PRESIDENT'S MESSAGE
Dear Investor:
I'm pleased to present the Semi-Annual Report to Stockholders for Liberty
Term Trust, Inc. - 1999 for the six-month period from January 1, 1996,
through June 30, 1996. The Report begins with a commentary by the fund's
portfolio manager and is followed by a complete listing of the fund's
investments and the financial statements.
At the end of the reporting period, 74.5% of the fund's portfolio consisted
of U.S. Treasury and U.S. government agency mortgage-backed securities. The
remainder of the portfolio was invested in municipal securities, mutual fund
issues, an asset-backed security and a repurchase agreement.
Over the reporting period, the fund paid dividends of $0.19 per share. At
the end of the reporting period, total assets stood at $43.8 million, while
the fund's net asset value per share was $8.38.
Shares are actively traded on the New York Stock Exchange under the symbol
LTT, and can be purchased through your investment representative. Thank you
for your confidence in Liberty Term Trust, Inc. - 1999. Your comments or
suggestions are always welcome.
Sincerely,
[Graphic]
Richard B. Fisher
President
August 15, 1996
INVESTMENT REVIEW
The expanding U.S. economy during the first six months of 1996 made for a
challenging time for U.S. bond investors as interest rates increased, on
average, one percent across the yield curve. The interest rate sensitive
sectors of the economy led the charge as manufacturing, retail, and housing
posted strong numbers. These sectors in combination with strong labor growth
raised the question of whether the Federal Reserve Board would react by
tightening monetary policy.
During this time period, the performance in the mortgage market was stellar.
Positive factors leading to solid mortgage market performance included
limited new mortgage origination, lower prepayment activity, investors'
desire for incremental yield, and tight corporate spreads. During the six
month semi-annual reporting period the fund continued its overweight in
mortgage-backed securities as well as its share repurchase program. During
the six month period, the fund repurchased 307,700 shares, 5.9% of those
outstanding. The fund intends to continue repurchasing shares offered at a
discount to net asset value as a means of attempting to increase shareholder
value. Transaction activity also included purchases of other target term
trusts with comparable investment objectives which were selling at 10%-15%
discounts to net asset value.
Given the events in the bond market over the last several years, the fund
has been unable to recapture the net asset value highs of 1993. A
combination of unprecedented mortgage prepayments in 1993 and a severe bear
market in fixed income securities in 1994 caused the fund and other term
trusts investing in mortgage-backed securities to realize significant
losses. Although it will be difficult for the fund to meet its investment
objectives, the fund will focus its efforts on returning principal to
investors by December 31, 1999, while pursuing income consistent with
meeting this goal. The fund's investment adviser will continue to review the
fund's investment policies and limitations and may recommend further changes
that, in the adviser's opinion, could enhance the fund's ability to offset
its current realized losses.
An Annual Meeting of the Stockholders of Liberty Term Trust, Inc. - 1999 was
held on May 16, 1996. On March 20, 1996, the record date for stockholders
voting at the meeting, there were 5,625,018 total outstanding shares. The
following items were considered by the stockholders and the results of their
voting were as follows:
<TABLE>
<CAPTION>
WITHHELD
AUTHORITY
AGENDA FOR AGAINST ABSTAIN TO VOTE
<C> <S> <C> <C> <C> <C>
1. Election of Class III
Directors*
John F. Donahue 4,060,755 0 0 102,518
Thomas G. Bigley 4,060,755 0 0 102,518
Edward L. Flaherty, Jr. 4,060,755 0 0 102,518
Gregor F. Meyer 4,060,755 0 0 102,518
John E. Murray, Jr. 4,060,755 0 0 102,518
</TABLE>
<TABLE>
<C> <S>
2. To ratify the selection by the Board of Directors of the firm of Ernst & Young LLP
as Independent Auditors for the fund.
