[LOGO] FEDERATED INVESTORS
LIBERTY UTILITY
FUND, INC.
Semi-Annual Report
August 31, 1995
Established 1988
EQUITY
President's Message
Dear Fellow Shareholder:
Liberty Utility Fund, Inc. was established in 1988, and I am pleased to present
the Semi-Annual Report to Shareholders of Liberty Utility Fund, Inc. for March
1, 1995 to August 31, 1995.
This report includes an interview with the fund's portfolio manager,
Christopher H. Wiles, Vice President of Federated Advisers. Following the
interview, a series of investment record charts portray the value of owning
shares of the fund over the last eight years as the market has changed. Also
published is a complete listing of the fund's dividend-paying utility stocks,
convertible securities and adjustable-rate preferred stocks along with the
fund's financial statements.
On August 31, 1995, the fund's net assets totaled $862.7 million. Liberty
Utility Fund, Inc. serves over 63,000 shareholders seeking high current income
and long-term growth of income from a diversified portfolio of utility
securities.
Dividends paid per Class A Share totaled $0.25 for the six-month period. The
fund's Class A Share net asset value rose from $10.98 on February 28, 1995 to
$11.61 on August 31, 1995. Total return for the past six months, based on net
asset value, amounted to 8.09%.* Total return based on offering price, which
includes the 5.5% sales load on Class A Shares, amounted to 2.13%.*
Dividends paid per Class B Share totaled $0.21 for the six-month period. The
fund's Class B Share net asset value rose from $10.98 on February 28, 1995 to
$11.60 on August 31, 1995. Total return for the past six months, based on net
asset value, amounted to 7.64%* Total return for Class B Shares, which includes
the 5.5% contingent deferred sales charge, amounted to 2.07%.*
Dividends paid per Class C Share totaled $0.21 for the six-month period. The
fund's Class C Share net asset value rose from $10.98 on February 28, 1995 to
$11.60 on August 31, 1995. Total return for the past six months, based on net
asset value, amounted to 7.62%.* Total return for Class C Shares, which
includes the 1.0% contingent deferred sales charge, amounted to 6.60%.*
*Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
This income-producing fund appeals to equity investors who wish to own a
diversified portfolio of utility companies in the U.S. and around the world.
Currently, the fund has 44 high-quality, good dividend-paying utility
companies. The fund's diversification also includes convertible securities in
industries not directly related to the utility industry. The fund has 26.5% in
convertible securities and 1.7% in adjustable-rate preferred stocks. The fund
also has 11.0% of its assets in utilities around the world, offering greater
growth potential than utility companies in the U.S. We believe this portion of
the fund's assets will respond favorably as the standards of living rise in
many countries and some continents.
Investors who seek income and long-term growth may consider this a wise
investment.
I urge you to read this report and add to your account. The key to enhancing
your potential for long-term investment success is to make additional
investments. Furthermore, just by reinvesting your dividends you increase the
number of shares you own and expand your potential for income returns.
We appreciate your continued confidence in Liberty Utility Fund, Inc. and
invite your comments and questions.
Sincerely yours,
[SIGNATURE LOGO]
Richard B. Fisher
President
October 16, 1995
Investment Review
Christopher H. Wiles, CFA
Vice President,
Federated Advisers
Q. The bull market and slow economic growth continued during the reporting
period. In this environment, how did the utilities market perform?
A. Overall, utilities have rebounded nicely from their lows in 1994. The S&P
Utility Index was up 20.27%, and the Dow Jones Utility Average was up 16.32%
year-to-date ending August 31, 1995. Within the utility market, performances
varied greatly. Electrics were up 12%, telephones were up 24%, and natural gas
stocks were up 22%.
Q. How did Liberty Utility Fund, Inc. perform in this context?
A. Liberty Utility Fund, Inc. Class A Shares returned 12.60% in the first eight
months of 1995.* The year to date total return, based on offering price, which
includes the 5.50% sales load on Class A Shares, was 6.44%.* The fund lagged
the major indexes due to our defensive holdings in non-utilities which greatly
contributed to our overall outperformance in 1994. We continue to believe that
our good defensive strategy will benefit the shareholder.
Q. Will you review the fund's investment philosophy?
A. This fund is designed to offer equity investors one of the most defensive
vehicles in the equity markets. Through a portfolio heavily invested in utility
stocks and marginally invested in other equity-income securities, we have
historically delivered utility-like returns, and yields at lower risk levels
than a pure utility fund, and the performance record of the fund's shares
clearly demonstrate this point.
*Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
Q. What are your near-term strategies?
A. We are increasing our exposure to electric utility stocks recently due to
the very attractive relative valuations of electric stocks versus telephone
stocks, natural gas stocks, and industrial stocks. Our current weighting in
electric stocks is now up to 40% of the fund's assets. These electric holdings
generate three times the income available from industrial stocks.
Q. Why is the current environment favorable for utilities investors?
A. After the sharp sell-off in utility stocks, due to the rapid increase in
interest rates during 1994, utility stocks have remained undervalued versus
other equity assets. The vital nature of utility services and the defensive
characteristics of utility stocks have not changed; we believe that utilities,
especially electric utilities, currently offer some of the most attractive
valuations in years. A number of New York Stock Exchange firms are recommending
ownership of utilities for various reasons with which we agree. We, of course,
are enjoying the support their buying adds to our holdings.
