trust hereby appoints Company as its agent to evaluate and
obtain custody services from a financial institution that (i) meets
the criteria established in Section 17(f) of the 1940 Act and (ii)
has been approved by the Board as eligible for selection by the
Company as a custodian (the "Eligible Custodian"). The Company
accepts such appointment.
Article 10. The Company and Its Duties.
Subject to the review, supervision and control of the Board, the
Company shall:
(1) evaluate the nature and the quality of the custodial services
provided by the Eligible Custodian;
(2) employ the Eligible Custodian to serve on behalf of the Trust
as Custodian of the Trust's assets substantially on the terms
set forth as the form of agreement in Exhibit 2;
(3) negotiate and enter into agreements with the Custodians for
the benefit of the Trust, with the Trust as a party to each
such agreement. The Company shall not be a party to any
agreement with any such Custodian;
(4) establish procedures to monitor the nature and the quality of
the services provided by the Custodians;
(5) continuously monitor the nature and the quality of services
provided by the Custodians; and
(6) periodically provide to the Trust (i) written reports on the
activities and services of the Custodians; (ii) the nature and
amount of disbursement made on account of the Trust with
respect to each custodial agreement; and (iii) such other
information as the Board shall reasonably request to enable it
to fulfill its duties and obligations under Sections 17(f) and
36(b) of the 1940 Act and other duties and obligations
thereof.
Article 11. Fees and Expenses.
A. Annual Fee
For the performance by the Company pursuant to Section Three of
this Agreement, the Trust and/or the Fund agree to pay the Company
an annual fee as set forth in Schedule E, attached hereto.
B. Payment
The Company shall send an invoice with respect to fees and
reimbursable expenses to each of the Trust/or Fund as soon as
practicable at the end of each month. Each invoice will provide
detailed information about the Compensation and out-of-pocket
expenses in occurrence with Schedule E. The Trust and/or Fund will
pay to the Company the amount of such invoice within 30 days
following the receipt of the invoice.
Article 12. Representations.
The Company represents and warrants that it has obtained all
required approvals from all government or regulatory authorities
necessary to enter into this arrangement and to provide the
services contemplated in Section Three of this Agreement.
SECTION FOUR: General Provisions.
Article 13. Documents.
A. In connection with the appointment of the Company under this
Agreement, the Trust shall file with the Company the following
documents:
(1) A copy of the Charter and By-Laws of the Trust and all
amendments thereto;
(2) A copy of the resolution of the Board of the Trust authorizing
this Agreement;
(3) Specimens of all forms of outstanding Share certificates of
the Trust or the Funds in the forms approved by the Board of
the Trust with a certificate of the Secretary of the Trust as
to such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following
documents:
(1) Each resolution of the Board of the Trust authorizing the
original issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to
the sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document
and the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing
officers to give Proper Instructions to the Custodian and
agents for fund accountant, custody services procurement, and
shareholder recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of
any Fund, accompanied by Board resolutions approving such
forms;
(6) Such other certificates, documents or opinions which the
Company may, in its discretion, deem necessary or appropriate
in the proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
Article 14. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State of
Delaware.
(3) It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to
authorize it to enter into and perform its obligations under
this Agreement.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
(6) It is in compliance with federal securities law requirements
and in good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Trust is an open-end investment company registered under
the 1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made
and will continue to be made, with respect to all Shares of
each Fund being offered for sale.
Article 15. Indemnification.
A. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund
shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents employees and affiliates,
harmless against any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liabilities arising out of or
attributable to:
(1) The acts or omissions of any Custodian,
(2) The Trust's or Fund's refusal or failure to comply with the
terms of this Agreement, or which arise out of the Trust's or
The Fund's lack of good faith, negligence or willful
misconduct or which arise out of the breach of any
representation or warranty of the Trust or Fund hereunder or
otherwise.
(3) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or
subcontractors and furnished to it by or on behalf of the
Fund, its Shareholders or investors regarding the
purchase, redemption or transfer of Shares and
Shareholder account information; or
(b) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Trust.
