As filed with the Securities and Exchange Commission on December 16, 2002
1933 Act File No. 333-100605
1940 Act File No. 811-21235
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. 3 .................... X
Post-Effective Amendment No. ....................
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 3 ..................................... X
FEDERATED PREMIER MUNICIPAL INCOME FUND
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
Leslie K. Ross, Esquire
Reed Smith LLP
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
Copies to:
Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
Approximate Date of Proposed Public Offering: As soon as possible after the
effectiveness of the Registration Statement.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that the Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Title of Amount Being Proposed Proposed Maximum
Securities Registered Maximum Offering Aggregate Offering
Being Price Per Unit Price
Registered
Common stock 4,000,000 $15/share $60,000,000
shares
Amount of Registration Fee*
$5,520
*$5,520 was previously paid on October 17, 2002.
CROSS-REFERENCE SHEET
PARTS A AND B
ITEM NO. CAPTION LOCATION IN PROSPECTUS
1. Outside Front Cover Page Outside Front Cover Page
2. Inside Front and Outside Back Inside Front and Outside Back
3. Fee Table and Synopsis Summary of Fund Expenses
4. Financial Highlights Not Applicable
5. Plan of Distribution Outside Front Cover Page
6. Selling Shareholders Not Applicable
7. Use of Proceeds Use of Proceeds
8. General Description of the Outside Front Cover Page
Registrant
9. Management Management of the Fund
10. Capital Stock, Long-Term Debt Shares of Beneficial Interests
and Other Securities
11. Defaults and Arrears on Senior Not Applicable
Securities
12. Legal Proceedings Not Applicable
13. Table of Contents of SAI Table of Contents (SAI)
14. Cover Page of SAI Cover Page (SAI)
15. Table of Contents of SAI Table of Contents (SAI)
16. General Information and Appendix A (SAI)
History
17. Investment Objective and Additional Investment Policies
Policies
18. Management Trustees and Officers (SAI);
Advisory and Other Services
19. Control Persons and Principal Not Applicable
Holders of Securities
20. Investment Adisory and Other Investment Advisory and Other Services
(SAI) Services
21. Brokerage Allocation and Other Brokerage Commissions (SAI)
Practices
22. Tax Status Not Applicable
23. Financial Statements Financial Statements (SAI)
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated November 25, 2002
[Logo]
PROSPECTUS
[4,000,000] SHARES
Federated Premier Municipal Income Fund
Common Shares
$15.00 Per Share
---------------------
Investment Objective. Federated Premier Municipal Income Fund (the "Fund")
is a newly organized, diversified, closed-end management investment company. The
Fund's investment objective is to provide current income exempt from federal
income tax, including alternative minimum tax ("AMT"). The Fund cannot assure
you that it will achieve its investment objective.
Investment Portfolio. The Fund will invest primarily in securities that, in
the opinion of bond counsel to the issuer, or on the basis of another authority
believed by Federated Investment Management Company (the Fund's investment
adviser) to be reliable, pay interest exempt from federal income tax, including
AMT. The Fund normally invests substantially all (at least 90%) of its total
assets in tax exempt securities. The Fund will invest at least 80% of its total
assets in investment grade tax exempt securities. The Fund may invest up to 20%
of its total assets in tax exempt securities of below investment grade quality
(but not lower than B). Tax exempt securities of below investment grade quality
are regarded as having predominately speculative characteristics with respect to
the issuer's capacity to pay interest and repay principal, and are commonly
referred to as "junk bonds." Under normal circumstances, the Fund will maintain
a dollar-weighted average portfolio maturity of 15 to 30 years and a
dollar-weighted average duration of 7 to 13 years.
No Prior History. Because the Fund is newly organized, its common shares
("Common Shares") have no history of public trading. Shares of closed-end
investment companies frequently trade at a discount from their net asset values
("NAV") and investors may lose money by purchasing Common Shares in the initial
public offering. This risk may be greater for investors expecting to sell their
Common Shares in a relatively short period after completion of the public
offering. The Common Shares have been approved for listing, subject to notice of
issuance, on the New York Stock Exchange under the symbol "FMN".
Preferred Shares. The Fund intends to use leverage by issuing shares of
preferred stock ("Preferred Shares") representing approximately 38% of the
Fund's capital immediately after their issuance. By using leverage, the Fund
will seek to obtain higher dividends for holders of Common Shares ("Common
Shareholders") than if the Fund did not use leverage. Leveraging is a
speculative technique and there are special risks involved. There can be no
assurance that a leveraging strategy will be used or that it will be successful
during any period in which it is employed. See "Preferred Shares and Leverage,"
"Risks-Leverage Risk" and "Risks-Derivative Contracts and Inverse Floater Risk."
Investing in Common Shares involves certain risks. See "Risks" on page 25
of this prospectus.
Per Share Total
Public offering price $15.00 $
Sales load $0.675 $
Estimated offering
expenses(1) $0.03 $
Proceeds to the Fund $14.295 $
(1) In addition to the sales load, the Fund will pay organizational and
offering expenses of up to $0.03 per Common Share, estimated to total $
"Proceeds to the Fund" (above) reflects such expenses. Federated Investment
Management Company has agreed to pay organizational expenses and offering costs
of the Fund (other than the sales load) that exceed $0.03 per Common Share.
The underwriters may purchase up to additional Common Shares at the public
offering price, less the sales load, within 45 days from the date of this
prospectus to cover over-allotments.
The Securities and Exchange Commission ("SEC") has not approved or
disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver Common Shares to purchasers on or about
..
Merrill Lynch & Co.
UBS Warburg A.G. Edwards & Sons, RBC Capital Markets
Inc.
Wachovia Securities Wells Fargo Securities, Advest, Inc.
LLC
Robert W. Baird & Co. BB&T Capital Markets, a Fahnestock & Co. Inc.
subsidiary of Scott &
Stringfellow, Inc.
Ferris, Baker Watts Janney Montgomery Scott McDonald Investments,
Incorporated LLC Inc.
Parker/Hunter Quick & Reilly, Inc. Stephens Inc.
Incorporated
Stifel, Nicholaus & Company Incorporated
The date of this prospectus is , 2002.
You should read this prospectus, which contains important information about
the Fund, before deciding whether to invest in Common Shares and retain it for
future reference. A Statement of Additional Information, dated , 2002,
containing additional information about the Fund, has been filed with the SEC
and is incorporated by reference in its entirety into this prospectus. You may
request a free copy of the Statement of Additional Information, the table of
contents of which is on page 52 of this prospectus, by calling 1-800-341-7400 or
by writing to the Fund, or obtain a copy (and other information regarding the
Fund) from the SEC's web site (http://www.sec.gov).
The Fund's Common Shares are not deposits or obligations of any bank, are
not endorsed or guaranteed by any bank and are not insured or guaranteed by the
U.S. government, the Federal Reserve Board or any other government agency.
TABLE OF CONTENTS
Prospectus Summary.....................................................2
Summary Of Fund Expenses...............................................2
The Fund...............................................................2
Use Of Proceeds........................................................2
The Fund's Investments.................................................2
Preferred Shares And Leverage..........................................2
Risks..................................................................2
How The Fund Manages Risk..............................................2
Management Of The Fund.................................................2
Net Asset Value........................................................2
Distributions..........................................................2
Dividend Reinvestment Plan.............................................2
Description Of Shares..................................................2
Certain Provisions In The Agreement And Declaration Of Trust...........2
Closed-End Fund Structure..............................................2
Repurchase Of Common Shares............................................2
Tax Matters............................................................2
Underwriting...........................................................2
Custodian And Transfer Agent...........................................2
Legal Opinions.........................................................2
Table Of Contents For The Statement Of Additional Information..........2
You should rely only on the information contained or incorporated by
reference in this prospectus. Neither the Fund nor the underwriters have
authorized anyone to provide you with different information. Neither the Fund
nor the underwriters are making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information contained
in this prospectus is accurate as of any other date than the date on the front
of this prospectus.
Until , 2003 (25 days after the date of this prospectus), all dealers that
buy, sell or trade the Common Shares, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the
dealers' obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
PROSPECTUS SUMMARY
This is only a summary. This summary does not contain all of the
information that you should consider before investing in Common Shares. You
should review the more detailed information contained in this prospectus and in
the Statement of Additional Information.
THE FUND..........................Federated Premier Municipal Income
Fund is a newly organized,
diversified, closed-end management
investment company. See "The Fund."
THE OFFERING......................The Fund is offering 4,000,000
Common Shares, with a par value of
$0.01 per Common Share, at $15.00
per Common Share, through a group of
underwriters led by Merrill Lynch,
Pierce, Fenner & Smith Incorporated
("Merrill Lynch"). You must
purchase at least 100 Common Shares.
The Fund has given the underwriters
an option to purchase up to
additional Common Shares to cover
orders in excess of Common
Shares. Federated Investment
Management Company (the "Adviser")
has agreed to pay organizational
expenses and offering costs (other
than the sales load) that exceed
$0.03 per Common Share. See
"Underwriting."
INVESTMENT OBJECTIVE............ The Fund's investment objective is
to provide current income exempt
from federal income tax, including
AMT.
INVESTMENT POLICIES...............The Fund will invest primarily in
securities that, in the opinion of
bond counsel to the issuer, or on
the basis of another authority
believed by the Adviser to be
reliable, pay interest exempt from
federal income tax, including AMT.
The Fund normally invests
substantially all (at least 90%) of
its total assets in tax exempt
securities. The Fund will invest at
least 80% of its total assets in
investment grade tax exempt
securities. Investment grade tax
exempt securities are those rated
within the four highest categories
by a nationally recognized
statistical rating organization
("NRSRO"). See "Investment
Ratings." The Fund may invest up
to 20% of its total assets in tax
exempt securities of below
investment grade quality (but not
lower than B). Tax exempt
securities of below investment grade
quality are regarded as having
predominately speculative
characteristics with respect to the
issuer's capacity to pay interest
and repay principal and are commonly
referred to as "junk bonds." See
"Investment Ratings."
Under normal circumstances, the Fund
will maintain a dollar-weighted
average portfolio maturity of 15 to
30 years and a dollar-weighted
average duration of 7 to 13 years.
See "The Fund's Investments."
The Fund may use derivative
contracts for risk management
purposes. Prior to the issuance of
Preferred Shares, the Fund may
leverage the portfolio by investing
up to 10% of its total assets in
inverse floaters and by investing in
derivative contracts. The Fund's
use of derivative contracts will be
limited by the Investment Company
Act of 1940, as amended (the "1940
Act"). See "Risks-Leverage Risk,"
"Risks-Derivative Contract and
Inverse Floater Risk," and
"Preferred Shares and Leverage-Other
Forms of Leverage and Borrowings."
SPECIAL TAX The Fund invests primarily in
CONSIDERATIONS....................securities that pay interest exempt
from federal income tax, including
AMT. Consequently, the regular
monthly dividends that you receive
generally will be exempt from
federal income tax, including AMT.
However, dividends may be subject to
state and local taxes. In addition,
distributions of any capital gain or
other taxable income will be taxable
to shareholders. The Fund will
allocate dividends paid as exempt
interest dividends, capital gain
dividends and ordinary taxable
dividends between Common
Shareholders and Preferred
Shareholders in proportion to the
total dividends paid to each such
class of shares. See "Tax Matters."
PROPOSED OFFERING OF PREFERRED Approximately one to three months
SHARES AND OTHER FORMS OF after completion of this offering of
LEVERAGE..........................Common Shares, the Fund intends to
offer Preferred Shares that will
represent approximately 38% of the
Fund's capital immediately after
their issuance. For purposes of
this prospectus, the Fund's capital
means the total assets of the Fund
less all liabilities and
indebtedness not representing
Preferred Shares or other senior
securities. The issuance of
Preferred Shares will leverage
Common Shares. Leverage involves
special risks. There is no
assurance that the Fund will issue
Preferred Shares or that, if issued,
the Fund's leveraging strategy will
be successful. See "Risks-Leverage
Risk."
The money that the Fund obtains by
selling Preferred Shares will be
invested in accordance with the
Fund's investment objective and
policies, primarily in long-term tax
exempt securities that generally
will pay fixed rates of interest
over the life of the securities.
The Preferred Shares will pay
dividends based on short-term
interest rates, which will reset
frequently. If the yield, after the
payment of applicable Fund expenses,
on the long-term tax exempt
securities and other instruments
purchased by the Fund, is greater
than the Preferred Share dividend
rate as reset periodically, the
investment of the proceeds of the
Preferred Shares will generate more
income than will be needed to pay
dividends on the Preferred Shares.
If so, the excess income may be used
to pay higher dividends to Common
Shareholders.
Prior to the issuance of Preferred
Shares, the Fund may add leverage to
the portfolio by investing up to 10%
of its total assets in inverse
floaters and by investing in
derivative contracts. The Fund's
use of derivative contracts will be
limited by the 1940 Act. See
"Preferred Shares and Leverage-Other
Forms of Leverage and Borrowings."
The Fund cannot assure you that the
issuance of Preferred Shares or the
use of other forms of leverage will
result in a higher yield on the
Common Shares. Once Preferred
Shares are issued or other forms of
leverage are used, the NAV and
market price of Common Shares and
the yield to Common Shareholders
will be more volatile. See
"Preferred Shares and Leverage,"
"Description of Shares-Preferred
Shares" "Risks-Leverage Risk," and
"Risks-Derivative Contract and
Inverse Floater Risk."
INVESTMENT ADVISER............. Federated Investment Management
Company will be the Fund's
investment adviser. The Adviser
will receive an annual fee in a
maximum amount equal to 0.55% of the
average daily value of the Fund's
Managed Assets. "Managed Assets"
means the total assets of the Fund
(including assets attributable to
any Preferred Shares or borrowings
that may be outstanding) minus the
sum of accrued liabilities (other
than debt representing financial
leverage). The liquidation
preference of the Preferred Shares
is not a liability. The Adviser has
contractually agreed to waive
receipt of a portion of the
management fee or reimburse other
expenses of the Fund in the amount
of 0.20% of the average daily value
of the Fund's Managed Assets from
the commencement of operations
through December 31, 2007 (i.e.,
approximately the first five years
of the Fund's operations), and for a
declining amount for an additional
three years (through December 31,
2010). See "Management of the Fund."
DISTRIBUTIONS.....................The Fund intends to distribute
monthly all or a portion of its tax
exempt interest income to Common
Shareholders (after it pays accrued
dividends on any Preferred Shares of
the Fund that may be outstanding).
It is expected that the initial
monthly dividend on Common Shares
will be declared approximately 45
days after completion of this
offering and that the initial
monthly dividend will be paid
approximately 60 to 90 days after
completion of this offering. Unless
an election is made to receive
dividends in cash, Common
Shareholders will automatically have
all dividends and distributions
reinvested in Common Shares through
the receipt of additional authorized
but unissued Common Shares from the
Fund or by purchasing Common Shares
in the open market through the
Fund's Dividend Reinvestment Plan.
See "Dividend Reinvestment Plan."
If the Fund realizes a capital gain
or other taxable income, it will be
required to allocate such income
between Common Shares and Preferred
Shares in proportion to the total
dividends paid to each class for the
year in which or with respect to
which the income is paid. The Fund
will distribute capital gains, if
any, annually. See "Distributions"
and "Preferred Shares and Leverage."
LISTING......................................
The Common Shares have been approved
for listing, subject to notice of
issuance, on the New York Stock
Exchange under the symbol "FMN". See
"Description of Shares-Common
Shares."
CUSTODIAN AND TRANSFER State Street Bank and Trust Company
AGENT.............................will serve as the Fund's Custodian
and EquiServe Trust Company, N.A.
will serve as the Fund's Transfer
Agent. See "Custodian and Transfer
Agent."
MARKET PRICE OF SHARES...... Common Shares of closed-end
investment companies frequently
trade at prices lower than their
NAV. Common Shares of closed-end
investment companies like the Fund
that invest primarily in investment
grade tax exempt securities have
during some periods traded at prices
higher than their NAV and during
other periods traded at prices lower
than their NAV. The Fund cannot
assure you that its Common Shares
will trade at a price higher than or
equal to NAV. The Fund's NAV will
be reduced immediately following
this offering by the sales load and
the amount of the organizational and
offering expenses paid by the Fund.
See "Use of Proceeds." In addition
to NAV, the market price of the
Fund's Common Shares may be affected
by dividend levels, which are in
turn affected by expenses, call
protection for portfolio securities,
dividend stability, portfolio credit
quality, liquidity and market supply
and demand. See "Preferred Shares
and Leverage," "Risks," "Description
of Shares" and the section of the
Statement of Additional Information
with the heading "Repurchase of
Common Shares." The Common Shares
are designed primarily for long-term
investors and you should not
purchase Common Shares if you intend
to sell them shortly after purchase.
SPECIAL RISK No Operating History. The Fund is a
CONSIDERATIONS....................... newly organized, closed-end
management investment company with
no operating history.
Market Discount Risk. Shares of
closed-end management investment
companies frequently trade at a
discount from their NAV.
Interest Rate Risk. Prices of tax
exempt securities rise and fall in
response to changes in the interest
rate paid by similar securities.
Generally, when interest rates rise,
prices of tax exempt securities
fall. However, market factors, such
as the demand for particular tax
exempt securities, may cause the
price of certain fixed income
securities to fall while the prices
of other securities rise or remain
unchanged.
Interest rate changes have a greater
effect on the price of tax exempt
securities with longer maturities.
Because the Fund will invest
primarily in long-term tax exempt
securities, the NAV of Common Shares
will fluctuate more in response to
changes in market interest rates
than if the Fund invested primarily
in shorter-term tax exempt
securities.
The Fund may use certain strategies
for the purpose of reducing the
interest rate sensitivity of the
portfolio and decreasing the Fund's
exposure to interest rate risk,
although there is no assurance that
it will do so or that such
strategies will be successful.
The Fund's use of leverage, as
described below, tends to increase
the interest rate risk of Common
Shares.
Credit Risk. Credit risk is the
possibility that an issuer of a tax
exempt security will default on a
security by failing to pay interest
or principal when due. If an issuer
defaults, the Fund will lose money.
Leverage Risk. The use of leverage
through the issuance of Preferred
Shares creates an opportunity for
increased income that may be
distributed as Common Share
dividends, but also creates special
risks for Common Shareholders. Two
major types of risks created by
leverage include:
o the likelihood of greater
volatility of NAV and market price
of Common Shares, because changes in
the value of the Fund's tax exempt
security portfolio (including
securities bought with the proceeds
of the Preferred Shares offering)
are borne entirely by Common
Shareholders; and
o the possibility either that Common
Share income will fall if the
Preferred Share dividend rate rises,
or that Common Share income will
fluctuate because the Preferred
Share dividend rate varies.
It is anticipated that dividends on
Preferred Shares will be based on
shorter-term tax exempt security
yields (which will be reset
periodically) and that the Fund will
invest the proceeds of the Preferred
Shares offering in long-term,
typically fixed rate, tax exempt
securities. So long as the Fund's
tax exempt security portfolio
provides a higher yield, net of Fund
expenses, than the Preferred Share
dividend rate, as reset
periodically, the leverage may cause
Common Shareholders to receive
higher dividends than if the Fund
were not leveraged. However, the
Fund's leveraging strategy may not
be successful. For example, if
short-term rates rise, the Preferred
Share dividend rate could exceed the
yield on long-term tax exempt
securities held by the Fund that
were acquired during periods of
generally lower interest rates,
reducing dividends to Common
Shareholders. In addition, if
interest rates rise, the value of
the Fund's holdings in long-term tax
exempt securities likely will fall,
resulting in a decline in the NAV of
Common Shares. Investment by the
Fund in inverse floaters and
derivative contracts may increase
the Fund's leverage and, during
periods of rising interest rates,
may adversely affect the Fund's
income, dividends and total returns
to Common Shareholders. See "The
Fund's Investments" for a discussion
of these instruments. Preferred
Shares are expected to pay
cumulative dividends, which may tend
to increase leverage risk.
Because the fees received by the
Adviser are based on the Managed
Assets of the Fund (including assets
represented by Preferred Shares and
any leverage created thereby), the
Adviser has a financial incentive
for the Fund to issue Preferred
Shares, which may create a conflict
of interest between the Adviser and
Common Shareholders.
Risks Associated with Non-Investment
Grade Securities. Securities rated
below investment grade, also known
as junk bonds, generally entail
greater interest rate and credit
risks than investment grade
securities. For example, their
prices are more volatile, economic
downturns and financial setbacks may
affect their prices more negatively,
and their trading market may be more
limited.
Tax Exempt Securities Market Risk.
The amount of public information
available about tax exempt
securities is generally less than
that for corporate equities or
bonds. Consequently, the Adviser
may make investment decisions based
on information that is incomplete or
inaccurate. The secondary market
for tax exempt securities also tends
to be less well-developed or liquid
than many other securities markets,
which may adversely affect the
Fund's ability to sell its tax
exempt securities at attractive
prices. Special factors, such as
legislative changes and local and
business developments, may adversely
affect the yield or value of the
Fund's investments in tax exempt
securities.
