SEMI-ANNUAL REPORT
President's Message
Dear Investor:
I am pleased to present the Semi-Annual Report for Liberty Term Trust, Inc.-1999
for the six-month reporting period from January 1, 1999 through June 30, 1999.
The report begins with a commentary by the fund's portfolio manager, which is
followed by a complete listing of fund's investments and its financial
statements.
As set forth in the accompanying materials, Liberty Term Trust, Inc.-1999 will
liquidate and terminate its existence on or about December 17, 1999, as required
by its Articles of Incorporation.
Over the six-month reporting period, the fund paid dividends totaling $0.16
per share. At the end of the period, net assets totaled $39.3 million,
while the fund's net asset value was $9.12. 1
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,
[Graphic]
Richard B. Fisher
President
August 15, 1999
1 Performance quoted reflects past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
Investment Review
LIBERTY TERM TRUST-1999
The U.S. Treasury market struggled in the first half of 1999. As the year began,
investors concerns focused on the emerging market contagion and a slowdown of
growth in the U.S. economy. Economic numbers painting a strong U.S. economy
forced the Federal Reserve Board (the "Fed") to reevaluate last fall's easing of
monetary policy. U.S. Treasury yields surged as market sentiment switched from
hopes for more easings to fears of further tightening. Concerns about potential
Japanese repatriation of funds, large corporate and agency issuance, and soaring
oil prices offered further incentive to sell U.S. Treasuries. The Treasury
market shifted from focusing on equities and emerging markets to economic data.
The market sentiment shifted from concerns about a global recession that would
hurt U.S. economic growth to worries of a global recovery that would bring
competition for the foreign capital that has supported the domestic economy.
Given this turn of events, the Fed increased short-term rates by 25 basis points
to end the first half of 1999.
The overall duration of the fund continues to shorten as the anticipated
December 1999, liquidation date approaches. Transaction activity continues to
focus on the share repurchase program. For the semi-annual reporting period, the
fund repurchased 8,300 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. As portfolio holdings mature or are sold the
proceeds are reinvested into short duration U.S. Treasuries or agencies to
coincide with the liquidation date.
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, liquidating
value to be returned to shareholders upon termination of the Fund (December 17,
1999) will be less than the $10 per share originally targeted by the Fund.
Last Meeting of Shareholders
An Annual Meeting of the Fund's Shareholders was held on May 28, 1999. On April
9, 1999, the record date for shareholders voting at the meeting, there were
5,625,018 outstanding shares. The following items were considered by
shareholders and the results of their voting were as follows:
AGENDA ITEM 1
Election of Directors:
WITHHELD
AUTHORITY
NAMES FOR TO VOTE
John F. Donahue 3,931,513 23,918
Thomas G. Bigley 3,932,578 22,853
Nicholas P. Constantakis 3,933,078 22,353
John E. Murray 3,932,578 22,853
John F. Cunningham 3,934,389 21,042
Charles F. Mansfield, Jr. 3,934,389 21,042
John S. Walsh 3,934,389 21,042
AGENDA ITEM 2
To ratify the selection of Ernst & Young LLP as the Fund's Independent Auditors.
