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 reporting period from January 1, 1998,
through June 30, 1998. 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 full value of the principal of your shares in
the year 1999. At the end of the reporting period, 44.6% of the fund's portfolio
consisted of U.S. government securities. The remainder of the portfolio was
invested in income-oriented mutual funds, municipal bonds, a collateralized
mortgage obligation and a repurchase agreement.
Over the reporting period, the fund paid dividends totaling $0.18 per share. At
the end of the reporting period, net assets totaled $38.8 million, while the
fund's net asset value per share was $8.97.
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 the Liberty Term Trust, Inc.--1999. Your comments or suggestions
are always welcome.
Sincerely,
Richard B. Fisher
President
August 15, 1998
INVESTMENT REVIEW
The U.S. Treasury market has put in an impressive performance in the first half
of 1998. Factors that drove the market were the perceived slowing in the U.S.
economy due to the Asian crisis, a favorable outlook for commodity prices, the
strength of the dollar, and the ongoing supply reduction of U.S. Treasury notes
and bonds. The overall impact of these factors caused the 30-year Treasury to
decline 30 basis points and resulted in a flat yield curve. Currently, there
exists no yield advantage in moving from a 2-year U.S. Treasury to a 10-year
U.S. Treasury. The one major risk to the overall bond market is the potential
for inflation to increase if labor demand continues to outpace labor supply. The
Federal Reserve Board's (the "Fed") current monetary policy has a tightening
bias, but reflects greater concern of strong domestic growth versus the problems
in Asia. The economic data combined with Fed Chairman Alan Greenspan's Humphrey
Hawkins testimony will dictate bond market psychology in the second half of
1998.
During the semi-annual reporting period, the fund pursued a duration neutral
strategy. The overall duration of the fund continues to narrow as the December
31, 1999, termination date approaches. Transaction activity continues to focus
on the share repurchase program. For the six-month reporting period, the fund
repurchased 38,000 shares. The policy of the fund is to continue repurchasing
shares offered at a discount to net asset value as a means of increasing
shareholder value. The fund reduced the holdings of mortgage derivatives during
this reporting period. The reinvestment of the proceeds was into short duration
U.S. Treasuries.
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 its investment objective by 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.
SHAREHOLDER MEETING RESULTS
An Annual Meeting of the Shareholders of Liberty Term Trust, Inc. -- 1999 (the
"Fund") was held on May 15, 1998. On March 23, 1998, the record date for
shareholders eligible to vote at the meeting, there were 5,625,018 total
outstanding shares. The following items were considered by the shareholders and
the results of their voting were as follows:
Agenda Item 1: Election of four Class II Directors and one Class III Director.*
<TABLE>
<CAPTION>
Shares Voted Shares Withheld
For Authority
<S> <C> <C>
William J. Copeland 4,278,004.946 44,275.000
Nicholas P. Constantakis 4,280,284.946 41,995.000
J. Christopher Donahue 4,279,284.946 42,995.000
James E. Dowd, Esq. 4,280,284.946 41,995.000
Lawrence D. Ellis, M.D. 4,280,284.946 41,995.000
</TABLE>
Agenda Item 2: To ratify the selection by the Board of Directors of the firm
Ernst & Young LLP as Independent Auditors for the Fund.
<TABLE>
<CAPTION>
Shares Voted Shares Voted Shares
For Against Abstain
<S> <C> <C>
4,287,145.505 6,180.000 28,954.441
</TABLE>
* The following Directors of the fund continued their terms: John F.Donahue,
Thomas G. Bigley, John T. Conroy, Jr., Edward L. Flaherty, Jr., Esq., Peter E.
Madden, . Murray, Jr., J.D., S.J.D., Wesley W. Posvar and Marjorie P. Smuts.