Derivative Contract and Inverse
Floater Risk. Prior to the issuance
of Preferred Shares, the Fund may
add leverage to its portfolio by
investing up to 10% of its total
assets in inverse floaters and by
investing in derivative contracts.
The Fund's use of derivative
contracts will be limited by the
1940 Act. See "Preferred Shares and
Leverage-Other Forms of Leverage and
Borrowings." The Fund also may
invest in derivative contracts for
risk management purposes.
Derivative contracts and inverse
floaters are subject to a number of
risks described elsewhere in this
prospectus, such as interest rate
and credit risks. In addition,
investment by the Fund in derivative
contracts and inverse floaters may
increase the Fund's leverage and,
during periods of rising interest
rates, may adversely affect the
Fund's income, dividends and total
returns to Common Shareholders.
Reinvestment Risk. Income from the
Fund's tax exempt security portfolio
will decline if and when the Fund
invests the proceeds from matured,
traded or called tax exempt
securities at market interest rates
that are below the portfolio's
current earnings rate. A decline in
income could affect the market price
or overall return of Common Shares.
Tax Risk. In order to be tax
exempt, municipal securities must
meet certain legal requirements.
Failure to meet such requirements
may cause the interest received and
distributed by the Fund to Common
Shareholders to be taxable.
The federal income tax treatment of
payments in respect of certain
derivative contracts is unclear.
Additionally, the Fund may not be
able to close out certain derivative
contracts when it wants to.
Consequently, the Fund may receive
payments that are treated as
ordinary income for federal income
tax purposes.
Sector Risk. The Fund may invest
25% or more of its total assets in
tax exempt securities of issuers in
the same economic sector, such as
hospitals or life care facilities
and transportation-related issuers.
In addition, a substantial part of
the Fund's portfolio may be
comprised of securities credit
enhanced by banks, insurance
companies or companies with similar
characteristics. As a result, the
Fund will be more susceptible to any
economic, business, political or
other developments which generally
affect these sectors and entities.
Anti-Takeover Provisions. The Fund's
Agreement and Declaration of Trust
includes provisions that could limit
the ability of other entities or
persons to acquire control of the
Fund or convert the Fund to open-end
status. These provisions could
deprive Common Shareholders of
opportunities to sell their Common
Shares at a premium over the then
current market price of Common
Shares or at NAV. In addition, if
the Fund issues Preferred Shares,
Preferred Shareholders will have
voting rights that could deprive
Common Shareholders of such
opportunities.
Inflation Risk. Inflation risk is
the risk that the value of assets or
income from the Fund's investments
will be worth less in the future as
inflation decreases the present
value of payments at future dates.
Market Disruption. As a result of
the terrorist attacks on the World
Trade Center and the Pentagon on
September 11, 2001, some of the U.S.
securities markets were closed for a
four-day period. These terrorist
attacks and related events have led
to increased market volatility and
may have long-term effects on U.S.
and world economies and markets. A
similar disruption of the financial
markets would impact interest rates,
auctions, secondary trading,
ratings, credit risk, inflation and
other factors relating to the
securities.
SUMMARY OF FUND EXPENSES
The following table shows Fund expenses as a percentage of net assets
attributable to Common Shares and assumes the issuance of Preferred Shares in an
amount equal to 38% of the Fund's capital (after their issuance).
Shareholder Transaction Expenses
Sales Load Paid by You (as a percentage of offering price) .........4.50%
Expenses Borne by the Fund.....................................0.20%(1)(2)
Dividend Reinvestment Plan Fees ...................................None(3)
Percentage Of Net Assets
Attributable To Common Shares
(Assumes Preferred Shares are Issued)(4)
-----------------------------------------------------------
Annual Expenses
Management Fees ............................................0.89%
Other Expenses .............................................0.32%
Total Annual Expenses ......................................1.21%
Fee and Expense Waiver..................................... 0.32%(5)
Total Net Annual Expenses.................................. 0.89%(5)
----------
(1) The Adviser has agreed to pay organizational and offering costs of the
Fund (other than the sales load) that exceed $0.03 per Common Share.
(2) If the Fund offers Preferred Shares, costs of that offering, estimated
to be slightly more than 1.00% of the total amount of the Preferred
Share offering, will effectively be borne by Common Shareholders and
result in the reduction of the NAV of Common Shares. Assuming the
issuance of 13,333,333 Common Shares and the issuance of Preferred
Shares in an amount equal to 38% of the Fund's total assets (after
issuance), those offering costs are estimated to be not more than
approximately $1,250,000 or $0.09 per Common Share (0.61% of the
offering price).
(3) You will pay brokerage charges if you direct the Plan Administrator to
sell your Common Shares held in a dividend reinvestment account.
(4) The table presented in this footnote also estimates Fund expenses as a
percentage of net assets attributable to Common Shares. However, unlike the
table above, this table assumes that no Preferred Shares are issued or
outstanding. In accordance with these assumptions, the Fund's estimated expenses
would be as follows:
Percentage Of
Net Assets
Attributable To Common Shares
(Assumes no Preferred Shares are Issued or Outstanding)
----------------------------------------
Annual Expenses
Management Fees.........................................0.55%
Other Expenses..........................................0.20%
Total Annual Expenses...................................0.75%
Fee and Expense Waiver..................................0.20%(5)
Total Net Annual Expenses...............................0.55%(5)
(5) The Adviser has agreed to waive a portion of the management fees that
it is entitled to receive from the Fund at the annual rate of 0.20% of the
Fund's Managed Assets from the commencement of operations through December 31,
2007 (i.e., approximately the first 5 years of the Fund's operations), 0.15% of
Managed Assets in year 6, 0.10% of Managed Assets in year 7 and 0.05% of Managed
Assets in year 8.
The purpose of the table above is to help you understand all fees and
expenses that you, as a Common Shareholder, would bear directly or indirectly.
The expenses shown in the table under "Other Expenses" are based on estimated
amounts for the Fund's first year of operation and assume that the Fund issues
approximately 13,333,333 Common Shares. See "Management of the Fund" and
"Dividend Reinvestment Plan."
The following example illustrates the expenses (including the $45 sales
load, estimated $2 offering expenses and estimated $6.10 Preferred Share
offering costs) that you would pay on a $1,000 investment in Common Shares,
assuming (a) total net annual expenses of 0.89% of net assets attributable to
Common Shares in years 1 through 5, increasing to 1.21% in year 10 and (b) a 5%
annual return(1):
1 year 3 years 5 years 10 years(2)
Total Expenses
Incurred......... $61.72 $80.04 $99.90 $171.73
(1) The example above should not be considered a representation of future
expenses. Actual expenses may be higher or lower than those shown. The example
assumes that the estimated "Other Expenses" set forth in the Annual Expenses
table are accurate, that fees and expenses increase as described in note 2
below, and that all dividends and distributions are reinvested at NAV. Actual
expenses may be greater or less than those assumed. Moreover, the Fund's actual
rate of return may be greater or less than the hypothetical 5% annual return
shown in the example.
(2) Assumes waiver of management fees at the annual rate of 0.24% of the
Fund's average daily net assets attributable to Common Shares in year 6 (0.15%
of average daily Managed Assets), 0.16% (0.10%) in year 7 and 0.08% (0.05%) in
year 8. The Adviser has not agreed to waive any portion of the management fees
it is entitled to receive from the Fund beyond December 31, 2010. See
"Management of the Fund-Investment Management Agreement."
THE FUND
The Fund is a newly organized, diversified, closed-end management
investment company registered under the 1940 Act. The Fund was organized as a
Delaware statutory trust on October 16, 2002, pursuant to an Agreement and
Declaration of Trust, which is governed by the laws of the State of Delaware. As
a newly organized entity, the Fund has no operating history. The Fund's
principal office is located at 5800 Corporate Drive, Pittsburgh, PA 15237-7000,
and its telephone number is 1-800-341-7400.
USE OF PROCEEDS
The net proceeds of the offering of Common Shares will be approximately $
($ if the underwriters exercise the over-allotment option in full) after payment
of the estimated organizational and offering costs. The Adviser has agreed to
pay the amount by which the aggregate of all the Fund's organizational and
offering costs (other than the sales load) exceeds $0.03 per Common Share. The
Fund will invest the net proceeds of the offering in accordance with the Fund's
investment objective and policies as stated below. The Fund currently
anticipates that it will be able to invest primarily in tax exempt securities
that meet the Fund's investment objective and policies within approximately
three months after the completion of the offering. Pending such investment, it
is anticipated that the proceeds will be invested in short-term, tax exempt or
taxable investment grade securities.
THE FUND'S INVESTMENTS
Investment Objective
The Fund's investment objective is to provide current income exempt from
federal income tax, including AMT.
Investment Policies
The Fund will invest primarily in securities that, in the opinion of bond
counsel to the issuer, or on the basis of another authority believed by the
Adviser to be reliable, pay interest exempt from federal income tax, including
AMT. The Adviser will not conduct its own analysis of the tax status of the
interest paid by tax exempt securities held by the Fund.
The Fund normally invests substantially all (at least 90%) of its total
assets in tax exempt securities. The Fund normally will invest at least 80% of
its total assets in investment grade tax exempt securities. The Fund may invest
up to 20% of its total assets in tax exempt securities of below investment grade
quality (but not lower than B). Bonds of below investment grade quality are
commonly referred to as "junk bonds." Bonds of below investment grade quality
are regarded as having predominately speculative characteristics with respect to
the issuer's capacity to pay interest and repay principal.
The Adviser performs a fundamental credit analysis on tax exempt securities
that the Fund is contemplating purchasing before the Fund purchases such
securities. The Adviser considers various factors, including the economic
feasibility of revenue bond financings and general purpose financings; the
financial condition of the issuer or guarantor; and political developments that
may affect credit quality. The Adviser monitors the credit risks of the tax
exempt securities held by the Fund on an ongoing basis by reviewing periodic
financial data and ratings of NRSROs.
Under normal circumstances, the Fund will maintain a dollar-weighted
average portfolio maturity of 15 to 30 years and a dollar-weighted average
duration of 7 to 13 years. "Duration" measures the sensitivity of a security's
price to changes in interest rates. The greater a portfolio's duration, the
greater the change in the portfolio's value in response to a change in market
interest rates. The Adviser increases or reduces the Fund's portfolio duration
based on its interest rate outlook. When the Adviser expects interest rates to
fall, it attempts to maintain a longer portfolio duration. When the Adviser
expects interest rates to increase, it attempts to shorten the portfolio
duration. The Adviser considers a variety of factors in formulating its interest
rate outlook, including current and expected U.S. economic growth; current and
expected interest rates and inflation; the Federal Reserve's monetary policy;
and supply and demand factors related to the municipal market and the effect
they may have on the returns offered for various bond maturities.
For temporary or for defensive purposes, including the period during which
the net proceeds of this offering are being invested, the Fund may invest up to
100% of its assets in short-term investments, including high quality, short-term
securities that may be either tax exempt or taxable. The Fund intends to invest
in taxable short-term investments only in the event that suitable tax exempt
short-term investments are not available at reasonable prices and yields.
Investments in taxable short-term investments would result in a portion of your
dividends being subject to federal income taxes. For more information, see "Tax
Matters" in the Statement of Additional Information.
Because the Fund refers to municipal investments in its name, it has an
investment policy that it will normally invest so that at least 80% of the
income that it distributes will be exempt from federal regular income tax. This
policy is referred to as the "80% Policy."
The Fund cannot change its investment objective or the 80% Policy without
the approval of (1) the holders of a majority of the outstanding Common Shares
and, once the Preferred Shares are issued, the Preferred Shares voting together
as a single class, and (2) the holders of a majority of the outstanding
Preferred Shares voting as a separate class. A "majority of the outstanding"
means (1) 67% or more of the shares present at a meeting, if the holders of more
than 50% of the shares are present or represented by proxy, or (2) more than 50%
of the shares, whichever is less. See "Description of Shares-Preferred
Shares-Voting Rights" and the Statement of Additional Information under
"Description of Shares-Preferred Shares" for additional information with respect
to the voting rights of Preferred Shareholders.
Investment Ratings
The Adviser will determine whether a security is investment grade based
upon the credit ratings given by one or more NRSROs, such as Standard & Poor's
("S&P"), Moody's Investors Service ("Moody's") or Fitch, Inc. ("Fitch"). For
example, S&P assigns ratings to investment grade securities (AAA, AA, A and BBB)
based on their assessment of the likelihood of the issuer's inability to pay
interest or principal (default) when due on each security. Lower credit ratings
correspond to higher credit risk. Securities in the lowest investment grade
category may be considered to possess speculative characteristics by certain
NRSROs. An NRSRO's rating categories are determined without regard for
sub-categories and gradations. If a security is downgraded below investment
grade, the Adviser will reevaluate the security, but will not be required to
sell it.
Tax exempt securities of below investment grade quality are regarded as
having predominately speculative characteristics with respect to the issuer's
capacity to pay interest and repay principal and are commonly referred to as
"junk bonds."
If a security has not received a rating, the Fund must rely entirely upon
the Adviser's credit assessment. See Appendix A to the Statement of Additional
Information for a description of NRSRO ratings.
Investment Securities
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Fixed income securities pay
interest, dividends or distributions at a specified rate. The rate may be a
fixed percentage of the principal or adjusted periodically.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes sufficient to
pay principal and interest on the bonds. However, the issuer's authority to
impose additional taxes may be limited by its charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues received by
the issuer such as specific taxes, assessments, tolls or fees. Holders of
special revenue bonds may not depend on the municipality's general taxes or
revenues for payment of the bonds. For example, a municipality may issue bonds
to build a toll road and pledge the tolls to repay the bonds. Therefore, a
shortfall in the tolls normally would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new factory
to improve its local economy. The municipality would lend the proceeds from its
bonds to the company using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable solely from
the company's loan payments, not from any other revenues of the municipality.
Therefore, any default on the loan normally would result in a default on the
bonds. The interest on many types of private activity bonds is subject to AMT.
Following are descriptions of other types of tax exempt securities in which
the Fund may invest:
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final
maturity unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities at a
price below the amount payable at maturity. The difference between the purchase
price and the amount paid at maturity represents interest on the zero coupon
security. Investors must wait until maturity to receive interest and principal,
which increases the interest rate risks and credit risks of a zero coupon
security.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order
to comply with state public financing laws, these leases are typically subject
to annual appropriation. In other words, a municipality may end a lease, without
penalty, by not providing for the lease payments in its annual budget. After the
lease ends, the lessor can resell the equipment or facility but may lose money
on the sale.
The Fund may invest in securities supported by individual leases or pools
of municipal leases.
Inverse Floaters
Prior to the issuance of Preferred Shares, the Fund may invest up to 10% of
its total assets in inverse floaters. An inverse floater has a variable interest
rate that moves in the opposite direction of market interest rates. When market
interest rates go up, the interest rate paid on the inverse floater goes down;
when market interest rates go down, the interest rate paid on the inverse
floater goes up. Inverse floaters generally respond with more volatility to
market interest rate changes than fixed rate, tax exempt securities of the same
maturity.
Credit Enhancement
The Fund may invest in securities that have credit enhancement. Credit
enhancement consists of an arrangement in which a company agrees to pay amounts
due on a fixed income security if the issuer defaults. In some cases the company
providing credit enhancement makes all payments directly to the security holders
and receives reimbursement from the issuer. Normally, the credit enhancer has
greater financial resources and liquidity than the issuer. For this reason, the
Adviser usually evaluates the credit risk of a fixed income security with credit
enhancement based solely upon its credit enhancement.
Delayed Delivery Transactions
The Fund may engage in delayed delivery transactions. Delayed delivery
transactions, including when-issued transactions, are arrangements in which the
Fund buys securities for a set price, with payment and delivery of the
securities scheduled for a future time. During the period between purchase and
settlement, no payment is made by the Fund to the issuer and no interest accrues
to the Fund. The Fund records the transactions when it agrees to buy the
securities and reflects their value in determining the price of its shares.
Settlement dates may be a month or more after entering into these transactions
so that the market values of the securities bought may vary from the purchase
prices. Therefore, delayed delivery transactions create interest rate risks for
the Fund. Delayed delivery transactions also involve credit risks in the event
of a counterparty default.
Derivative Contracts
The Fund may buy and sell derivative contracts. Derivative contracts are
financial instruments that require payments based upon changes in the values of
designated or underlying securities, commodities, financial indices or other
assets or instruments. Some derivative contracts such as futures, forwards and
options require payments relating to a future trade involving the underlying
asset. Other derivative contracts such as swaps require payments relating to the
income or returns from the underlying asset or instrument. The other party to a
derivative contract is referred to as a counterparty.
Many derivative contracts are traded on securities or commodities
exchanges. In this case, the exchange sets all the terms of the contract except
for the price. Most exchanges require investors to maintain margin accounts
through their brokers to cover their potential obligations to the exchange. The
Fund may also trade derivative contracts over-the-counter (OTC) in transactions
negotiated directly between the Fund and the counterparty.
Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset or
instrument, derivative contracts may increase or decrease the Fund's exposure to
interest rate risks, and may also expose the Fund to leverage and tax risks. OTC
contracts also expose the Fund to credit risks in the event that a counterparty
defaults on the contract.
Other Investment Companies
The Fund may invest up to 10% of its total assets in securities of other
open- or closed-end investment companies that invest primarily in tax exempt
securities of the types in which the Fund may invest directly. The Fund
generally expects to invest in other investment companies during periods when it
has large amounts of uninvested cash, such as the period shortly after the Fund
receives the proceeds of the offering of its Common Shares or Preferred Shares,
during periods when there is a shortage of attractive high-yielding tax exempt
securities available in the market, or when the Adviser believes share prices of
other investment companies offer attractive values. The Fund may invest in
investment companies advised by the Adviser to the extent permitted by
applicable law or pursuant to exemptive relief from the SEC; currently, the Fund
has not applied for such exemptive relief. As a shareholder in an investment
company, the Fund will bear its ratable share of that investment company's
expenses and will remain subject to payment of the Fund's advisory and other
fees and expenses with respect to assets so invested. Common Shareholders will
therefore be subject to duplicative expenses to the extent that the Fund invests
in other investment companies. The Adviser will take expenses into account when
evaluating the investment merits of an investment in an investment company
relative to available tax exempt securities. In addition, the securities of
other investment companies may also be leveraged and will therefore be subject
to the same leverage risks to which the Fund is subject. As described in this
prospectus in the sections entitled "Risks" and "Preferred Shares and Leverage,"
the NAV and market value of leveraged shares will be more volatile and the yield
to shareholders will tend to fluctuate more than the yield generated by
unleveraged shares. The Fund treats its investment in such open- or closed-end
investment companies as investments in tax exempt securities.
PREFERRED SHARES AND LEVERAGE
Subject to market conditions, approximately one to three months after the
completion of the offering of Common Shares, the Fund intends to offer Preferred
Shares representing approximately 38% of the Fund's capital immediately after
their issuance. Preferred Shares will have complete priority over Common Shares
upon distribution of assets in liquidation of the Fund. The issuance of
Preferred Shares will leverage Common Shares. Leverage involves special risks
and there is no assurance that the Fund's leveraging strategies will be
successful. Although the timing and other terms of the offering of Preferred
Shares will be determined by the Fund's Board of Trustees (the "Board"), the
Fund expects to invest the proceeds of a Preferred Shares offering primarily in
long-term tax exempt securities. Preferred Shares will pay dividends based on
short-term rates, which would be redetermined periodically by an auction
process. So long as the Fund's portfolio is invested in securities that provide
a higher yield than the dividend rate of Preferred Shares, after taking expenses
into consideration, the leverage will allow Common Shareholders to receive
higher dividends than if the Fund were not leveraged.
Changes in the value of the Fund's tax exempt security portfolio, including
securities bought with the proceeds of the Preferred Shares offering, will be
borne entirely by Common Shareholders. If there is a net decrease (or increase)
in the value of the Fund's investment portfolio, the leverage will decrease (or
increase) the NAV per Common Share to a greater extent than if the Fund were not
leveraged. During periods in which the Fund is using leverage, the fees paid to
the Adviser will be higher than if the Fund did not use leverage because the
fees paid will be calculated on the basis of the Fund's Managed Assets,
including the gross proceeds from the issuance of Preferred Shares.
For tax purposes, the Fund currently is required to allocate net capital
gain and other taxable income, if any, between the Common Shares and Preferred
Shares in proportion to total distributions paid to each class for the taxable
year in which the net capital gain or other taxable income is realized. If net
capital gain or other taxable income is allocated to Preferred Shares instead of
solely tax exempt income, the Fund will have to pay higher total dividends to
Preferred Shareholders or make dividend payments intended to compensate
Preferred Shareholders for the unanticipated characterization of a portion of
the dividends as taxable ("Gross-up Dividends"). This would reduce any advantage
of the Fund's leveraged structure to Common Shareholders.
