ANNUAL REPORT
President's Message
Dear Investor:
I am pleased to present the Annual Report to Shareholders for Liberty Term
Trust, Inc.-1999 for the 12-month fiscal year period from January 1, 1998
through December 31, 1998. The report begins with a review of the fund's
objective and investments, and includes a complete listing of its portfolio and
financial statements.
Liberty Term Trust, Inc.-1999 began operation in April of 1992 as a closed-end
investment company that pursues high monthly income.
Over the year, dividends paid to shareholders by the fund's portfolio of
investments totaled $0.36 per share. At the end of the period, the fund's assets
totaled $39.4 million. More than 50% of the fund's portfolio was invested in
U.S. government agency securities. The remaining assets were invested in U.S.
Treasury bills, AAA-rated long-term municipal securities, a collateralized
mortgage obligation, mutual fund shares, and repurchase agreements.
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
pursuing investment income through Liberty Term Trust Inc.-1999. Your comments
or suggestions are always welcome.
Sincerely,
[Graphic]
Richard B. Fisher
President
February 15, 1999
Investment Review
The U.S. Treasury market put in awesome performance in 1998, as the sector
outperformed other major fixed income asset classes. The key factors driving the
performance of Treasuries in 1998 were reductions in Treasury supply due to the
first budget surplus in close to 30 years, declining commodity prices, emerging
market contagion, and heightened liquidity premiums. While the U.S. economy
continued to post strong growth in 1998, the overall performance and shape of
the U.S. Treasury yield curve were driven by events taking place in other
markets. In the first ten days of 1998, the yield curve spread between 2- and
30-year U.S. Treasuries steepened from 28 to 56 basis points as the yield on the
2-year Treasury declined by 45 basis points. Factors that drove the decline were
the focus by the bond market on the Asian crisis, talk of deflation, and a
declining stock market. Lower interest rates proved to be temporary as investors
quickly realized that the interest rate rally was ahead of the facts. As a
result, the short end of the yield curve retraced the majority of the earlier
interest rate declines and the yield curve flattened. The turning point for
investors was the spreading of the emerging market crisis to Russia and Latin
America. As this crisis unfolded, investors favored the most liquid U.S.
Treasury securities available and avoided all other fixed income asset classes.
This risk aversion drove U.S. Treasury rates to levels not seen in a generation
and spreads on non-U.S. Treasury assets to their widest point in 10 years. At
the peak of this turmoil, the yield on the 30-year U.S. Treasury reached a low
of 4.71%. During this period, the Federal Reserve eased 75 basis points over a
three-month time period to provide stability to the capital markets. As the
markets stabilized, there was a partial reversal of the flight to quality
activity, and the U.S. Treasury market gave back some of the gains.
The overall duration of the fund continues to shorten as the anticipated
December 31, 1999, liquidation date approaches. Transaction activity continues
to focus on the share repurchase program. For the annual reporting period, the
fund repurchased 46,700 shares. The policy of the fund is to continue to
repurchase shares offered at a discount to net asset value as a means of
increasing shareholder value. During the course of the year, the fund reduced
the holdings of mortgage-backed securities. The reinvestment of the proceeds was
into short duration U.S. Treasuries and agencies.
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 is
unlikely that the fund will meet its investment objective to return at least $10
per share on or shortly before December 31, 1999.