PORTFOLIO OF INVESTMENTS
Liberty Term Trust, Inc. -- 1999
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Credit
or Shares Rating* Value
<S> <C> <C> <C>
Long-Term Municipal Obligations--13.1%
Pennsylvania--3.4%
$1,400,000 Allegheny County, PA, Sanitation Authority Sewer Revenue Bonds,
Series A (FGIC Insured), 12/1/1999 AAA/Aaa $1,325,128
Texas--2.8%
1,145,000 Austin, TX, Capital Appreciation Refunding & Improvement LT GO
Bonds (FGIC Insured), 9/1/1999 AAA/NR 1,094,029
Utah--6.9%
2,770,000 Utah Associated Municipal Power Systems Revenue Bonds,
(Hunter Project)/(AMBAC Insured), 7/1/1999 AAA/Aaa 2,664,491
Total Long-Term Municipal Obligations (identified
cost $5,013,560) 5,083,648
Closed-End Mutual Fund Issues--35.4%
300,000 Hyperion 1999 Term Trust, Inc. AAA 2,137,500
1,000,000 Income Opportunities Fund 1999, Inc. -- 9,625,000
205,000 Income Opportunities Fund 2000, Inc. -- 1,985,937
Total Closed-End Mutual Fund Issues (identified
cost $12,868,480) 13,748,437
U.S. Government Agency Obligations--44.6%
(a) Federal Home Loan Mortgage Corp. REMIC--6.8%
2,634,785 5.85%, Series 1492-D, 5/15/2017 -- 2,627,461
Federal National Mortgage Association--4.4%
1,737,500 5.00%, 8/1/2001 -- 1,711,889
U.S. Treasury Note--33.4%
13,000,000 5.375%, 1/31/2000 -- 12,974,520
Total U.S. Government Agency Obligations
(identified cost $17,192,279) 17,313,870
Collateralized Mortgage Obligation--4.3%
22,752,641 First Union /Lehman Brothers Commercial Mortgage Trust,
Series 1997-C1, 1.307%, (Interest Only) 4/18/2027 AAA/Aaa 1,656,620
Total Collateralized Mortgage Obligations
(identified cost $1,699,036) 1,656,620
(b) Repurchase Agreement--1.7%
665,000 BT Securities Corp., 5.87%, dated 6/30/1998, due 7/1/1998
(at amortized cost) -- 665,000
Total Investments (identified cost $37,438,355)(c) $ 38,467,575
</TABLE>
* Please refer to the following page for an explanation of the credit ratings.
Current credit ratings are unaudited.
(a) Because of monthly principal payments, the average lives of REMIC's are less
than the indicated periods.
(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 $37,438,355. The
net unrealized appreciation of investments on a federal tax basis amounts to
$1,029,220 which is comprised of $1,071,636 appreciation and $42,416
depreciation at June 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($38,814,931) at June 30, 1998.
The following acronym(s) are used throughout this portfolio:
AMBAC --American Bond Assurance Corporation
FGIC --Financial Guaranty Insurance Company
GO --General Obligation
LT --Limited Tax
REMIC --Real Estate Mortgage Investment Conduit
* Credit ratings
Standard and Poor's ("S&P") Municipal Bond Ratings
AAA--Debt rated "AAA" has the highest ratings assigned by S&P. Capacity to pay
interest and repay principal is extremely strong. Moody's Investors Service,
Inc. ("Moody's") Municipal Bond Ratings Aaa--Bonds which are rated Aaa are
judged to be of the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and principle is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
Liberty Term Trust, Inc.--1999
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Assets:
<S> <C> <C>
Total investments in securities, at value (identified and tax cost $37,438,355) $38,467,575
Cash 1,965
Income receivable 414,564
Prepaid expenses 20,477
Total assets 38,904,581
Liabilities:
Income distribution payable $ 89,650
Total liabilities 89,650
Net Assets for 4,327,418 shares outstanding $38,814,931
Net Assets Consist of:
Paid in capital $43,985,949
Net unrealized appreciation of investments 1,029,220
Accumulated net realized loss on investments (6,396,882)
Undistributed net investment income 196,644
Total Net Assets $38,814,931
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$38,814,931 / 4,327,418 shares outstanding $8.97
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
Liberty Term Trust, Inc. -- 1999
Six Months Ended June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Investment Income:
<S> <C> <C>
Dividends $ 357,368
Interest 730,253
Total income 1,087,621
Expenses:
Investment advisory fee $ 86,382
Administrative personnel and services fee 61,987
Custodian fees 1,529
Transfer and dividend disbursing agent fees and expenses 13,773
Directors'/Trustees' fees 4,917
Auditing fees 8,809
Legal fees 3,000
Portfolio accounting fees 28,512
Printing and postage 5,253
Insurance premiums 1,448
Taxes 1,992
Miscellaneous 5,336
Total expenses 222,938
Waivers--
Waiver of investment advisory fee (49,331)
Net expenses 173,607
Net investment income 914,014
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 522,321
Net change in depreciation of investments (324,046)
Net realized gain on investments 198,275
Change in net assets resulting from operations $1,112,289
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
Liberty Term Trust, Inc. -- 1999
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
(unaudited) December 31,
June 30, 1998 1997
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 914,014 $ 2,186,130
Net realized gain (loss) on investments and futures contracts ($522,321 net gain and
$289,808 net loss, respectively, as computed for federal tax purposes) 522,321 281,528
Net change in unrealized appreciation/depreciation (324,046) 860,569
Change in net assets resulting from operations 1,112,289 3,328,227
Distributions to Shareholders--
Distributions from net investment income (817,858) (2,016,218)