Two Ways You May Seek to Invest for Success in
Liberty Utility Fund, Inc.
Initial Investment:
If you had made an initial investment of $8,000 in the Class A Shares of
Liberty Utility Fund, Inc. on 5/27/88, reinvested your dividends and capital
gains, and didn't redeem any shares, your account would be worth $17,297 on
8/31/95. You would have earned an 11.20%* average annual total return for the
7-year investment life span quite attractive for a utility stock fund,
-
especially during a time when the economic markets went through several cycles.
One key to investing wisely is to reinvest all distributions in fund shares.
This increases the number of shares on which you can earn future dividends,
and you gain the benefit of compounding.
- -------------------------------------------------------------------------------
As of 9/30/95, the Class A Shares' average annual one-year, five-year, and
since inception (5/27/88) total returns were 9.03%, 11.96%, and 11.81%,
respectively. Class B Shares average annual one-year and since inception
(9/28/94) were 8.95% and 10.33%, respectively. Class C Shares' average annual
one-year and since inception (4/27/93) total returns were 13.42% and 5.81%,
respectively.
- -------------------------------------------------------------------------------
INITIAL INVESTMENT GRAPH. SEE APPENDIX A.
* Total return represents the change in the value of an investment in Class A
Shares after reinvestment all income and capital gains, and takes into account
the 5.5% sales load applicable to an initial investment in Class A Shares.
Data quoted represents past performance and does not guarantee future results.
Investment return and principal value will fluctuate so an investor's shares,
when redeemed, may be worth more or less than their original cost.
Liberty Utility Fund, Inc.
One Step at a Time:
$1,000 invested each year for 7 years (reinvesting all dividends and capital
gains) grew to $11,309.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of Liberty
Utility Fund, Inc. on 5/27/88, reinvested your dividends and capital gains, and
didn't redeem any shares, you would have invested only $8,000, but your account
would have reached a total value of $11,309* by 8/31/95. You would have earned
an average annual total return of 9.07%.
A practical investment plan helps you pursue long-term performance from utility
securities. Through systematic investing, you buy shares on a regular basis and
reinvest all earnings. This investment plan works for you even if you invest
only $1,000 annually. You can take it one step at a time. Put time and
compounding to work!
YEARLY INVESTMENT GRAPH. SEE APPENDIX B.
*No method of investing can guarantee a profit or protect against loss in down
markets. However, by investing regularly over time and buying shares at various
prices, investors can purchase more shares at lower prices. All accumulated
shares have the ability to pay income to the investor. Because such a plan
involves continuous investment, regard- less of changing price levels, the
investor should consider whether or not to continue purchases through periods
of low price levels.
Liberty Utility Fund, Inc.
Portfolio of Investments
- --------------------------------------------------------------------------------
August 31, 1995
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ----------------- ------------------------------------------------------------------------------ --------------
COMMON STOCKS--66.8%
- -------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--1.0%
------------------------------------------------------------------------------
118,000 Philip Morris Cos., Inc. $ 8,805,750
------------------------------------------------------------------------------ --------------
ELECTRIC UTILITIES: CENTRAL--13.5%
------------------------------------------------------------------------------
660,000 Cinergy Corp. 16,912,500
------------------------------------------------------------------------------
776,000 CMS Energy Corp. 19,109,000
------------------------------------------------------------------------------
714,600 DPL, Inc. 15,899,850
------------------------------------------------------------------------------
678,000 Illinova Corp. 17,034,750
------------------------------------------------------------------------------
493,200 NIPSCO Industries, Inc. 16,152,300
------------------------------------------------------------------------------
550,000 Utilicorp United, Inc. 14,918,750
------------------------------------------------------------------------------
550,000 Western Resources, Inc. 16,637,500
------------------------------------------------------------------------------ --------------
Total 116,664,650
------------------------------------------------------------------------------ --------------
ELECTRIC UTILITIES: EAST--9.2%
------------------------------------------------------------------------------
429,000 Baltimore Gas & Electric Co. 11,261,250
------------------------------------------------------------------------------
750,000 DQE, Inc. 17,906,250
------------------------------------------------------------------------------
550,000 General Public Utilities 15,743,750
------------------------------------------------------------------------------
921,900 Peco Energy Co. 24,545,587
------------------------------------------------------------------------------
370,000 Public Service Enterprises Group, Inc. 10,175,000
------------------------------------------------------------------------------ --------------
Total 79,631,837
------------------------------------------------------------------------------ --------------
ELECTRIC UTILITIES: SOUTH--10.1%
------------------------------------------------------------------------------
527,400 Duke Power Co. 21,425,625
------------------------------------------------------------------------------
350,000 Florida Progress Corp. 10,631,250
------------------------------------------------------------------------------
550,500 FPL Group, Inc. 21,400,688
------------------------------------------------------------------------------
750,000 Southern Co. 15,843,750
------------------------------------------------------------------------------
512,700 Texas Utilities Co. 17,816,325
------------------------------------------------------------------------------ --------------
Total 87,117,638
------------------------------------------------------------------------------ --------------
ELECTRIC UTILITIES: WEST--4.0%