Under the 1940 Act, the Fund is not permitted to issue Preferred Shares
unless immediately after such issuance the value of the Fund's capital is at
least 200% of the liquidation value of the outstanding Preferred Shares plus the
aggregate amount of any senior securities of the Fund representing indebtedness
(i.e., the liquidation value of the Preferred Shares plus the aggregate amount
of senior securities representing indebtedness may not exceed 50% of the Fund's
capital). In addition, the Fund is not permitted to declare any cash dividend or
other distribution on its Common Shares unless, at the time of such declaration,
the Fund satisfies the 200% capital requirement. If Preferred Shares are issued,
the Fund intends, to the extent possible, to purchase or redeem Preferred Shares
from time to time to the extent necessary in order to maintain coverage of at
least 200%. If the Fund has Preferred Shares outstanding, two of the Fund's
Trustees will be elected by Preferred Shareholders voting separately as a class.
The remaining Trustees will be elected by Common Shareholders and Preferred
Shareholders voting together as a single class. In the event that the Fund
failed to pay dividends on Preferred Shares for two years, Preferred
Shareholders would be entitled to elect a majority of the Trustees of the Fund.
If the Fund issues Preferred Shares, it will be subject to certain
guidelines imposed by those NRSROs that rate the Preferred Shares. These
guidelines are expected to impose capital or portfolio composition requirements
that are more stringent than those imposed on the Fund by the 1940 Act. It is
not anticipated that these guidelines will impede the Adviser from managing the
Fund's portfolio in accordance with the Fund's investment objective and
policies.
Preferred Shares may have to be redeemed to the extent that the Fund fails
to comply with the capital requirements imposed by the 1940 Act or the NRSROs.
In order to redeem Preferred Shares, the Fund may have to liquidate portfolio
securities. Such redemptions and liquidations would cause the Fund to incur
related transaction costs and could result in capital losses to the Fund.
Prohibitions on dividends and other distributions on the Common Shares could
impair the Fund's ability to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code").
Assuming that the Preferred Shares will represent approximately 38% of the
Fund's capital and pay dividends at an annual average rate of 2.00%, the income
generated by the Fund's portfolio (net of estimated expenses) must exceed 0.76%
in order to cover such dividend payments. Of course, these numbers are merely
estimates used for illustration. Actual Preferred Share dividend rates will vary
frequently and may be significantly higher or lower than the rate estimated
above.
The following table is designed to illustrate the effect of leverage on
Common Share total return. The assumed portfolio total returns and Common Share
total returns are hypothetical and actual returns may be greater or less than
those appearing in the table. The table assumes investment portfolio total
returns (comprised of income and changes in the value of the tax exempt
securities held in the Fund's portfolio) of -10%, -5%, 0%, 5% and 10%. The table
further assumes the issuance of Preferred Shares representing 38% of the Fund's
capital and the Fund's currently projected annual Preferred Share dividend rate
of 2.00%.
Assumed Portfolio Total
Return (10)% (5)% 0% 5% 10%
(Net of Expenses)
Common Share Total Return (17.35)% (9.29)% (1.23)% 6.84% 14.90%
Common Share total return is composed of two elements: the Common Share
dividends paid by the Fund (the amount of which is largely determined by the net
investment income of the Fund after paying dividends on Preferred Shares) and
changes in the value of the tax exempt securities that the Fund owns. The table
depicts three cases in which the Fund suffers capital losses and two in which it
enjoys capital appreciation. For example, to assume a total return of 0%, the
Fund must assume that the tax exempt interest it receives on investments in tax
exempt securities is entirely offset by losses in the value of those
investments.
Other Forms of Leverage and Borrowings
Prior to the issuance of Preferred Shares, the Fund also may add leverage
to the portfolio by investing up to 10% of its total assets in inverse floaters
and by investing in derivative contracts. By adding additional leverage, these
strategies have the potential to increase returns to Common Shareholders, but
also involve additional risks. Additional leverage will increase the volatility
of the Fund's investment portfolio and could result in larger losses than if the
strategies were not used.
Under the 1940 Act, the Fund generally is not permitted to engage in
borrowings, including through the use of derivative contracts to the extent that
these instruments constitute senior securities, unless immediately after a
borrowing the value of the Fund's capital is at least 300% of the principal
amount of such borrowing. In addition, the Fund is not permitted to declare any
cash dividend or other distribution on Common Shares unless, at the time of such
declaration, the value of the Fund's capital is at least 300% of such principal
amount. If the Fund borrows, it intends, to the extent possible, to prepay all
or a portion of the principal amount of the borrowing to the extent necessary in
order to maintain the required capital. Failure to meet the capital requirements
described herein could result in an event of default and entitle Preferred
Shareholders to elect a majority of the Trustees of the Fund. Derivative
contracts used by the Fund will not constitute senior securities (and will not
be subject to the Fund's limitations on borrowings) to the extent that the Fund
segregates liquid assets at least equal in amount to its obligations under the
instruments, or enters into offsetting transactions or owns positions covering
its obligations. For instance, the Fund may cover its position in a forward
purchase commitment by segregating liquid assets in an amount sufficient to meet
the purchase price.
RISKS
The NAV of the Common Shares will fluctuate with and be affected by, among
other things, market discount risk, interest rate risk, credit risk, leverage
risk, risks associated with non-investment grade securities, tax exempt security
market risk, derivative contract and inverse floater risk, reinvestment risk,
tax risk, sector risk and inflation risk. An investment in Common Shares will
also be subject to the risk associated with the fact that the Fund is newly
organized.
Newly Organized. The Fund is a newly organized, closed-end management
investment company and has no operating history.
Market Discount Risk. As with any stock, the price of the Common Shares
will fluctuate with market conditions and other factors. If Common Shares are
sold, the price received may be more or less than the original investment.
NAV will be reduced immediately following the initial public offering by
the amount of the sales load and organizational and selling expenses paid by the
Fund. Shares of closed-end management investment companies frequently trade at a
discount from their NAV. This risk may be greater for investors who sell Common
Shares in a relatively short period of time after completion of the initial
public offering.
Interest Rate Risk. Prices of tax exempt securities rise and fall in
response to changes in the interest rate paid by similar securities. Generally,
when interest rates rise, prices of tax exempt securities fall. However, market
factors, such as the demand for particular tax exempt securities, may cause the
price of certain fixed income securities to fall while the prices of other
securities rise or remain unchanged. Interest rate changes have a greater effect
on the price of tax exempt securities with longer maturities. Because the Fund
will invest primarily in long-term tax exempt securities, the NAV of Common
Shares will fluctuate more in response to changes in market interest rates than
if the Fund invested primarily in shorter-term tax exempt securities.
The Fund may use certain strategies for the purpose of reducing the
interest rate sensitivity of the portfolio and decreasing the Fund's exposure to
interest rate risk, although there is no assurance that it will do so or that
such strategies will be successful.
The Fund's use of leverage will increase the interest rate risk of Common
Shares.
Credit Risk. Credit risk is the possibility that an issuer will default on
a security by failing to pay interest or principal when due. If an issuer
defaults, the Fund will lose money. Many tax exempt securities receive credit
ratings from NRSROs such as S&P and Moody's. These NRSROs assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher perceived credit risk and higher credit ratings correspond
to lower perceived credit risk. Credit ratings do not provide assurance against
default or other loss of money. If a security has not received a rating, the
Fund must rely entirely upon the Adviser's credit assessment.
Credit risk includes the possibility that a party to a transaction
involving the Fund will fail to meet its obligations. This could cause the Fund
to lose the benefit of the transaction or prevent the Fund from selling or
buying other securities to implement its investment strategy.
Leverage Risk. Leverage risk includes the risk associated with the issuance
of the Preferred Shares or the use of inverse floaters and derivative contracts
in order to leverage the Fund's portfolio. There is no assurance that the Fund's
leveraging strategies involving Preferred Shares or inverse floaters and
derivative contracts will be successful. Once the Preferred Shares are issued or
other forms of leverage are used, the NAV and market value of Common Shares will
be more volatile, and the yield distribution to Common Shareholders will tend to
fluctuate more in response to changes in interest rates and with changes in the
short-term dividend rates on Preferred Shares. If the dividend rate on Preferred
Shares approaches the yield on the Fund's investment portfolio, the benefit of
leverage to Common Shareholders would be reduced. If the dividend rate on
Preferred Shares exceeds the yield on the Fund's portfolio, the leverage will
result in a lower dividend to Common Shareholders than if the Fund were not
leveraged. Because the long-term bonds included in the Fund's portfolio will
typically pay fixed rates of interest while the dividend rate on Preferred
Shares will be adjusted periodically, this could occur even when both long-term
and short-term municipal rates rise. In addition, the Fund will pay and the
Common Shareholders will bear any costs and expenses relating to the issuance
and ongoing maintenance of the Preferred Shares. Furthermore, if the Fund has
net capital gain or other taxable income that is allocated to Preferred Shares
instead of solely tax-exempt income, the Fund may have to pay higher total
dividends or Gross-up Dividends to Preferred Shareholders, which would reduce
any advantage of the Fund's leveraged structure to Common Shareholders without
reducing the associated risk. See "Preferred Shares and Leverage." The Fund
cannot assure you that it will issue Preferred Shares or use other forms of
leverage or, if used, that these strategies will result in a higher yield or
return to Common Shareholders.
Similarly, any decline in the NAV of the Fund's investments will be borne
entirely by Common Shareholders. Therefore, if the market value of the Fund's
portfolio declines, the leverage will result in a greater decrease in NAV to
Common Shareholders than if the Fund were not leveraged. This greater NAV
decrease will also tend to cause a greater decline in the market price for
Common Shares. The Fund might be in danger of failing to maintain the 200%
capital requirement or of losing its ratings on Preferred Shares or, in an
extreme case, the Fund's current investment income might not be sufficient to
meet the dividend requirements on Preferred Shares. In order to counteract such
an event, the Fund might need to liquidate investments in order to fund a
redemption of some or all of the Preferred Shares. Liquidation at times of low
tax exempt securities prices may result in capital loss and may reduce returns
to Common Shareholders.
While the Fund may from time to time consider reducing leverage in response
to actual or anticipated changes in interest rates in an effort to mitigate the
increased volatility of current income and NAV associated with leverage, there
can be no assurance that the Fund will actually reduce leverage in the future or
that any reduction, if undertaken, will benefit the Common Shareholders. Changes
in the future direction of interest rates are very difficult to predict
accurately. If the Fund were to reduce leverage based on a prediction about
future changes to interest rates, and that prediction turned out to be
incorrect, the reduction in leverage likely would operate to reduce the income
and/or total returns to Common Shareholders relative to the circumstance where
the Fund had not reduced leverage. The Fund may decide that this risk outweighs
the likelihood of achieving the desired reduction to volatility in income and
Common Share price if the prediction were to turn out to be correct, and
determine not to reduce leverage as described above.
The Fund may invest up to 10% of its total assets in the securities of
other investment companies. Such securities may also be leveraged and will
therefore be subject to the leverage risks described above. This additional
leverage may in certain market conditions reduce the NAV of the Fund's Common
Shares and the returns to Common Shareholders.
Prior to the issuance of Preferred Shares, the Fund may leverage the
portfolio by investing up to 10% of its total assets in inverse floaters and by
investing in derivative contracts. The Fund's use of derivative contracts will
be limited by the 1940 Act. See "Preferred Shares and Leverage-Other Forms of
Leverage and Borrowings." These instruments may increase the Fund's leverage
and, during periods of rising short-term interest rates, may adversely affect
the Fund's NAV per share and distributions to Common Shareholders. See "Inverse
Floaters" and "Derivative Contracts" under "The Fund's Investments" and the
section of the Statement of Additional Information with the heading "Derivative
Contracts."
Risks Associated With Non-Investment Grade Securities. Securities rated
below investment grade, also known as junk bonds, generally entail greater
credit, interest rate and liquidity risks than investment grade securities. For
example, their prices are more volatile, economic downturns and financial
setbacks may affect their prices more negatively and their trading market may be
more limited.
Tax Exempt Security Market Risk. Investing in the tax exempt securities
market involves certain risks. The amount of public information available about
the tax exempt securities in the Fund's portfolio is generally less than that
for corporate equities or bonds. Consequently, the Adviser may make investment
decisions based on information that is incomplete or inaccurate. The secondary
market for tax exempt securities tends to be less well-developed or liquid than
many other securities markets, which may adversely affect the Fund's ability to
sell its bonds at attractive prices. Special factors, such as legislative
changes and local and business developments, may adversely affect the yield or
value of the Fund's investments in tax exempt securities.
The ability of municipal issuers to make timely payments of interest and
principal may be diminished in general economic downturns and as governmental
cost burdens are reallocated among federal, state and local governments. In
addition, laws enacted in the future by Congress or state legislatures or
referenda could extend the time for payment of principal and/or interest, or
impose other constraints on enforcement of such obligations or on the ability of
municipalities to levy taxes.
Derivative Contract and Inverse Floater Risk. Prior to the issuance of
Preferred Shares, the Fund may leverage its portfolio by investing up to 10% of
its total assets in inverse floaters and by investing in derivative contracts.
The Fund's use of derivative contracts will be limited by the 1940 Act. See
"Preferred Shares and Leverage-Other Forms of Leverage and Borrowings." The Fund
also may invest in derivative contracts for risk management purposes. Derivative
contracts and inverse floaters are subject to a number of risks described
elsewhere in this prospectus, such as interest rate risk and credit risk. In
addition, investment by the Fund in derivative contracts and inverse floaters
may increase the Fund's leverage and, during periods of rising interest rates,
may adversely affect the Fund's income, dividends and total returns to Common
Shareholders. Derivative contracts also involve the risk of mispricing or
improper valuation, the risk of ambiguous documentation and the risk that
changes in the value of a derivative contract may not correlate perfectly with
an underlying asset, interest rate or index. Suitable inverse floaters and
derivative contracts may not be available in all circumstances and there can be
no assurance that the Fund will engage in these transactions to reduce exposure
to other risks when that would be beneficial.
Reinvestment Risk. Reinvestment risk is the risk that income from the
Fund's bond portfolio will decline if and when the Fund invests the proceeds
from matured, traded, prepaid or called bonds at market interest rates that are
below the portfolio's current earnings rate. A decline in income could affect
the market price or overall returns of Common Shares.
Tax Risk. In order to be tax exempt, municipal securities must meet certain
legal requirements. Failure to meet such requirements may cause the interest
received and distributed by the Fund to Common Shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
The federal income tax treatment of payments in respect of certain
derivative contracts is unclear. Additionally, the Fund may not be able to close
out certain derivative contracts when it wants to. Consequently, the Fund may
receive payments that are treated as ordinary income for federal income tax
purposes.
In certain circumstances, a portion of the Fund's dividends may be subject
to AMT.
Sector Risk. The Fund may invest 25% or more of its total assets in tax
exempt securities of issuers in the same economic sector, including without
limitation the following: bonds issued by state and local health finance,
housing finance, pollution control, industrial development and other authorities
or municipal entities for the benefit of hospitals, life care facilities,
educational institutions, housing facilities, transportation systems, industrial
corporations or utilities. In addition, a substantial part of the Fund may be
comprised of securities that are credit enhanced by insurance companies, banks
or other similar financial institutions. As a result, the performance of the
Fund will be more susceptible to any economic, business, political or other
developments that generally affect these sectors or entities.
Anti-Takeover Provisions. The Fund's Agreement and Declaration of Trust
includes provisions that could limit the ability of other entities or persons to
acquire control of the Fund or convert the Fund to open-end status. These
provisions could deprive Common Shareholders of opportunities to sell their
Common Shares at a premium over the then current market price of Common Shares
or at NAV. In addition, if the Fund issues Preferred Shares, Preferred
Shareholders will have voting rights that could deprive Common Shareholders of
such opportunities.
Inflation Risk. Inflation risk is the risk that the value of assets or
income from investment will be worth less in the future as inflation decreases
the value of money. As inflation increases, the real value of, and distribution
of, Common Shares can decline. In addition, during any periods of rising
inflation, Preferred Share dividend rates would likely increase, which would
tend to further reduce returns to Common Shareholders.
Market Disruption. As a result of the terrorist attacks on the World Trade
Center and the Pentagon on September 11, 2001, some of the U.S. securities
markets were closed for a four-day period. These terrorist attacks and related
events have led to increased market volatility and may have long-term effects on
U.S. and world economies and markets. A similar disruption of the financial
markets would impact interest rates, auctions, secondary trading, ratings,
credit risk, inflation and other factors relating to the securities.
HOW THE FUND MANAGES RISK
Investment Limitations
The Fund has adopted certain investment limitations designed to limit
investment risk. These limitations are fundamental and may not be changed
without the approval of (1) the holders of a majority of the outstanding Common
Shares and, if issued, Preferred Shares voting together as a single class, and
(2) the approval of the holders of a majority of the outstanding Preferred
Shares voting as a separate class.
Concentration. The Fund will not make investments that will result in the
concentration of its investments in the securities of issuers primarily engaged
in the same industry, but may invest more than 25% of its total assets in
securities of issuers in the same economic sector.
Diversification of Investments. With respect to securities comprising 75%
of the value of its total assets, the Fund will not purchase the securities of
any one issuer (other than cash, cash items, securities issued or guaranteed by
the government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such U.S. government securities and
securities of other investment companies) if as a result more than 5% of the
value of its total assets would be invested in the securities of that issuer, or
it would own more than 10% of the outstanding voting securities of that issuer.
Underwriting. The Fund will not underwrite any issue of securities, except
as it may be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies and limitations.
Investing in Real Estate. The Fund may not buy or sell real estate,
although it may invest in tax exempt securities secured by real estate or
interests in real estate.
Investing in Commodities. The Fund may not purchase or sell physical
commodities, provided that the Fund may purchase securities of companies that
deal in commodities. For purposes of this restriction, investments in
transactions involving futures contracts and options, swap transactions, and
other financial contracts that settle by payment of cash are not deemed to be
investments in commodities.
Lending. The Fund will not make loans, but may acquire publicly or
non-publicly issued tax exempt securities as permitted by its investment
objective, policies and limitations.
Borrowing Money and Issuing Senior Securities. The Fund may borrow money,
directly or indirectly, and issue senior securities to the maximum extent
permitted under the 1940 Act.
The Fund may become subject to guidelines which are more limiting than its
investment restrictions in order to obtain and maintain ratings from an NRSRO on
the Preferred Shares that it intends to issue. The Fund does not anticipate that
such guidelines would have a material adverse effect on the Fund's Common
Shareholders or the Fund's ability to achieve its investment objective. See
"Investment Objective and Policies" in the Statement of Additional Information
for a complete list of the fundamental and non-fundamental investment policies
of the Fund.
Quality of Investments
The Fund will invest at least 80% of its total assets in investment grade
tax exempt securities.
Limited Issuance of Preferred Shares
Under the 1940 Act, the Fund could issue Preferred Shares having a total
liquidation value (original purchase price of the shares being liquidated plus
any accrued and unpaid dividends) of up to 50% of the value of the capital of
the Fund. To the extent that the Fund has outstanding any senior securities
representing indebtedness such as through the use of derivative contracts that
constitute senior securities, the aggregate amount of such senior securities
will be added to the total liquidation value of any outstanding Preferred Shares
for purposes of this capital requirement. If the total liquidation value of the
Preferred Shares plus the aggregate amount of such other senior securities were
ever more than 50% of the value of the capital of the Fund, the Fund would not
be able to declare dividends on the Common Shares until the liquidation value
and/or aggregate amount of other senior securities, as a percentage of the
Fund's assets, was reduced. Approximately one to three months after the
completion of the offering of the Common Shares, the Fund intends to issue
Preferred Shares representing about 38% of the Fund's capital immediately after
the time of issuance of the Preferred Shares. This higher than required margin
of NAV provides a cushion against later fluctuations in the value of the Fund's
portfolio and will subject Common Shareholders to less income and NAV volatility
than if the Fund were more highly leveraged through Preferred Shares. The Fund
intends to purchase or redeem Preferred Shares, if necessary, to keep the
liquidation value of the Preferred Shares plus the aggregate amount of other
senior securities representing indebtedness below 50% of the value of the Fund's
capital.
Management of Investment Portfolio and Capital Structure to Limit Leverage Risk
The Fund may take certain actions if short-term interest rates increase, or
market conditions otherwise change (or the Fund anticipates such an increase or
change) and the Fund's leverage begins (or is expected) to adversely affect
Common Shareholders. In order to attempt to offset such a negative impact of
leverage on Common Shareholders, the Fund may shorten the average maturity or
duration of its investment portfolio (by selling long-term securities and
investing in short-term, high quality securities or implementing certain hedging
strategies) or may extend the auction period of outstanding Preferred Shares.
The Fund may also attempt to reduce the leverage by redeeming or otherwise
purchasing Preferred Shares or redeeming holdings in derivative contracts or
other instruments that create leverage. As explained above under "Risks-Leverage
Risk," the success of any such attempt to limit leverage risk depends on the
Adviser's ability to accurately predict interest rate or other market changes.
Because of the difficulty of making such predictions, the Fund may never attempt
to manage its capital structure in the manner described in this paragraph.
If market conditions suggest that additional leverage would be beneficial,
the Fund may sell previously unissued Preferred Shares or Preferred Shares that
the Fund previously issued but later repurchased or, prior to the issuance of
Preferred Shares, use other forms of leverage, such as derivative contracts.
