PRESIDENT'S MESSAGE
Dear Investor:
I am pleased to present the Semi-Annual Report to Stockholders for
Liberty Term Trust, Inc. -- 1999 for the six-month period from January
1, 1997, through June 30, 1997. The Report begins with a commentary by
the fund's portfolio manager, which is followed by a complete listing
of its investments and the financial statements.
Liberty Term Trust, Inc. -- 1999 is a closed-end mutual fund that
pursues high monthly income and seeks to return the principal of your
shares in the year 1999. At the end of the reporting period, 47.4% of
the fund's net assets consisted of U.S. government agency obligations.
The remainder of the portfolio was invested in mutual funds, long-term
municipal obligations, a collateralized mortgage obligation and a
repurchase agreement.
Over the period, the fund paid dividends totaling $0.22 per share. At
the end of the period, total assets stood at $37.8 million, while the
fund's net asset value per share was $8.58.
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, 1997
INVESTMENT REVIEW
During the first half of 1997, the U.S. Treasury market presented a
challenging time for U.S. bond investors. Initially, interest rates
increased in the first quarter by 50 basis points only to reverse
course in the second quarter. The change in the market's tone was
fueled by data showing an economy that was moderating following a
strong first quarter. This was caused by very strong consumer spending
which rose by 6.4%, the fastest pace in nine years. The Federal
Reserve cited the strength in demand as the reason for raising
interest rates. As the second quarter unfolded, there were signs that
demand had slowed. Retail sales had declined for the three consecutive
months ending in May, consumer credit shrunk, and inflation was
dormant. The lack of corporate pricing power continues to constrain
inflation. Competitive pressures, which are now global in nature, are
responsible for limiting the ability of many companies to raise
prices. Manufacturing capacity has been expanding at the fastest pace
in 28 years, thereby preventing bottlenecks from developing in the
industrial sector. Since capital spending remains healthy, capacity
should continue to grow strongly, further dampening inflationary
pressures. Despite earlier expectations for an increase in interest
rates at the May 20 Federal Open Market Committee meeting, the Federal
Reserve chose to leave the federal funds rate unchanged.
Throughout this time period, the performance in the mortgage market
was stellar. This was caused by limited new mortgage origination,
benign prepayment activity, investors' desire for incremental yield,
and tight corporate spreads.
During this semi-annual reporting period, the fund continued to
overweight mortgage-backed securities and the share repurchase
program. During the six-month period, the fund repurchased 505,600 of
its shares, 9.0% of those originally issued. The fund intends to
continue repurchasing shares offered at a discount to net asset value
as a means of increasing shareholder value. The fund has received
exemptive relief from the Securities and Exchange Commission to
purchase other closed-end investment companies (target term trusts).
Transaction activity included purchases of these target term trusts
with comparable investment objectives, which were selling at 7- 8
percent discounts to net asset value. The fund plans to continue this
strategy if market conditions warrant.
Given the events in the bond market over the last several years, the
fund's net asset value has not returned to the 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. Therefore, it will be difficult for the fund to
meet the portion of its investment objective relating to returning at
least $10.00 per share by December 31, 1999. 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, 1997. On March 19, 1997, the record date for
stockholders voting at the meeting, there were 4,774,818 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 ITEM FOR AGAINST ABSTAIN TO VOTE
<S> <C> <C> <C> <C>
1.Election of Class I
Directors*
John T. Conroy, Jr. 3,955,495 0 0 68,272
Peter E. Madden 3,954,095 0 0 69,672
Wesley W. Posvar 3,952,337 0 0 71,429
Marjorie P. Smuts 3,955,595 0 0 68,172
<CAPTION>
2.To ratify the selection by the Board of Directors of the firm of
Ernst & Young LLP as Independent Auditors for the fund.
<S> <C> <C> <C> <C>
3,973,765 9,310 40,691 0
</TABLE>
* The following Directors of the fund continued their terms as Directors of
the fund: John F. Donahue, Thomas G. Bigley, William J. Copeland, J.
Christopher Donahue, James E. Dowd, Lawrence D. Ellis, M.D., Edward L.
Flaherty, Jr., Gregor F. Meyer and John E. Murray, Jr.