------------------------------------------------------------------------------
780,000 Pacificorp 14,137,500
------------------------------------------------------------------------------
</TABLE>
Liberty Utility Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ----------------- ------------------------------------------------------------------------------ --------------
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES: WEST--CONTINUED
------------------------------------------------------------------------------
803,000 Pinnacle West Capital Corp. $ 19,974,625
------------------------------------------------------------------------------ --------------
Total 34,112,125
------------------------------------------------------------------------------ --------------
ENERGY MINERALS--1.4%
------------------------------------------------------------------------------
175,000 Exxon Corp. 12,031,250
------------------------------------------------------------------------------ --------------
FINANCE--1.9%
------------------------------------------------------------------------------
499,400 Meditrust, REIT 16,417,775
------------------------------------------------------------------------------ --------------
MAJOR U.S. TELECOMMUNICATIONS--9.5%
------------------------------------------------------------------------------
500,000 AT&T Corp. 28,250,000
------------------------------------------------------------------------------
206,000 BellSouth Corp. 14,162,500
------------------------------------------------------------------------------
720,000 GTE Corp. 26,370,000
------------------------------------------------------------------------------
450,000 Pacific Telesis Group 12,768,750
------------------------------------------------------------------------------ --------------
Total 81,551,250
------------------------------------------------------------------------------ --------------
NATURAL GAS DISTRIBUTION--4.8%
------------------------------------------------------------------------------
240,800 Consolidated Natural Gas Co. 9,300,900
------------------------------------------------------------------------------
708,200 MCN Corp. 13,190,225
------------------------------------------------------------------------------
608,200 Pacific Enterprises 14,596,800
------------------------------------------------------------------------------
194,800 UGI Corp. 4,163,850
------------------------------------------------------------------------------ --------------
Total 41,251,775
------------------------------------------------------------------------------ --------------
NON-U.S. UTILITIES--3.4%
------------------------------------------------------------------------------
566,000 National Power Co. PLC, ADR 8,419,250
------------------------------------------------------------------------------
225,000 Telefonica de Espana, ADR 9,140,625
------------------------------------------------------------------------------
750,000 Westcoast Energy, Inc. 11,437,500
------------------------------------------------------------------------------ --------------
Total 28,997,375
------------------------------------------------------------------------------ --------------
OIL/GAS TRANSMISSION--7.3%
------------------------------------------------------------------------------
450,000 Enron Corp. 15,131,250
------------------------------------------------------------------------------
344,400 Enron Global Power & Pipelines, L.L.C. 8,007,300
------------------------------------------------------------------------------
209,900 Panhandle Eastern Corp. 5,247,500
------------------------------------------------------------------------------
750,000 Sonat, Inc. 23,812,500
------------------------------------------------------------------------------
</TABLE>
Liberty Utility Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ----------------- ------------------------------------------------------------------------------ --------------
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------------------
OIL/GAS TRANSMISSION--CONTINUED
------------------------------------------------------------------------------
300,000 Williams Companies, Inc. (The) $ 10,987,500
------------------------------------------------------------------------------ --------------
Total 63,186,050
------------------------------------------------------------------------------ --------------
OTHER TELEPHONE/COMMUNICATIONS--0.7%
------------------------------------------------------------------------------
192,000 Southern New England Telecommunications 6,456,000
------------------------------------------------------------------------------ --------------
TOTAL COMMON STOCKS (IDENTIFIED COST $518,597,971) 576,223,475
------------------------------------------------------------------------------ --------------
PREFERRED STOCKS--20.2%
- -------------------------------------------------------------------------------------------------
CONSUMER DURABLES--0.7%
------------------------------------------------------------------------------
407,600 Kaufman & Broad Homes Corp., Conv. Pfd., Series B, $1.52 5,808,300
------------------------------------------------------------------------------ --------------
CONSUMER NON-DURABLES--3.8%
------------------------------------------------------------------------------
5,500,000 RJR Nabisco Holdings Corp., Conv. Pfd., Series C, $.60 33,000,000
------------------------------------------------------------------------------ --------------
ELECTRIC UTILITIES: CENTRAL--0.5%
------------------------------------------------------------------------------
188,450 Toledo Edison Co., ARPS, Series B 3,863,225
------------------------------------------------------------------------------ --------------
ELECTRIC UTILITIES: EAST--0.9%
------------------------------------------------------------------------------
335,000 Niagara Mohawk Power Corp., ARPS, Series C 7,788,750
------------------------------------------------------------------------------ --------------
ELECTRIC UTILITIES: SOUTH--0.4%
------------------------------------------------------------------------------
42,000 Texas Utilities Electric Co., ARPS, Series A 3,801,000
------------------------------------------------------------------------------ --------------
ENERGY MINERALS--1.0%
------------------------------------------------------------------------------
152,000 (a)Occidental Petroleum Corp., Conv. Pfd., $3.88 8,531,000