Portfolio of Investments
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING 1 VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL OBLIGATIONS-13.2%
PENNSYLVANIA-3.5%
$ 1,400,000 Allegheny County, PA, Sanitation Authority Sewer Revenue
Bonds, Series A (FGIC Insured), 12/1/1999 AAA/Aaa $ 1,360,086
TEXAS-2.8%
1,145,000 Austin, TX, Capital Appreciation Refunding & Improvement LT
GO Bonds, (FGIC Insured), 9/1/1999 AAA/NR 1,121,266
UTAH-6.9%
2,770,000 Utah Associated Municipal Power Systems Revenue Bonds,
(HunterProject)/(AMBAC Insured), 7/1/1999 AAA/Aaa 2,726,650
TOTAL LONG-TERM MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $5,139,953) 5,208,002
CLOSED-END MUTUAL FUND ISSUES-35.1%
300,000 Hyperion 1999 Term Trust, Inc. AAA 2,156,250
1,000,000 Income Opportunities Fund 1999, Inc. - 9,687,500
205,000 Income Opportunities Fund 2000, Inc. - 1,985,937
TOTAL CLOSED-END MUTUAL FUND ISSUES
(IDENTIFIED COST $12,868,479) 13,829,687
U.S. GOVERNMENT AGENCY OBLIGATIONS-50.3%
FEDERAL HOME LOAN MORTGAGE CORP. REMIC-2.3% 2
911,581 5.850%, Series 1492-D, 5/15/2017 - 910,797
FEDERAL NATIONAL MORTGAGE ASSOCIATION DEBENTURE-10.9%
2,850,000 4.78%, 11/30/1999 - 2,851,254
1,468,175 5.00%, 8/1/2001 - 1,457,472
TOTAL 4,308,726
FEDERAL NATIONAL MORTGAGE ASSOCIATION REMIC-7.1% 2
2,838,211 Series 93-219 -C (Principal Only), 8/25/2023 - 2,801,059
U.S. TREASURY BILLS-30.0%
12,250,000 3 4.273%, 10/14/1999 - 11,835,827
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(IDENTIFIED COST $19,757,095) 19,856,409
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<C> <S> <C> <C>
REPURCHASE AGREEMENT-0.8% 4
$ 325,000 Westdeutsche Landesbank Girozentrale, 4.90%, dated
12/31/1998, due 1/4/1999 - $ 325,000
TOTAL INVESTMENTS (IDENTIFIED COST $38,090,527) 5 $ 39,219,098
</TABLE>
1 Please refer to the list below for an explanation of the credit ratings.
Current credit ratings are unaudited.
2 Because of monthly principal payments, the average lives of REMICs are less
than indicated periods.
3 Represents rate of discount at the time of purchase.
4 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.
5 The cost of investments for federal tax purposes amounts to $38,090,527. The
net unrealized appreciation of investments on a federal tax basis amounts to
$1,128,571 at December 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($39,433,556) at December 31, 1998.
The following acronyms 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
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and
tax cost $38,090,527) $ 39,219,098
Cash 1,821
Income receivable 217,379
TOTAL ASSETS 39,438,298
LIABILITIES:
Accrued expenses $ 4,742
TOTAL LIABILITIES 4,742
Net assets for 4,318,718 shares outstanding $ 39,433,556
NET ASSETS CONSIST OF:
Paid in capital $ 44,213,991
Net unrealized appreciation of investments 1,128,571
Accumulated net realized loss on investments (6,136,677)
Undistributed net investment income 227,671
TOTAL NET ASSETS $ 39,433,556
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS
PER SHARE:
$39,433,556 / 4,318,718 shares outstanding $9.13
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Operations
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 824,325
Interest 1,378,298
TOTAL INCOME 2,202,623
EXPENSES:
Investment advisory fee $ 174,939
Administrative personnel and services fee 125,000
Custodian fees 3,103
Transfer and dividend disbursing agent fees and expenses 11,215
Directors'/Trustees' fees 10,131
Auditing fees 17,692
Portfolio accounting fees 79,919
Share registration costs 370
Printing and postage 15,094
Insurance premiums 2,700
Taxes 4,330
Miscellaneous 11,797
TOTAL EXPENSES 456,290
WAIVERS:
Waiver of investment advisory fee (104,702)
Net expenses 351,588
Net investment income 1,851,035
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 845,310
Net change in unrealized appreciation/depreciation of
investments (224,695)
Net realized and unrealized gain on investments 620,615
Change in net assets resulting from operations $ 2,471,650
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 1,851,035 $ 2,186,130
Net realized gain (loss) on investments ($755,023 and
$289,808, respectively, as computed for federal tax
purposes) 845,310 281,528
Net change in unrealized appreciation/depreciation (224,695) 860,569
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 2,471,650 3,328,227
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (1,710,615) (2,016,218)
SHARE TRANSACTIONS:
Cost of shares reacquired from shareholders (171,020) (4,425,281)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (171,020) (4,425,281)
Change in net assets 590,015 (3,113,272)
NET ASSETS:
Beginning of period 38,843,541 41,956,813
End of period (including undistributed net investment income
of $227,671 and $100,488, respectively) $ 39,433,556 $ 38,843,541
</TABLE>
See Notes which are an integral part of the Financial Statements
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.90 $ 8.54 $ 8.56 $ 7.97 $ 9.10
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.39 0.47 0.48 0.50 0.66
Net realized and unrealized gain (loss) on investments 0.20 0.32 (0.08) 0.53 (1.19)
TOTAL FROM INVESTMENT OPERATIONS 0.59 0.79 0.40 1.03 (0.53)
LESS DISTRIBUTIONS:
Distributions from net investment income (0.36) (0.43) (0.42) (0.44) (0.60)
NET ASSET VALUE, END OF PERIOD $ 9.13 $ 8.90 $ 8.54 $ 8.56 $ 7.97
MARKET VALUE, PER SHARE
END OF PERIOD $ 8.81 $ 8.38 $ 7.88 $ 7.38 $ 7.13
TOTAL INVESTMENT RETURNS 1
Based on net asset value per share 6.77% 9.44% 4.78% 12.92% (6.20%)
Based on market value per share 9.50% 11.67% 12.14% 9.68% (10.43%)
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.90% 0.90% 0.90% 0.90% 0.90%
Net investment income 4.76% 5.56% 5.60% 6.07% 7.83%
Expense waiver/reimbursement 2 0.27% 0.25% 0.29% 0.25% 0.24%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $39,434 $38,844 $41,957 $47,357 $44,851
Portfolio turnover 91% 141% 252% 238% 393%
</TABLE>
1 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.