LIBERTY TERM TRUST, INC. -- 1999
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING* VALUE
<C> <S> <S> <C>
LONG-TERM MUNICIPAL OBLIGATIONS -- 12.8%
PENNSYLVANIA -- 3.3%
$1,400,000 Allegheny County, PA, Sanitary Authority Sewer
Revenue Bonds, Series A, 12/1/1999 AAA/Aaa $ 1,262,758
TEXAS -- 2.8%
1,145,000 Austin, TX, Capital Appreciation Refunding
& Improvement LT GO Bonds (FGIC Insured), 9/1/1999 AAA/Aaa 1,042,617
UTAH -- 6.7%
2,770,000 Utah Associated Municipal Power Systems Revenue
Bonds, (Hunter Project)/(AMBAC Insured), 7/1/1999 AAA/Aaa 2,539,758
TOTAL LONG-TERM MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $4,592,235) 4,845,133
MUTUAL FUND ISSUES -- 34.4%
300,000 Hyperion 1999 Term Trust, Inc. -- 1,987,500
1,000,000 Income Opportunities Fund 1999, Inc. -- 9,125,000
205,000 Income Opportunities Fund 2000, Inc. -- 1,883,438
TOTAL MUTUAL FUND ISSUES (IDENTIFIED COST $12,868,480) 12,995,938
U.S. GOVERNMENT OBLIGATIONS -- 47.4%
FEDERAL HOME LOAN MORTGAGE CORP. REMIC -- 7.8%
3,000,000 5.850%, Series 1492-D, 5/15/2017 (Interest Only) -- 2,961,270
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 5.4%
2,128,525 5.00%, 8/1/2001 -- 2,034,742
FEDERAL NATIONAL MORTGAGE ASSOCIATION REMIC -- 30.0%
5,937,238 6.03%, Series 1996-43A, 10/25/2003 (Principal Only) -- 4,618,910
5,800,000 6.25%, Series 1996-69PD, 12/18/2019 (Interest Only) -- 5,744,204
2,250,000 6.50%, Series 1997-9H, 3/25/2027 (Interest Only) -- 976,297
Total 11,339,411
</TABLE>
LIBERTY TERM TRUST, INC. -- 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING* VALUE
<C> <S> <S> <C>
U.S. GOVERNMENT OBLIGATIONS -- CONTINUED
U.S. TREASURY BILLS -- 2.2%
$685,000 (c)5.33%, 6/25/1998 -- $ 648,599
200,000 (c)5.625%, 4/2/1998 -- 192,026
Total 840,625
U.S. TREASURY NOTES -- 2.0%
770,000 5.875%, 11/15/1999 -- 765,464
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $18,234,170) 17,941,513
COLLATERALIZED MORTGAGE OBLIGATION -- 4.8%
23,000,000 First Union/Lehman Brothers Commercial Mortgage Trust,
Series 1997-C1, 1.2653% (interest only), 4/18/2027 AAA/Aaa 1,822,980
TOTAL COLLATERALIZED MORTGAGE OBLIGATION
(IDENTIFIED COST $1,823,416) 1,822,980
(A)REPURCHASE AGREEMENT -- 0.6%
230,000 BT Securities Corporation, 6.00%, dated 6/30/1997,
due 7/1/1997 (AT AMORTIZED COST) -- 230,000
TOTAL INVESTMENTS (IDENTIFIED COST $37,748,301)(B) $37,835,564
</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
$37,748,301. The net unrealized appreciation of investments on a
federal tax basis amounts to $87,263 which is comprised of
$240,782 appreciation and $153,519 depreciation at June 30, 1997.
(c) Represents rate of discount at the time of purchase.
* Please refer to the Appendix of the Statement of Additional
Information for an explanation of the credit ratings. Current credit
ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($37,830,337) at June 30, 1997.