Hedging and Related Strategies
The Fund may use various investment strategies designed to limit the risk
of price fluctuations of its portfolio securities and to preserve capital. These
hedging strategies may include using financial futures contracts; short sales;
swap agreements or options thereon; options on financial futures; options based
on either an index of municipal securities or on taxable debt securities whose
prices, in the opinion of the Adviser, correlate with the prices of the Fund's
investments. Income earned by the Fund from many hedging activities will be
treated as capital gain and, if not offset by net realized capital loss, will be
distributed to shareholders as taxable distributions. If effectively used,
hedging strategies will offset in varying percentages losses incurred on the
Fund's investments due to adverse interest rate changes. There is no assurance
that these hedging strategies will be available at any time or that the Adviser
will determine to use them for the Fund or, if used, that the strategies will be
successful.
MANAGEMENT OF THE FUND
Trustees And Officers
The Board is responsible for the overall management of the Fund, including
supervision of the duties performed by the Adviser. There are twelve Trustees of
the Fund. Three of the Trustees are "interested persons" (as defined in the 1940
Act). The name and business addresses of the Trustees and officers of the Fund
and their principal occupations and other affiliations during the past five
years are set forth under "Management of the Fund" in the Statement of
Additional Information.
Investment Adviser
Federated Investment Management Company acts as the Fund's investment
adviser. The Adviser's address is Federated Investors Tower, 1001 Liberty
Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated Investors, Inc.
("Federated") advise approximately 139 mutual funds and a variety of separate
accounts, which totaled approximately $180 billion in assets as of December 31,
2001. Federated was established in 1955 and is one of the largest mutual fund
investment managers in the United States, with approximately 1,800 employees.
More than 4,000 investment professionals make Federated Funds available to their
customers. In the municipal sector, as of December 31, 2001, Federated managed
12 bond funds with approximately $2.3 billion in assets and 22 money market
funds with approximately $19.5 billion in total assets.
The Fund's Portfolio Managers are:
Mary Jo Ochson
Mary Jo Ochson is the Fund's Portfolio Manager. Ms. Ochson joined Federated
in 1982 and has been a Senior Portfolio Manager and a Senior Vice President of
the Fund's Adviser since 1996. From 1988 through 1995, Ms. Ochson served as a
Portfolio Manager and a Vice President of the Fund's Adviser. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in Finance from the
University of Pittsburgh.
Lee R. Cunningham II
Lee R. Cunningham II is the Fund's Portfolio Manager. Mr. Cunningham joined
Federated in 1995 as an Investment Analyst and has been a Portfolio Manager
since 1998. He was named an Assistant Vice President of the Fund's Adviser in
January 1998 and became a Vice President of the Fund's Adviser in July 2000.
From 1986 through 1994, Mr. Cunningham was a Project Engineer with Pennsylvania
Power and Light Company. Mr. Cunningham received his M.B.A. with concentration
in finance and operations from the University of Pittsburgh.
RJ Gallo
RJ Gallo is the Fund's Portfolio Manager. Mr. Gallo joined Federated in
2000 as an Investment Analyst. He was named an Assistant Vice President of the
Fund's Adviser in January 2002. From 1996 to 2000, Mr. Gallo was a Financial
Analyst and Trader at the Federal Reserve Bank of New York. Mr. Gallo received a
Master's in Public Affairs with a concentration in economics and public policy
from Princeton University.
Investment Management Agreement
Pursuant to an investment management agreement between the Adviser and the
Fund, the Fund has agreed to pay for the investment advisory services and
facilities provided by the Adviser a fee at an annual rate equal to 0.55% of the
average daily value of Managed Assets (the "Management Fee"). The Adviser has
contractually agreed to waive receipt of a portion of its Management Fee in the
amount of 0.20% of the average daily value of Managed Assets for the first five
years of the Fund's operations (through December 31, 2007), and for a declining
amount for an additional three years (through December 31, 2010). During periods
in which the Fund is using leverage, the fee paid to the Adviser will be higher
than if the Fund did not use leverage, because the fee is calculated as a
percentage of Managed Assets, which include those assets purchased with
leverage.
In addition to the Management Fee of the Adviser, the Fund pays all other
costs and expenses of its operations, including compensation of its trustees
(other than those affiliated with the Adviser), custodian, transfer and dividend
disbursing agent expenses, legal fees, leverage expenses, rating agency fees,
listing fees and expenses, expenses of independent auditors, expenses of
repurchasing shares, expenses of preparing, printing and distributing
shareholder reports, notices, proxy statements and reports to governmental
agencies and taxes, if any.
For the first 8 years of the Fund's operation, the Adviser has undertaken
to waive its investment advisory fees and expenses payable by the Fund in the
amounts, and for the time periods, set forth below:
Percentage Waived (as A Percentage Of
Average
Daily Managed Assets)
Twelve Month
Period Ending
Month Date, Year**
December 31, 2003 0.20%
December 31, 2004 0.20%
December 31, 2005 0.20%
December 31, 2006 0.20%
December 31, 2007 0.20%
December 31, 2008 0.15%
December 31, 2009 0.10%
December 31, 2010 0.05%
** From the commencement of operations.
The Adviser has not undertaken to waive any portion of the Fund's fees and
expenses beyond December 31, 2010 or after termination of the investment
management agreement.
Administrative Agreement
Federated Services Company, a subsidiary of Federated, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. The Administrator's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
Federated Services Company provides these at the following annual rate of the
average aggregate daily net assets of all Federated Funds as specified below:
Average Aggregate Daily Net
Maximum Administrative Fee Assets of the Federated Funds
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year will be at least
$125,000. Federated Services Company may voluntarily waive a portion of its fee
and may reimburse the Fund for expenses.
NET ASSET VALUE
The Fund's NAV per Common Share is determined as of the close of regular
trading (normally 4:00 p.m. Eastern time) on each day the New York Stock
Exchange is open for business. To calculate NAV, the Fund's assets are valued
and totaled, liabilities and the aggregate liquidation value of the outstanding
Preferred Shares, if any, are subtracted, and the balance is divided by the
total number of Common Shares then outstanding.
The Fund values its fixed income securities by using market quotations,
prices provided by market makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics in
accordance with procedures established by the Board. A substantial portion of
the Fund's fixed income investments will be valued according to the mean between
bid and asked prices as furnished by an independent pricing service. Debt
securities with remaining maturities of 60 days or less will be valued at
amortized cost. Any securities or other assets for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by or under the direction of the Board.
DISTRIBUTIONS
The Fund will distribute to Common Shareholders monthly dividends of all or
a portion of its tax exempt interest income after payment of dividends on any
Preferred Shares of the Fund which may be outstanding. It is expected that the
initial monthly dividend on the Fund's Common Shares will be declared
approximately 45 days and paid approximately 60 to 90 days after completion of
this offering. The Fund expects that all or a portion of any capital gain and
other taxable income will be distributed at least annually.
Various factors will affect the level of the Fund's income, including the
asset mix, the amount of leverage used by the Fund and the effects thereof and
the Fund's use of hedging. To permit the Fund to maintain a more stable monthly
distribution, the Fund may from time to time distribute less than the entire
amount of tax exempt interest income earned in a particular period. The
undistributed tax exempt interest income would be available to supplement future
distributions. As a result, the distributions paid by the Fund for any
particular monthly period may be more or less than the amount of tax exempt
interest income actually earned by the Fund during the period. Undistributed tax
exempt interest income will add to the Fund's NAV and, correspondingly,
distributions from undistributed tax exempt interest income will be deducted
from the Fund's NAV. Shareholders will automatically have all dividends and
distributions reinvested in Common Shares of the Fund issued by the Fund or
purchased in the open market in accordance with the Fund's Dividend Reinvestment
Plan unless an election is made to receive cash. See "Dividend Reinvestment
Plan."
DIVIDEND REINVESTMENT PLAN
Unless the registered owner of Common Shares elects to receive cash by
contacting the Plan Administrator, all dividends declared on Common Shares of
the Fund will be automatically reinvested by EquiServe Trust Co., N.A. (the
"Plan Administrator"), the administrator for shareholders in the Fund's Dividend
Reinvestment Plan (the "Plan"), in additional Common Shares of the Fund. Common
Shareholders who elect not to participate in the Plan will receive all dividends
and other distributions in cash paid by check mailed directly to the shareholder
of record (or, if the Common Shares are held in street or other nominee name,
then to such nominee) by the Plan Administrator, as dividend disbursing agent.
You may elect not to participate in the Plan and to receive all dividends in
cash by contacting the Plan Administrator at the address set forth below if your
Shares are registered in your name or by contacting your bank, broker or other
entity if your Shares are held in street or other nominee name. Participation in
the Plan is completely voluntary and may be terminated or resumed at any time
without penalty by notice if received and processed by the Plan Administrator
prior to the dividend record date; otherwise such termination or resumption will
be effective with respect to any subsequently declared dividend or other
distribution. Some brokers may automatically elect to receive cash on your
behalf and may re-invest that cash in additional Common Shares of the Fund for
you. If you wish for all dividends declared on your Common Shares to be
automatically reinvested pursuant to the Plan, please contact your broker. The
Plan Administrator will open an account for each Common Shareholder under the
Plan in the same name in which such Common Shareholder's Common Shares are
registered. Whenever the Fund declares a dividend or other distribution
(together, a "Dividend") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in Common
Shares. The Common Shares will be acquired by the Plan Administrator for the
participants' accounts, depending upon the circumstances described below, either
(1) through receipt of additional unissued but authorized Common Shares from the
Fund ("Newly Issued Common Shares") or (2) by purchase of outstanding Common
Shares on the open market ("Open-Market Purchases") on the New York Stock
Exchange or elsewhere. If, on the payment date for any Dividend, the closing
market price plus estimated brokerage commissions per Common Share is equal to
or greater than the NAV per Common Share, the Plan Administrator will invest the
Dividend amount in Newly Issued Common Shares on behalf of the participants. The
number of Newly Issued Common Shares to be credited to each participant's
account will be determined by dividing the dollar amount of the Dividend by the
NAV per Common Share on the payment date; provided that, if the NAV is less than
or equal to 95% of the closing market value on the payment date, the dollar
amount of the Dividend will be divided by 95% of the closing market price per
Common Share on the payment date. If, on the payment date for any Dividend, the
NAV per Common Share is greater than the closing market value plus estimated
brokerage commissions, the Plan Administrator will invest the Dividend amount in
Common Shares acquired on behalf of the participants in Open-Market Purchases.
In the event of a market discount on the payment date for any Dividend, the Plan
Administrator will have until the last business day before the next date on
which the Common Shares trade on an "ex-dividend" basis or 30 days after the
payment date for such Dividend, whichever is sooner (the "Last Purchase Date"),
to invest the Dividend amount in Common Shares acquired in Open-Market
Purchases. It is contemplated that the Fund will pay monthly income Dividends.
Therefore, the period during which Open-Market Purchases can be made will exist
only from the payment date of each Dividend through the date before the next
"ex-dividend" date, which will be approximately ten days. If, before the Plan
Administrator has completed its Open-Market Purchases, the market price per
Common Share exceeds the NAV per Common Share, the average per Common Share
purchase price paid by the Plan Administrator may exceed the NAV of the Common
Shares, resulting in the acquisition of fewer Common Shares than if the Dividend
had been paid in Newly Issued Common Shares on the Dividend payment date.
Because of the foregoing difficulty with respect to Open-Market Purchases, the
Plan provides that if the Plan Administrator is unable to invest the full
Dividend amount in Open-Market Purchases during the purchase period or if the
market discount shifts to a market premium during the purchase period, the Plan
Administrator may cease making Open-Market Purchases and may invest the
uninvested portion of the Dividend amount in Newly Issued Common Shares at the
NAV per Common Share at the close of business on the Last Purchase Date provided
that, if the NAV is less than or equal to 95% of the then current market price
per Common Share, the dollar amount of the Dividend will be divided by 95% of
the market price on the payment date.
The Plan Administrator maintains all shareholders' accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by shareholders for tax records. Common Shares in the account
of each Plan participant will be held by the Plan Administrator on behalf of the
Plan participant, and each shareholder proxy will include those shares purchased
or received pursuant to the Plan. The Plan Administrator will forward all proxy
solicitation materials to participants and vote proxies for shares held under
the Plan in accordance with the instructions of the participants.
In the case of record shareholders such as banks, brokers or nominees which
hold Common Shares for others who are the beneficial owners, the Plan
Administrator will administer the Plan on the basis of the number of Common
Shares certified from time to time by the record shareholder and held for the
account of beneficial owners who participate in the Plan.
There will be no brokerage charges with respect to Common Shares issued
directly by the Fund. However, each participant will pay a pro rata share of
brokerage commissions incurred in connection with Open-Market Purchases. The
automatic reinvestment of Dividends will not relieve participants of any
Federal, state or local income tax that may be payable (or required to be
withheld) on such Dividends. See "Tax Matters." Participants that request a sale
of shares through the Plan Administrator are subject to a $15.00 sales fee and a
12(cent) per share sold brokerage commission.
The Fund reserves the right to amend or terminate the Plan. There is no
direct service charge to participants with regard to purchases in the Plan;
however, the Fund reserves the right to amend the Plan to include a service
charge payable by the participants.
All correspondence or questions concerning the Plan should be directed to
the Plan Administrator, EquiServe Trust Company, N.A., P.O. Box 43011,
Providence, RI 02940-3011 or by telephone at (800) 730-6001.
DESCRIPTION OF SHARES
Common Shares
The Fund is an unincorporated statutory trust organized under the laws of
Delaware pursuant to an Agreement and Declaration of Trust dated as of October
16, 2002. The Fund is authorized to issue an unlimited number of Common Shares
of beneficial interest, par value $0.01 per Common Share. Each Common Share has
one vote and, when issued and paid for in accordance with the terms of this
offering, will be fully paid and non-assessable. Whenever Preferred Shares are
outstanding, Common Shareholders will not be entitled to receive any
distributions from the Fund unless (1) all accrued dividends on Preferred Shares
have been paid, (2) the Fund satisfies the 200% capital requirement and (3)
certain other requirements imposed by any NRSROs rating the Preferred Shares
have been met. See "Preferred Shares" below. All Common Shares are equal as to
dividends, assets and voting privileges and have no conversion, preemptive or
other subscription rights. The Fund will send annual and semi-annual reports,
including financial statements, to all Common Shareholders.
The Fund has no present intention of offering any additional shares other
than the Preferred Shares and Common Shares issued under the Fund's Dividend
Reinvestment Plan. Any additional offerings of shares will require approval by
the Board. Any additional offering of shares will be subject to the requirements
of the 1940 Act, which provides that shares may not be issued at a price below
the then current NAV, exclusive of sales load, except in connection with an
offering to existing Common Shareholders or with the consent of a majority of
the Fund's outstanding voting securities.
The Common Shares have been approved for listing, subject to notice of
issuance, on the New York Stock Exchange under the symbol "FMN".
The Fund's NAV per share generally increases when interest rates decline
and decreases when interest rates rise, and these changes are likely to be
greater because the Fund intends to have a leveraged capital structure. NAV will
be reduced immediately following the offering of Common Shares by the amount of
the sales load and organizational and offering expenses paid by the Fund. See
"Use of Proceeds."
Unlike open-end funds, closed-end funds like the Fund do not continuously
offer shares and do not provide daily redemptions. Rather, if a Common
Shareholder determines to buy additional Common Shares or sell Common Shares
already held, the Common Shareholder may do so by trading through a broker on
the New York Stock Exchange or otherwise. Shares of closed-end investment
companies frequently trade on an exchange at prices lower than NAV. Shares of
closed-end investment companies like the Fund that invest primarily in
investment grade tax exempt securities have during some periods traded at prices
higher than NAV and during other periods have traded at prices lower than NAV.
Because the market value of the Common Shares may be influenced by such factors
as dividend levels (which are in turn affected by expenses), call protection on
its portfolio securities, dividend stability, portfolio credit quality, NAV,
relative demand for and supply of such shares in the market, general market and
economic conditions and other factors beyond the control of the Fund, the Fund
cannot assure you that Common Shares will trade at a price equal to or higher
than NAV in the future. The Common Shares are designed primarily for long-term
investors and you should not purchase the Common Shares if you intend to sell
them soon after purchase. See "Preferred Shares and Leverage" and the Statement
of Additional Information under "Repurchase of Common Shares."
Preferred Shares
The Fund's Agreement and Declaration of Trust provides that the Board may
authorize and issue Preferred Shares with rights as determined by the Board, by
action of the Board without the approval of the Common Shareholders. Common
Shareholders have no preemptive right to purchase any Preferred Shares that
might be issued.
The Board has indicated its intention to authorize an offering of Preferred
Shares, representing approximately 38% of the Fund's capital, immediately after
the Preferred Shares are issued, within approximately one to three months after
completion of this offering of Common Shares, subject to market conditions and
to the Board's continuing belief that leveraging the Fund's capital structure
through the issuance of Preferred Shares is likely to achieve the potential
benefits to the Common Shareholders described in this prospectus. The Fund may
conduct other offerings of Preferred Shares in the future. The Board also
reserves the right to change the foregoing percentage limitation and may issue
Preferred Shares to the extent permitted by the 1940 Act, which currently limits
the aggregate liquidation preference of all outstanding Preferred Shares to 50%
of the value of the Fund's capital. We cannot assure you, however, that any
Preferred Shares will be issued. Although the terms of any Preferred Shares,
including dividend rate, liquidation preference and redemption provisions, will
be determined by the Board, subject to applicable law and the Fund's Agreement
and Declaration of Trust, it is likely that the Preferred Shares will be
structured to carry a relatively short-term dividend rate reflecting interest
rates on short-term tax exempt debt securities, by providing for the periodic
redetermination of the dividend rate at relatively short intervals through an
auction, remarketing or other procedure. The Fund also believes that it is
likely that the liquidation preference, voting rights and redemption provisions
of the Preferred Shares will be similar to those stated below.
Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Fund, the Preferred Shareholders
will be entitled to receive a preferential liquidating distribution, which is
expected to equal the original purchase price per Preferred Share plus accrued
and unpaid dividends, whether or not declared, before any distribution of assets
is made to Common Shareholders. After payment of the full amount of the
liquidating distribution to which they are entitled, the Preferred Shareholders
will not be entitled to any further participation in any distribution of assets
by the Fund.
Voting Rights. The 1940 Act requires that Preferred Shareholders, voting
separately as a single class, have the right to elect at least two Trustees at
all times. The remaining Trustees will be elected by Common Shareholders and
Preferred Shareholders, voting together as a single class. In addition, subject
to the prior rights, if any, of the holders of any other class of senior
securities outstanding, the Preferred Shareholders have the right to elect a
majority of the Trustees of the Fund at any time two years' dividends on any
Preferred Shares are unpaid. The 1940 Act also requires that, in addition to any
approval by shareholders that might otherwise be required, the approval of the
holders of a majority of any outstanding Preferred Shares, voting separately as
a class, would be required to (1) adopt any plan of reorganization that would
adversely affect the Preferred Shares, and (2) take any action requiring a vote
of security holders under Section 13(a) of the 1940 Act, including, among other
things, changes in the Fund's subclassification as a closed-end investment
company or changes in its fundamental investment restrictions. See "Certain
Provisions in the Agreement and Declaration of Trust." As a result of these
voting rights, the Fund's ability to take any such actions may be impeded to the
extent that there are any Preferred Shares outstanding. The Board presently
intends that, except as otherwise indicated in this prospectus and except as
otherwise required by applicable law, Preferred Shareholders will have equal
voting rights with Common Shareholders (one vote per share, unless otherwise
required by the 1940 Act) and will vote together with Common Shareholders as a
single class.
The affirmative vote of the holders of a majority of the outstanding
Preferred Shares, voting as a separate class, will be required to amend, alter
or repeal any of the preferences, rights or powers of Preferred Shareholders so
as to affect materially and adversely such preferences, rights or powers, or to
increase or decrease the authorized number of Preferred Shares. The class vote
of Preferred Shareholders described above will in each case be in addition to
any other vote required to authorize the action in question.
Redemption, Purchase and Sale of Preferred Shares by the Fund. The terms of
the Preferred Shares are expected to provide that (1) they are redeemable by the
Fund in whole or in part at the original purchase price per share plus accrued
dividends per share, (2) the Fund may tender for or purchase Preferred Shares
and (3) the Fund may subsequently resell any shares so tendered for or
purchased. Any redemption or purchase of Preferred Shares by the Fund will
reduce the leverage applicable to the Common Shares, while any resale of shares
by the Fund will increase that leverage.
The discussion above describes the possible offering of Preferred Shares by
the Fund. If the Board determines to proceed with such an offering, the terms of
the Preferred Shares may be the same as, or different from, the terms described
above, subject to applicable law and the Fund's Agreement and Declaration of
Trust. The Board, without the approval of the Common Shareholders, may authorize
an offering of Preferred Shares or may determine not to authorize such an
offering, and may fix the terms of the Preferred Shares to be offered.
