Federated Utility Fund, Inc.
(formerly, Liberty
Utility Fund, Inc.)
SEMI-ANNUAL REPORT
AUGUST 31, 1996
ESTABLISHED 1988
GROWTH AND INCOME
PRESIDENT'S MESSAGE
[Insert Graphic A representation here.]
Dear Shareholder:
I am pleased to present the Semi-Annual Report for Federated Utility Fund,
Inc.
This report covers the six-month period from March 1, 1996, through August
31, 1996. Linda Duessel, Vice President, Federated Management -- who
co-manages the fund with Christopher H. Wiles, Senior Vice President,
Federated Management -- discusses her outlook for the utility industry.
Following Linda's discussion are a complete listing of the fund's holdings
in good dividend-paying utilities and convertible securities, along with the
fund's financial statements.
Federated Utility Fund, Inc., was established in 1988, and has paid regular
dividends since inception, currently has assets totaling $1.6 billion, and
serves over 63,000 shareholders. The fund invests in more than 60 issues
spread across the electric, telecommunication, natural gas and international
utilities. To help offset interest rate risk, approximately 30% of the
fund's holdings are in securities which are less sensitive to U.S. interest
rate movements. The fund may be attractive to those investors who are
interested in income derived from good dividend-paying securities.
We did not expect that 1996 would repeat the strong performance seen in
1995. We are optimistic for the balance of the year and into 1997 as many of
the fund's holdings have increased their dividends.
As of June 1, 1996, Class F Shares were added to the fund.
Thank you for participating in the income and growth opportunities of
utilities through the fund's broadly diversified portfolio. Our outlook for
utilities is highly positive. Remember, reinvesting your monthly dividends
is a convenient way to build the value of your account -- and helps your
shares increase through the benefit of compounding.
As always, we welcome your comments and suggestions.
Sincerely,
[Insert Graphic B representation here.]
Richard B. Fisher
President
October 15, 1996
INVESTMENT REVIEW
[Graphic]
Linda A. Duessel
Vice President
Federated Management
[Graphic]
AFTER VERY STRONG PERFORMANCE IN CALENDAR YEAR 1995, WHEN THE FUND'S NET
ASSET VALUE ROSE FROM $10.54 TO $12.68,* THE UTILITY MARKET EXPERIENCED A
PULLBACK IN 1996. CAN YOU COMMENT?
Utility prices are sensitive to fluctuations in interest rates. Long-term
interest rates have risen and prices have fallen this year as investors
worried about the possibility that a strong economy would accelerate
inflation. Consequently, the long-term Treasury bond declined -11.34% as of
August 31, 1996. The S&P Utility Index** declined by -4.24% during this
period, which was actually a respectable relative performance.
[Graphic]
IN THIS ENVIRONMENT, HOW DID FEDERATED UTILITY FUND PERFORM?
For the six months ended August 31, 1996, the Federated Utility Fund Class A
Shares returned -0.19% based on net asset value, compared to a return of
- -1.61% for the S&P Utility Index.*** It should be noted that during this
period, Standard & Poor's removed telephone utilities from its utility index
and placed them in a separate S&P Communications Index.+ This index was down
5.14% since its inception on July 10, 1996. In this light, Federated Utility
Fund's flat performance was impressive.
[Graphic]
HAVE THE FUND'S INTERNATIONAL UTILITIES AND NON-UTILITY SECURITIES PROVIDED
A MEASURE OF DOWNSIDE PROTECTION DURING THE PERIOD?
Yes. International utilities have been big positive contributors to our
fund's performance during the period, proving the value of diversification
among non-U.S. holdings. For example, National Power, the United Kingdom's
large electric generating company, increased its dividend by 18% and paid a
large special dividend. Also, Telebras, the Brazilian telephone company,
enjoyed a 41.4% total return during the period.++
* Class A Shares.
** The Standard & Poor's Utility Index is an unmanaged index comprised of
forty different utilities that track daily changes in the price of stocks.
Investments cannot be made in an index.
*** 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. Total return
for the period based on offering price for Class A Shares, Class B Shares,
and Class C Shares was -5.65%, -6.02%, and -1.53%, respectively. Total
return based on offering price for Class F Shares from 6/01/96 inception
through 8/31/96 was -2.95%.