(4) The reliance on, or the carrying out by the Company or its
agents or subcontractors of Proper Instructions of the Trust
or the Fund.
(5) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such Shares
be registered in such state or in violation of any stop order
or other determination or ruling by any federal agency or any
state with respect to the offer or sale of such Shares in such
state.
Provided, however, that the Company shall not be protected by
this Article 15.A. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties.
B. Indemnification by the Company
The Company shall indemnify and hold the Trust or each Fund
harmless from and against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities arising
out of or attributable to any action or failure or omission to act
by the Company as a result of the Company's willful misfeasance,
bad faith, gross negligence or reckless disregard of its duties.
C. Reliance
At any time the Company may apply to any officer of the Trust or
Fund for instructions, and may consult with legal counsel with
respect to any matter arising in connection with the services to be
performed by the Company under this Agreement, and the Company and
its agents or subcontractors shall not be liable and shall be
indemnified by the Trust or the appropriate Fund for any action
reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such
action is not in violation of applicable federal or state laws or
regulations. The Company, its agents and subcontractors shall be
protected and indemnified in recognizing stock certificates which
are reasonably believed to bear the proper manual or facsimile
signatures of the officers of the Trust or the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 15 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party
seeking indemnification shall promptly notify the other party of
such assertion, and shall keep the other party advised with respect
to all developments concerning such claim. The party who may be
required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The
party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be
required to indemnify it except with the other party's prior
written consent.
Article 16. Termination of Agreement.
This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other. Should the Trust
exercise its rights to terminate, all out-of-pocket expenses
associated with the movement of records and materials will be borne
by the Trust or the appropriate Fund. Additionally, the Company
reserves the right to charge for any other reasonable expenses
associated with such termination. The provisions of Article 15
shall survive the termination of this Agreement.
Article 17. Amendment.
This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 18. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and
the Trust may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Agreement
as may in their joint opinion be consistent with the general tenor
of this Agreement. Any such interpretive or additional provisions
shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any
provision of the Charter. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an
amendment of this Agreement.
Article 19. Governing Law.
This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts
Article 20. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or
to the Company at Federated Investors Tower, Pittsburgh,
Pennsylvania, 15222-3779, or to such other address as the Trust or
the Company may hereafter specify, shall be deemed to have been
properly delivered or given hereunder to the respective address.
Article 21. Counterparts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
Article 22. Limitations of Liability of Trustees and Shareholders of
the Trust.
The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an authorized officer of
the Trust, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose
any liability on any of them personally, and the obligations of
this Agreement are not binding upon any of the Trustees or
Shareholders of the Trust, but bind only the appropriate property
of the Fund, or Class, as provided in the Declaration of Trust.
Article 23. Limitations of Liability of Trustees and Shareholders of
the Company.
The execution and delivery of this Agreement have been authorized
by the Trustees of the Company and signed by an authorized officer
of the Company, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officer shall
be deemed to have been made by any of them individually or to
impose any liability on any of them personally, and the obligations
of this Agreement are not binding upon any of the Trustees or
Shareholders of the Company, but bind only the property of the
Company as provided in the Declaration of Trust.
Article 24. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to the Trust or the Funds by either of the
parties hereto except by the specific written consent of the other
party.
Article 25. Merger of Agreement.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written.
Article 26. Successor Agent.
If a successor agent for the Trust shall be appointed by the Trust,
the Company shall upon termination of this Agreement deliver to
such successor agent at the office of the Company all properties of
the Trust held by it hereunder. If no such successor agent shall
be appointed, the Company shall at its office upon receipt of
Proper Instructions deliver such properties in accordance with such
instructions.
In the event that no written order designating a successor agent or
Proper Instructions shall have been delivered to the Company on or
before the date when such termination shall become effective, then
the Company shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the 1940 Act, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$2,000,000, all properties held by the Company under this
Agreement. Thereafter, such bank or trust company shall be the
successor of the Company under this Agreement.
Article 27. Force Majeure.
The Company shall have no liability for cessation of services
hereunder or any damages resulting therefrom to the Fund as a
result of work stoppage, power or other mechanical failure, natural
disaster, governmental action, communication disruption or other
impossibility of performance.