CERTAIN PROVISIONS IN THE AGREEMENT AND DECLARATION OF TRUST
The Fund's Agreement and Declaration of Trust includes provisions that
could have the effect of limiting the ability of other entities or persons to
acquire control of the Fund or to change the composition of its Board. This
could have the effect of depriving shareholders of an opportunity to sell their
shares at a premium over prevailing market prices by discouraging a third party
from seeking to obtain control over the Fund. Such attempts could have the
effect of increasing the expenses of the Fund and disrupting the normal
operation of the Fund. The Board is divided into three classes, with the terms
of one class expiring at each annual meeting of shareholders. At each annual
meeting, one class of Trustees is elected to a three-year term. This provision
could delay for up to two years the replacement of a majority of the Board. A
Trustee may be removed from office only for cause by the action of a majority of
the remaining Trustees followed by a vote of the holders of at least 75% of the
shares then entitled to vote for the election of the respective Trustee.
In addition, the Fund's Agreement and Declaration of Trust requires the
favorable vote of a majority of the Fund's Board followed by the favorable vote
of the holders of at least 75% of the outstanding shares of each affected class
or series of the Fund, voting separately as a class or series, to approve, adopt
or authorize certain transactions with 5% or greater holders of a class or
series of shares and their associates, unless the transaction has been approved
by at least 80% of the Trustees. For purposes of these provisions, a 5% or
greater holder of a class or series of shares (a "Principal Shareholder") refers
to any person, including its affiliates and associates, who, whether directly or
indirectly and whether alone or together with its affiliates and associates,
beneficially owns 5% or more of the outstanding shares of any class or series of
shares of beneficial interest of the Fund. The 5% holder transactions subject to
these special approval requirements are:
o the merger or consolidation of the Fund or any subsidiary of the Fund
with or into any Principal Shareholder;
o the issuance of any securities of the Fund to any Principal
Shareholder for cash (other than pursuant to any automatic dividend
reinvestment plan);
o the sale, lease or exchange of all or any substantial part of the
assets of the Fund to any Principal Shareholder, except assets having
an aggregate fair market value of less than $1,000,000, aggregating
for the purpose of such computation all assets sold, leased or
exchanged in any series of similar transactions within a twelve-month
period; or
o the sale, lease or exchange to the Fund or any subsidiary of the Fund,
in exchange for securities of the Fund, of any assets of any Principal
Shareholder, except assets having an aggregate fair market value of
less than $1,000,000, aggregating for purposes of such computation all
assets sold, leased or exchanged in any series of similar transactions
within a twelve-month period.
To convert the Fund to an open-end investment company, the Fund's Agreement
and Declaration of Trust requires the favorable vote of a majority of the Board
followed by the favorable vote of the holders of at least 75% of the outstanding
shares of each affected class or series of shares of the Fund, voting separately
as a class or series, unless such amendment has been approved by at least 80% of
the Trustees, in which case "a majority of the outstanding voting securities" as
defined in the 1940 Act of the Fund will be required. The foregoing vote would
satisfy a separate requirement in the 1940 Act that any conversion of the Fund
to an open-end investment company be approved by the shareholders. If approved
in the foregoing manner, conversion of the Fund to an open-end investment
company could not occur until 90 days after the shareholders' meeting at which
such conversion was approved and would also require at least 30 days' prior
notice to all shareholders. Conversion of the Fund to an open-end investment
company would require the redemption of any outstanding Preferred Shares, which
could eliminate or alter the leveraged capital structure of the Fund with
respect to the Common Shares. Following any such conversion, it is also possible
that certain of the Fund's investment policies and strategies would have to be
modified to assure sufficient portfolio liquidity. In the event of conversion,
the Common Shares would cease to be listed on the New York Stock Exchange or
other national securities exchanges or market systems. Shareholders of an
open-end investment company may require the company to redeem their shares at
any time, except in certain circumstances as authorized by or under the 1940
Act, at their NAV, less such redemption charge, if any, as might be in effect at
the time of a redemption. The Fund expects to pay all such redemption requests
in cash, but reserves the right to pay redemption requests in a combination of
cash or securities. If such partial payment in securities were made, investors
may incur brokerage costs in converting such securities to cash. If the Fund
were converted to an open-end fund, it is likely that new shares would be sold
at NAV plus a sales load. The Board believes, however, that the closed-end
structure is desirable in light of the Fund's investment objective and policies.
Therefore, you should assume that it is not likely that the Board would vote to
convert the Fund to an open-end fund.
To liquidate the Fund, the Fund's Agreement and Declaration of Trust
requires the favorable vote of a majority of the Board followed by the favorable
vote of the holders of at least 75% of the outstanding shares of each affected
class or series of the Fund, voting separately as a class or series, unless such
liquidation has been approved by at least 80% of the Trustees, in which case "a
majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Fund will be required.
For the purposes of calculating "a majority of the outstanding voting
securities" under the Fund's Agreement and Declaration of Trust, each class and
series of the Fund will vote together as a single class, except to the extent
required by the 1940 Act or the Fund's Agreement and Declaration of Trust with
respect to any class or series of shares. If a separate vote is required, the
applicable proportion of shares of the class or series, voting as a separate
class or series, also will be required. The Board has determined that the
provisions with respect to the Board and the shareholder voting requirements
described above, which voting requirements are greater than the minimum
requirements under Delaware law or the 1940 Act, are in the best interest of
shareholders generally. Reference should be made to the Agreement and
Declaration of Trust on file with the Securities and Exchange Commission for the
full text of these provisions.
CLOSED-END FUND STRUCTURE
The Fund is a newly organized, diversified, closed-end management
investment company, commonly referred to as a closed-end fund. Closed-end funds
differ from open-end funds, which are generally referred to as mutual funds, in
that closed-end funds generally list their shares for trading on a stock
exchange and do not redeem their shares at the request of the shareholder. This
means that if you wish to sell your shares of a closed-end fund you must trade
them on the market like any other stock at the prevailing market price at that
time. In a mutual fund, if the shareholder wishes to sell shares of the fund,
the mutual fund will redeem or buy back the shares at "NAV," less any applicable
redemption fee or "back end" sales charge. Also, mutual funds generally offer
new shares on a continuous basis to new investors, and closed-end funds
generally do not. The continuous inflows and outflows of assets in a mutual fund
can make it difficult to manage the fund's investments. By comparison,
closed-end funds are generally able to stay more fully invested in securities
that are consistent with their investment objective, and also have greater
flexibility to make certain types of investments, and to use certain investment
strategies, such as financial leverage and investments in illiquid securities.
Shares of closed-end funds frequently trade at a discount to their NAV.
Because of this possibility and the recognition that any such discount may not
be in the interest of shareholders, the Fund's Board might consider from time to
time engaging in open-market repurchases, tender offers for Common Shares or
other programs intended to reduce the discount. There is no guarantee or
assurance that the Fund's Board will decide to engage in any of these actions.
Nor is there any guarantee or assurance that such actions, if undertaken, would
result in the Common Shares trading at a price equal or close to NAV per share.
The Board might also consider converting the Fund to an open-end mutual fund,
which would also require a vote of the shareholders of the Fund.
REPURCHASE OF COMMON SHARES
Shares of closed-end investment companies often trade at a discount to
their NAVs, and the Fund's Common Shares may also trade at a discount to their
NAV, although it is possible that they may trade at a premium above NAV. The
market price of the Fund's Common Shares will be determined by such factors as
relative demand for and supply of such Common Shares in the market, the Fund's
NAV, general market and economic conditions and other factors beyond the control
of the Fund. See "Net Asset Value." Although the Fund's Common Shareholders will
not have the right to redeem their Common Shares, the Fund may take action to
repurchase Common Shares in the open market or make tender offers for its Common
Shares. This may have the effect of reducing any market discount from NAV. There
is no assurance that, if action is undertaken to repurchase or tender for Common
Shares, such action will result in the Common Shares trading at a price which
approximates their NAV. Although share repurchases and tenders could have a
favorable effect on the market price of the Fund's Common Shares, you should be
aware that the acquisition of Common Shares by the Fund will decrease the
capital of the Fund and, therefore, may have the effect of increasing the Fund's
expense ratio and decreasing the asset coverage with respect to any Preferred
Shares outstanding. Any share repurchases or tender offers will be made in
accordance with requirements of the Securities Exchange Act of 1934, as amended,
the 1940 Act and the principal stock exchange on which the Common Shares are
traded.
TAX MATTERS
Federal Tax Matters
The discussion below and in the Statement of Additional Information
provides general tax information related to an investment in the Common Shares.
The discussion reflects applicable tax laws of the United States as of the date
of this prospectus, which tax laws may be changed or subject to new
interpretations by the courts or the Internal Revenue Service retroactively or
prospectively. Because tax laws are complex and often change, you should consult
your tax advisor about the tax consequences of an investment in the Fund.
The Fund invests primarily in securities the income of which is exempt from
federal income tax, including AMT. Consequently, the regular monthly dividends
you receive will generally be exempt from Federal income tax, including AMT. A
portion of these dividends, however, may be subject to AMT.
Although the Fund does not seek to realize taxable income or capital gains,
the Fund may realize and distribute taxable income or capital gains from time to
time as a result of the Fund's normal investment activities. The Fund will
distribute at least annually any taxable income or realized capital gains.
Distributions of net short-term gains are taxable as ordinary income.
Distributions of net long-term capital gains are taxable to you as long-term
capital gains regardless of how long you have owned your Common Shares.
Dividends will not qualify for a dividends received deduction generally
available to corporate shareholders.
Each year, you will receive a year-end statement designating the amounts of
tax exempt dividends, capital gain dividends and ordinary income dividends paid
to you during the preceding year, including the source of investment income by
state. You will receive this statement from the firm where you purchased your
Common Shares if you hold your investment in street name. The Fund will send you
this statement if you hold your Common Shares in registered form.
The tax status of your dividends is not affected by whether you reinvest
your dividends or receive them in cash.
In order to avoid corporate taxation of its taxable income and be permitted
to pay tax exempt dividends, the Fund must elect to be treated as a regulated
investment company under Subchapter M of the Code and meet certain requirements
that govern the Fund's sources of income, diversification of assets and
distribution of earnings to shareholders. The Fund intends to make such an
election and meet these requirements. If the Fund failed to do so, the Fund
would be required to pay corporate taxes on its taxable income and all the
distributions would be taxable as ordinary income to the extent of the Fund's
earnings and profits. In particular, in order for the Fund to pay tax exempt
dividends, at least 50% of the value of the Fund's total assets must consist of
tax exempt obligations on a quarterly basis. The Fund intends to meet this
requirement. If the Fund failed to do so, it would not be able to pay tax exempt
dividends and your distributions attributable to interest received by the Fund
from any source would be taxable as ordinary income to the extent of the Fund's
earnings and profits.
The Fund may at times buy tax exempt securities at a discount from the
price at which they were originally issued, especially during periods of rising
interest rates. For federal income tax purposes, some or all of any market
discount that is other than de minimis will be included in the Fund's ordinary
income and will be taxable to shareholders as such when it is distributed.
The Fund may be required to withhold taxes on certain of your dividends if
you have not provided the Fund with your correct taxpayer identification number
(if you are an individual, normally your Social Security number), or if you are
otherwise subject to back-up withholding. If you receive Social Security
benefits, you should be aware that tax exempt dividend income is taken into
account in calculating the amount of these benefits that may be subject to
federal income tax. If you borrow money to buy Fund shares, you may not be
permitted to deduct the interest on that loan. Under federal income tax rules,
Fund shares may be treated as having been bought with borrowed money even if the
purchase of the Fund shares cannot be traced directly to borrowed money. Holders
are urged to consult their own tax advisors regarding the impact of an
investment in Common Shares upon the deductibility of interest payable by the
holder.
State and Local Tax Matters
The exemption from federal income tax for exempt-interest dividends does
not necessarily result in exemption for such dividends under the income or other
tax laws of any state or local taxing authority. In some states, the portion of
any exempt-interest dividend that is derived from interest received by a
regulated investment company on its holdings of that state's securities and its
political subdivisions and instrumentalities is exempt from that state's income
tax. Therefore, the Fund will report annually to its shareholders the percentage
of interest income earned by the Fund during the preceding year on tax exempt
obligations indicating, on a state-by-state basis, the source of such income.
Shareholders of the Fund are advised to consult with their own tax advisors
about state and local tax matters.
Please refer to the Statement of Additional Information for more detailed
information. You are urged to consult your tax advisor.
UNDERWRITING
Subject to the terms and conditions of a purchase agreement dated [ ],
2002, each underwriter named below has severally agreed to purchase, and the
Fund has agreed to sell to such underwriter the number of Common Shares set
forth opposite the name of such underwriter.
Underwriter Number of Common Shares
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
UBS Warburg LLC
A.G. Edwards & Sons, Inc.
RBC Dain Rauscher, Inc.
Wachovia Securities, Inc.
Wells Fargo Securities, LLC
Advest, Inc.
Robert W. Baird & Co. Incorporated
BB&T Capital Markets, a subsidiary of
Scott & Stringfellow, Inc.
Fahnestock & Co. Inc.
Ferris, Baker Watts, Incorporated
Janney Montgomery Scott LLC
McDonald Investments Inc., a KeyCorp Company
Parker/Hunter Incorporated
Quick & Reilly, Inc.
Stephens Inc.
Stifel, Nicolaus & Company, Incorporated
Total..............................................[ ]
The purchase agreement provides that the obligations of the underwriters to
purchase the Common Shares included in this offering are subject to the approval
of certain legal matters by counsel under the purchase agreement and to certain
other conditions. The underwriters are obligated to purchase all of the Common
Shares (other than those covered by the over-allotment described below) if any
of the Common Shares are purchased. In the purchase agreement, the Fund and the
Adviser have agreed to indemnify the underwriters against certain liabilities,
including liabilities arising under the Securities Act of 1933, as amended, or
to contribute to payments the underwriters may be required to make for any of
those liabilities.
The underwriters propose to initially offer some of the Common Shares
directly to the public at the public offering price set forth on the cover page
of this prospectus and some of the Common Shares to certain dealers at the
public offering price less a concession not in excess of $ per Common Share. The
sales load the Fund will pay of $.675 per Common Share is equal to 4.5% of the
initial offering price. The underwriters may allow, and the dealers may reallow,
a discount not in excess of $ per Common Share on sales to other dealers. After
the initial public offering, the public offering price, concession and discount
may be changed.
The following table shows the public offering price, sales load and
proceeds before and after expenses to the Fund. The information assumes either
no exercise or full exercise by the underwriters of their over-allotment option.
Without With
Per Share Option Option
Public offering price $15.00 $ $
Sales load $0.675 $ $
Proceeds, before expenses, to the Fund $14.325 $ $
Proceeds, after expenses, to the Fund $14.295 $ $
The expenses of the offering are estimated at $ and are payable by the
Fund. The Fund has agreed to pay the underwriters $0.005 per Common Share as a
partial reimbursement of expenses incurred in connection with the offering. The
Adviser has agreed to pay organizational expenses and offering costs of the Fund
(other than sales load, but including the reimbursement of underwriters
expenses) that exceed $.03 per Common Share.
The Fund has granted the underwriters an option to purchase up to
additional Common Shares at the public offering price, less the sales load,
within 45 days from the date of this prospectus solely to cover any
over-allotments. If the underwriters exercise this option, each will be
obligated, subject to conditions contained in the purchase agreement, to
purchase a number of additional Common Shares proportionate to that
underwriter's initial amount reflected in the above table.
Until the distribution of the Common Shares is complete, SEC rules may
limit underwriters and selling group members from bidding for and purchasing
Common Shares. However, the representatives may engage in transactions that
stabilize the price of Common Shares, such as bids or purchases to peg, fix or
maintain that price.
If the underwriters create a short position in Common Shares in connection
with the offering, i.e., if they sell more Common Shares than are listed on the
cover of this prospectus, the representatives may reduce that short position by
purchasing Common Shares in the open market. The representatives may also elect
to reduce any short position by exercising all or part of the over-allotment
option described above. The underwriters also may impose a penalty bid, whereby
selling concessions allowed to syndicate members or other broker-dealers in
respect of Common Shares sold in this offering for their account may be
reclaimed by the syndicate if such Common Shares are repurchased by the
syndicate in stabilizing or covering transactions. Purchases of Common Shares to
stabilize its price or to reduce a short position may cause the price of Common
Shares to be higher than it might be in the absence of such purchases.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of Common Shares. In addition, neither we
nor any of the underwriters make any representation that the representatives
will engage in these transactions or that these transactions, once commenced,
will not be discontinued without notice.
The Fund has agreed not to offer or sell any additional Common Shares for a
period of 180 days after the date of the purchase agreement without the prior
written consent of the underwriters, except for the sale of the Common Shares to
the underwriters pursuant to the purchase agreement and the sale of Common
Shares pursuant to the Fund's Dividend Reinvestment Plan.
The Fund anticipates that the underwriters may from time to time act as
brokers or dealers in executing the Fund's portfolio transactions after they
have ceased to be underwriters. The underwriters are active underwriters of, and
dealers in, securities and act as market markers in a number of such securities,
and therefore can be expected to engage in portfolio transactions with the Fund.
The Common Shares will be sold to ensure that New York Stock Exchange
distribution standards (round lots, public shares and aggregate market value)
will be met.
The Adviser has also agreed to pay a fee to Merrill Lynch payable quarterly
at the annual rate of .10% of the Fund's Managed Assets during the continuance
of the investment management agreement or other advisory agreement between the
Adviser and the Fund. The sum of this fee plus the amount of the expense
reimbursement of $.005 per Common Share payable by the Fund to the underwriters
will not exceed 4.5% of the total price to the public of the Common Shares
offered hereby; provided, that in determining when the maximum amount has been
paid the value of each of the quarterly payments shall be discounted at the
annual rate of 10% to the closing date of this offering. Merrill Lynch has
agreed to provide certain after-market support services to the Adviser designed
to maintain the visibility of the Fund on an ongoing basis, to provide relevant
information, studies or reports regarding the Fund and the closed-end investment
company and asset management industries and to provide information to and
consult with the Adviser with respect to applicable strategies designed to
address market discounts, if any.
The principal business address of Merrill Lynch, Pierce, Fenner & Smith
Incorporated is 4 World Financial Center, New York, New York 10080.
CUSTODIAN AND TRANSFER AGENT
The Custodian of the assets of the Fund is State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02110. The Custodian
performs custodial, fund accounting and portfolio accounting services. EquiServe
Trust Company, N.A., P.O. Box 43011, Providence, RI 02940-3011, will serve as
the Fund's Transfer Agent and Dividend Disbursing Agent.
LEGAL OPINIONS
Certain legal matters in connection with the Common Shares will be passed
upon for the Fund by Dickstein Shapiro Morin & Oshinsky LLP and for the
underwriters by Clifford Chance US LLP, New York, New York. Dickstein Shapiro
Morin & Oshinsky LLP and Clifford Chance US LLP may rely as to certain matters
of Delaware law on the opinion of Reed Smith LLP.
TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION
Page
Use of Proceeds.......................................................2
Investment Strategies.................................................2
Fundamental Investment Objective, Policy and Limitations..............2
Non-Fundamental Investment Policies...................................4
Investment Securities.................................................5
Management of the Fund................................................11
Brokerage Transactions................................................19
Description of Shares.................................................19
Repurchase of Common Shares...........................................20
Tax Matters...........................................................22
Performance Related and Comparative Information.......................27
Federated Investors, Inc..............................................29
Experts...............................................................30
Additional Information................................................30
Independent Auditors' Report..........................................30
Financial Statements..................................................32
APPENDIX A Ratings of Investments.....................................34
4,000,000 Shares
Federated Premier Municipal Income Fund
Common Shares
PROSPECTUS
Merrill Lynch & Co.
UBS Warburg A.G. Edwards & Sons, RBC Capital Markets
Inc.
Wachovia Securities Wells Fargo Securities, Advest, Inc.
LLC
Robert W. Baird & Co. BB&T Capital Markets, a Fahnestock & Co. Inc.
subsidiary of Scott &
Stringfellow, Inc.
Ferris, Baker Watts Janney Montgomery Scott McDonald Investments,
Incorporated LLC Inc.
Parker/Hunter Quick & Reilly, Inc. Stephens Inc.
Incorporated
Stifel, Nicholaus & Company Incorporated
[Month Day, 2002]
CUSIP 31423P108
The information in this Statement of Additional Information is not complete
and may be changed. We may not sell these securities until the Registration
Statement filed with the Securities and Exchange Commission is effective. This
Statement of Additional Information is not an offer to sell these securities in
any state where the offer or sale is not permitted.
FEDERATED PREMIER MUNICIPAL INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
Federated Premier Municipal Income Fund (the "Fund") is a newly organized,
diversified, closed-end management investment company. This Statement of
Additional Information relating to Common Shares does not constitute a
prospectus, but should be read in conjunction with the prospectus relating
thereto dated November 25, 2002. This Statement of Additional Information does
not include all information that a prospective investor should consider before
purchasing Common Shares, and investors should obtain and read the prospectus
prior to purchasing such Common Shares. A copy of the prospectus may be obtained
without charge by calling 1-800-341-7400. You may also obtain a copy of the
prospectus on the Securities and Exchange Commission's web site
(http://www.sec.gov). Capitalized terms used but not defined in this Statement
of Additional Information have the meanings ascribed to them in the prospectus.