+ The S&P Communications Index was initiated on July 10, 1996 and holds 25
of the largest telecommunications stocks, including the regional bells, long
distance companies and cellular concerns.
++ Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing and
other financial standards.
The non-utility portion also served to help mitigate the interest rate risk
inherent in utilities. Most of our non-utility securities are convertible
bonds or convertible preferred stocks, which enjoy much of the upside moves
in the underlying common stocks while helping to provide downside protection
because of their handsome yields. Examples of these holdings include the
Aetna 6.25% convertible preferreds and the Altera 5.75% convertible bonds.
[Graphic]
HOW ARE THE FUND'S ASSETS CURRENTLY ALLOCATED?
The fund's assets are allocated as follows:
<TABLE>
<CAPTION>
SECTOR % OF PORTFOLIO # OF ISSUES
<S> <C> <C>
Electrics 35.40% 15
Telecommunications 20.96% 8
Natural Gas 11.07% 3
Non-Utility 21.67% 25
International Utilities 9.41% 10
</TABLE>
[Graphic]
AS WE APPROACH THE END OF 1996, WHAT IS YOUR OUTLOOK FOR UTILITIES?
Our outlook for utilities is bullish. Currently, the interest rate outlook
is positive as we see little evidence of inflation. Further, fundamentals
look good for utilities. Natural gas prices and demand remain strong heading
into the winter season, and electric utility deregulation is proceeding
slowly with generally utility-friendly proposals from a number of state
commissions.
Excitement has come to the utility industry with the continuation of merger
announcements between electric companies (recently Ohio Edison and Centerior
Energy) as well as electric/natural gas company mergers (Enron and Portland
General; Houston Industries and Noram Energy). Not only are these mergers
good for the competitive positioning of the companies, but for some of the
acquisition candidates these mergers are being proposed at healthy premiums
to the pre-announcement stock price.
Finally, utilities look inexpensive on a price and current yield basis
compared to the lofty general equity market. This is especially true for
telephone utilities that have declined considerably from their peak prices
early in 1996 and now appear to be rising strongly from their early
September lows. We have seen price improvement in MCI Communications Corp.,
Ameritech Corp., and Pacific Telesis Group, among others.
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
INITIAL INVESTMENT:
IF YOU HAD MADE AN INITIAL INVESTMENT OF $9,000 IN THE CLASS A SHARES OF
FEDERATED UTILITY FUND, INC. ON 5/27/88, REINVESTED YOUR DIVIDENDS AND
CAPITAL GAINS, AND DIDN'T REDEEM ANY SHARES, YOUR ACCOUNT WOULD BE WORTH
$21,385 ON 8/31/96. YOU WOULD HAVE EARNED AN 11.03% AVERAGE ANNUAL TOTAL
RETURN FOR THE 8-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.
[Graphic]
As of September 30, 1996, the Class A Shares' average annual one-year,
five-year, and since inception (5/27/88) total returns were 2.03%, 8.57% and
11.34% respectively. Class B Shares' average annual one-year, and since
inception (9/28/94) total returns were 1.30%, and 9.14% respectively. Class
C Shares' average annual one-year, and since inception (4/27/93) total
returns were 6.09% and 6.20% respectively. The Class F Shares' cumulative
since inception (6/1/96) total return was -1.97%.
* Total return represents the change in the value of an investment in Class
A Shares after reinvesting 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.
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
ONE STEP AT A TIME:
$1,000 INVESTED EACH YEAR FOR 8 YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL
GAINS) GREW TO $13,572.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of
Federated Utility Fund, Inc. on 5/27/88, reinvested your dividends and
capital gains, and didn't redeem any shares, you would have invested only
$9,000, but your account would have reached a total value of $13,572* by
8/31/96. You would have earned an average annual total return of 9.41%.
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!
[Graphic]
* No method of investing can guarantee a profit or protect against loss in
down markets. However, by investing regularly over time and buying shares at
various prices, investors can purchase more shares at lower prices. All
accumulated shares have the ability to pay income to the investor.
Because such a plan involves continuous investment, regardless of changing
price levels, the investor should consider whether or not to continue
purchases through periods of low price levels.