Article 28. Assignment; Successors.
This Agreement shall not be assigned by either party without the
prior written consent of the other party, except that either party
may assign to a successor all of or a substantial portion of its
business, or to a party controlling, controlled by, or under common
control with such party. Nothing in this Article 28 shall prevent
the Company from delegating its responsibilities to another entity
to the extent provided herein.
Article 29. Severability.
In the event any provision of this Agreement is held illegal, void
or unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf under their seals by and
through their duly authorized officers, as of the day and year first
above written.
ATTEST: INVESTMENT COMPANIES (listed on Exhibit 1)
/s/ John W. McGonigle_______ By:__/s/ John F. Donahue___
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber By:_/s/ James J. Dolan_____
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
Liberty Utility Fund, Inc.
Exhibit 9(ii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan ("Plan") is adopted as
of this 1st day of March, 1994, by the Boards of Directors
or Trustees, as applicable (the "Boards"), of those
investment companies listed on Exhibit 1 hereto as may be
amended from time to time, having their principal office and
place of business at Federated Investors Tower, Pittsburgh,
PA 15222-3779 (individually referred to herein as a "Fund"
and collectively as "Funds").
1. This Plan is adopted to allow the Funds to
make payments as contemplated herein to obtain certain
personal services for shareholders and/or the maintenance of
shareholder accounts ("Services").
2. This Plan is designed to compensate Federated
Shareholder Services ("FSS") for providing personal services
and/or the maintenance of shareholder accounts to the Funds
and their shareholders. In compensation for the services
provided pursuant to this Plan, FSS may be paid a monthly
fee computed at the annual rate not to exceed .25 of 1% of
the average aggregate net asset value of the shares of each
Fund held during the month.
3. Any payments made by the Funds to FSS
pursuant to this Plan will be made pursuant to a
"Shareholder Services Agreement" between FSS and each of the
Funds.
4. Quarterly in each year that this Plan remains
in effect, FSS shall prepare and furnish to the Boards of
the Funds, and the Boards shall review, a written report of
the amounts expended under the Plan.
5. This Plan shall become effective with regard
to each Fund (i) after approval by majority votes of: (a)
such Fund's Board; and (b) the members of the Board of such
Fund who are not interested persons of such Fund and have no
direct or indirect financial interest in the operation of
such Fund's Plan or in any related documents to the Plan
("Independent Trustees or Directors"), cast in person at a
meeting called for the purpose of voting on the Plan.
6. This Plan shall remain in effect with respect
to each Fund presently set forth on an exhibit and any
subsequent Fund added pursuant to an exhibit during the
initial year of this Plan for the period of one year from
the date set forth above and may be continued thereafter if
this Plan is approved with respect to each Fund at least
annually by a majority of the relevant Fund's Board and a
majority of the Independent Trustees or
Directors, of such Fund as applicable, cast in person at a
meeting called for the purpose of voting on the renewal of
such Plan. If this Plan is adopted with respect to a fund
after the first annual approval by the Trustees or Directors
as described above, this Plan will be effective as to that
Fund at such time as Exhibit 1 hereto is amended to add such
Fund and will continue in effect until the next annual
approval of this Plan by the Funds' Boards and thereafter
for successive periods of one year subject to approval as
described above.
7. All material amendments to this Plan must be
approved by a vote of the Board of each Fund and of the
Independent Directors or Trustees of such Fund, cast in
person at a meeting called for such purpose.
8. This Plan may be terminated as follows:
(a) at any time, without the payment of any
penalty, by the vote of a majority of the Independent
Board Members of any Fund or by a vote of a majority
of the outstanding voting securities of any Fund as
defined in the Investment Company Act of 1940 on
sixty (60) days' written notice to the parties to
this Agreement; or
(b) by any party to the Agreement without cause
by giving the other party at least sixty (60) days'
written notice of its intention to terminate.
9. While this Plan shall be in effect, the
selection and nomination of Independent Directors or
Trustees of each Fund shall be committed to the discretion
of the Independent Directors or Trustees then in office.