TABLE OF CONTENTS
Page
Use Of Proceeds........................................................2
Investment Strategies..................................................2
Fundamental Investment Objective, Policy And Limitations...............2
Non-Fundamental Investment Policies....................................2
Investment Securities..................................................2
Management Of The Fund.................................................2
Brokerage Transactions.................................................2
Description Of Shares..................................................2
Repurchase Of Common Shares............................................2
Tax Matters............................................................2
Performance And Related Comparative Information........................2
Federated Investors, Inc...............................................2
Experts................................................................2
Additional Information.................................................2
Independent Auditors' Report...........................................2
Financial Statements...................................................2
Appendix A Ratings Of Investments......................................2
This Statement of Additional Information is dated November __, 2002.
--
December 17, 2002 3:17 PM
USE OF PROCEEDS
Pending investment in tax exempt securities that meet the Fund's investment
objective and policies, the net proceeds of the offering will be invested in
high-quality, short-term tax exempt money market securities or in high-quality
tax exempt securities with relatively low volatility (such as pre-refunded and
intermediate-term bonds), to the extent such securities are available. If
necessary to invest fully the net proceeds of the offering immediately, the Fund
may also purchase, as temporary investments, short-term taxable investments the
income on which is subject to federal regular income tax, and securities of
other open- or closed-end investment companies that invest primarily in tax
exempt securities of the type in which the Fund may invest directly.
INVESTMENT STRATEGIES
Under normal circumstances, the Fund will maintain a dollar-weighted
average portfolio maturity of 15 to 30 years and a dollar-weighted average
duration of 7 to 13 years.
The Fund's average portfolio maturity represents an average based on the
actual stated maturity dates of the debt securities in the Fund's portfolio,
except that: (1) variable-rate securities are deemed to mature at the next
interest-rate adjustment date, unless subject to a demand feature; (2)
variable-rate securities subject to a demand feature are deemed to mature on the
longer of the next interest-rate adjustment date or the date on which principal
can be recovered through demand; (3) floating-rate securities subject to a
demand feature are deemed to mature on the date on which the principal can be
recovered through demand; and (4) securities being hedged with futures contracts
may be deemed to have a longer maturity, in the case of purchases of futures
contracts, and a shorter maturity, in the case of sales of futures contracts,
than they would otherwise be deemed to have. In addition, a security that is
subject to redemption at the option of the issuer on a particular date ("call
date"), which is prior to the security's stated maturity, may be deemed to
mature on the call date rather than on its stated maturity date. The call date
of a security will be used to calculate average portfolio maturity when the
Adviser reasonably anticipates, based upon information available to it, that the
issuer will exercise its right to redeem the security. The average portfolio
maturity of the Fund is dollar weighted based upon the market value of the
Fund's securities at the time of calculation.
The Fund cannot accurately predict its portfolio turnover rate but
anticipates that its annual portfolio turnover rate will not exceed 100%. The
Fund generally will not trade securities for the purpose of realizing short-term
profits, but it will adjust its portfolio as it deems advisable in view of
prevailing or anticipated market conditions to accomplish its investment
objective. Other than for consideration of tax consequences, frequency of
portfolio turnover will not be a limiting factor if the Fund considers it
advantageous to purchase or sell securities.
FUNDAMENTAL INVESTMENT OBJECTIVE, POLICY AND LIMITATIONS
The following fundamental investment objective, policy and limitations may
not be changed by the Fund's Board without the approval of the holders of a
majority of (1) the outstanding Common Shares and Preferred Shares (if any)
voting together as a class, and (2) the outstanding Preferred Shares (if any),
voting as a separate class. When used with respect to particular shares of the
Fund, "majority of the outstanding" means (a) 67% or more of the shares present
at a meeting, if the holders of more than 50% of the shares are present or
represented by proxy, or (b) more than 50% of the shares, whichever is less.
Investment Objectives
The Fund's investment objective is to provide current income exempt from
federal income tax, including AMT.
Investment Policy
The Fund will invest its assets so that at least 80% of the income that it
distributes will be exempt from federal regular income tax.
Investment Limitations
Concentration
The Fund will not make investments that will result in the concentration of
its investments in the securities of issuers primarily engaged in the same
industry, but may invest more than 25% of its total assets in securities of
issuers in the same economic sector.
Diversification of Investments
With respect to securities comprising 75% of the value of its total assets,
the Fund will not purchase the securities of any one issuer (other than cash,
cash items, securities issued or guaranteed by the government of the United
States or its agencies or instrumentalities and repurchase agreements
collateralized by such U.S. government securities, and securities of other
investment companies) if as a result more than 5% of the value of its total
assets would be invested in the securities of that issuer, or it would own more
than 10% of the outstanding voting securities of that issuer.
Underwriting
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the sale of securities in accordance with its investment objective, policies and
limitations.
Investing in Real Estate
The Fund will not buy or sell real estate, although it may invest in tax
exempt securities secured by real estate or interests in real estate.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the
Fund may purchase securities of companies that deal in commodities. For purposes
of this restriction, investments in transactions involving futures contracts and
options, swap transactions, and other financial contracts that settle by payment
of cash are not deemed to be investments in commodities.
Lending
The Fund will not make loans, but may acquire publicly or non-publicly
issued tax exempt securities as permitted by its investment objective, policies
and limitations.
Borrowing Money and Issuing Senior Securities
The Fund may borrow money, directly or indirectly, and issue senior
securities to the maximum extent permitted under the Investment Company Act of
1940 (the "1940 Act").
For purposes of applying the concentration limitation, securities of the
U.S. government, its agencies or instrumentalities, and securities backed by the
credit of a governmental entity are not considered to represent industries.
However, obligations backed only by the assets and revenues of non-governmental
issuers may for this purpose be deemed to be issued by such non-governmental
issuers. Thus, the 25% limitation would apply to such obligations.
For the purpose of applying the concentration limitation, a
non-governmental issuer will be deemed the sole issuer of a security when its
assets and revenues are separate from other governmental entities and its
securities are backed only by its assets and revenues. Similarly, in the case of
a non-governmental issuer, such as an industrial corporation or a privately
owned or operated hospital, if the security is backed only by the assets and
revenues of the non-governmental issuer, then such non-governmental issuer would
be deemed to be the sole issuer. Where a security is also backed by the
enforceable obligation of a superior or unrelated governmental or other entity
(other than a bond insurer), it will also be included in the computation of
securities owned that are issued by such governmental or other entity. Where a
security is guaranteed by a governmental entity or some other facility, such as
a bank guarantee or letter of credit, such a guarantee or letter of credit would
be considered a separate security and would be treated as an issue of such
government, other entity or bank.
NON-FUNDAMENTAL INVESTMENT POLICIES
The Fund is also subject to the following non-fundamental investment
policies, which may be changed by the Board without shareholder approval.
Short Sales
The Fund will not make any short sale of securities except in conformity
with applicable laws, rules and regulations and unless after giving effect to
such sale, the market value of all securities sold short does not exceed 25% of
the value of the Fund's total assets and the Fund's aggregate short sales of a
particular class of securities does not exceed 25% of the then outstanding
securities of that class.
Investing in Other Investment Companies
The Fund may purchase securities of open-end or closed-end investment
companies in compliance with the 1940 Act or any exemptive relief obtained
thereunder.
Exercise of Control
The Fund will not purchase securities of companies for the purpose of
exercising control.
INVESTMENT SECURITIES
The following information supplements the discussion of the Fund's
investment securities that are described in the prospectus.
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a
specified rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The Fund may invest in tax exempt securities, which pay interest that is
not subject to regular income taxes, including AMT. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
Following is a description of non-principal tax exempt securities in which
the Fund may invest.
Variable Rate Demand Instruments. Variable rate demand instruments are tax
exempt securities that require the issuer or a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The securities
also pay interest at a variable rate intended to cause the securities to trade
at their face value. The Fund treats demand instruments as short-term securities
because their variable interest rate adjusts in response to changes in market
rates, even though their stated maturity may extend beyond 13 months.
Municipal Notes. Municipal notes are short-term tax exempt securities. Many
municipalities issue such notes to fund their current operations before
collecting taxes or other municipal revenues. Municipalities may also issue
notes to fund capital projects prior to issuing long-term bonds. The issuers
typically repay the notes at the end of their fiscal year, either with taxes,
other revenues or proceeds from newly issued notes or bonds.
Tax Increment Financing Bonds. Tax increment financing (TIF) bonds are
payable from increases in taxes or other revenues attributable to projects
financed by the bonds. For example, a municipality may issue TIF bonds to
redevelop a commercial area. The TIF bonds would be payable solely from any
increase in sales taxes collected from merchants in the area. The bonds could
default if merchants' sales, and related tax collections, failed to increase as
anticipated.
Municipal Mortgage Back Securities. Municipal mortgage backed securities
are special revenue bonds the proceeds of which may be used to provide mortgage
loans for single family homes or to finance multifamily housing. Municipal
mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates, maturities
and other terms. Municipal mortgage backed securities generally have fixed
interest rates.
PACS. PACs (planned amortization classes) are a sophisticated form of
mortgage backed security issued with a companion class. PACs receive principal
payments and prepayments at a specified rate. In addition, PACs will receive the
companion classes' share of principal payments, if necessary, to cover a
shortfall in the prepayment rate. This helps PACs to control prepayment risks by
increasing the risks to their companion classes.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of credit,
bond insurance and surety bonds. Credit enhancement also includes arrangements
where securities or other liquid assets secure payment of a fixed income
security. If a default occurs, these assets may be sold and the proceeds paid to
a security's holders. Each form of credit enhancement reduces credit risks by
providing another source of payment for a fixed income security.
Structured Notes
The Fund may invest in "structured" notes, which are privately negotiated
debt obligations where the principal and/or interest is determined by reference
to the performance of a benchmark asset, market or interest rate, such as
selected securities, an index of securities or specified interest rates or the
differential performance of two assets or markets, such as indices reflecting
taxable and tax exempt bonds. Depending on the terms of the note, the Fund may
forgo all or part of the interest and principal that would be payable on a
comparable conventional note. The rate of return on structured notes may be
determined by applying a multiplier to the performance or differential
performance of the referenced index(es) or other assets(s). Application of a
multiplier involves leverage that will serve to magnify the potential for gain
and the risk of loss.
The Fund currently intends that any use of structured notes will be for the
purpose of reducing the interest rate sensitivity of the Fund's portfolio (and
thereby decreasing the Fund's exposure to interest rate risk) and, in any event,
that the interest income on the notes will normally be exempt from federal
income tax. The Fund will only invest in structured notes if it has received an
opinion of counsel for the issuer (or the advice of another authority believed
by the Adviser to be reliable) that the interest income on the notes will be
exempt from federal income tax. Like other sophisticated strategies, the Fund's
use of structured notes may not work as intended; for example, the change in
value of the structured notes may not match very closely the change in the value
of bonds that the structured notes were purchased to hedge.
Derivative Contracts
Derivative contracts are financial instruments that require payments based
upon changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets or instruments. Some derivative
contracts (such as futures, forwards and options) require payments relating to a
future trade involving the underlying asset. Other derivative contracts (such as
swaps) require payments relating to the income or returns from the underlying
asset or instrument. The other party to a derivative contract is referred to as
a counterparty.
Many derivative contracts are traded on securities or commodities
exchanges. In this case, the exchange sets all the terms of the contract except
for the price. Investors make payments due under their contracts through the
exchange. Most exchanges require investors to maintain margin accounts through
their brokers to cover their potential obligations to the exchange. Parties to
the contract make (or collect) daily payments to the margin accounts to reflect
losses (or gains) in the value of their contracts. This protects investors
against potential defaults by the counterparty. Trading contracts on an exchange
also allows investors to close out their contracts by entering into offsetting
contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.
The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset or
instrument, derivative contracts may increase or decrease the Fund's exposure to
interest rate risks, and may also expose the Fund to liquidity, leverage and tax
risks. OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.
The Fund may trade in the following types of derivative contracts, as well
as combinations of these contracts, including, but not limited to, options on
futures contracts, options on forward contracts and options on swaps.
Futures Contracts. Futures contracts provide for the future sale by one
party and purchase by another party of a specified amount of an underlying asset
or instrument at a specified price, date and time. Entering into a contract to
buy an underlying asset is commonly referred to as buying a contract or holding
a long position in the asset. Entering into a contract to sell an underlying
asset is commonly referred to as selling a contract or holding a short position
in the asset. Futures contracts are considered to be commodity contracts.
Futures contracts traded OTC are frequently referred to as forward contracts.
The Fund may buy or sell the interest rate futures contracts and index
financial futures contracts. The Fund may also buy or sell futures contracts on
tax exempt securities and U.S. government and agency securities.
Options. Options are rights to buy or sell an underlying asset or
instrument for a specified price (the exercise price) during, or at the end of,
a specified period. A call option gives the holder (buyer) the right to buy the
underlying asset or instrument from the seller (writer) of the option. A put
option gives the holder the right to sell the underlying asset or instrument to
the writer of the option. The writer of the option receives a payment, or
premium, from the buyer, which the writer keeps regardless of whether the buyer
uses (or exercises) the option. If the Fund writes options on futures contracts,
it will be subject to margin requirements similar to those applied to futures
contracts.
Swaps. Swaps are contracts in which two parties agree to pay each other
(swap) the returns derived from underlying assets or instruments with differing
characteristics. Most swaps do not involve the delivery of the underlying assets
or instruments by either party, and the parties might not own the assets or
instruments underlying the swap. The payments are usually made on a net basis so
that, on any given day, the Fund would receive (or pay) only the amount by which
its payment under the contract is less than (or exceeds) the amount of the other
party's payment. Swap agreements are sophisticated instruments that can take
many different forms, and are known by a variety of names including caps, floors
and collars. Common swap agreements that the Fund may use include:
Interest Rate Swaps. Interest rate swaps are contracts in which one party
agrees to make regular payments equal to a fixed or floating interest rate times
a stated, notional principal amount of fixed income securities, in return for
payments equal to a different fixed or floating rate times the same notional
principal amount, for a specific period. For example, a $10 million LIBOR swap
would require one party to pay the equivalent of the London Interbank Offer Rate
of interest (which fluctuates) on $10 million notional principal amount in
exchange for the right to receive the equivalent of a stated fixed rate of
interest on $10 million notional principal amount.
Caps and Floors. Caps and floors are contracts in which one party agrees to
make payments only if an interest rate or index goes above (cap) or below
(floor) a certain level in return for a fee from the other party.
Total Return Swaps. Total return swaps are contracts in which one party
agrees to make payments of the total return from the underlying asset or
instrument during the specified period, in return for payments equal to a fixed
or floating rate of interest or the total return from another underlying asset
or instrument.
Municipal Market Data Rate Locks. The Fund may purchase and sell Municipal
Market Data Rate Locks ("MMD Rate Locks"). An MMD Rate Lock permits the Fund to
lock in a specified municipal interest rate for a portion of its portfolio to
preserve a return on a particular investment or a portion of its portfolio as a
duration management technique or to protect against any increase in the price of
securities to be purchased at a later date. The Fund will ordinarily use these
transactions as a hedge or for duration or risk management although it is
permitted to enter into them to enhance income or gain. An MMD Rate Lock is a
contract between the Fund and an MMD Rate Lock provider pursuant to which the
parties agree to make payments to each other on a notional amount, contingent
upon whether the Municipal Market Data AAA General Obligation Scale is above or
below a specified level on the expiration date of the contract. For example, if
the Fund buys an MMD Rate Lock and the Municipal Market Data AAA General
Obligation Scale is below the specified level on the expiration date, the
counterparty to the contract will make a payment to the Fund equal to the
specified level minus the actual level, multiplied by the notional amount of the
contract. If the Municipal Market Data AAA General Obligation Scale is above the
specified level on the expiration date, the Fund will make a payment to the
counterparty equal to the actual level minus the specified level, multiplied by
the notional amount of the contract. In entering into MMD Rate Locks, there is a
risk that municipal yields will move in the direction opposite the direction
anticipated by the Fund.
Short Sales
The Fund may make short sales of securities as part of its overall
portfolio management strategy and to offset potential declines in long positions
in securities in the Fund's portfolio. A short sale is a transaction in which
the Fund sells a security it does not own in anticipation that the market price
of that security will decline. Although short sale transactions are not
currently available with respect to Municipal Bonds, the Fund may engage in
short sales on taxable bonds and on futures contracts with respect to Municipal
Bonds and taxable bonds.
When the Fund makes a short sale on a security, it must borrow the security
sold short and deliver it to the broker-dealer through which it made the short
sale as collateral for its obligation to deliver the security upon conclusion of
the sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any accrued interest and dividends on such borrowed
securities.
If the price of the security sold short increases between the time of the
short sale and the time the Fund replaces the borrowed security, the Fund will
incur a loss; conversely, if the price declines, the Fund will realize a capital
gain. Any gain will be decreased, and any loss increased, by the transaction
costs described above. The successful use of short selling may be adversely
affected by imperfect correlation between movements in the price of the security
sold short and the securities being hedged.
To the extent that the Fund engages in short sales, it will provide
collateral to the broker-dealer. A short sale is "against the box" to the extent
that the Fund contemporaneously owns, or has the right to obtain at no added
cost, securities identical to those sold short. The Fund may also engage in
so-called "naked" short sales (i.e., short sales that are not "against the
box"), in which case the Fund's losses could theoretically be unlimited in cases
where the Fund is unable for whatever reason to close out its short position.
The Fund has the flexibility to engage in short selling to the extent permitted
by the 1940 Act and rules and interpretations thereunder.
Investing In Securities Of Other Investment Companies
The Fund may invest its assets in securities of other open-end or
closed-end investment companies, including the securities of affiliated
investment companies, as an efficient means of carrying out its investment
policies and managing its uninvested cash.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities:
Treasury Securities. Treasury securities are direct obligations of the
federal government of the United States.
Agency Securities. Agency securities are issued or guaranteed by a federal
agency or other government sponsored entity ("GSE") acting under federal
authority. The United States supports some GSEs with its full faith and credit.
Other GSEs receive support through federal subsidies, loans or other benefits. A
few GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities.
Bank Instruments. Bank instruments are unsecured interest bearing deposits
with banks. Bank instruments include bank accounts, time deposits, certificates
of deposit and banker's acceptances.
Corporate Debt Securities. Corporate debt securities are fixed income
securities issued by businesses. Notes, bonds, debentures and commercial paper
are the most prevalent types of corporate debt securities.
Commercial Paper. Commercial paper is an issuer's obligation with a
maturity of less than nine months. Companies typically issue commercial paper to
pay for current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If the
issuer cannot continue to obtain liquidity in this fashion, its commercial paper
may default. The short maturity of commercial paper reduces both the market and
credit risks as compared to other debt securities of the same issuer.
Repurchase Agreements. Repurchase agreements are transactions in which the
Fund buys a security from a dealer or bank and agrees to sell the security back
at a mutually agreed upon time and place. The repurchase price exceeds the sale
price, reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
MANAGEMENT OF THE FUND
Board of Trustees
The Board is responsible for managing the Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders. The
following tables give information about each Board member and the senior
officers of the Fund. Where required, the tables separately list Board members
who are "interested persons" of the Fund (i.e., "Interested" Board members) and
those who are not (i.e., "Independent" Board members). Unless otherwise noted,
the address of each person listed is Federated Investors Tower, 1001 Liberty
Avenue, Pittsburgh, PA. The Federated Fund Complex consists of 44 investment
companies (comprising 139 portfolios). Unless otherwise noted, each Board member
oversees all portfolios in the Federated Fund Complex; serves for an indefinite
term; and also serves as a Board member of the following investment company
complexes: Banknorth Funds--five portfolios; CCMI Funds--two portfolios; Regions
Funds--eight portfolios; Riggs Funds--nine portfolios; and WesMark Funds--five
portfolios.
Interested Trustees Background And Compensation
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Total
Compensation
Aggregate From
Name Birth Date CompensationFund and
Address Principal Occupation(s) for Past Five Years, From Federated
Positions Held Other Directorships Held and Previous Positions Fund + Fund
with Fund Complex
(past
calendar
year)
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
John F. Principal Occupations: Chairman and Director or $0 $0
Donahue* Birth Trustee of the Federated Fund Complex; Chairman
Date: July28, and Director, Federated Investors, Inc.;
1924 CHAIRMAN Chairman, Federated Investment Management
AND Company, Federated Global Investment Management
TRUSTEE(1)(2) Corp. and Passport Research, Ltd. Previous
Positions: Trustee, Federated Investment
Management Company and Chairman and Director,
Federated Investment Counseling.
J. Christopher Principal Occupations: President and Chief $0 $0
Donahue* Birth Executive Officer of the Federated Fund
Date: April11, Complex; Director or Trustee of some of the
1949 PRESIDENT Funds in the Federated Fund Complex; President,
AND Chief Executive Officer and Director, Federated
TRUSTEE(1)(2) Investors, Inc.; President, Chief Executive
Officer and Trustee, Federated Investment
Management Company; Trustee, Federated
Investment Counseling; President, Chief
Executive Officer and Director, Federated
Global Investment Management Corp.; President
and Chief Executive Officer, Passport Research,
Ltd.; Trustee, Federated Shareholder Services
Company; Director, Federated Services Company.