ABSTENTIONS
AND BROKER
FOR AGAINST NON-VOTES
3,926,116 8,000 21,315
Portfolio of Investments
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT CREDIT
OR SHARES RATING 1 VALUE
<C> <S> <C> <C>
LONG-TERM MUNICIPAL
OBLIGATIONS-13.5%
PENNSYLVANIA-3.5%
$ 1,400,000 Allegheny County, PA,
Sanitation Authority Sewer
Revenue Bonds, Series A
(FGIC INS), 12/1/1999 AAA/Aaa $ 1,380,540
TEXAS-2.9%
1,145,000 Austin, TX, Capital
Appreciation Refunding &
Improvement LT GO Bonds,
(FGIC INS), 9/1/1999 AAA/NR 1,138,505
UTAH-7.1%
2,770,000 Utah Associated Municipal
Power Systems Revenue
Bonds,
(HunterProject)/(AMBAC
INS), 7/1/1999 AAA/Aaa 2,769,750
TOTAL LONG-TERM MUNICIPAL
OBLIGATIONS (IDENTIFIED
COST $5,268,887) 5,288,795
U.S. GOVERNMENT AGENCY
OBLIGATIONS-49.1%
FEDERAL FARM CREDIT
SYSTEM-5.1%
2,000,000 4.750%, 12/1/1999 - 1,995,240
FEDERAL NATIONAL MORTGAGE
ASSOCIATION-3.2%
1,295,132 5.000%, 8/1/2001 - 1,265,785
FEDERAL NATIONAL MORTGAGE
ASSOCIATION DEBENTURE-
10.0%
1,100,000 4.720%, 12/16/1999 - 1,096,997
2,850,000 4.780%, 11/30/1999 - 2,843,616
TOTAL 3,940,613
U.S. TREASURY BILLS-30.8%
12,250,000 2 4.273%, 10/14/1999 - 12,088,545
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(IDENTIFIED COST
$19,267,375) 19,290,183
CLOSED-END MUTUAL FUND
ISSUES-35.4%
300,000 Hyperion 1999 Term Trust,
Inc. - 2,137,500
1,000,000 Income Opportunities Fund
1999, Inc. - 9,750,000
205,000 Income Opportunities Fund
2000, Inc. - 2,011,563
TOTAL CLOSED-END MUTUAL
FUND ISSUES
(IDENTIFIED COST $12,868,480) 13,899,063
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING 1 VALUE
<C> <S> <C> <C>
REPURCHASE AGREEMENT-2.2% 3
$ 885,000 Goldman Sachs Group, LP,
5.250%, dated 6/30/1999,
due 7/1/1999 (at amortized
cost) - $ 885,000
TOTAL INVESTMENTS
(IDENTIFIED
COST $38,289,742) 4 $ 39,363,041
</TABLE>
1 Please refer to the list below for an explanation of the credit ratings.
Current credit ratings are unaudited.
2 Represents rate of discount at the time of purchase.
3 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.
4 The cost of investments for federal tax purposes amounts to $38,289,742. The
net unrealized appreciation of investments on a federal tax basis amounts to
$1,073,299 which is comprised of $1,091,613 appreciation and $18,314
depreciation at June 30, 1999.
Note: The categories of investments are shown as a percentage of net assets
($39,302,252) at June 30, 1999.
The following acronyms are used throughout this portfolio:
AMBAC -American Bond Assurance Corporation
FGIC -Financial Guaranty Insurance Company
GO -General Obligation
INS -Insured
LT -Limited Tax
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
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$38,289,742) $ 39,363,041
Cash 4,084
Income receivable 27,955
Other assets 14,921
TOTAL ASSETS 39,410,001
LIABILITIES:
Income distribution
payable $ 107,749
TOTAL LIABILITIES 107,749
Net assets for 4,310,418
shares outstanding $ 39,302,252
NET ASSETS CONSIST OF:
Paid in capital $ 44,138,967
Net unrealized
appreciation of
investments 1,073,299
Accumulated net realized
loss on investments (6,239,404)
Undistributed net
investment income 329,390
TOTAL NET ASSETS $ 39,302,252
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$39,302,252 / 4,310,418
shares outstanding $9.12
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Operations
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 308,434
Interest 611,377
TOTAL INCOME 919,811
EXPENSES:
Investment advisory fee $ 87,969
Administrative personnel
and services fee 61,987
Custodian fees 1,614
Transfer and dividend
disbursing agent fees and
expenses 14,360
Directors'/Trustees' fees 5,161
Auditing fees 8,843
Legal fees 1,440
Portfolio accounting fees 23,977
Printing and postage 7,406
Insurance premiums 912
Taxes 1,511
Miscellaneous 7,932
TOTAL EXPENSES 223,112
WAIVERS:
Waiver of investment
advisory fee (46,315)
Net expenses 176,797
Net investment income 743,014
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized loss on
investments (102,727)
Net change in unrealized
appreciation of
investments (55,272)
Net realized and
unrealized loss on
investments (157,999)
Change in net assets
resulting from operations $ 585,015
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited) YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS OPERATIONS:
Net investment income $ 743,014 $ 1,851,035
Net realized gain (loss) on
investments ($(102,727)
and $755,023,
respectively, as computed
for federal tax purposes) (102,727) 845,310
Net change in unrealized
appreciation (55,272) (224,695)
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 585,015 2,471,650