10. All agreements with any person relating
to the implementation of this Plan shall be in writing and
any agreement related to this Plan shall be subject to
termination, without penalty, pursuant to the provisions of
Paragraph 8 herein.
11. This Plan shall be construed in
accordance with and governed by the laws of the Commonwealth
of Pennsylvania.
Witness the due execution hereof this as of the
date set forth above.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
EXHIBIT 1
Liberty Utility Fund, Inc.
Exhibit 9(iii) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this
first day of March, 1994, between those investment companies
listed on Exhibit 1, as may be amended from time to time, having
their principal office and place of business at Federated
Investors Tower, Pittsburgh PA 15222-3779 (individually
referred to herein as "Fund" and collectively referred to as
"Funds), on behalf of the portfolios of the Funds, and Federated
Administrative Services, a Delaware business trust (herein
called "FAS").
WHEREAS, the Funds desire to retain FAS as their
Administrator to provide them with Administrative Services (as
herein defined), and FAS is willing to render such services;
WHEREAS, the Funds are registered as open-end management
investment companies under the Investment Company Act of 1940,
as amended (the "1940 Act"), with authorized and issued shares
of capital stock or beneficial interest ("Shares"); and
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Funds hereby
appoint FAS as Administrator of the Funds on the terms and
conditions set forth in this Agreement; and FAS hereby accepts
such appointment and agrees to perform the services and duties
set forth in Section 2 of this Agreement in consideration of the
compensation provided for in Section 4 hereof.
2. Services and Duties. As Administrator, and subject to
the supervision and control of the Funds' Boards of Trustees or
Directors, as applicable (the "Boards"), FAS will provide
facilities, equipment, and personnel to carry out the following
administrative services for operation of the business and
affairs of the Funds and each of their portfolios:
(a) prepare, file, and maintain the
Funds' governing documents and any amendments
thereto, including the Declaration of Trust or
Articles of Incorporation, as appropriate,(which has
already been prepared and filed), the By-laws and
minutes of meetings of their Boards, Committees, and
shareholders;
(b) prepare and file with the
Securities and Exchange Commission and the
appropriate state securities authorities the
registration statements for the Funds and the Funds'
shares and all amendments thereto, reports to
regulatory authorities and shareholders,
prospectuses, proxy statements, and such other
documents all as may be necessary to enable the Funds
to make continuous offerings of their shares, as
applicable;
(c) prepare, negotiate, and
administer contracts on behalf of the Funds with,
among others, each Fund's investment adviser,
distributor, custodian, and transfer agent, subject
to any applicable restrictions of the Boards or the
1940 Act;
(d) supervise the Funds' custodians
in the maintenance of the Funds' general ledgers and
in the preparation of the Funds' financial
statements, including oversight of expense accruals
and payments, the determination of the net asset
value of the Funds and the declaration and payment of
dividends and other distributions to shareholders;
(e) calculate performance data of
the Funds for dissemination to information services
covering the investment company industry;
(f) prepare and file the Funds' tax
returns;
(g) examine and review the
operations of the Funds' custodians and transfer
agents;
(h) coordinate the layout and
printing of publicly disseminated prospectuses and
reports;
(i) perform internal audit
examinations in accordance with a charter to be
adopted by FAS and the Funds;
(j) assist with the design,
development, and operation of the Funds;
(k) provide individuals reasonably
acceptable to the Funds' Boards for nomination,
appointment, or election as officers of the Funds,
who will be responsible for the management of certain
of the Funds' affairs as determined by the Funds'
Boards; and
(l) consult with the Funds and their
Boards of Trustees or Directors, as appropriate, on
matters concerning the Funds and their affairs.
The foregoing, along with any additional services that FAS
shall agree in writing to perform for the Funds hereunder, shall
hereafter be referred to as "Administrative Services."
Administrative Services shall not include any duties, functions,
or services to be performed for any Fund by such Fund's
investment adviser, distributor, custodian, transfer agent, or
shareholder service agent, pursuant to their respective
agreements with such Fund.