Previous Position: President, Federated
Investment Counseling.
Lawrence D. Principal Occupations: Director or Trustee of $0 $117,117.17
Ellis, M.D.* the Federated Fund Complex; Professor of
Birth Date: Medicine, University of Pittsburgh; Medical
October11, 1932 Director, University of Pittsburgh Medical
3471 Fifth Center Downtown; Hematologist, Oncologist and
Avenue Suite Internist, University of Pittsburgh Medical
1111 Center. Other Directorships Held: Member,
Pittsburgh, PA National Board of Trustees, Leukemia Society of
TRUSTEE(1)(2) America. Previous Positions: Trustee,
University of Pittsburgh; Director, University
of Pittsburgh Medical Center.
* Family relationships and reasons for "interested" status: John F. Donahue
is the father of J. Christopher Donahue; both are "interested" due to the
positions they hold with Federated Investors, Inc. and its subsidiaries.
Lawrence D. Ellis, M.D. is "interested" because his son-in-law is employed by,
Federated Securities Corp., a subsidiary of Federated Investors, Inc.
+ Board members will not receive compensation from the Fund during the
Fund's first fiscal year. Thereafter, the Fund will be subject to a base charge
of $250 per quarter; the remainder of the "Total Compensation" in column two
will be allocated to each fund in the Federated Fund Complex based on the net
assets of each such fund.
Independent Trustees Background And Compensation
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Name Birth Date Principal Occupation(s) for Past Five Years, Aggregate Total
Address Other Directorships Held and Previous CompensationCompensation
Positions Held Positions From From
with Fund Fund Fund and
(past Federated
fiscal Fund
year)+ Complex
(past
calendar
year)
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Thomas G. Principal Occupation: Director or Trustee of $0 $128,847.72
Bigley Birth the Federated Fund Complex. Other
Date: Directorships Held: Director, Member of
February3, 1934 Executive Committee, Children's Hospital of
15 Old Timber Pittsburgh; Director, Member of Executive
Trail Committee, University of Pittsburgh. Previous
Pittsburgh, PA Position: Senior Partner, Ernst & Young LLP.
TRUSTEE(1)(2)
John T. Conroy, Principal Occupations: Director or Trustee of $0 $128,847.66
Jr. Birth Date: the Federated Fund Complex; Chairman of the
June23, 1937 Board, Investment Properties Corporation;
Grubb & Partner or Trustee in private real estate
Ellis/Investment ventures in Southwest Florida. Previous
Properties Positions: President, Investment Properties
Corporation Corporation; Senior Vice President, John R.
3838 Tamiami Wood and Associates, Inc., Realtors;
Trail North President, Naples Property Management, Inc.
Naples, FL and Northgate Village Development Corporation.
TRUSTEE(1)(2)
Nicholas P. Principal Occupation: Director or Trustee of $0 $126,923.53
Constantakis the Federated Fund Complex; Previous
Birth Date: Position: Partner, Andersen Worldwide SC
September3, (prior to 9/1/97). Other Directorships Held:
1939 175 Director, Michael Baker Corporation
Woodshire Drive (engineering and energy services worldwide).
Pittsburgh, PA
TRUSTEE (1)(2)
John F. Principal Occupation: Director or Trustee of $0 $115,368.16
Cunningham the Federated Fund Complex. Other
Birth Date: Directorships Held: Chairman, President and
March5, 1943 Chief Executive Officer, Cunningham & Co.,
353 El Brillo Inc. (strategic business consulting); Trustee
Way Palm Beach, Associate, Boston College. Previous Positions:
FL TRUSTEE(1)(2) Director, Redgate Communications and EMC
Corporation (computer storage systems);
Chairman of the Board and Chief Executive
Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang
Laboratories; Director, First National Bank of
Boston; Director, Apollo Computer, Inc.
Peter E. Madden Principal Occupation: Director or Trustee of $0 $117,117.14
Birth Date: the Federated Fund Complex; Management
March16, 1942 Consultant. Previous Positions:
One Royal Palm Representative, Commonwealth of Massachusetts
Way 100 Royal General Court; President, State Street Bank
Palm Way Palm and Trust Company and State Street Corporation
Beach, FL (retired); Director, VISA USA and VISA
TRUSTEE(1)(2) International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.
Charles F. Principal Occupations: Director or Trustee of $0 $128,847.66
Mansfield, Jr. the Federated Fund Complex; Management
Birth Date: Consultant; Executive Vice President, DVC
April10, 1945 Group, Inc. (marketing, communications and
80 South Road technology) (prior to 9/1/00). Previous
Westhampton Positions: Chief Executive Officer, PBTC
Beach, NY International Bank; Partner, Arthur Young &
TRUSTEE(1)(2) Company (now Ernst & Young LLP); Chief
Financial Officer of Retail Banking Sector,
Chase Manhattan Bank; Senior Vice President,
HSBC Bank USA (formerly, Marine Midland Bank);
Vice President, Citibank; Assistant Professor
of Banking and Finance, Frank G. Zarb School
of Business, Hofstra University.
John E. Murray, Principal Occupations: Director or Trustee of $0 $117,117.14
Jr., J.D., the Federated Fund Complex; Chancellor and Law
S.J.D. Birth Professor, Duquesne University; Consulting
Date: Partner, Mollica & Murray. Other Directorships
December20, Held: Director, Michael Baker Corp.
1932 (engineering, construction, operations and
Chancellor, technical services). Previous Positions:
Duquesne President, Duquesne University; Dean and
University Professor of Law, University of Pittsburgh
Pittsburgh, PA School of Law; Dean and Professor of Law,
TRUSTEE(1)(2) Villanova University School of Law.
Marjorie P. Principal Occupations: Director or Trustee of $0 $117,117.17
Smuts Birth the Federated Fund Complex; Public Relations/
Date: June21, Marketing Consultant/Conference Coordinator.
1935 4905 Previous Positions: National Spokesperson,
Bayard Street Aluminum Company of America; television
Pittsburgh, PA producer; President, Marj Palmer Assoc.;
TRUSTEE(1)(2) Owner, Scandia Bord.
+ Board members will not receive compensation from the Fund during the
Fund's first fiscal year. Thereafter, the Fund will be subject to a base charge
of $250 per quarter; the remainder of the "Total Compensation" in column two
will be allocated to each fund in the Federated Fund Complex based on the net
assets of each such fund.
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Name Birth Date Principal Occupation(s) for Past Five Years, Aggregate Total
Address Other Directorships Held and Previous CompensationCompensation
Positions Held Positions From From
with Fund Fund Fund and
(past Federated
fiscal Fund
year)+ Complex
(past
calendar
year)
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
John S. Walsh Principal Occupations: Director or Trustee of $0 $117,117.17
Birth Date: the Federated Fund Complex; President and
November28, Director, Heat Wagon, Inc. (manufacturer of
1957 2604 construction temporary heaters); President and
William Drive Director, Manufacturers Products, Inc.
Valparaiso, IN (distributor of portable construction
TRUSTEE(1)(2) heaters); President, Portable Heater Parts, a
division of Manufacturers Products, Inc. Other
Directorships Held: Director, Walsh & Kelly,
Inc. (heavy highway contractor). Previous
Position: Vice President, Walsh & Kelly, Inc.
OFFICERS**
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Name Birth Principal Occupation(s) and Previous Positions
Date Address
Positions Held
with Fund
---------------------------------------------------------------------------------------
John W. Principal Occupations: Executive Vice President and Secretary of the
McGonigle Federated Fund Complex; Executive Vice President, Secretary and
Birth Date: Director, Federated Investors, Inc. Previous Positions: Trustee,
October26, Federated Investment Management Company and Federated Investment
1938 EXECUTIVE Counseling; Director, Federated Global Investment Management Corp.,
VICE PRESIDENT Federated Services Company and Federated Securities Corp.
AND SECRETARY
Richard J. Principal Occupations: Treasurer of the Federated Fund Complex;
Thomas Birth Senior Vice President, Federated Administrative Services. Previous
Date: June17, Positions: Vice President, Federated Administrative Services; held
1954 TREASURER various management positions within Funds Financial Services
Division of Federated Investors, Inc.
Richard B. Principal Occupations: President or Vice President of some of the
Fisher Birth Funds in the Federated Fund Complex; Vice Chairman, Federated
Date: May17, Investors, Inc.; Chairman, Federated Securities Corp. Previous
1923 VICE Positions: Director or Trustee of some of the Funds in the Federated
PRESIDENT Fund Complex; Executive Vice President, Federated Investors, Inc.
and Director and Chief Executive Officer, Federated Securities Corp.
William D. Principal Occupations: Chief Investment Officer of this Fund and
Dawson III various other Funds in the Federated Fund Complex; Executive Vice
Birth Date: President, Federated Investment Counseling, Federated Global
March3, 1949 Investment Management Corp., Federated Investment Management Company
CHIEF and Passport Research, Ltd.; Director, Federated Global Investment
INVESTMENT Management Corp. and Federated Investment Management Company;
OFFICER Portfolio Manager, Federated Administrative Services; Vice
President, Federated Investors, Inc. Previous Positions: Executive
Vice President and Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management Services Division;
Senior Vice President, Federated Investment Management Company and
Passport Research, Ltd.
Mary Jo Ochson Mary Jo Ochson is the Portfolio Manager of the Fund. She is Vice
Birth Date: President of the Fund. Ms. Ochson joined Federated in 1982 and has
September 12, been a Senior Portfolio Manager and a Senior Vice President of the
1953 SENIOR Fund's Adviser since 1996. From 1988 through 1995, Ms. Ochson served
VICE PRESIDENT as a Portfolio Manager and a Vice President of the Fund's Adviser.
Ms. Ochson is a Chartered Financial Analyst and received her M.B.A.
in Finance from the University of Pittsburgh.
+ Board members will not receive compensation from the Fund during the
Fund's first fiscal year. Thereafter, the Fund will be subject to a base charge
of $250 per quarter; the remainder of the "Total Compensation" in column two
will be allocated to each fund in the Federated Fund Complex based on the net
assets of each such fund.
(1) After a Trustee's initial term, each Trustee is expected to serve a
three year term concurrent with the class of trustees for which he or
she serves:
-- Messrs. John F. Donahue, Thomas G. Bigley, John T. Conroy, Jr., and
John S. Walsh, as Class I trustees, are expected to stand for
re-election at the Fund's 2004 meeting of shareholders.
-- Messrs. J. Christopher Donahue, Nicholas P. Constantakis, John F.
Cunningham, and Majorie P. Smuts, as Class II trustees, are expected
to stand for re-election at the Fund's 2005 meeting of shareholders.
-- Messrs. Lawrence D. Ellis, M.D., Peter E. Madden, Charles F.
Mansfield, Jr. and John E. Murray, Jr., J.D, S.J.D., as Class III
trustees, are expected to stand for re-election at the Fund's 2006
meeting of shareholders.
** Officers do not receive any compensation from the Fund.
Thomas R. Donahue, Chief Financial Officer, Vice President, Treasurer and
Assistant Secretary of Federated Investors, Inc. and an officer of its various
advisory and underwriting subsidiaries, has served as a Term Member on the Board
of Directors of Duquesne University, Pittsburgh, Pennsylvania, since May 12,
2000. Mr. John E. Murray, Jr., an Independent Trustee of the Fund, served as
President of Duquesne from 1988 until his retirement from that position in 2001,
and became Chancellor of Duquesne on August 15, 2001. It should be noted that
Mr. Donahue abstains on any matter that comes before Duquesne's Board that
affects Mr. Murray personally.
Committees of the Board
--------------------------------------------------------------------------------------
Meetings
Held
During
Last
Board Committee Fiscal
Committee Members Committee Functions Year
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Executive John F. In between meetings of the full Board, the NA
Donahue John Executive Committee generally may exercise all
E. Murray, the powers of the full Board in the management
Jr., J.D., and direction of the business and conduct of the
S.J.D. affairs of the Fund in such manner as the
Executive Committee shall deem to be in the best
interests of the Fund. However, the Executive
Committee cannot elect or remove Board members,
increase or decrease the number of Trustees,
elect or remove any Officer, declare dividends,
issue shares or recommend to shareholders any
action requiring shareholder approval.
Audit Thomas G. The Audit Committee reviews and recommends to NA
Bigley John T. the full Board the independent auditors to be
Conroy, Jr. selected to audit the Fund's financial
Nicholas P. statements; meets with the independent auditors
Constantakis periodically to review the results of the audits
Charles F. and report the results to the full Board;
Mansfield, Jr. evaluates the independence of the auditors,
reviews legal and regulatory matters that may
have a material effect on the financial
statements, related compliance policies and
programs, and the related reports received from
regulators; reviews the Fund's internal audit
function; review compliance with the Fund's code
of conduct/ethics; review valuation issues;
monitors inter-fund lending transactions;
reviews custody services and issues and
investigate any matters brought to the
Committee's attention that are within the scope
of its duties.
Board Ownership of Shares in the Fund and in the Federated Family of
Investment Companies
--------------------------------------------
Aggregate
Dollar Dollar
Range Range of
of Shares
Interested Board Shares Owned in
Member Name Owned Federated
in Fund Family of
Investment
Companies
--------------------------------------------
--------------------------------------------
John F. Donahue $0 Over
$100,000
J. Christopher $0 Over
Donahue $100,000
Lawrence D. Ellis, $0 Over
M.D. $100,000
Independent Board
Member Name
Thomas G. Bigley $0 Over
$100,000
John T. Conroy, Jr. $0 Over
$100,000
Nicholas P. $0 Over
Constantakis $100,000
John F. Cunningham $0 Over
$100,000
Peter E. Madden $0 Over
$100,000
Charles F. $0 $50,001 -
Mansfield, Jr. $100,000
John E. Murray, $0 Over
Jr., J.D., S.J.D. $100,000
Marjorie P. Smuts $0 Over
$100,000
John S. Walsh $0 Over
$100,000
Code of Ethics
As required by SEC rules, the Fund, its Adviser, and the Fund's principal
underwriters have adopted codes of ethics. These codes permit personnel subject
to the codes to invest in securities, including securities that may be purchased
or held by the Fund. These codes can be reviewed and copied at the Securities
and Exchange Commission's Public Reference Room in Washington, D.C. Information
on the operation of the Public Reference Room may be obtained by calling the
Securities and Exchange Commission at 1-202-942-8090. The codes of ethics are
available on the EDGAR Database on the Security and Exchange Commission's web
site (http://www.sec.gov), and copies of these codes may be obtained, after
paying a duplicating fee, by electronic request at the following e-mail address:
publicinfo@sec.gov, or by writing the Security and Exchange Commission's Public
Reference Section, Washington, D.C. 20549-0102.
Investment Adviser
The Adviser conducts investment research and makes investment decisions for
the Fund.
The Adviser is a wholly owned subsidiary of Federated.
Pursuant to an investment management agreement between the Adviser and the
Fund, the Fund has agreed to pay for the investment advisory services and
facilities provided by the Adviser a fee payable monthly in arrears at an annual
rate equal to 0.55% of the average daily value of the Fund's Managed Assets (the
"Management Fee"). The Adviser has contractually agreed to waive receipt of a
portion of its Management Fee in the amount of 0.20% of the average daily value
of the Fund's Managed Assets for the first five years of the Fund's operations
(through December 31, 2007), and for a declining amount for an additional three
years (through December 31, 2010). Managed Assets means the total assets of the
Fund including any assets attributable to any Preferred Shares or borrowings
that may be outstanding, minus the sum of accrued liabilities (other than
indebtedness attributable to financial leverage). The liquidation preference on
the Preferred Shares is not a liability. This means that during periods in which
the Fund is using leverage, the fee paid to the Adviser will be higher than if
the Fund did not use leverage because the fee is calculated as a percentage of
the Fund's Managed Assets, which include those assets purchased with leverage.
The Adviser shall not be liable to the Fund or any Fund shareholder for any
losses that may be sustained in the purchase, holding or sale of any security or
for anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
imposed upon it by its contract with the Fund.
As required by the 1940 Act, the Board has reviewed the Fund's investment
advisory contract. During its review of the contract, the Board considered many
factors, among the most material of which are: the Fund's investment objectives;
the Adviser's management philosophy, personnel and processes; the preferences
and expectations of Fund shareholders and their relative sophistication; the
continuing state of competition in the mutual fund industry; comparable fees in
the mutual fund industry; the range and quality of services provided to the Fund
and its shareholders by the Federated organization in addition to investment
advisory services; and the Fund's relationship to other funds in the Federated
Fund family ("Federated Funds").
The Board also considered the compensation and benefits received by the
Adviser. This includes fees to be received for services provided to the Fund by
other entities in the Federated organization and research services to be
received by the Adviser from brokers that execute Fund trades, as well as
advisory fees. In this regard, the Board is aware that various courts have
interpreted provisions of the 1940 Act and have indicated in their decisions
that the following factors may be relevant to an adviser's compensation: the
nature and quality of the services provided by the adviser, including the
performance of the fund; the adviser's cost of providing the services; the
extent to which the adviser may realize "economies of scale" as the fund grows
larger; any indirect benefits that may accrue to the adviser and its affiliates
as a result of the adviser's relationship with the fund; performance and
expenses of comparable funds; and the extent to which the independent Board
members are fully informed about all facts bearing on the adviser's services and
fee. The Fund's Board is aware of these factors and has taken them into account
in its review of the Fund's advisory contract.
The Board considered and weighed these circumstances in light of its
accumulated experience in working with Federated on matters relating to the
Federated Funds, and was assisted in its deliberations by the advice of
independent legal counsel. In this regard, the Board requested and received a
significant amount of information about the Fund, the Federated Funds and the
Federated organization. Thus, the Board's evaluation of the Fund's advisory
contract included an analysis of reports covering such matters as: the Adviser's
investment philosophy, personnel, and processes; the short- and long-term
performance of other Federated Funds (in absolute terms as well as in
relationship to their particular investment programs and certain competitor or
"peer group" funds) and comments on the reasons for performance; the Fund's
proposed expenses (including the advisory fee itself and the overall expense
structure of the Fund, both in absolute terms and relative to similar and/or
competing funds, with due regard for contractual or voluntary expense
limitations); the possible use and allocation of brokerage commissions derived
from trading the Fund's portfolio securities; the nature and extent of the
advisory and other services to be provided to the Fund by the Adviser and its
affiliates; compliance and audit reports concerning the Federated Funds and the
Federated companies that service them; and relevant developments in the mutual
fund industry and how the Federated Funds and/or Federated are responding to
them.
The Board also received financial information about Federated, including
reports on the compensation and benefits Federated derives from its
relationships with the Federated Funds. These reports cover not only the fees
under the advisory contracts, but also fees received by Federated's subsidiaries
for providing other services to the Federated Funds under separate contracts
(e.g., for serving as administrator and transfer agent to the Federated Funds).
The reports also discuss any indirect benefit Federated may derive from its
receipt of research services from brokers who execute fund trades.
The Board based its decision to approve the Fund's advisory contract on the
totality of the circumstances and relevant factors, and with a view to past and
future long-term considerations. The Board did not consider any one of the
factors and considerations identified above to be determinative. Because the
totality of circumstances included considering the relationship of each Fund to
the Federated Funds, the Board did not approach consideration of the Fund's
advisory contract as if that were the only Federated Fund.
Custodian
State Street Bank and Trust Company, Boston, Massachusetts, is custodian
for the securities and cash of the Fund. Foreign instruments purchased by the
Fund are held by foreign banks participating in a network coordinated by State
Street Bank.
Transfer Agent and Dividend Disbursing Agent
EquiServe Trust Company, N.A. maintains all necessary shareholder records.
The Fund pays the transfer agent a fee based on the size, type and number of
accounts and transactions made by shareholders.
Independent Auditors
The independent auditor for the Fund, Ernst & Young LLP, conducts its
audits in accordance with auditing standards generally accepted in the United
States of America, which require it to plan and perform its audits to provide
reasonable assurance about whether the Fund's financial statements and financial
highlights are free of material misstatement.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order at a
favorable price. The Adviser will generally use those who are recognized dealers
in specific portfolio instruments, except when a better price and execution of
the order can be obtained elsewhere. In selecting among firms believed to meet
these criteria, the Adviser may give consideration to those firms which have
sold or are selling Shares of the Fund and other funds under common control with
the Fund. The Adviser makes decisions on portfolio transactions and selects
brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of
other accounts managed by the Adviser. When the Fund and one or more of those
accounts invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the accounts(s) in
a manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
DESCRIPTION OF SHARES
Common Shares
The Fund intends to hold annual meetings of shareholders so long as the
Common Shares are listed on a national securities exchange and such meetings are
required as a condition to such listing.
Preferred Shares
Although the terms of any Preferred Share issued by the Fund, including
their dividend rate, voting rights, liquidation preference and redemption
provisions, will be determined by the Board (subject to applicable law and the
Fund's Agreement and Declaration of Trust) when it authorizes a Preferred Shares
offering, the Fund currently expects that the preference on distributions,
liquidation preference, voting rights and redemption provisions of any such
Preferred Shares will likely be as stated in the prospectus.