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income (641,295) (1,710,615)
SHARE TRANSACTIONS:
Cost of shares required
from shareholders (75,024) (171,020)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS (75,024) (171,020)
Change in net assets (131,304) 590,015
NET ASSETS:
Beginning of period 39,433,556 38,843,541
End of period (including
undistributed net
investment income of
$329,390 and $227,671,
respectively) $39,302,252 $39,433,556
</TABLE>
See Notes which are an integral part of the Financial Statements
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited)
JUNE 30, YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.13 $ 8.90 $ 8.54 $ 8.56 $ 7.97 $ 9.10
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.17 0.39 0.47 0.48 0.50 0.66
Net realized and
unrealized gain (loss) on
investments (0.02) 0.20 0.32 (0.08) 0.53 (1.19)
TOTAL FROM
INVESTMENT OPERATIONS 0.15 0.59 0.79 0.40 1.03 (0.53)
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.16) (0.36) (0.43) (0.42) (0.44) (0.60)
NET ASSET VALUE, END OF
PERIOD: $ 9.12 $ 9.13 $ 8.90 $ 8.54 $ 8.56 $ 7.97
MARKET VALUE, PER SHARE END
OF PERIOD $ 9.00 $ 8.81 $ 8.38 $ 7.88 $ 7.38 $ 7.13
TOTAL INVESTMENT RETURNS: 1
Based on net asset value
per share 1.65% 6.77% 9.44% 4.78% 12.92% (6.20%)
Based on market value per
share 4.01% 9.50% 11.67% 12.14% 9.68% (10.43%)
RATIOS TO AVERAGE NET
ASSETS:
Expenses 2 1.14% 3 1.17% 1.15% 1.19% 1.15% 1.14%
Net investment income 2 3.56% 3 4.49% 5.31% 5.31% 5.82% 7.59%
Expenses (after waivers) 0.90% 3 0.90% 0.90% 0.90% 0.90% 0.90%
Net investment income
(after waivers) 3.80% 3 4.76% 5.56% 5.60% 6.07% 7.83%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $39,302 $39,434 $38,844 $41,957 $47,357 $44,851
Portfolio turnover 1% 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 the period, and reinvestment
of all dividends and distributions at prices that were obtained by the Fund's
dividend reinvestment plan.
2 During the period certain fees were voluntarily waived. If such waivers had
not occurred, the ratios would have been as indicated.
3 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
JUNE 30, 1999 (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 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 17, 1999 while providing high monthly income. It is unlikely that the
amount which the Fund will return upon its termination, however, will be equal
to the targeted $10.00 per share amount.
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"). Distributions to shareholders are recorded on the ex- dividend
date.
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 June 30, 1999, there were 1,000,000,000 shares of $0.001 par value capital
stock authorized.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Shares Reacquired 8,300 46,700 547,600 621,800 90,200
Average Price per Share $8.99 $8.53 $8.08 $7.81 $7.49
Weighted Average Discount 0.66% 4.55% 6.23% 8.71% 12.36%
</TABLE>
As of June 30, 1999, the Fund has reacquired a total of 1,314,600 shares of
capital stock.
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE
INVESTMENT ADVISORY FEE
Federated Investment Management Company, 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 in 1983 and has been a Vice
President of the Fund's investment adviser since June 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 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 June 30, 1999, 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 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.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1999, were as follows:
Purchases $ 3,096,969
Sales $ 384,810
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.
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, 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 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, P.O. Box
8200, Boston, Massachusetts 02266- 8200.
Directors
JOHN F. DONAHUE
THOMAS G. BIGLEY
JOHN T. CONROY, JR.
NICHOLAS P. CONSTANTAKIS
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
J. CHRISTOPHER DONAHUE
Executive Vice President
EDWARD C. GONZALES
Executive Vice President
JOHN W. MCGONIGLE
Executive Vice President and Secretary
KATHY M. FOODY-MALUS
Vice President
RICHARD J. THOMAS
Treasurer
C. GRANT ANDERSON
Assistant Secretary
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Federated
World-Class Investment Manager
SEMI-ANNUAL REPORT
Liberty Term Trust, Inc.-1999
SEMI-ANNUAL REPORT TO SHAREHOLDERS
JUNE 30, 1999
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Federated
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
2080602 (8/99)
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