3. Expenses. FAS shall be responsible for expenses
incurred in providing office space, equipment, and personnel as
may be necessary or convenient to provide the Administrative
Services to the Fund, including the compensation of FAS
employees who serve on the Funds' Boards, or as officers of the
Funds. Each Fund shall be responsible for all other expenses
incurred by FAS on behalf of such Fund, including without
limitation postage and courier expenses, printing expenses,
travel expenses, registration fees, filing fees, fees of outside
counsel and independent auditors, insurance premiums, fees
payable to members of such Fund's Board who are not FAS
employees, and trade association dues.
4. Compensation. For the Administrative Services
provided, each Fund hereby agrees to pay and FAS hereby agrees
to accept as full compensation for its services rendered
hereunder an administrative fee at an annual rate, payable
daily, as specified below, based upon the total assets of all of
the Funds:
Maximum Administrative Average Daily Net Assets
Fee of the Funds
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250
million
.075% on assets in excess of
$750 million
However, in no event shall the administrative fee received
during any year of this Agreement be less than, or be paid at a
rate less than would aggregate, $125,000, per individual Fund,
with an additional $30,000 for each class of shares added to any
such Fund after the date hereof.
5. Standard of Care.
(a) FAS shall not be liable for any
error of judgment or mistake of law or for any loss
suffered by any Fund in connection with the matters
to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or
gross negligence on its part in the performance of
its duties or from reckless disregard by it of its
obligations and duties under this Agreement. FAS
shall be entitled to rely on and may act upon advice
of counsel (who may be counsel for such Fund) on all
matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such
advice. Any person, even though also an officer,
trustee, partner, employee or agent of FAS, who may
be or become a member of such Fund's Board, officer,
employee or agent of any Fund, shall be deemed, when
rendering services to such Fund or acting on any
business of such Fund (other than services or
business in connection with the duties of FAS
hereunder) to be rendering such services to or acting
solely for such Fund and not as an officer, trustee,
partner, employee or agent or one under the control
or direction of FAS even though paid by FAS.
(b) This Section 5 shall survive
termination of this Agreement.
6. Duration and Termination. The initial term of this
Agreement with respect to each Fund shall commence on the date
hereof, and extend for a period of one year, renewable annually
by the approval of the Board of Directors/Trustees of each Fund.
7. Amendment. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which an
enforcement of the change, waiver, discharge or termination is
sought.
8. Limitations of Liability of Trustees or Officers,
Employees, Agents and Shareholders of the Funds. FAS is
expressly put on notice of the limitation of liability as set
forth in the Declaration of Trust of each Fund that is a
Massachusetts business trust and agrees that the obligations
assumed by each such Fund pursuant to this Agreement shall be
limited in any case to such Fund and its assets and that FAS
shall not seek satisfaction of any such obligations from the
shareholders of such Fund, the Trustees, Officers, Employees or
Agents of such Fund, or any of them.
9. Limitations of Liability of Trustees and Shareholders
of FAS. The execution and delivery of this Agreement have been
authorized by the Trustees of FAS and signed by an authorized
officer of FAS, acting as such, and neither such authorization
by such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the
Trustees or shareholders of FAS, but bind only the trust
property of FAS as provided in the Declaration of Trust of FAS.
10. Notices. Notices of any kind to be given hereunder
shall be in writing (including facsimile communication) and
shall be duly given if delivered to any Fund at the following
address: Federated Investors Tower, Pittsburgh, PA 15222-3779,
Attention: President and if delivered to FAS at Federated
Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
11. Miscellaneous. This Agreement constitutes the entire
agreement between the parties hereto and supersedes any prior
agreement with respect to the subject hereof whether oral or
written. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit
any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement
shall be held or made invalid by a court or regulatory agency
decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. Subject to the
provisions of Section 5, hereof, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and
their respective successors and shall be governed by
Pennsylvania law; provided, however, that nothing herein shall
be construed in a manner inconsistent with the Investment
Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
12. Counterparts. This Agreement may be executed by
different parties on separate counterparts, each of which, when
so executed and delivered, shall be an original, and all such
counterparts shall together constitute one and the same
instrument.