------------------------------------------------------------------------------ --------------
FINANCE--3.4%
------------------------------------------------------------------------------
20,200 Allstate Corp., $2.30, Conv. Pfd. 818,100
------------------------------------------------------------------------------
239,200 Merrill Lynch & Co., Inc., STRYPES, Series MGIC, $3.12 12,976,600
------------------------------------------------------------------------------
323,000 Sunamerica, Inc., Conv. Pfd., Series D, $2.78 15,342,500
------------------------------------------------------------------------------ --------------
Total 29,137,200
------------------------------------------------------------------------------ --------------
NON-ENERGY MINERALS--1.6%
------------------------------------------------------------------------------
260,000 Reynolds Metals Co., PRIDES, $3.30 13,942,500
------------------------------------------------------------------------------ --------------
</TABLE>
Liberty Utility Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
- ----------------- ------------------------------------------------------------------------------ --------------
PREFERRED STOCKS--CONTINUED
- -------------------------------------------------------------------------------------------------
NON-U.S. UTILITIES--2.0%
------------------------------------------------------------------------------
340,000 (a)Cointel/Telefonica de Argentina SA, PRIDES, $5.04 $ 17,000,000
------------------------------------------------------------------------------ --------------
OIL/GAS TRANSMISSION--0.9%
------------------------------------------------------------------------------
122,500 Williams Companies, Inc. (The), Conv. Pfd., $7.00 8,085,000
------------------------------------------------------------------------------ --------------
PROCESS INDUSTRIES--1.6%
------------------------------------------------------------------------------
403,500 James River Corp. of Virginia, DECS, Series P, $1.55 13,365,938
------------------------------------------------------------------------------ --------------
PRODUCER MANUFACTURING--2.4%
------------------------------------------------------------------------------
1,533,000 (a)Westinghouse Electric Corp., PEPs, Series C, $1.30 20,841,135
------------------------------------------------------------------------------ --------------
TECHNOLOGY SERVICES--1.0%
------------------------------------------------------------------------------
135,100 General Motors Corp., Conv. Pfd., Series C (GME), $3.25 8,967,262
------------------------------------------------------------------------------ --------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $169,017,670) 174,131,310
------------------------------------------------------------------------------ --------------
CORPORATE BONDS--8.2%
- -------------------------------------------------------------------------------------------------
CONSUMER SERVICES--1.0%
------------------------------------------------------------------------------
$ 17,810,000 (a)Rogers Communications, Inc., Conv. Deb., 2.00%, 11/26/2005 9,083,100
------------------------------------------------------------------------------ --------------
ENERGY MINERALS--1.4%
------------------------------------------------------------------------------
10,000,000 Pennzoil Co., Conv. Deb., 6.50%, 1/15/2003 12,060,300
------------------------------------------------------------------------------ --------------
FINANCE--1.0%
------------------------------------------------------------------------------
7,515,000 Equitable Cos., Inc., Conv. Sub. Deb., 6.125%, 12/15/2024 8,803,822
------------------------------------------------------------------------------ --------------
HEALTH TECHNOLOGY--1.8%
------------------------------------------------------------------------------
39,000,000 Roche Holdings, Inc., Conv. LYON, 7.00% accrual, 4/20/2010 15,356,250
------------------------------------------------------------------------------ --------------
NON-U.S. UTILITIES--3.0%
------------------------------------------------------------------------------
20,000,000,000 Softe SA, Conv. Bond, 4.25%, 7/30/1998 14,677,826
------------------------------------------------------------------------------
12,000,000 (a)Telekom Malaysia Berhad, Conv. Bond, 4.00%, 10/3/2004 10,920,000
------------------------------------------------------------------------------ --------------
Total 25,597,826
------------------------------------------------------------------------------ --------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $70,170,302) 70,901,298
------------------------------------------------------------------------------ --------------
</TABLE>
Liberty Utility Fund, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ----------------- ------------------------------------------------------------------------------ --------------
(B)REPURCHASE AGREEMENTS--4.1%
- -------------------------------------------------------------------------------------------------
$ 35,605,000 J.P. Morgan Securities, Inc., 5.83%, dated 8/31/1995, due 9/1/1995 (at
amortized cost) $ 35,605,000
------------------------------------------------------------------------------ --------------
TOTAL INVESTMENTS (IDENTIFIED COST $793,390,943)(C) $ 856,861,083
------------------------------------------------------------------------------ --------------
</TABLE>
(a) Restricted securities--Investment in securities not registered under the
Securities Act of 1933. At the end of the period, these securities amounted
to 7.7% of net assets.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to $793,390,943.
The unrealized appreciation of investments on a federal tax basis amounts
to $63,470,140 which is comprised of $78,895,286 appreciation and
$15,425,146 depreciation at August 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($862,688,559) at August 31, 1995.
The following acronyms are used throughout this portfolio:
ADR--American Depositary Receipt
ARPS--Adjustable Rate Preferred Stock
DECS--Dividend Enhanced Convertible Stock
LYON--Liquid Yield Option Note
PEPs--Participating Equity Preferred Stock
PLC--Public Limited Company
PRIDES--Preferred Redeemable Increased Dividend Equity Securities
REIT--Real Estate Investment Trust
SA--Support Agreement
STRYPES--Structured Yield Product Exchangeable for Stock
(See Notes which are an integral part of the Financial Statements)
Liberty Utility Fund, Inc.