</TABLE>
<TABLE>
<C> <S> <C> <C> <C> <C>
4,077,734 41,847 43,691,750 0
</TABLE>
* The following Directors of the fund continued their terms as Directors of
the fund: John T. Conroy, Jr., William J. Copeland, J. Christopher Donahue,
James E. Dowd, Lawrence D. Ellis, M.D., Peter E. Madden, Wesley W. Posvar
and Marjorie P. Smuts.
LIBERTY TERM TRUST, INC. - 1999
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING* VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL OBLIGATIONS -- 11.2%
PENNSYLVANIA -- 2.7%
$ 1,400,000 Allegheny County, PA, Sanitary Authority Sewer
Revenue Bonds, Series A, 12/1/1999 AAA $ 1,200,878
TEXAS -- 3.0%
1,500,000 Austin, TX, Capital Appreciation Refunding &
Improvement LT GO Bonds (FGIC Insured), 9/1/1999 AAA 1,298,325
UTAH -- 5.5%
2,770,000 Utah Associated Municipal Power Systems Revenue
Bonds, (Hunter Project)/(AMBAC Insured), 7/1/1999 AAA 2,413,667
TOTAL LONG-TERM MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $4,807,438) 4,912,870
MUTUAL FUND ISSUES -- 6.7%
60,000 Blackrock 1999 Term Trust, Inc. -- 510,000
52,500 Blackrock 2001 Term Trust, Inc. -- 400,312
150,000 Hyperion 1999 Term Trust, Inc. -- 956,250
125,000 Income Opportunities Fund 1999 -- 1,062,500
TOTAL MUTUAL FUND ISSUES (IDENTIFIED COST $2,934,375) 2,929,062
U.S. GOVERNMENT OBLIGATIONS -- 74.5%
FEDERAL HOME LOAN MORTGAGE CORP. -- 6.3%
2,748,888 8.00%, 10/1/2025 -- 2,775,992
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 21.6%
5,155,852 6.50%, 2/1/2009 -- 5,010,457
10,000,000 FNR 93-257C, 0%, (Principal only), 6/25/2023 -- 4,458,100
Total 9,468,557
</TABLE>
LIBERTY TERM TRUST, INC. - 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING* VALUE
<C> <S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 35.7%
$ 11,083,243 7.00%, 3/15/2026 -- $ 10,632,820
5,046,363 7.50%, 4/15/2026 -- 4,982,577
Total 15,615,397
U.S. TREASURY NOTE -- 10.9%
4,800,000 6.125%, 7/31/2000 -- 4,748,256
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $33,254,890) 32,608,202
COLLATERALIZED MORTGAGE OBLIGATION -- 6.6%
3,000,000 Structured Asset Securities Corp., 1996-CFL, Class A1C,
5.94%, 2/25/2028 (IDENTIFIED COST $3,000,060) AAA 2,887,500
(A)REPURCHASE AGREEMENT -- 0.8%
365,000 BT Securities Corporation, 5.50%, dated 6/28/1996,
due 7/1/1996 (AT AMORTIZED COST) -- 365,000
TOTAL INVESTMENTS (IDENTIFIED COST $44,361,763)(B) $ 43,702,634
</TABLE>
(a) 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.
(b) The cost of investments for federal tax purposes amounts to $44,361,763.
The net unrealized depreciation of investments on a federal tax basis
amounts to $659,129 which is comprised of $194,112 appreciation and
$853,241 depreciation at June 30, 1996.
* See Notes to Portfolio of Investments on page 5. Current credit ratings
are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($43,805,504) at June 30, 1996.