13. Assignment; Successors. This Agreement shall not be
assigned by any party without the prior written consent of FAS,
in the case of assignment by any Fund, or of the Funds, in the
case of assignment by FAS, except that any party may assign to a
successor all of or a substantial portion of its business to a
party controlling, controlled by, or under common control with
such party. Nothing in this Section 14 shall prevent FAS from
delegating its responsibilities to another entity to the extent
provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as
of the day and year first above written.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Administrative Services
By: /s/ Edward C. Gonzales
Edward C. Gonzales
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
EXHIBIT 1
Liberty Utility Fund, Inc.
Exhibit 9(iv) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES AGREEMENT
AGREEMENT made as of the first day of March, 1994, by
and between those investment companies listed on Exhibit 1,
as may be amended from time to time, having their principal
office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 and who have approved a
Shareholder Services Plan (the "Plan") and this form of
Agreement (individually referred to herein as a "Fund" and
collectively as "Funds") and Federated Shareholder Services,
a Delaware business trust, having its principal office and
place of business at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779 ("FSS").
1. The Funds hereby appoint FSS to render or cause to
be rendered personal services to shareholders of the Funds
and/or the maintenance of accounts of shareholders of the
Funds ("Services"). In addition to providing Services
directly to shareholders of the Funds, FSS is hereby
appointed the Funds' agent to select, negotiate and
subcontract for the performance of Services. FSS hereby
accepts such appointments. FSS agrees to provide or cause
to be provided Services which, in its best judgment (subject
to supervision and control of the Funds' Boards of Trustees
or Directors, as applicable), are necessary or desirable for
shareholders of the Funds. FSS further agrees to provide
the Funds, upon request, a written description of the
Services which FSS is providing hereunder.
2. During the term of this Agreement, each Fund will
pay FSS and FSS agrees to accept as full compensation for
its services rendered hereunder a fee at an annual rate,
calculated daily and payable monthly, up to 0.25% of 1% of
average net assets of each Fund.
For the payment period in which this Agreement becomes
effective or terminates with respect to any Fund, there
shall be an appropriate proration of the monthly fee on the
basis of the number of days that this Agreement is in effect
with respect to such Fund during the month. To enable the
Funds to comply with an applicable exemptive order, FSS
represents that the fees received pursuant to this Agreement
will be disclosed to and authorized by any person or entity
receiving Services, and will not result in an excessive fee
to FSS.
3. This Agreement shall continue in effect for one
year from the date of its execution, and thereafter for
successive periods of one year only if the form of this
Agreement is approved at least annually by the Board of each
Fund, including a majority of the members of the Board of
the Fund who are not interested persons of the Fund and have
no direct or indirect financial interest in the operation of
the Funds' Plan or in any related documents to the Plan
("Independent Board Members") cast in person at a meeting
called for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be
terminated as follows:
(a) at any time, without the payment of any
penalty, by the vote of a majority of the Independent
Board Members of any Fund or by a vote of a majority
of the outstanding voting securities of any Fund as
defined in the Investment Company Act of 1940 on
sixty (60) days' written notice to the parties to
this Agreement;
(b) automatically in the event of the
Agreement's assignment as defined in the Investment
Company Act of 1940; and
(c) by any party to the Agreement without cause
by giving the other party at least sixty (60) days'
written notice of its intention to terminate.
5. FSS agrees to obtain any taxpayer identification
number certification from each shareholder of the Funds to
which it provides Services that is required under Section
3406 of the Internal Revenue Code, and any applicable
Treasury regulations, and to provide each Fund or its
designee with timely written notice of any failure to obtain
such taxpayer identification number certification in order
to enable the implementation of any required backup
withholding.