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
August 31, 1995 (unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $793,390,943) $ 856,861,083
- ---------------------------------------------------------------------------------------------------
Cash 24,996
- ---------------------------------------------------------------------------------------------------
Income receivable 4,622,794
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 3,242,599
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 1,749,438
- --------------------------------------------------------------------------------------------------- -------------
Total assets 866,500,910
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------
Payable for investments purchased $ 1,779,823
- ------------------------------------------------------------------------------------
Payable for shares redeemed 1,663,687
- ------------------------------------------------------------------------------------
Accrued expenses 368,841
- ------------------------------------------------------------------------------------ -------------
Total liabilities 3,812,351
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 74,338,871 shares outstanding $ 862,688,559
- --------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital $ 799,287,015
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities
in foreign currency 63,468,619
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (1,294,199)
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 1,227,124
- --------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 862,688,559
- --------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- ---------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($754,791,714 / 65,035,201 shares outstanding) $ 11.61
- --------------------------------------------------------------------------------------------------- -------------
Offering Price Per Share (100/94.50 of $11.61)* $ 12.29
- --------------------------------------------------------------------------------------------------- -------------
Redemption Proceeds Per Share (100.00/100 of $11.61)** $ 11.61
- --------------------------------------------------------------------------------------------------- -------------
CLASS B SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($49,035,535 / 4,227,437 shares outstanding) $ 11.60
- --------------------------------------------------------------------------------------------------- -------------
Offering Price Per Share (100/100.00 of $11.60)* $ 11.60
- --------------------------------------------------------------------------------------------------- -------------
Redemption Proceeds Per Share (94.50/100 of $11.60)** $ 10.96
- --------------------------------------------------------------------------------------------------- -------------
CLASS C SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($58,861,310 / 5,076,233 shares outstanding) $ 11.60
- --------------------------------------------------------------------------------------------------- -------------
Offering Price Per Share (100/100.00 of $11.60)* $ 11.60
- --------------------------------------------------------------------------------------------------- -------------
Redemption Proceeds Per Share (99.00/100 of $11.60)** $ 11.48
- --------------------------------------------------------------------------------------------------- -------------
</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
- --------------------------------------------------------------------------------
Six Months Ended August 31, 1995 (unaudited)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $41,166) $ 22,184,831
- ---------------------------------------------------------------------------------------------------
Interest 2,465,218
- --------------------------------------------------------------------------------------------------- ------------
Total income 24,650,049
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------
Investment advisory fee $ 3,177,204
- --------------------------------------------------------------------------------------
Administrative personnel and services fee 320,686
- --------------------------------------------------------------------------------------
Custodian fees 65,495
- --------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 576,813
- --------------------------------------------------------------------------------------
Directors'/Trustees' fees 9,936
- --------------------------------------------------------------------------------------
Auditing fees 10,488
- --------------------------------------------------------------------------------------
Legal fees 15,624
- --------------------------------------------------------------------------------------
Portfolio accounting fees 92,607
- --------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 128,767
- --------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 222,110
- --------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 942,109
- --------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 42,922
- --------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 74,037
- --------------------------------------------------------------------------------------
Share registration costs 48,400
- --------------------------------------------------------------------------------------
Printing and postage 110,768
- --------------------------------------------------------------------------------------
Insurance premiums 9,016
- --------------------------------------------------------------------------------------
Taxes 90,528
- --------------------------------------------------------------------------------------
Miscellaneous 1,656
- -------------------------------------------------------------------------------------- -----------
Total expenses 5,939,166
- --------------------------------------------------------------------------------------
Waivers--
- --------------------------------------------------------------------------------------
Waiver of investment advisory fee $ (712,362)
- --------------------------------------------------------------------------
Waiver of shareholder services fee--Class A Shares (30,068)
- --------------------------------------------------------------------------
Waiver of shareholder services fee--Class C Shares (14,807)
- -------------------------------------------------------------------------- ----------
Total waivers (757,237)
- -------------------------------------------------------------------------------------- -----------
Net expenses 5,181,929
- --------------------------------------------------------------------------------------------------- ------------
Net investment income 19,468,120
- --------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 18,853,539
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and foreign currency transactions 26,226,713
- --------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments and foreign currency transactions 45,080,252
- --------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 64,548,372
- --------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Liberty Utility Fund, Inc.