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 78.6%
CONSUMER DURABLES -- 1.3%
590,900 Ford Motor Co. $ 19,795,150
CONSUMER NON-DURABLES -- 2.1%
361,100 Philip Morris Cos., Inc. 32,408,725
ELECTRIC UTILITIES: CENTRAL -- 11.1%
1,484,500 CMS Energy Corp. 44,349,437
588,400 Cinergy Corp. 17,652,000
1,718,200 DPL, Inc. 40,592,475
1,416,100 Illinova Corp. 36,995,613
945,400 NIPSCO Industries, Inc. 34,979,800
Total 174,569,325
ELECTRIC UTILITIES: EAST -- 5.6%
1,297,900 DQE, Inc. 36,016,725
733,000 General Public Utility, Inc. 23,089,500
1,209,200 Peco Energy Co. 28,416,200
Total 87,522,425
ELECTRIC UTILITIES: SOUTH -- 14.3%
1,276,900 Duke Power Co. 59,695,075
1,388,900 FPL Group, Inc. 61,458,825
1,594,200 Southern Co. 36,068,775
1,408,200 TECO Energy, Inc. 33,620,775
834,700 Texas Utilities Co. 34,222,700
Total 225,066,150
ELECTRIC UTILITIES: WEST -- 4.4%
1,227,100 Pacificorp 24,695,388
1,516,000 Pinnacle West Capital Corp. 43,585,000
Total 68,280,388
</TABLE>
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
ENERGY MINERALS -- 0.5%
97,800 Exxon Corp. $ 7,958,475
FINANCE -- 3.1%
956,200 Meditrust, REIT 32,749,850
288,600 Mellon Bank Corp. 15,981,225
Total 48,731,075
MAJOR U.S. TELECOMMUNICATIONS -- 20.8%
1,109,000 AT&T Corp. 58,222,500
942,700 Ameritech Corp. 48,666,887
1,544,100 BellSouth Corp. 55,973,625
1,516,800 GTE Corp. 59,724,000
1,627,100 MCI Communications Corp. 40,880,887
979,000 Pacific Telesis Group 31,695,125
674,700 SBC Communications, Inc. 31,457,887
Total 326,620,911
NATURAL GAS DISTRIBUTION -- 4.7%
1,334,700 MCN Corp. 35,703,225
117,200 New Jersey Resources Corp. 3,354,850
1,152,200 Pacific Enterprises 34,421,975
Total 73,480,050
NON-U.S. UTILITIES -- 6.3%
445,100 CPT Telefonica del Peru S.A., Class B, ADR 10,404,213
181,100 Compania Telecomunicacion Chile, ADR 17,702,525
1,688,600 Iberdrola S.A. 15,243,603
541,800 Korea Electric Power Corp., ADR 11,513,250
1,053,310 National Power Co. PLC, ADR 25,806,095
968,100 STET-Societa Finanziaria Telefonica S.P.A. 2,335,434
207,000 Telecomunicacoes Brasileras, ADR 15,395,625
Total 98,400,745
</TABLE>
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
FOREIGN
CURRENCY
PAR AMOUNT
OR SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
OIL/GAS TRANSMISSION -- 4.1%
857,800 Enron Corp. $ 34,419,225
401,700 Panenergy Corp. 13,306,313
339,700 Williams Cos., Inc. (The) 16,942,538
Total 64,668,076
WATER SUPPLY -- 0.3%
196,600 American Water Works Co., Inc. 4,202,325
TOTAL COMMON STOCKS (IDENTIFIED COST $1,079,468,583) 1,231,703,820
CONVERTIBLE CORPORATE BONDS -- 7.7%
HEALTH CARE -- 0.9%
$ 15,040,000 Alza Corp., Conv. Bond, 5.00%, 5/1/2006 14,693,779
NON-U.S. UTILITIES -- 3.2%
16,070,000 Korea Electric Power Corp., Conv. Bond, 5.00%, 8/1/2001 16,311,050