6. FSS shall not be liable for any error of judgment
or mistake of law or for any loss suffered by any Fund in
connection with the matters to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations
and duties under this Agreement. FSS shall be entitled to
rely on and may act upon advice of counsel (who may be
counsel for such Fund) on all matters, and shall be without
liability for any action reasonably taken or omitted
pursuant to such advice. Any person, even though also an
officer, trustee, partner, employee or agent of FSS, who may
be or become a member of such Fund's Board, officer,
employee or agent of any Fund, shall be deemed, when
rendering services to such Fund or acting on any business of
such Fund (other than services or business in connection
with the duties of FSS hereunder) to be rendering such
services to or acting solely for such Fund and not as an
officer, trustee, partner, employee or agent or one under
the control or direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this
Agreement.
7. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which an
enforcement of the change, waiver, discharge or termination
is sought.
8. FSS is expressly put on notice of the limitation
of liability as set forth in the Declaration of Trust of
each Fund that is a Massachusetts business trust and agrees
that the obligations assumed by each such Fund pursuant to
this Agreement shall be limited in any case to such Fund and
its assets and that FSS shall not seek satisfaction of any
such obligations from the shareholders of such Fund, the
Trustees, Officers, Employees or Agents of such Fund, or any
of them.
9. The execution and delivery of this Agreement have
been authorized by the Trustees of FSS and signed by an
authorized officer of FSS, acting as such, and neither such
authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made
by any of them individually or to impose any liability on
any of them personally, and the obligations of this
Agreement are not binding upon any of the Trustees or
shareholders of FSS, but bind only the trust property of FSS
as provided in the Declaration of Trust of FSS.
10. Notices of any kind to be given hereunder shall be
in writing (including facsimile communication) and shall be
duly given if delivered to any Fund and to such Fund at the
following address: Federated Investors Tower, Pittsburgh,
PA 15222-3779, Attention: President and if delivered to
FSS at Federated Investors Tower, Pittsburgh, PA 15222-
3779, Attention: President.
11. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior
agreement with respect to the subject hereof whether oral or
written. If any provision of this Agreement shall be held
or made invalid by a court or regulatory agency decision,
statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. Subject to the provisions of
Sections 3 and 4, hereof, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto
and their respective successors and shall be governed by
Pennsylvania law; provided, however, that nothing herein
shall be construed in a manner inconsistent with the
Investment Company Act of 1940 or any rule or regulation
promulgated by the Securities and Exchange Commission
thereunder.
12. This Agreement may be executed by different
parties on separate counterparts, each of which, when so
executed and delivered, shall be an original, and all such
counterparts shall together constitute one and the same
instrument.
13. This Agreement shall not be assigned by any party
without the prior written consent of FSS in the case of
assignment by any Fund, or of the Funds in the case of
assignment by FSS, except that any party may assign to a
successor all of or a substantial portion of its business to
a party controlling, controlled by, or under common control
with such party. Nothing in this Section 14 shall prevent
FSS from delegating its responsibilities to another entity
to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below
as of the day and year first above written.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
EXHIBIT 1
Liberty Utility Fund, Inc.
Exhibit 15(i) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
LIBERTY UTILITY FUND, INC.
RULE 12b-1 PLAN
This Plan ("Plan") is adopted as of this 4th day of
May, 1993, by the Board of Directors of LIBERTY UTILITY
FUND, INC. (the "Corporation"), a Maryland corporation with
respect to certain classes of shares ("Classes") of the
Corporation set forth in exhibits hereto.
1. This Plan is adopted pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended ("Act"), so
as to allow the Corporation to make payments as contemplated
herein, in conjunction with the distribution of Classes of
the Funds ("Shares").
2. This Plan is designed to finance activities of
Federated Securities Corp. ("FSC") principally intended to
result in the sale of Shares to include: (a) providing
incentives to financial institutions ("Institutions") to
sell Shares; (b) advertising and marketing of Shares to
include preparing, printing and distributing prospectuses
and sales literature to prospective shareholders and with
Institutions; and (c) implementing and operating the Plan.
In compensation for services provided pursuant to this Plan,
FSC will be paid a fee in respect of the following Classes
set forth on the applicable exhibit.
3. Any payment to FSC in accordance with this Plan
will be made pursuant to the "Distributor's Contract"
entered into by the Corporation and FSC. Any payments made
by FSC to Institutions with funds received as compensation
under this Plan will be made pursuant to the "Rule 12b-1
Agreement" entered into by FSC and the Institution.