2 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
Notes to Financial Statements
DECEMBER 31, 1998
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 return
(i.e., provide a liquidating value equal to) at least $10.00 per Share (the
initial public offering price per Share) to investors on or shortly before
December 31, 1999 while providing high monthly income. It is unlikely that the
Fund will meet its investment objective to return at least $10.00 per share on
or shortly before December 31, 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 60 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"). 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 difference are primarily due to differing treatments for non-taxable
income. The following reclassifications have been made to the financial
statements.
INCREASE (DECREASE)
PAID-IN UNDISTRIBUTED NET ACCUMULATED NET
CAPITAL INVESTMENT INCOME REALIZED LOSS
$76,021 ($13,237) ($62,784)
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, 1998, the Fund, for federal tax purposes, had a capital loss
carryforward of $6,236,548, 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:
EXPIRATION YEAR EXPIRATION AMOUNT
2002 $4,954,501
2003 992,239
2005 289,808
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 December 31, 1998, there were 1,000,000,000 shares of $0.001 par value
capital stock authorized.
YEAR ENDED DECEMBER 31 1995 1996 1997 1998
Shares Reacquired 90,200 621,800 547,600 46,700
Average Price Per Share $7.49 $7.81 $8.08 $8.53
Weighted Average Discount 12.36% 8.71% 6.23% 4.55%
As of December 31, 1998, the Fund has reacquired a total of 1,306,300 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 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 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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund shares for the period. The fee paid to FSSC is used to
finance certain services for shareholders and to maintain shareholder accounts.
For the period ended December 31, 1998, the Fund did not incur a shareholder
services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, 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 each 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.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities for the
period ending December 31, 1998, were as follows:
Purchases $34,359,009
Sales $33,490,564
YEAR 2000 (UNAUDITED)
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 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.
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. 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 participants' 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.
Report of Ernst & Young LLP, Independent Auditors
TO THE DIRECTORS AND STOCKHOLDERS OF
LIBERTY TERM TRUST, INC.-1999:
We have audited the accompanying statement of assets and liabilities of Liberty
Term Trust, Inc.-1999, including the schedule of portfolio investments, as of
December 31, 1998, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Liberty Term Trust, Inc.-1999 at December 31, 1998, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Boston, Massachusetts
February 12, 1999
Directors
JOHN F. DONAHUE
THOMAS G. BIGLEY
JOHN T. CONROY, JR.
NICHOLAS P. CONSTANTAKIS
WILLIAM J. COPELAND
JOHN F. CUNNINGHAM
J. CHRISTOPHER DONAHUE
LAWRENCE D. ELLIS, M.D.
PETER E. MADDEN
CHARLES F. MANSFIELD, JR.
JOHN E. MURRAY, JR., J.D., S.J.D.
MARJORIE P. SMUTS
JOHN S. WALSH
Officers
JOHN F. DONAHUE
Chairman
RICHARD B. FISHER
President
WILLIAM D. DAWSON, III
Chief Investment Officer
J. CHRISTOPHER DONAHUE
Executive Vice President
EDWARD C. GONZALES
Executive Vice President
JOHN W. MCGONIGLE
Executive Vice President and Secretary
RICHARD J. THOMAS
Treasurer
NICHOLAS J. SEITANAKIS
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
ANNUAL REPORT
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Liberty Term Trust, Inc.-1999
ANNUAL REPORT
TO STOCKHOLDERS
DECEMBER 31, 1998
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Liberty Term Trust, Inc.-1999
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Cusip 531282101
2022001A (2/99)
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