17,150,000 (a) New World Infrastructure, Conv. Bond, 5.00%, 7/15/2001 17,643,063
16,975,000,000 Softe S.A., Conv. Bond, 4.25%, 7/30/1998 15,335,302
Total 49,289,415
TECHNOLOGY -- 3.6%
6,490,000 (a) 3Com Corp., Conv. Bond, 10.25%, 11/1/2001 10,424,173
15,850,000 (a) Altera Corp., Conv. Bond, 5.75%, 6/15/2002 17,271,904
11,540,000 Analog Devices, Inc., Conv. Bond, 3.50%, 12/1/2000 12,861,445
17,400,000 (a) Solectron Corp., Conv. Bond, 6.00%, 3/1/2006 15,988,164
Total 56,545,686
TOTAL CONVERTIBLE CORPORATE BONDS (IDENTIFIED COST $120,513,948) 120,528,880
</TABLE>
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS -- 12.3%
BASIC INDUSTRY -- 1.8%
801,100 Coeur d'Alene Mines Corp., Conv. Pfd., $1.49 $ 13,818,975
120,000 International Paper Co., Cumulative Conv. Pfd., $2.63 5,615,520
189,300 (a) International Paper Co., Cumulative Conv. Pfd., Series 144A, $2.63 8,858,483
Total 28,292,978
CABLE INDUSTRY -- 0.6%
424,800 Merrill Lynch & Co., Inc., STRYPES, Series Cox, 6.00% 8,867,700
ENERGY MINERALS -- 0.7%
473,900 Sun Co., Inc., Conv. Pfd., Series A, $1.80 11,669,788
FINANCE -- 4.6%
237,528 Aetna Services Inc., Conv. Pfd., 6.25% 16,508,196
156,400 Merrill Lynch & Co., Inc., STRYPES, Series SunAmerica, 7.25% 9,364,450
513,500 Merrill Lynch & Co., Inc., STRYPES, Series MGIC, $3.12 29,783,000
294,800 Salomon, Inc., DECS, Series FSA, 7.625% 8,364,950
107,600 Sunamerica, Inc., PERCS, Series E, $3.10 8,877,000
Total 72,897,596
OIL/GAS TRANSMISSION -- 2.3%
216,000 Noram Financing, Conv. Pfd., $3.13 13,392,000
275,000 Williams Cos., Inc. (The), Conv. Pfd., $3.50 22,137,500
Total 35,529,500
OTHER TELEPHONE/COMMUNICATIONS -- 0.1%
30,000 MFS Communications Company, Inc., Conv. Pfd., $2.68 2,160,000
SERVICES -- 2.2%
88,000 Alco Standard Corp., ACES, $5.04 7,491,000
608,300 Browning-Ferris Industries, Inc., ACES, $2.58 17,944,850
786,900 Hollinger International Publishing, Inc., Conv. Pfd., $.95 8,459,175
Total 33,895,025
TOTAL CONVERTIBLE PREFERRED STOCKS (IDENTIFIED COST $183,639,740) 193,312,587
</TABLE>
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(B)REPURCHASE AGREEMENT -- 1.1%
$ 16,940,000 BT Securities Corporation, 5.27%, dated 8/30/1996, due 9/3/1996
(at amortized cost) $ 16,940,000
TOTAL INVESTMENTS (IDENTIFIED COST $1,400,562,271)(C) $1,562,485,287
</TABLE>
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At August 31, 1996, these securities
amounted to $70,185,787 which represents 4.5% 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
$1,400,681,861. The net unrealized appreciation of investments on a
federal tax basis amounts to $161,803,426 which is comprised of
$201,170,071 appreciation and $39,366,645 depreciation at
August 31, 1996.
Note: The categories of investments are shown as a percentage of net assets
($1,567,875,283) at August 31, 1996.