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
AUGUST 31, 1995 FEBRUARY 28, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------
Net investment income $ 19,468,120 $ 41,388,791
- -----------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency
transactions ($18,853,539 net gain and $7,917,809, net loss
respectively, as computed for federal tax purposes) 18,853,539 (19,441,678)
- -----------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) and foreign
currency transactions 26,226,713 (34,280,851)
- ----------------------------------------------------------------------- -------------------- -------------------
Change in net assets resulting from operations 64,548,372 (12,333,738)
- ----------------------------------------------------------------------- -------------------- -------------------
NET EQUALIZATION CREDITS (DEBITS)-- (248,713) (855,673)
- ----------------------------------------------------------------------- -------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------------
Distributions from net investment income:
- -----------------------------------------------------------------------
Class A Shares (16,398,210) (46,462,395)
- -----------------------------------------------------------------------
Class B Shares (504,539) (67,769)
- -----------------------------------------------------------------------
Class C Shares (1,089,534) (3,044,848)
- -----------------------------------------------------------------------
Distributions from net realized gains:
- -----------------------------------------------------------------------
Class A Shares -- (8,786,234)
- -----------------------------------------------------------------------
Class B Shares -- --
- -----------------------------------------------------------------------
Class C Shares -- (689,533)
- -----------------------------------------------------------------------
Tax return of captial distribution:
- -----------------------------------------------------------------------
Class A Shares -- (25,589,376)
- -----------------------------------------------------------------------
Class B Shares -- (34,407)
- -----------------------------------------------------------------------
Class C Shares -- (1,545,897)
- ----------------------------------------------------------------------- -------------------- -------------------
Change in net assets resulting from distributions to
shareholders (17,992,283) (84,220,459)
- ----------------------------------------------------------------------- -------------------- -------------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------------
Proceeds from sale of shares 63,063,680 97,809,978
- -----------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 12,868,899 62,775,867
- -----------------------------------------------------------------------
Cost of shares redeemed (79,405,554) (185,244,140)
- ----------------------------------------------------------------------- -------------------- -------------------
Change in net assets resulting from share transactions (3,472,975) (24,658,295)
- ----------------------------------------------------------------------- -------------------- -------------------
Change in net assets 42,834,401 (122,068,165)
- -----------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------
Beginning of period 819,854,158 941,922,323
- ----------------------------------------------------------------------- -------------------- -------------------
End of period (including undistributed net investment income of
$1,227,124 and $0, respectively) $ 862,688,559 $ 819,854,158
- ----------------------------------------------------------------------- -------------------- -------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Liberty Utility Fund, Inc.
Financial Highlights--Class A Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
AUGUST 31, YEAR ENDED FEBRUARY 28 OR 29,
1995 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.98 $12.24 $12.29 $11.03 $10.13 $9.82 $9.15 $9.15
- ----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------
Net investment income 0.26 0.55 0.60 0.58 0.68 0.71 0.71 0.72
- ----------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 0.62 (0.69) -- 1.44 0.92 0.43 0.79 (0.02)
- ---------------------------------------- ------- --------- --------- --------- --------- --------- --------- ---------
Total from investment operations 0.88 (0.14) 0.60 2.02 1.60 1.14 1.50 0.70
- ---------------------------------------- ------- --------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- ----------------------------------------
Distributions from net investment
income (0.25) (0.66) (0.61) (0.66) (0.64) (0.70) (0.76) (0.70)
- ----------------------------------------
Distributions from net realized gain on
investment transactions -- (0.12) (0.04) (0.10) (0.06) (0.13) (0.07) --
- ----------------------------------------
Tax return of capital distribution -- (0.34) -- -- -- -- -- --
- ---------------------------------------- ----- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.25) (1.12) (0.65) (0.76) (0.70) (0.83) (0.83) (0.70)
- ---------------------------------------- ----- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $11.61 $10.98 $12.24 $12.29 $11.03 $10.13 $9.82 $9.15
- ---------------------------------------- ----- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN(B) 8.09% (0.98%) 4.93% 19.26% 16.48% 12.41% 16.72% 8.00%
- ----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------
Expenses 1.14 %(c) 1.10% 1.12% 1.04% 1.05% 1.02% 1.02% 1.00%
- ----------------------------------------
Net investment income 4.66 %(c) 4.95% 4.81% 5.98% 6.31% 7.41% 7.17% 8.04%
- ----------------------------------------
Expense waiver/reimbursement (d) 0.18 %(c) 0.21% 0.17% 0.01% 0.19% 0.51% 0.74% 0.40%
- ----------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------
Net assets, end of period (000 omitted) $754,792 $742,274 $877,513 $739,511 $375,656 $125,599 $48,050 $410,575
- ----------------------------------------
Portfolio turnover 29% 55% 24% 18% 35% 45% 37% 34%
- ----------------------------------------
<CAPTION>
1988(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.30
- ----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------
Net investment income 0.55
- ----------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (0.31)
- ---------------------------------------- -----
Total from investment operations 0.24
- ---------------------------------------- -----
LESS DISTRIBUTIONS
- ----------------------------------------
Distributions from net investment
income (0.39)
- ----------------------------------------
Distributions from net realized gain on
investment transactions --
- ----------------------------------------
Tax return of capital distribution --
- ---------------------------------------- -----
Total distributions (0.39)
- ---------------------------------------- -----
NET ASSET VALUE, END OF PERIOD $ 9.15
- ---------------------------------------- -----
TOTAL RETURN(B) 3.25%
- ----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------
Expenses 1.56%(c)
- ----------------------------------------
Net investment income 8.24%(c)
- ----------------------------------------
Expense waiver/reimbursement (d) 0.38%(c)
- ----------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------
Net assets, end of period (000 omitted) $52,947
- ----------------------------------------
Portfolio turnover 17 %
- ----------------------------------------
</TABLE>
(a) Reflects operations for the period from June 5, 1987 (date of initial
public investment) to February 29, 1988.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Liberty Utility Fund, Inc.