Share Transactions--
Cost of shares reacquired from shareholders (323,041) (4,425,281)
Change in net assets resulting from share transactions (323,041) (4,425,281)
Change in net assets (28,610) (3,113,272)
Net Assets:
Beginning of period 38,843,541 41,956,813
End of period (including undistributed net investment income of $196,644 and
$100,488, respectively) $38,814,931 $38,843,541
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
Liberty Term Trust, Inc. -- 1999
<TABLE>
<CAPTION>
(For a share outstanding throughout each period)
Six Months
Ended
(Unaudited)
June 30, Year Ended December 31,
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.90 $ 8.54 $ 8.56 $ 7.97 $ 9.10 $ 9.09
Income from investment operations
Net investment income 0.20 0.47 0.48 0.50 0.66 0.78
Net realized and unrealized gain (loss) on investments 0.05 0.32 (0.08) 0.53 (1.19) (0.02)
Total from investment operations 0.25 0.79 0.40 1.03 (0.53) 0.76
Less distributions
Distributions from net investment income (0.18) (0.43) (0.42) (0.44) (0.60) (0.75)
Net asset value, end of period $ 8.97 $ 8.90 $ 8.54 $ 8.56 $ 7.97 $ 9.10
Market Value, per share end of period $ 8.69 $ 8.38 $ 7.88 $ 7.38 $ 7.13 $ 8.63
Total Investment returns (a)
Based on net asset value per share 2.83% 9.44% 4.78% 12.92% (6.20%) 8.73%
Based on market value per share 5.80% 11.67% 12.14% 9.68% (10.43%) (8.49%)
Ratios to average net assets
Expenses 0.90%* 0.90% 0.90% 0.90% 0.90% 0.90%
Net investment income 4.76%* 5.56% 5.60% 6.07% 7.83% 8.46%
Expense waiver/reimbursement (b) 0.26%* 0.25% 0.29% 0.25% 0.24% 0.40%
Supplemental data
Net assets, end of period (000 omitted) $38,815 $38,844 $41,957 $47,357 $44,851 $51,175
Average commission rate paid (c) $ 0.00 $0.0500 $0.0500 -- -- --
Portfolio turnover 35% 141% 252% 238% 393% 402%
</TABLE>
* Computed on an annualized basis.
(a) 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 last day of period,
and reinvestment of all dividends and distributions at prices that were
obtained by the Fund's dividend reinvestment plan.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) 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)
NOTES TO FINANCIAL STATEMENTS
Liberty Term Trust, Inc. -- 1999
June 30, 1998 (unaudited)
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.
Effective February 11, 1997, the Fund received an exemptive order from the
Securities and Exchange Commission. The order permits the Fund to invest in
shares of target term trusts in quantities that exceed those allowed by
statutory limitations. The Fund intends to make such purchases if discounts to
net asset value are attractive.
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 agency 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.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for non-taxable
income. The following reclassifications have been made to the financial
statements.
Increase (Decrease)
Undistributed Net
Paid-In Capital Investment Income
$236,841 $(236,841)
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
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, 1997, the Fund, for federal tax purposes, had a capital loss
carryforward of $6,991,571, 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
<S> <C>
2000 $ 686,616
2002 5,022,908
2003 992,239
2005 289,808
</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.
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.
Capital Stock
At June 30, 1998, 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, 1998 1997 1996 1995
<S> <C> <C> <C> <C>
Shares Reacquired 38,000 547,600 621,800 90,200
Average Price Per Share $ 8.50 $ 8.08 $ 7.81 $ 7.49
Weighted Average Discount 4.56% 6.23% 8.71% 12.36%
</TABLE>
As of June 30, 1998, the Fund has reacquired a total of 1,297,600 shares of
capital stock.
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 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 1994. Ms.
Foody-Malus joined Federated Investors Inc., or its predecessor 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 Inc., or its predecessor in 1987 and has been a
Senior Vice President of the Fund's investment adviser since April 1997. Ms.
Nason served as a Vice President of the investment adviser from 1993 to 1997,
and as an Assistant Vice President from 1990 until 1992. Ms. Nason is a
Chartered Financial Analyst and received her M.S.I.A. concentrating in Finance
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, Inc. 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, 1998, the Fund shares 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.
Year 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
Investment Transactions
Purchases and sales of investments, excluding short-term securities for the
period ended June 30, 1998, were as follows:
Purchases $ 12,951,250
Sales $ 12,966,140
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 tax that may be payable on such
dividends.
Experience under the Plan may indicate that charges 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.
Nicholas P. Constantakis
William J. Copeland
J. Christopher Donahue
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
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
Nicholas J. Seitanakis
Assistant Secretary
[Logo of Federated]
Liberty Term
Trust, Inc.--1999
Semi-Annual Report
to Shareholders
June 30, 1998
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 531282101
2080602 (8/98)