The following acronyms are used throughout this portfolio:
ACES -- Adjustable Convertible Extendable Securities
ADR -- American Depositary Receipt
DECS -- Dividend Enhanced Convertible Stock
PERCS -- Preferred Equity Redemption Cumulative Stock
PLC -- Public Limited Company
REIT -- Real Estate Investment Trust
STRYPES -- Structured Yield Product Exchangeable for Common Stock
(See Notes which are an integral part of the Financial Statements)
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $1,400,562,271 and tax $ 1,562,485,287
cost $1,400,681,861)
Cash 75,848
Income receivable 7,405,543
Receivable for investments sold 5,975,512
Receivable for shares sold 1,159,089
Total assets 1,577,101,279
LIABILITIES:
Payable for investments purchased $4,989,257
Payable for shares redeemed 2,656,496
Income distribution payable 956,230
Accrued expenses 624,013
Total liabilities 9,225,996
Net Assets for 129,056,883 shares outstanding $ 1,567,875,283
NET ASSETS CONSIST OF:
Paid in capital $ 1,382,403,138
Net unrealized appreciation of investments 161,924,953
Accumulated net realized gain on investments 28,085,955
Distributions in excess of net investment income (4,538,763)
Total Net Assets $ 1,567,875,283
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($734,013,407 / 60,412,491 shares outstanding) $12.15
Offering Price Per Share (100/94.50 of $12.15)* $12.86
Redemption Proceeds Per Share $12.15
CLASS B SHARES:
Net Asset Value Per Share ($90,091,885 / 7,416,132 shares outstanding) $12.15
Offering Price Per Share $12.15
Redemption Proceeds Per Share (94.50/100 of $12.15)** $11.48
CLASS C SHARES:
Net Asset Value Per Share ($60,699,025 / 4,994,516 shares outstanding) $12.15
Offering Price Per Share $12.15
Redemption Proceeds Per Share (99.00/100 of $12.15)** $12.03
CLASS F SHARES:
Net Asset Value Per Share ($683,070,966 / 56,233,744 shares outstanding) $12.15
Offering Price Per Share (100/99.00 of $12.15)*** $12.27
Redemption Proceeds Per Share (99.00/100 of $12.15)** $12.03
</TABLE>
* See "Investing in Class A Shares."
** See "Contingent Deferred Sales Charge" in the Prospectus.
*** See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 23,719,881
Interest 2,811,895
Total income 26,531,776
EXPENSES:
Investment advisory fee $ 4,848,670
Administrative personnel and services fee 488,746
Custodian fees 92,903
Transfer and dividend disbursing agent fees and expenses 805,622
Directors'/Trustees' fees 5,704
Auditing fees 12,604
Legal fees 2,944
Portfolio accounting fees 95,813
Distribution services fee -- Class B Shares 333,251
Distribution services fee -- Class C Shares 242,953
Shareholder services fee -- Class A Shares 976,081
Shareholder services fee -- Class B Shares 111,084
Shareholder services fee -- Class C Shares 80,984
Shareholder services fee -- Class F Shares* 448,074
Share registration costs 156,216
Printing and postage 109,572
Insurance premiums 9,660
Taxes 48,852
Miscellaneous 7,728
Total expenses 8,877,461
Waivers --
Waiver of investment advisory fee $ (838,185)
Waiver of shareholder services fee -- Class A Shares (23,426)
Waiver of shareholder services fee -- Class C Shares (564)
Waiver of shareholder services fee -- Class F Shares* (53,768)
Total waivers (915,943)
Net expenses 7,961,518
Net investment income 18,570,258
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 28,207,858
Net change in unrealized appreciation of investments 36,628,486
Net realized and unrealized gain on investments 64,836,344
Change in net assets resulting from operations $ 83,406,602
</TABLE>
* For the period ended from June 1, 1996 (date of initial public
investments) to August 31, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
(UNAUDITED) ENDED
AUGUST 31, FEBRUARY 29,
1996 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 18,570,258 $ 35,422,847
Net realized gain on investments ($28,207,858 and $35,892,535 respectively,
as computed for federal tax purposes) 28,207,858 47,885,694
Net change in unrealized appreciation of investments 36,628,486 88,054,561
Change in net assets resulting from operations 83,406,602 171,363,102
NET EQUALIZATION (DEBITS) -- (7,992) (318,431)
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income
Class A Shares (15,504,127) (31,171,022)
Class B Shares (1,296,658) (1,826,388)
Class C Shares (934,629) (2,080,469)
Class F Shares* (5,311,350) --
Distributions in excess of net investment income
Class A Shares -- (381,611)
Class B Shares -- --
Class C Shares -- (30,642)
Class F Shares* -- --
Distributions from net realized gains on investments
Class A Shares (23,260,919) --
Class B Shares (2,641,341) --
Class C Shares (1,944,579) --
Class F Shares* -- --
Change in net assets resulting from distributions to shareholders (50,893,603) (35,490,132)
SHARE TRANSACTIONS --
Proceeds from sale of shares 701,447,994 149,459,995
Net asset value of shares issued to shareholders in payment of 42,105,959 26,442,124
distributions declared
Cost of shares redeemed (177,384,214) (162,110,279)
Change in net assets resulting from share transactions 566,169,739 13,791,840
Change in net assets 598,674,746 149,346,379
NET ASSETS:
Beginning of period 969,200,537 819,854,158
End of period $ 1,567,875,283 $ 969,200,537
</TABLE>
* For the period ended June 1, 1996 (date of initial public investments) to
August 31, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED UTILITY FUND, INC.