The following acronyms are used throughout this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation
FGIC -- Financial Guaranty Insurance Company
GO -- General Obligation
LT -- Limited Tax
(See Notes which are an integral part of the Financial Statements)
LIBERTY TERM TRUST INC. INC. - 1999
NOTES TO PORTFOLIO OF INVESTMENTS
The municipal bonds rated by Moody's Investors Service, Inc. ("Moody's") in
which the fund may invest are Aaa, Aa, and A. Municipal bonds rated Aaa are
judged to be of the "best quality." The rating Aa is assigned to municipal
bonds which are of "high quality by all standards," but as to which margins
of protection or other elements make long-term risks appear somewhat larger
than Aaa-rated municipal bonds. The Aaa and Aa-rated municipal bonds
comprise what are generally known as "high-grade" bonds." Municipal bonds
which are rated A by Moody's possess many favorable investment attributes
and are considered "upper medium grade obligations." Factors giving security
to principal and interest of A-rated municipal bonds are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future. The letter ratings carry numerical modifiers with
1 indicating the higher end of the rating category, 2 indicating the
mid-range, and 3 indicating the lower end of the rating category.
Moody's highest rating for state and municipal short-term securities if
MIG1/VMIG1. Short-term municipal securities rated MIG1/VMIG1 are of the best
quality. They have strong protection from established cash flows of funds
for their servicing or have established a broad-based access to the market
for refinancing or both. The VMIG1 rating denotes that the security has a
variable rate and is payable on demand.
The municipal bonds rated by Standard & Poor's Ratings Group (Standard &
Poor's) in which the fund may invest are AAA, AA, and A. Municipal bonds
rated AAA are "obligations of the highest quality." The rating of AA is
accorded issues with investment characteristics "only slightly less marked
than those of the prime quality issues." The category of A describes "the
third strongest capacity for payment of debt service." Principal and
interest payments on bonds in this category are regarded as safe. It differs
from the two higher ratings because with respect to general obligation bonds
there is some weakness, either in the local economic base, in debt burden,
in the balance between revenues and expenditures, or in quality of
management. Under certain adverse circumstances, any one such weakness might
impair the ability of the issuer to meet debt obligations at some future
date. With respect to revenue bonds, debt service coverage is good, but not
exceptional. Stability of the pledge revenues could show some variations
because of increased competition or economic influences on revenues. Basic
security provisions, while satisfactory, are less stringent. These ratings
may be modified by the addition of a plus or minus sign to show relative
standing with the major categories.
NR indicates that the bonds are not currently rated by Moody's or Standard &
Poor's; however, management considers them to be of good quality.
Bonds for which the security depends upon the completion of some act or the
fulfillment of some condition are rated conditionally.
LIBERTY TERM TRUST, INC. - 1999
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $44,361,763) $ 43,702,634
Cash 4,948
Income receivable 191,659
Other assets 142,662
Total assets 44,041,903
LIABILITIES:
Income distribution payable $ 172,495
Payable for daily variation margin 58,219
Accrued expenses 5,685
Total liabilities 236,399
NET ASSETS for 5,227,118 shares outstanding $ 43,805,504
NET ASSETS CONSIST OF:
Paid in capital $ 50,769,365
Net unrealized depreciation of investments and
futures contracts (828,490)
Accumulated net realized loss on investments and
futures contracts (6,534,269)
Undistributed net investment
income 398,898
Total Net Assets $ 43,805,504
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$43,805,504 / 5,227,118 shares outstanding $8.38
</TABLE>
(See Notes which are an integral part of the Financial Statements)
LIBERTY TERM TRUST, INC. - 1999
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 42,076
Interest 1,458,575
Total income 1,500,651
EXPENSES:
Investment advisory fee $ 112,316
Administrative personnel and services fee 62,158
Custodian fees 10,429
Transfer and dividend disbursing agent fees and expenses 13,418
Directors'/Trustees' fees 3,914
Auditing fees 8,736
Legal fees 1,973
Portfolio accounting fees 23,433
Share registration costs 121
Printing and postage 11,832
Insurance premiums 2,184