Financial Highlights--Class B Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) PERIOD ENDED
AUGUST 31, 1995 FEBRUARY 28, 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.98 $ 10.92
- ---------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------
Net investment income 0.27 0.22
- ---------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 0.56 (0.04)
- --------------------------------------------------------------- ------- -------
Total from investment operations 0.83 0.18
- --------------------------------------------------------------- ------- -------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------
Distributions from net investment income (0.21) (0.08)
- ---------------------------------------------------------------
Tax return of capital distribution -- (0.04)
- --------------------------------------------------------------- ------- -------
Total distributions (0.21) (0.12)
- --------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $11.60 $10.98
- --------------------------------------------------------------- ------- -------
TOTAL RETURN(B) 7.64% 2.16%
- ---------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------
Expenses 1.90%(c) 1.87%(c)
- ---------------------------------------------------------------
Net investment income 3.88%(c) 4.53%(c)
- ---------------------------------------------------------------
Expense waiver/reimbursement (d) 0.17%(c) 0.25%(c)
- ---------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------
Net assets, end of period (000 omitted) $49,036 $18,780
- ---------------------------------------------------------------
Portfolio turnover 29% 55%
- ---------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from October 12, 1994, (date of initial
public investment) to February 28, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Liberty Utility Fund, Inc.
Financial Highlights--Class C Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
(UNAUDITED) FEBRUARY 28,
FEBRUARY 28, 1995 1995 1994(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.98 $12.23 $12.27
- ------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------
Net investment income 0.22 0.42 0.48
- ------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 0.61 (0.60) (0.07)
- ------------------------------------------------------------------ ------- --------- -----------
Total from investment operations 0.83 (0.22) 0.41
- ------------------------------------------------------------------ ------- --------- -----------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------
Distributions from net investment income (0.21) (0.60) (0.41)
- ------------------------------------------------------------------
Distributions from net realized gain on investment transactions -- (0.13) (0.04)
- ------------------------------------------------------------------
Tax return of capital distribution -- (0.30) --
- ------------------------------------------------------------------ ------- --------- -----------
Total distributions (0.21) (1.03) (0.45)
- ------------------------------------------------------------------ ------- --------- -----------
NET ASSET VALUE, END OF PERIOD $11.60 $10.98 $12.23
- ------------------------------------------------------------------ ------- --------- -----------
TOTAL RETURN(B) 7.62% (1.66)% 3.28 %
- ------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------
Expenses 1.85 (c) 1.86% 1.87 %(c)
- ------------------------------------------------------------------
Net investment income 3.95 (c) 4.19% 4.02 %(c)
- ------------------------------------------------------------------
Expense waiver/reimbursement (d) 0.22 (c) 0.21% 0.17 %(c)
- ------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------
Net assets, end of period (000 omitted) $58,861 $58,800 $64,409
- ------------------------------------------------------------------
Portfolio turnover 29% 55% 24%
- ------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from April 30, 1993 (date of initial
public investment) to February 28, 1994.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Liberty Utility Fund, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
August 31, 1995 (unaudited)
(1) ORGANIZATION
Liberty Utility Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company. The Fund offers three classes of shares: Class A
Shares, Class B Shares and Class C Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. All other securities are valued at
prices provided by an independent pricing service.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the
"Directors"). Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount,
if applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code").
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary. Withholding taxes on foreign
dividends have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. At February
28, 1995, the Fund, for federal tax purposes, had a capital loss
carryforward of $7,917,809 reduce the Fund's taxable income arising from
future net realized gain on investments, if any, to the extent permitted by
the
Liberty Utility Fund, Inc.
- --------------------------------------------------------------------------------
Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will
expire in 2003. Additionally, net capital losses of $11,890,028
attributable to security transactions incurred after October 31, 1994 are
treated as arising on the first day of the Fund's next taxable year.
EQUALIZATION--The Fund follows the accounting practice known as
equalization. With equalization, a portion of the proceeds from sales and
costs of redemptions of fund shares (equivalent, on a per share basis, to
the amount of undistributed net investment income on the date of the
transaction) is credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share is unaffected by
sales or redemptions of fund shares.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of FCs, currency gains or losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be
determined to be liquid under criteria established by the Board of
Directors. The Fund will not incur any registration costs upon such
resales. The Fund's restricted securities are valued at the price provided
by dealers in the secondary market or, if no market prices are available,
at the fair value as determined by the Fund's pricing committee.