(FORMERLY, 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,
1996 1996 1995 1994 1993 1992 1991 1990 1989 1988(A)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $12.79 $10.98 $12.24 $12.29 $11.03 $10.13 $ 9.82 $ 9.15 $ 9.15 $ 9.30
INCOME FROM
INVESTMENT
OPERATIONS
Net investment income 0.18 0.48 0.55 0.60 0.58 0.68 0.71 0.71 0.72 0.55
Net realized and
unrealized gain
(loss) on (0.19) 1.82 (0.69) -- 1.44 0.92 0.43 0.79 (0.02) (0.31)
investments
Total from invest-
ment operations (0.01) 2.30 (0.14) 0.60 2.02 1.60 1.14 1.50 0.70 0.24
LESS DISTRIBUTIONS
Distributions from
net investment income (0.25) (0.48) (0.66) (0.61) (0.66) (0.64) (0.70) (0.76) (0.70) (0.39)
Distributions from
net realized gain on
investments (0.38) -- (0.12) (0.04) (0.10) (0.06) (0.13) (0.07) -- --
Distributions in
excess of net
investment income(b) -- (0.01) -- -- -- -- -- -- -- --
Tax return of
capital distribution -- -- (0.34) -- -- -- -- -- -- --
Total distributions (0.63) (0.49) (1.12) (0.65) (0.76) (0.70) (0.83) (0.83) (0.70) (0.39)
NET ASSET
VALUE, END
OF PERIOD $12.15 $12.79 $10.98 $12.24 $12.29 $11.03 $10.13 $ 9.82 $ 9.15 $ 9.15
TOTAL RETURN(C) (0.19%) 21.47% (0.98%) 4.93% 19.26% 16.48% 12.41% 16.72% 8.00% 3.25%
RATIOS TO AVERAGE
NET ASSETS
Expenses 1.15%* 1.14% 1.10% 1.12% 1.04% 1.05% 1.02% 1.02% 1.00% 1.56%*
Net investment income 2.94%* 4.09% 4.95% 4.81% 5.98% 6.31% 7.41% 7.17% 8.04% 8.24%*
Expense waiver(d) 0.13%* 0.15% 0.21% 0.17% 0.01% 0.19% 0.51% 0.74% 0.40% 0.38%*
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $734,013 $816,687 $742,274 $877,513 $739,511 $375,656 $125,599 $48,050 $410,575 $52,947
Average commission
rate paid $0.0079 -- -- -- -- -- -- -- -- --
Portfolio turnover 23% 76% 55% 24% 18% 35% 45% 37% 34% 17%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from June 5, 1987 (date of initial
public investment) to February 29, 1988.
(b) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
AUGUST 31, FEBRUARY 28 OR 29,
1996 1996 1995(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.77 $10.98 $10.92
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.15 0.43 0.22
Net realized and unrealized gain (loss) on investments (0.20) 1.77 (0.04)
Total from investment operations (0.05) 2.20 0.18
LESS DISTRIBUTIONS
Distributions from net investment income (0.19) (0.41) (0.08)
Distributions from net realized gain on investment (0.38) -- --
Tax return of capital distribution -- -- (0.04)
Total distributions (0.57) (0.41) (0.12)
NET ASSET VALUE, END OF PERIOD $12.15 $12.77 $10.98
TOTAL RETURN(B) (0.53%) 20.45% 2.16%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.91%* 1.90% 1.87%*
Net investment income 2.22%* 3.19% 4.53%*
Expense waiver(c) 0.13%* 0.14% 0.25%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $90,092 $85,650 $18,780
Average commission rate paid $0.0079 -- --
Portfolio turnover 23% 76% 55%
</TABLE>
* Computed on an annualized basis.