Taxes 2,730
Miscellaneous 13,407
Total expenses 266,651
Deduct -- Waiver of investment advisory fee (63,495)
Net expenses 203,156
Net investment income 1,297,495
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS:
Net realized gain on investments and futures contracts 465,842
Net change in unrealized appreciation of investments and futures contracts (1,977,666)
Net realized and unrealized loss on investments and futures contracts (1,511,824)
Change in net assets resulting from operations $ (214,329)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
LIBERTY TERM TRUST, INC. - 1999
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 1,297,495 $ 2,822,610
Net realized gain (loss) on investments and futures contracts
($465,842 net gain and $992,239 net loss, respectively, as
computed for federal tax purposes) 465,842 568,549
Net change in unrealized appreciation (depreciation) and
futures contracts (1,977,666) 2,261,435
Change in net assets resulting from operations (214,329) 5,652,594
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (992,802) (2,473,079)
SHARE TRANSACTIONS -- Cost of shares reacquired from shareholders (2,344,537) (673,763)
Change in net assets resulting from share transactions (2,344,537) (673,763)
Change in net assets (3,551,668) 2,505,752
NET ASSETS:
Beginning of period 47,357,172 44,851,420
End of period (including undistributed net investment income
of $398,898 and $94,205, respectively) $ 43,805,504 $ 47,357,172
</TABLE>
(See Notes which are an integral part of the Financial Statements)
LIBERTY TERM TRUST, INC. - 1999
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED DECEMBER 31,
JUNE 30, 1996 1995 1994 1993 1992(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.56 $ 7.97 9.10 $ 9.09 $ 9.50
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.25 0.50 0.66 0.78 0.60
Net realized and unrealized gain
(loss) on investments (0.24) 0.53 (1.19) (0.02) (0.42)
Total from investment operations 0.01 1.03 (0.53) 0.76 0.18
LESS DISTRIBUTIONS
Distributions from net investment income (0.19) (0.44) (0.60) (0.75) (0.59)
NET ASSET VALUE, END OF PERIOD $ 8.38 $ 8.56 7.97 $ 9.10 $ 9.09
MARKET VALUE, PER SHARE END OF PERIOD $ 7.38 $ 7.38 7.13 $ 8.63 $10.25
TOTAL INVESTMENT RETURN(B)
Based on net asset value per share 0.08% 12.92% (6.20%) 8.73% 1.75%
Based on market value per share 2.57% 9.68% (10.43%) (8.49%) 8.90%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.90%* 0.90% 0.90% 0.90% 0.90%*
Net investment income 5.74%* 6.07% 7.83% 8.46% 8.65%*
Expense waiver/reimbursement(c) 0.28%* 0.25% 0.24% 0.40% 0.18%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $43,806 $47,357 $44,851 $51,175 $51,132
Average commission rate paid $0.0500 -- -- -- --
Portfolio Turnover 111% 238% 393% 402% 164%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 4, 1992 (date of initial
public investment) to December 31, 1992.
(b) Total return based on market value per share is calculated using
purchase of common stock at the current market price on the first day and
sale at the current market price as of the last day of the period, and
reinvestment of all dividends and distributions at prices that were
obtained by the fund's dividend reinvestment plan. Total return based on
net asset value per share is calculated using purchase of common stock
at the current net asset value on the first day and a sale at the net
asset value as of the last day of the period, and reinvestment of all
dividends and distributions at prices that were obtained by the fund's
dividend reinvestment plan.
(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)
LIBERTY TERM TRUST, INC. - 1999
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)
1. ORGANIZATION
Liberty Term Trust, Inc. - 1999 (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
closed-end management investment company. The investment objective of the
Fund is to pursue high monthly income and seeks to return full value of the
principal of the shares in the year 1999.
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 -- Municipal bonds are valued by an independent
pricing service, taking into consideration yield, liquidity, risk, credit
quality, coupon, maturity, type of issue, and any other factors or market
data the pricing service deems relevant. U.S. government securities, are
generally valued at the mean of the latest bid and asked price as furnished
by an independent pricing service. Investments in Closed-End Investment
Companies 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. Investments
in other open-end regulated investment companies are valued at net asset
value.