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
REMIC -- Real Estate Mortgage Investment Conduit
(See Notes which are an integral part of the Financial Statements)
LIBERTY TERM TRUST, INC. -- 1999
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $37,748,301) $ 37,835,564
Cash 5,656
Income receivable 246,656
Total assets 38,087,876
LIABILITIES:
Payable for investments purchased $ 85,874
Income distribution payable 154,260
Accrued expenses 17,405
Total liabilities 257,539
NET ASSETS for 4,407,418 shares outstanding $ 37,830,337
NET ASSETS CONSIST OF:
Paid in capital $ 44,425,394
Net unrealized appreciation of investments 87,263
Accumulated net realized loss on investments and futures contracts (6,894,542)
Undistributed net investment income 212,222
Total Net Assets $ 37,830,337
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$37,830,337 / 4,407,418 shares outstanding $8.58
</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, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 194,402
Interest (net of dollar roll expense of $34,536) 1,064,227
Total income 1,258,629
EXPENSES:
Investment advisory fee $ 88,889
Administrative personnel and services fee 61,987
Custodian fees 2,241
Transfer and dividend disbursing agent fees and expenses 7,163
Directors'/Trustees' fees 4,706
Auditing fees 8,960
Legal fees 12,687
Portfolio accounting fees 24,965
Printing and postage 7,512
Insurance premiums 1,448
Taxes 4,172
Miscellaneous 10,675
Total expenses 235,405
Waiver of investment advisory fee (58,202)
Net expenses 177,203
Net investment income 1,081,426
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 306,189
Net change in unrealized appreciation of investments (405,434)
Net realized and unrealized loss on investments (99,245)
Change in net assets resulting from operations $ 982,181
</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, 1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 1,081,426 $ 2,491,906
Net realized gain (loss) on investments
($306,189 and $284,843 net gains, respectively, as computed
for federal tax purposes) 306,189 (200,620)
Net change in unrealized appreciation/depreciation of
investments and futures contracts (405,434) (656,479)
Change in net assets resulting from operations 982,181 1,634,807
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (1,036,621) (2,181,152)
SHARE TRANSACTIONS --
Cost of shares reacquired from shareholders (4,072,036) (4,854,014)
Change in net assets resulting from share transactions (4,072,036) (4,854,014)
Change in net assets (4,126,476) (5,400,359)
NET ASSETS:
Beginning of period 41,956,813 47,357,172
End of period (including undistributed net investment income
of $212,222 and $167,417, respectively) $ 37,830,337 $ 41,956,813
</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)
JUNE 30, YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 8.54 $ 8.56 $ 7.97 $ 9.10 $ 9.09 $ 9.50
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.23 0.48 0.50 0.66 0.78 0.60
Net realized and unrealized
gain (loss) on investments and
futures contracts 0.03 (0.08) 0.53 (1.19) (0.02) (0.42)
Total from investment 0.26 0.40 1.03 (0.53) 0.76 0.18
operations
LESS DISTRIBUTIONS
Distributions from net
investment income (0.22) (0.42) (0.44) (0.60) (0.75) (0.59)
NET ASSET VALUE, END OF PERIOD $ 8.58 $ 8.54 $ 8.56 $7.97 $ 9.10 $ 9.09
MARKET VALUE, PER SHARE
END OF PERIOD $ 8.13 $7.88 $ 7.38 $7.13 $8.63 $10.25
TOTAL INVESTMENT RETURNS(B)
Based on net asset value per 3.07% 4.78% 12.92% (6.20%) 8.73% 1.75%
share
Based on market value per share 5.85% 12.14% 9.68% (10.43%) (8.49%) 8.90%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.90%* 0.90% 0.90% 0.90% 0.90% 0.90%*
Net investment income 5.52%* 5.60% 6.07% 7.83% 8.46% 8.65%*
Expense waiver/reimbursement(c) 0.29%* 0.29% 0.25% 0.24% 0.40% 0.18%*
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $37,830 $41,957 $47,357 $44,851 $51,175 $51,132
Average commission rate paid(d) $0.0500 $0.0500 -- -- -- --
Portfolio turnover 140% 252% 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.
(d) Represents total commissions paid on portfolio securities divided
by total portfolio shares purchased or sold on which commissions
were charged. This disclosure is required for fiscal years
beginning on or after September 1, 1995.
(See Notes which are an integral part of the Financial Statements)
LIBERTY TERM TRUST, INC. -- 1999
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (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, 1996, the Fund, for federal tax purposes, had a
capital loss carryforward of $6,701,763, 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 as
follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<C> <C>
2000 $ 686,616
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. 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. For the six months ended June 30, 1997, the
Fund had realized gains on future contracts of $177,217. At June 30,
1997, the Fund had no outstanding futures contracts.
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.
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 December 31, 1996, there were 1,000,000,000 shares of $0.001 par
value capital stock authorized.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997 1996 1995
<S> <C> <C> <C>
Shares Reacquired 505,600 621,800 90,200
Average Price Per Share $8.05 $7.81 $7.49
Weighted Average Discount 5.98% 8.71% 12.36%
</TABLE>
As of June 30, 1997, the Fund has reacquired a total of 1,217,600
shares of capital stock.
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 0.45% of the Fund's average weekly
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.
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 six months
ended June 30, 1997, 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, 1997, were as follows:
PURCHASES $56,716,790
SALES $ 69,587,976
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.
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 8200, Boston, Massachusetts 02266-8200.
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
J. Crilley Kelly
Assistant Secretary
LIBERTY
TERM
TRUST, INC.
- -- 1999
SEMI-ANNUAL REPORT
TO STOCKHOLDERS
JUNE 30, 1997
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Federated Investors
Federated Securities Corp., Distributor
Cusip 531282101
2080602 (8/97)
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