(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 charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
AUGUST 31, FEBRUARY 28 OR 29,
1996 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.77 $10.98 $12.23 12.27
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.14 0.39 0.42 0.48
Net realized and unrealized gain (loss) on investments (0.19) 1.80 (0.64) (0.07)
Total from investment operations (0.05) 2.19 (0.22) 0.41
LESS DISTRIBUTIONS
Distributions from net investment income (0.19) (0.39) (0.60) (0.41)
Distributions from net realized gain on investment (0.38) -- (0.13) (0.04)
Distributions in excess of net investment income(b) -- (0.01) -- --
Tax return of capital distribution -- -- (0.30) --
Total distributions (0.57) (0.40) (1.03) (0.45)
NET ASSET VALUE, END OF PERIOD $12.15 $12.77 $10.98 $12.23
TOTAL RETURN(C) (0.54%) 20.43% (1.66%) 3.28%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.90%* 1.87% 1.86% 1.87%*
Net investment income 2.18%* 3.35% 4.19% 4.02%*
Expense waiver(d) 0.13%* 0.17% 0.21% 0.17%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $60,699 $66,864 $58,800 $64,409
Average commission rate paid $0.0079 -- -- --
Portfolio turnover 23% 76% 55% 24%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 30, 1993 (date of initial
public investment) to February 28, 1994.
(b) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
FINANCIAL HIGHLIGHTS -- CLASS F SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
(UNAUDITED)
AUGUST 31,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.37
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.10
Net realized and unrealized gain (loss) on investments (0.23)
Total from investment operations (0.13)
LESS DISTRIBUTIONS
Distributions from net investment income (0.09)
NET ASSET VALUE, END OF PERIOD $12.15
TOTAL RETURN(B) (1.03%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.12%*
Net investment income 3.04%*
Expense waiver(c) 0.17%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $683,071
Average commission rate paid $0.0079
Portfolio turnover 23%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from June 1, 1996 (date of initial
public investment) to August 31, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996 (UNAUDITED)
1. ORGANIZATION
Federated 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 four classes of shares: Class
A Shares, Class B Shares, Class C Shares and Class F Shares. The primary
investment objective of the Fund is current income and long-term growth of
income.
The Fund's Board of Directors approved a change in the name of the Fund as
follows:
<TABLE>
<CAPTION>
EFFECTIVE DATE NEW NAME
<S> <S>
March 30, 1996 Federated Utility Fund, Inc.
</TABLE>
Effective June 1, 1996 the Fund added Class F Shares. Effective June 1, 1996
the assets of Fortress Utility Fund, Inc. were acquired by the Fund in
exchange for Class F 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 -- Listed corporate bonds and other fixed income and
asset-backed securities and unlisted securities and private placement
securities are valued at the mean of the latest bid and asked price as
provided by an independent pricing service. Listed equity securities are
valued at the last sale price reported on a national securities exchange.
Short-term securities are valued at the prices provided by an independent
pricing service. However, short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. 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.
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.
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the
"Directors"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS -- Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the "Code").
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
Distributions in excess of net investment income were the result of certain
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.
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.
EQUALIZATION -- The Fund follows the accounting practice known as
equalization. With equalization, a portion of the proceeds from sales and
costs of redemptions of fund shares (equivalent, on a per share basis, to
the amount of undistributed net investment income on the date of the
transaction) is credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share is unaffected by
sales or redemptions of fund shares.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
RESTRICTED SECURITIES -- Restricted securities are securities that may only
be resold upon registration under federal securities laws or in transactions
exempt from such registration. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the
issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Directors. The Fund will not incur any
registration costs upon such resales.