REPURCHASE AGREEMENTS -- It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System, or to have segregated within the custodian bank's
vault, all securities held as collateral under repurchase agreement
transactions. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals the
repurchase price to be paid under the repurchase agreement 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 -- 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.
LIBERTY TERM TRUST, INC. - 1999
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.
At December 31, 1995, the Fund, for federal tax purposes, had a capital loss
carryforward of $6,986,606, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire if the Fund liquidates as planned on December 31,
1999, or as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<C> <C>
2000 $ 971,459
2002 5,022,908
2003 992,239
</TABLE>
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.
FUTURES CONTRACTS -- The Fund purchases U.S. government securities futures
contracts to hedge fluctuations in the market value of certain portfolio
securities. Upon entering into U.S. government securities futures contracts
with a broker, the Fund is required to deposit in a segregated account a
specified amount of cash or U.S. government securities. Futures contracts
are valued daily and unrealized gains or losses are recorded in a "variation
margin" account. Daily, the Fund receives from or pays to the broker a
specified amount of cash based upon changes in the variation margin account.
When a contract is closed, the Fund recognizes a realized gain or loss. For
the period ended June 30, 1996, the Fund had realized gains on future
contracts of $238,709.
At June 30, 1996, the Fund had outstanding futures contracts as set forth
below:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION CONTRACTS TO TOTAL FACE APPRECIATION
DATE DELIVER VALUE POSITION (DEPRECIATION)
<S> <C> <C> <C> <C>
September 1996 81 U.S. T-Note $8,539,211 Long ($168,289)
</TABLE>
Futures contracts have market risks, including the risk that the change in
the value of the contract may not correlate with changes in the value of the
underlying securities.
DOLLAR ROLL TRANSACTIONS -- The Fund enters into dollar roll transactions,
with respect to mortgage securities issued by GNMA, FNMA and FHLMC, in which
the Fund sells mortgage securities to financial institutions and
simultaneously agrees to accept substantially similar (same type, coupon and
maturity) securities at a later date at an agreed upon price. Dollar roll
transactions are short-term financing arrangements which will not exceed
twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the
Fund's current yield and total return.
LIBERTY TERM TRUST, INC. - 1999
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 June 30, 1996, there were 1,000,000,000 shares of $ 0.001 par value
capital stock authorized. The Fund purchased 307,700 shares for the six
months ended June 30, 1996, at an average price per share of $7.60 and a
weighted average discount of 9.56%. The Fund purchased 90,200 shares during
the year ended December 31, 1995, at an average price per share of $ 7.49
and a weighted average discount of 12.36%.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Advisers, the Fund's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to 0.50% 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.
Kathleen M. Foody-Malus has been the Fund's portfolio manager since June
1994. Ms. Foody-Malus joined Federated Investors in 1983 and has been a Vice
President of the Fund's investment adviser since 1993. Ms. Foody-Malus
served as an Assistant Vice President of the investment adviser from 1990
until 1992. Ms. Foody-Malus received her M.B.A. in Accounting/Finance from
the University of Pittsburgh.
Susan M. Nason has been the Fund's portfolio manager since June 1994. Ms.
Nason joined Federated Investors in 1987 and has been a Vice President of
the Fund's investment adviser since 1993. Ms. Nason served as an Assistant
Vice President of the investment analyst. Ms. Nason is a Chartered Financial
Analyst and received her M.B.A. in Industrial Administration from Carnegie
Mellon University.
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.
LIBERTY TERM TRUST, INC. - 1999
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS
up to 0.25% of average daily net assets of the Fund for the period. The fee
paid to FSS is used to finance certain services for shareholders and to
maintain shareholder accounts. For the period ended June 30, 1996, the Fund
did not incur a shareholder services fee.
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.