Additional information on each restricted security held at August 31, 1995
is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
<S> <C> <C>
Cointel/Telefonica de Argentina SA 2/24/94-6/22/95 $ 21,791,661
Occidental Petroleum Corp 2/10/93-9/2/94 7,937,500
Rogers Communications, Inc. 1/20/95-4/6/95 9,448,543
Telekom Malaysia Berhad 9/22/94-1/5/95 11,885,000
Westinghouse Electric Corp. 3/22/94 22,136,520
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
(3) CAPITAL STOCK
At August 31, 1995, there were 1,000,000,000 shares of $0.001 par value stock
authorized. Of these shares, 375,000,000 have been designated Class A Shares of
the Fund, 250,000,000 as Class B Shares of the Fund and 375,000,000 as Class C
Shares of the Fund.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1995 FEBRUARY 28, 1995
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------- ------------- --------------- ------------- ---------------
Shares sold 2,394,681 $ 26,805,047 5,157,127 $ 57,323,665
- -------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 1,081,338 11,927,420 5,418,083 60,027,990
- -------------------------------------------------
Shares redeemed (6,019,299) (67,192,600) (14,669,198) (161,671,999)
- ------------------------------------------------- ------------- --------------- ------------- ---------------
Net change resulting from Class A share
transactions (2,543,280) $ (28,460,133) (4,093,988) $ (44,320,344)
- ------------------------------------------------- ------------- --------------- ------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
AUGUST 31, 1995 FEBRUARY 28, 1995*
<S> <C> <C> <C> <C>
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------- ------------- --------------- ------------- ---------------
Shares sold 2,618,714 $ 29,321,953 1,728,390 $ 18,557,302
- -------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 34,361 384,888 4,400 46,586
- -------------------------------------------------
Shares redeemed (136,660) (1,540,292) (21,768) (233,240)
- ------------------------------------------------- ------------- --------------- ------------- ---------------
Net change resulting from Class B
share transactions 2,516,415 $ 28,166,549 1,711,022 $ 18,370,648
- ------------------------------------------------- ------------- --------------- ------------- ---------------
</TABLE>
*For the period form September 19, 1994 (start of business) to February 28,
1995.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1995 FEBRUARY 28, 1995
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------- ------------- --------------- ------------- ---------------
Shares sold 619,229 $ 6,936,680 1,960,855 $ 21,929,011
- -------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 50,122 556,591 243,585 2,701,291
- -------------------------------------------------
Shares redeemed (950,738) (10,672,662) (2,114,688) (23,338,901)
- ------------------------------------------------- ------------- --------------- ------------- ---------------
Net change resulting from Class C
share transactions (281,387) $ (3,179,391) 89,752 $ 1,291,401
- ------------------------------------------------- ------------- --------------- ------------- ---------------
Net change resulting from
share transactions (308,252) (3,472,975) (2,293,214) (24,658,295)
- ------------------------------------------------- ------------- --------------- ------------- ---------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--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 may voluntarily choose to waive any portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The
FAS fee is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000 per
each additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan,
the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended
to result in the sale of the Fund's Class B and Class C shares. The Plan
provides that the Fund may incur distribution expenses up to .75 of 1% of
the average daily net assets of the B and C shares, annually, to compensate
FSC.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay
FSS up to .25 of 1% of daily average net assets of the Fund shares for the
period. This fee is to obtain certain services for shareholders and to
maintain shareholder accounts. FSS may voluntarily choose to waive a
portion of its fee. FSS can modify or terminate this voluntarily waiver at
any time at its sole discretion.
TRANSFER AGENT FEES--Federated Services Company ("FServ") serves as
transfer and dividend disbursing agent for the Fund. This fee is based on
the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES--Fserv also maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of the
Fund's average daily net assets for the period, plus out-of-pocket
expenses.
GENERAL--Certain of the Officers and Directors of the Fund are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended August 31, 1995, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
PURCHASES $ 253,545,085
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 233,843,091
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
Directors Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Richard B. Fisher
James E. Dowd President
Lawrence D. Ellis, M.D. J. Christopher Donahue
Richard B. Fisher Executive Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden Executive Vice President
Gregor F. Meyer John W. McGonigle
John E. Murray, Jr. Executive Vice President and Secretary
Wesley W. Posvar David M. Taylor
Marjorie P. Smuts Treasurer
Charles H. Field
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank,
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other government
agency. Investment in mutual funds involves investment risk, including possible
loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses and other
information.
[logo] FEDERATED SECURITIES CORP.
--------------------------------------------------------------------
Distributor
A Subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 531545101
Cusip 531545309
Cusip 531545200
8092606 (10/95) [RECYCLE LOGO]
APPENDIX
A. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text above it, which shows that an initial investment of $8,000 in
Liberty Utility Fund, Inc. Class A Shares on May 27, 1988 would have grown to
$17,297.. The "x" axis reflects the cost of investment, the "y" axis reflects
computation periods from 1988 to 1995, and the right margin reflects a total
investment range from $0 to $20,000. The chart further indicates the ending
market value attributable to principal, as well as the ending market value
attributable to reinvested income.
B. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text above it, which shows that an annual investment of $1,000 in
Liberty Utility Fund, Inc. Class A Shares beginning on May 27, 1988 would have
grown to $11,309.. The "x" axis reflects the cost of investment, the "y" axis
reflects computation periods from 1988 to 1995, and the right margin reflects a
total investment range from $0 to $12,000. The chart further indicates the
ending market value attributable to principal, as well as the ending market