4. FSC has the right (i) to select, in its sole
discretion, the Institutions to participate in the Plan and
(ii) to terminate without cause and in its sole discretion
any Rule 12b-1 Agreement.
5. Quarterly in each year that this Plan remains in
effect, FSC shall prepare and furnish to the Board of
Directors of the Corporation, and the Board of Directors
shall review, a written report of the amounts expended under
the Plan and the purpose for which such expenditures were
made.
6. This Plan shall become effective with respect to
each Class (i) after approval by majority votes of: (a) the
Corporation's Board of Directors; (b) the members of the
Board of the Corporation who are not interested persons of
the Corporation and have no direct or indirect financial
interest in the operation of the Corporation's Plan or in
any related documents to the Plan ("Disinterested
Directors"), cast in person at a meeting called for the
purpose of voting on the Plan; and (c) the outstanding
voting securities of the particular Class, as defined in
Section 2(a)(42) of the Act and (ii) upon execution of an
exhibit adopting this Plan with respect to such Class.
7. This Plan shall remain in effect with respect to
each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the
initial year of this Plan for the period of one year from
the date set forth above and may be continued thereafter if
this Plan is approved with respect to each Class at least
annually by a majority of the Corporation's Board of
Directors and a majority of the Disinterested Directors,
cast in person at a meeting called for the purpose of voting
on such Plan. If this Plan is adopted with respect to a
Class after the first annual approval by the Directors as
described above, this Plan will be effective as to that
Class upon execution of the applicable exhibit pursuant to
the provisions of paragraph 6(ii) above and will continue in
effect until the next annual approval of this Plan by the
Directors and thereafter for successive periods of one year
subject to approval as described above.
8. All material amendments to this Plan must be
approved by a vote of the Board of Directors of the
Corporation and of the Disinterested Directors, cast in
person at a meeting called for the purpose of voting on it.
9. This Plan may not be amended in order to increase
materially the costs which the Classes may bear for
distribution pursuant to the Plan without being approved by
a majority vote of the outstanding voting securities of the
Classes as defined in Section 2(a)(42) of the Act.
10. This Plan may be terminated with respect to a
particular Class at any time by: (a) a majority vote of the
Disinterested Directors; or (b) a vote of a majority of the
outstanding voting securities of the particular Class as
defined in Section 2(a)(42) of the Act; or (c) by FSC on 60
days' notice to the Corporation.
11. While this Plan shall be in effect, the selection
and nomination of Disinterested Directors of the Corporation
shall be committed to the discretion of the Disinterested
Directors then in office.
12. All agreements with any person relating to the
implementation of this Plan shall be in writing and any
agreement related to this Plan shall be subject to
termination, without penalty, pursuant to the provisions of
Paragraph 10 herein.
13. This Plan shall be construed in accordance with
and governed by the laws of the Commonwealth of
Pennsylvania.
EXHIBIT A
to the
12b-1 Plan
LIBERTY UTILITY FUND, INC.
Class C Shares
This Plan is adopted by LIBERTY UTILITY FUND, INC. with
respect to the Class of Shares of the Corporation set forth
above.
In compensation for the services provided pursuant to
this Plan, FSC will be paid a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net asset
value of the Class C Shares of the Corporation held during
the month.
Witness the due execution hereof this 4th day of May,
1993.
LIBERTY UTILITY FUND, INC.
By:/s/ Richard B. Fisher
President
Exhibit 15(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
EXHIBIT B
to the
12b-1 Plan
LIBERTY UTILITY FUND, INC.
Class B Shares
This Plan is adopted by LIBERTY UTILITY FUND, INC. with
respect to the Class of Shares of the Corporation set forth
above.
In compensation for the services provided pursuant to
this Plan, FSC will be paid a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net asset
value of the Class B Shares of the Corporation held during
the month.
Witness the due execution hereof this ___ day of
________, 1994.
LIBERTY UTILITY FUND, INC.
By:
President