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 June 30, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $49,719,423
SALES $53,733,386
</TABLE>
6. DIVIDEND REINVESTMENT PLAN
Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"), a
stockholder may elect to have all dividends (including capital gains
distributions) automatically reinvested by State Street Bank and Trust
Company, as agent for stockholders (the "Plan Agent"), in additional Shares
of Common Stock ("Shares") of the Fund. A stockholder who does not elect to
participate in the Plan will receive all such amounts in cash paid by check
mailed directly to the stockholder of record (or if the Shares are held in
street or nominee name, then to the nominee) by the Plan Agent. Stockholders
whose Shares are registered in their own names may elect to participate in
the Plan by sending written instructions to the Plan Agent at the address
set forth below. Stockholders whose Shares are held of record by brokers,
nominees or otherwise in "street name" should contact such brokers or
nominees and request that they make arrangements to participate in the Plan
on such stockholders' behalf. Upon transferring your Shares between or among
brokers or nominees, please note that these transferees may be unable to
participate in the Plan. If your brokerage firm, bank or other nominee is
unable to participate in the Plan, you may request your nominee to
re-register the Shares in your own name so that you may take advantage of
the Plan. Participation in the Plan is completely voluntary and may be
terminated or resumed at any time without penalty by written notice if
received by the Plan Agent not less than ten days prior to any dividend
record date; otherwise, such termination will be effective with
respect to any subsequently declared dividend or distribution.
LIBERTY TERM TRUST, INC. - 1999
Whenever the Fund declares an income dividend or capital gains distribution
(collectively referred to as "dividends"), non-participants in the Plan will
receive cash and participants will receive the equivalent in Shares. The
Shares will be acquired by the Plan Agent for the participant's account by
the purchase of outstanding shares on the open market on the New York Stock
Exchange or elsewhere. If, before the Plan Agent has completed its
purchases, the market price exceeds the net asset value of the Shares, the
average purchase price per Share paid by the Plan Agent may exceed the net
asset value of the Fund's Shares, resulting in the acquisition of fewer
Shares than if the dividend or distribution had been paid in Shares issued
by the Fund. The Plan Agent will use all dividends and distributions
received in cash to purchase Shares in the open market within 30 days of the
dividend payment date. Each participant will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open market
purchases. Interest will not be paid on any uninvested cash payments.
Dividends are expected to be paid monthly. Participants in the Plan may
withdraw from the Plan upon written notice to the Plan Agent. When a
participant withdraws from the Plan or upon termination of the Plan,
certificates for whole Shares credited to his or her account under the Plan
will be issued and a cash payment will be made for any fraction of a Share
credited to such account; or if a participant so desires, the Plan Agent
will sell his or her Shares in the Plan and send the proceeds to the
participant, less brokerage commissions. The Plan Agent may charge a service
fee for performing this service.
The Plan Agent maintains all stockholders' accounts in the Plan and
furnishes written confirmation of all transactions in the account, including
information needed by stockholders for tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in non-certificated
form in the name of the participant, and each stockholder's proxy will
include those shares received pursuant to the Plan.
In the case of stockholders such as banks, brokers, or nominees that hold
Shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of Shares certified from time
to time by the record stockholders as representing the total amount
registered in the record stockholder's name and held for the account of
beneficial owners who are to participate in the Plan.
The automatic reinvestment of dividends (including capital gains
distributions) will not relieve participants of any income taxes that may be
payable on such dividends.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan.
There is no direct service charge to participants in the Plan; however, the
Fund reserves the right to amend the Plan to include a service charge
payable by the participants. All correspondence concerning the Plan should
be directed to State Street Bank and Trust Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600.
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
J. Christopher Donahue
James E. Dowd
Lawrence D. Ellis, M.D.
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
LIBERTY
TERM
TRUST, INC.
- 1999
SEMI-ANNUAL REPORT
TO STOCKHOLDERS
JUNE 30, 1996
[graphic]
Federated Investors
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 531282101
2080602 (8/96)