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
Additional information on each restricted security held at August 31, 1996
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
3Com Corp. 11/30/95-4/10/96 $ 10,151,052
Altera Corp. 3/21/96-6/7/96 19,487,009
International Paper Co. 11/30/95-12/8/95 8,591,639
New World Infrastruture 5/15/96-5/15/96 17,150,000
Solectron Corp. 2/15/96-3/15/96 17,341,310
</TABLE>
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER -- Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At August 31, 1996, par value shares ($ 0.001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A Shares 250,000,000
Class B Shares 250,000,000
Class C Shares 250,000,000
Class F Shares 250,000,000
Total 1,000,000,000
</TABLE>
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, 1996 FEBRUARY 29, 1996
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,899,593 $ 23,768,902 5,648,312 $ 67,001,561
Shares issued to shareholders in payment of
distributions declared 2,594,004 32,670,032 2,093,790 23,963,889
Shares redeemed (7,914,130) (98,975,698) (11,487,559) (134,618,367)
Net change resulting from Class A
Share transactions (3,420,533) $ (42,536,764) (3,745,457) $ (43,652,917)
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, 1996 FEBRUARY 29, 1996
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,228,917 $ 15,353,939 5,569,457 $ 65,886,136
Shares issued to shareholders in payment of
distributions declared 261,648 3,294,714 97,013 1,137,632
Shares redeemed (779,253) (9,707,202) (672,672) (8,251,465)
Net change resulting from Class B
Share transactions 711,312 $ 8,941,451 4,993,798 $ 58,772,303
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, 1996 FEBRUARY 29, 1996
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 381,063 $ 4,769,123 1,400,958 $ 16,572,299
Shares issued to shareholders in payment of
distributions declared 191,292 2,409,902 115,628 1,340,603
Shares redeemed (811,910) (10,125,796) (1,640,135) (19,240,448)
Net change resulting from Class C
Share transactions (239,555) $(2,946,771) (123,549) $ (1,327,546)
<CAPTION>
PERIOD ENDED YEAR ENDED
AUGUST 31, 1996(A) FEBRUARY 29, 1996
CLASS F SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 60,656,703 $657,556,030 -- $ --
Shares issued to shareholders in payment of
distributions declared 304,292 3,731,311 -- --
Shares redeemed (4,727,251) (58,575,518) -- --
Net change resulting from Class F
share transactions 56,233,744 $ 602,711,823 -- --
Net change resulting from
Share transactions 53,284,968 $ 566,169,739 1,124,792 $13,791,840
</TABLE>
(a) For the period from June 1, 1996 (date of initial public investment) to
August 31, 1996.
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
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 0.75% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive any portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during
the period of the Administrative Services Agreement shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan,
the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended
to result in the sale of the Fund's Class B and Class C shares. The Plan
provides that the Fund may incur distribution expenses according to the
following schedule annually, to compensate FSC.
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE
SHARE CLASS DAILY NET ASSETS OF CLASS
<S> <C>
Class B Shares .75%
Class C Shares .75%
</TABLE>
The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
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 average daily net assets of the Fund shares for the period.
The fee paid to FSS is used to finance certain services for shareholders and
to maintain shareholder accounts. FSS may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary waiver at any
time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ through
its subsidiary, Federated Shareholder Services Company ("FSSC") serves as
transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is
based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's
average daily net assets for the period, plus out-of-pocket expenses.
FEDERATED UTILITY FUND, INC.
(FORMERLY, LIBERTY UTILITY FUND, INC.)
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
period ended August 31, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $305,996,856
SALES $220,513,183
</TABLE>
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr.
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
S. Elliott Cohan
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only
when preceded or accompanied by the fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses and other
information.
Federated Investors
[Graphic]
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
[Graphic]
Cusip 314286105
Cusip 314286204
Cusip 314286303
Cusip 314286402
8092606 (10/96)
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
$9,000 in the Class A Shares of Federated Utility Fund, Inc. (formerly
Liberty Utility Fund, Inc.), on June May 27, 1988, would have grown to
$21,385 by August 31, 1996. The "x" axis reflects the cost of investment,
the "y" axis reflects computation periods from 1988 to 1996, and the right
margin reflects a total investment range from $0 to $24,000. The chart
further indicates the ending market value attributable to principal, as
well as the ending market value attributable to capital gains and
reinvested dividends.
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 investment of $1,000
annually, each year for 8 years, in the Class A Shares of Federated Utility
Fund, Inc. (formerly Liberty Utility Fund, Inc.), on June May 27, 1988,
would have grown to $13,572 by August 31, 1996. The "x" axis reflects the
cost of investment, the "y" axis reflects computation periods from 1988 to
1996, and the right margin reflects a total investment range from $0 to
$14,000. The chart further indicates the ending market value attributable
to principal, as well as the ending market value attributable to capital
gains and reinvested dividends.