If the Board determines to proceed with an offering of Preferred Shares,
the terms of Preferred Shares may be the same as, or different from, the terms
described in the prospectus, subject to applicable law and the Fund's Agreement
and Declaration of Trust. The Board, without the approval of Common
Shareholders, may authorize an offering of Preferred Shares or may determine not
to authorize such an offering, and may fix the terms of the Preferred Shares to
be offered.
Other Shares
The Board (subject to applicable law and the Fund's Agreement and
Declaration of Trust) may authorize an offering, without the approval of the
Common Shareholders or Preferred Shareholders, of other classes of shares, or
other classes or series of shares, as they determine to be necessary, desirable
or appropriate, having such terms, rights, preferences, privileges, limitations
and restrictions as the Board sees fit. The Fund currently does not expect to
issue any other classes of shares, or series of shares, except for the Common
Shares and the Preferred Shares.
REPURCHASE OF COMMON SHARES
The Fund is a closed-end management investment company and as such its
Common Shareholders will not have the right to cause the Fund to redeem their
shares. Instead, the Fund's Common Shares will trade in the open market at a
price that will be a function of several factors, including dividend levels
(which are in turn affected by expenses), NAV, call protection, dividend
stability, relative demand for and supply of such shares in the market, general
market and economic conditions and other factors. Because shares of a closed-end
investment company may frequently trade at prices lower than NAV, the Fund's
Board may consider action that might be taken to reduce or eliminate any
material discount from NAV in respect of Common Shares, which may include the
repurchase of such Common Shares in the open market or in private transactions,
the making of a tender offer for such Common Shares or the conversion of the
Fund to an open-end investment company. The Board may decide not to take any of
these actions. In addition, there can be no assurance that share repurchases or
tender offers, if undertaken, will reduce market discount.
Notwithstanding the foregoing, at any time when the Fund's Preferred Shares
are outstanding, the Fund may not purchase, redeem or otherwise acquire any of
its Common Shares unless (1) all accrued Preferred Shares dividends have been
paid and (2) at the time of such purchase, redemption or acquisition, the NAV of
the Fund's portfolio (determined after deducting the acquisition price of the
Common Shares) is at least 200% of the liquidation value of the outstanding
Preferred Shares (expected to equal the original purchase price per share plus
any accrued and unpaid dividends thereon). Any service fees incurred in
connection with any tender offer made by the Fund will be borne by the Fund and
will not reduce the stated consideration to be paid to tendering shareholders.
Subject to its investment restrictions, the Fund may borrow to finance the
repurchase of shares or to make a tender offer. Interest on any borrowings to
finance share repurchase transactions or the accumulation of cash by the Fund in
anticipation of share repurchases or tenders will reduce the Fund's net income.
Any share repurchase, tender offer or borrowing that might be approved by the
Fund's Board would have to comply with the Securities Exchange Act of 1934, as
amended, the 1940 Act and the rules and regulations thereunder.
Although the decision to take action in response to a discount from NAV
will be made by the Board at the time it considers such issue, it is the Board's
present policy, which may be changed by the Board, not to authorize repurchases
of Common Shares or a tender offer for such Common Shares if: (1) such
transactions, if consummated, would (a) result in the delisting of the Common
Shares from the New York Stock Exchange, or (b) impair the Fund's status as a
regulated investment company under the Code, (which would make the Fund a
taxable entity, causing the Fund's income to be taxed at the corporate level in
addition to the taxation of shareholders who receive dividends from the Fund) or
as a registered closed-end investment company under the Investment Company Act;
(2) the Fund would not be able to liquidate portfolio securities in an orderly
manner and consistent with the Fund's investment objective and policies in order
to repurchase shares; or (3) there is, in the Board's judgment, any (a) material
legal action or proceeding instituted or threatened challenging such
transactions or otherwise materially adversely affecting the Fund, (b) general
suspension of or limitation on prices for trading securities on the New York
Stock Exchange, (c) declaration of a banking moratorium by Federal or state
authorities or any suspension of payment by United States or New York banks, (d)
material limitation affecting the Fund or the issuers of its portfolio
securities by Federal or state authorities on the extension of credit by lending
institutions or on the exchange of foreign currency, (e) commencement of war,
armed hostilities or other international or national calamity directly or
indirectly involving the United States, or (f) other event or condition which
would have a material adverse effect (including any adverse tax effect) on the
Fund or its shareholders if shares were repurchased. The Board may in the future
modify these conditions in light of experience.
The repurchase by the Fund of its shares at prices below NAV will result in
an increase in the NAV of those shares that remain outstanding. However, there
can be no assurance that share repurchases or tender offers at or below NAV will
result in the Fund's shares trading at a price equal to their net asset value.
Nevertheless, the fact that the Fund's shares may be the subject of repurchase
or tender offers from time to time, or that the Fund may be converted to an
open-end investment company, may reduce any spread between market price and NAV
that might otherwise exist.
In addition, a purchase by the Fund of its Common Shares will decrease the
Fund's Managed Assets which would likely have the effect of increasing the
Fund's expense ratio. Any purchase by the Fund of its Common Shares at a time
when Preferred Shares are outstanding will increase the leverage applicable to
the outstanding Common Shares then remaining.
Before deciding whether to take any action if the Common Shares trade below
NAV, the Fund's Board would likely consider all relevant factors, including the
extent and duration of the discount, the liquidity of the Fund's portfolio, the
impact of any action that might be taken on the Fund or its shareholders and
market considerations. Based on these considerations, even if the Fund's shares
should trade at a discount, the Board may determine that, in the interest of the
Fund and its shareholders, no action should be taken.
TAX MATTERS
The following is a description of certain federal income tax consequences
to a shareholder of acquiring, holding and disposing of Common Shares. The
discussion reflects applicable tax laws of the United States as of the date of
this prospectus, which tax laws may be changed or subject to new interpretations
by the courts or the Internal Revenue Service retroactively or prospectively.
The Fund intends to elect to be treated and to qualify to be taxed as a
regulated investment company under Subchapter M of the Code. In order to qualify
as a regulated investment company, the Fund must satisfy certain requirements
relating to the source of its income, diversification of its assets and
distributions of its income to its shareholders. First, the Fund must derive at
least 90% of its annual gross income (including tax exempt interest) from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stock or securities or foreign currencies, or other
income (including but not limited to gains from options, futures and forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "90% gross income test"). Second, the Fund must
diversify its holdings so that, at the close of each quarter of its taxable
year, (1) at least 50% of the value of its total assets is comprised of cash,
cash items, United States government securities, securities of other regulated
investment companies and other securities, limited in respect of any one issuer
to an amount not greater in value than 5% of the value of the Fund's total
assets and to not more than 10% of the outstanding voting securities of such
issuer, and (2) not more than 25% of the value of the total assets is invested
in the securities of any one issuer (other than United States government
securities and securities of other regulated investment companies) or two or
more issuers controlled by the Fund and engaged in the same, similar or related
trades or businesses.
As a regulated investment company, the Fund will not be subject to federal
income tax on income and gains that it distributes each taxable year to its
shareholders, provided that in such taxable year it distributes at least 90% of
the sum of (1) its "investment company taxable income" (which includes, among
other items, dividends, taxable interest, taxable original issue discount and
market discount income, income from securities lending, net short-term capital
gain in excess of net long-term capital loss and any other taxable income other
than "net capital gain" (as defined below) and is reduced by deductible
expenses) determined without regard to the deduction for dividends paid and (2)
its net tax exempt interest (the excess of its gross tax exempt interest income
over certain disallowed deductions). The Fund may retain for investment its net
capital gain (which consists of the excess of its net long-term capital gain
over its net short-term capital loss). However, if the Fund retains any net
capital gain or any investment company taxable income, it will be subject to tax
at regular corporate rates on the amount retained. If the Fund retains any net
capital gain, it may designate the retained amount as undistributed capital
gains in a notice to its shareholders who, if subject to federal income tax on
long-term capital gains, (1) will be required to include in income for federal
income tax purposes, as long-term capital gain, their share of such
undistributed amount and (2) will be entitled to credit their proportionate
shares of the tax paid by the Fund against their federal income tax liabilities,
if any, and to claim refunds to the extent the credit exceeds such liabilities.
For federal income tax purposes, the tax basis of shares owned by a shareholder
of the Fund will be increased by the amount of undistributed capital gains
included in the gross income of the shareholder less the tax deemed paid by the
shareholder under clause (ii) of the preceding sentence. The Fund intends to
distribute at least annually to its shareholders all or substantially all of its
net tax exempt interest and any investment company taxable income and net
capital gain.
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, to elect (unless it
has made a special taxable year election for excise tax purposes) to treat all
or part of any net capital loss, any net long-term capital loss or any net
foreign currency loss incurred after October 31 as if it had been incurred in
the succeeding year.
Distributions by the Fund of investment company taxable income, if any,
whether received in cash or additional shares, will be taxable to shareholders
as ordinary income (to the extent of the current or accumulated earning and
profits of the Fund) and generally will not qualify for the dividends received
deduction in the case of corporate shareholders. Net long-term capital gains
realized by the Fund and distributed to shareholders in cash or additional
shares will be taxable to shareholders as long-term capital gains regardless of
the length of time investors have owned shares of the Fund. Distributions by the
Fund that do not constitute ordinary income dividends, capital gain
distributions or exempt-interest dividends (as defined below) will be treated as
a return of capital to the extent of (and in reduction of) the shareholder's tax
basis in his or her shares. Any excess will be treated as gain from the sale of
his or her shares, as discussed below.
The Fund intends to invest in sufficient tax exempt securities to permit
payment of "exempt-interest dividends" (as defined in the Code). Except as
provided below, exempt-interest dividends paid to Common Shareholders are not
includable in the holder's gross income for federal income tax purposes.
If the Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to the Fund, defer the Fund's losses, cause
adjustments in the holding periods of the Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to Common Shareholders.
Prior to purchasing shares in the Fund, an investor should carefully
consider the impact of dividends which are expected to be or have been declared,
but not paid. Any dividend declared shortly after a purchase of such shares
prior to the record date will have the effect of reducing the per share net
asset value by the per share amount of the dividend.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to holders of
common shares of record on a specified date in one of those months and paid
during the following January, will be treated as having been distributed by the
Fund (and received by the holder of common shares) on December 31.
The Internal Revenue Service's position in a published revenue ruling
indicates that the Fund is required to designate distributions paid with respect
to its Common Shares and its Preferred Shares as consisting of a portion of each
type of income distributed by the Fund. The portion of each type of income
deemed received by the holders of each class of shares will be equal to the
portion of total Fund dividends received by such class. Thus, the Fund will
designate dividends paid as exempt-interest dividends in a manner that allocates
such dividends between Common Shareholders and Preferred Shareholders in
proportion to the total dividends paid to each such class during or with respect
to the taxable year, or otherwise as required by applicable law. Capital gain
dividends and ordinary income dividends will similarly be allocated between the
two classes.
Exempt-interest dividends are included in determining what portion, if any,
of a person's Social Security and railroad retirement benefits will be
includable in gross income subject to federal income tax.
Although exempt-interest dividends generally may be treated by Common
Shareholders as items of interest excluded from their gross income, each Common
Shareholder is advised to consult his tax advisor with respect to whether
exempt-interest dividends retain their exclusion if the shareholder would be
treated as a "substantial user," or a "related person" of a substantial user, of
the facilities financed with respect to any of the tax exempt obligations held
by the Fund.
Federal income tax law imposes an alternative minimum tax with respect to
both corporations and individuals based on certain items of tax preference.
Interest on certain "private activity bonds" is an item of tax preference
subject to the alternative minimum tax on individuals and corporations. In
addition, for corporations alternative minimum taxable income is increased by
75% of the difference between an alternative measure of income ("adjusted
current earnings") and the amount otherwise determined to be the alternative
minimum taxable income. Interest on municipal bonds, and therefore all
exempt-interest dividends received from the Fund, are included in calculating
adjusted current earnings. Accordingly, investment in the Fund could cause
Common Shareholders to be subject to or result in an increased liability under
the AMT. The Fund will annually supply Common Shareholders a report indicating
the amount and nature of amounts distributed to them.
The redemption, sale or exchange of Common Shares normally will result in
capital gain or loss to Common Shareholders who hold their Common Shares as
capital assets. Generally, a Common Shareholder's gain or loss will be long-term
capital gain or loss if the shares have been held for more than one year even
though the increase in value in such common shares is attributable to tax exempt
interest income. In addition, gain realized by the Fund from the disposition of
a tax exempt security that is attributable to accrued market discount will be
treated as ordinary income rather than capital gain, and thus may increase the
amount of ordinary income dividends received by Common Shareholders. Present law
taxes both long- and short-term capital gains of corporations at the rates
applicable to ordinary income. For non-corporate taxpayers, however, long-term
capital gains will be taxed at a maximum rate of 20% (or 18% for capital assets
that have been held for more than five years and whose holding periods began
after December 31, 2000), while short-term capital gains and other ordinary
income will currently be taxed at a maximum rate of 38.6%1. Because of the
limitations on itemized deductions and the deduction for personal exemptions
applicable to higher income taxpayers, the effective tax rate may be higher in
certain circumstances.
All or a portion of a sales charge paid in purchasing Common Shares cannot
be taken into account for purposes of determining gain or loss on the
redemption, sale or exchange of such Shares within 90 days after their purchase
to the extent Common Shares or shares of another fund are subsequently acquired
without payment of a sales charge pursuant to the reinvestment or exchange
privilege. Any disregarded portion of such charge will result in an increase in
the shareholder's tax basis in the shares subsequently acquired. In addition, no
loss will be allowed on the redemption, sale or exchange of Common Shares if the
Common Shareholder purchases other Common Shares of the Fund (whether through
reinvestment of distributions or otherwise) or the shareholder acquires or
enters into a contract or option to acquire shares that are substantially
identical to Common Shares of the Fund within a period of 61 days beginning 30
days before and ending 30 days after such redemption, sale or exchange. If
disallowed, the loss will be reflected in an adjustment to the basis of the
shares acquired. Further, any losses realized on the redemption, sale or
exchange of Common Shares held for six months or less will be disallowed to the
extent of any exempt-interest dividends received with respect to such Common
Shares and, if not disallowed, such losses will be treated as long-term capital
losses to the extent of any capital gain dividends received (or amounts credited
as undistributed capital gains) with respect to such Common Shares.
In order to avoid a 4% federal excise tax, the Fund must distribute or be
deemed to have distributed by December 31 of each calendar year the sum of at
least 98% of its taxable ordinary income for such year, at least 98% of its
capital gain net income (the excess of its realized capital gains over its
realized capital losses, generally computed on the basis of the one-year period
ending on October 31 of such year) and 100% of any taxable ordinary income and
capital gain net income for the prior year that was not distributed during such
year and on which the Fund paid no federal income tax. For purposes of the
excise tax, a regulated investment company may reduce its capital gain net
income (but not below its net capital gain) by the amount of any net ordinary
loss for the calendar year. The Fund intends to make timely distributions in
compliance with these requirements and consequently it is anticipated that it
generally will not be required to pay the excise tax.
If in any tax year the Fund should fail to qualify under Subchapter M for
tax treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its taxable income for that year, and
distributions to its shareholders would be taxable to shareholders as ordinary
dividend income for federal income tax purposes to the extent of the Fund's
earnings and profits.
----------
1 The Economic Growth and Tax Relief Reconciliation Act of 2001,
effective for taxable years beginning after December 31, 2000, creates
a new 10 percent income tax bracket and reduces the tax rates
applicable to ordinary income over a six year phase-in period.
Beginning in the taxable year 2006, ordinary income will be subject to
a 35% maximum rate, with approximately proportionate reductions in the
other ordinary rates.
---------
The Fund is required to withhold tax at a rate equal to the fourth lowest
rate applicable to unmarried individuals (currently, 30%) on taxable dividends
and certain other payments paid to non-corporate shareholders who have not
furnished to the Fund their correct taxpayer identification number (in the case
of individuals, their Social Security number) and certain certifications, or who
are otherwise subject to backup withholding. Backup withholding is not an
additional tax and any amount withheld may be refunded or credited against the
shareholder's federal income tax liability, provided the required information is
furnished to the Internal Revenue Service.
The foregoing is a general and abbreviated summary of the provisions of the
Code and the Treasury Regulations presently in effect as they directly govern
the taxation of the Fund and its shareholders. For complete provisions,
reference should be made to the pertinent Code sections and Treasury
Regulations. The Code and the Treasury Regulations are subject to change by
legislative or administrative action, and any such change may be retroactive
with respect to Fund transactions. Common Shareholders are advised to consult
their own tax advisers for more detailed information concerning the federal
income taxation of the Fund and the income tax consequences to its holders of
Common Shares.
PERFORMANCE AND RELATED COMPARATIVE INFORMATION
Tax Equivalency Table
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal income tax. However, some of the Fund's income may be subject
to state or local taxes.
Taxable Yield Equivalent for 2002
Multistate Municipal Fund
Federal Income Tax Bracket
10.00% 15.00% 27.00% 30.00% 35.00% 38.60%
Joint $0- $12,001 $46,701-112$112,851-1$17,951-307Over
Return 12,000 - 46,700 307,050
Single $0- $6,001-27,$27,951-67,$67,701-14$141-251-30Over0
Return 6,000 307,050
Tax Exempt
Yield Taxable Yield Equivalent
0.50% 0.56% 0.59% 0.68% 0.71% 0.77% 0.81%
1.00% 1.11% 1.18% 1.37% 1.43% 1.54% 1.63%
1.50% 1.67% 1.76% 2.05% 2.14% 2.31% 2.44%
2.00% 2.22% 2.35% 2.74% 2.86% 3.08% 3.26%
2.50% 2.78% 2.94% 3.42% 3.57% 3.85% 4.07%
3.00% 3.33% 3.53% 4.11% 4.29% 4.62% 4.89%
3.50% 3.89% 4.12% 4.79% 5.00% 5.38% 5.70%
4.00% 4.44% 4.71% 5.48% 5.71% 6.15% 6.51%
4.50% 5.00% 5.29% 6.16% 6.43% 6.92% 7.33%
5.00% 5.56% 5.88% 6.85% 7.14% 7.69% 8.14%
5.50% 6.11% 6.47% 7.53% 7.86% 8.46% 8.96%
6.00% 6.67% 7.06% 8.22% 8.57% 9.23% 9.77%
6.50% 7.22% 7.65% 8.90% 9.29% 10.00% 10.59%
7.00% 7.78% 8.24% 9.59% 10.00% 10.77% 11.40%
7.50% 8.33% 8.82% 10.27% 10.71% 11.54% 12.21%
8.00% 8.89% 9.41% 10.96% 11.43% 12.31% 13.03%
8.50% 9.44% 10.00% 11.64% 12.14% 13.08% 13.84%
9.00% 10.00% 10.59% 12.33% 12.86% 13.85% 14.66%
9.50% 10.56% 11.18% 13.01% 13.57% 14.62% 15.47%
10.00% 11.11% 11.76% 13.70% 14.29% 15.38% 16.29%
10.50% 11.67% 12.35% 14.38% 15.00% 16.15% 17.10%
11.00% 12.22% 12.94% 15.07% 15.71% 16.92% 17.92%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent.
Performance Comparisons
Advertising and sales literature may include:
- references to ratings, rankings and financial publications and/or
performance comparisons of Common Shares to certain indices;
- charts, graphs and illustrations using the Fund's returns, or returns
in general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
- discussions of economic, financial and political developments and
their impact on the securities market, including the portfolio
manager's views on how such developments could impact the Fund; and
- information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of
securities in which it invests, to a variety of other investments, including
federally insured bank products such as bank savings accounts, certificates of
deposit, and Treasury bills. Advertisements may contain a chart showing average
tax-adjusted returns and volatility of returns for the last 10 years ending
October 31, 2002 for indices of municipal bonds, corporate bonds, U.S. Treasury
securities, high-yield securities, mortgage-backed securities, the S&P 500, the
Russell 2000 and NASDAQ.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete
view of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:
Lipper Analytical Services, Inc.
Lipper Analytical Services, Inc. ranks funds in various fund categories
based on total return.
Morningstar, Inc.
Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns.
Money
Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
Lehman Brothers Municipal Bond Index
Lehman Brothers Municipal Bond Index is an unmanaged broad based total
return performance benchmark for the long-term, investment grade bond market.
FEDERATED INVESTORS, INC.
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
Municipal Funds. In the municipal sector, as of December 31, 2001,
Federated managed 12 bond funds with approximately $2.3 billion in assets and 22
money market funds with approximately $19.5 billion in total assets. In 1976,
Federated introduced one of the first municipal bond mutual funds in the
industry and is now one of the largest institutional buyers of municipal
securities. The Funds may quote statistics from organizations including The Tax
Foundation and the National Taxpayers Union regarding the tax obligations of
Americans.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are William D. Dawson III--Global and Fixed
Income and Stephen F. Auth--Federated Global and Equity. The Chief Investment
Officers are Executive Vice Presidents of the Federated advisory companies.
EXPERTS
The financial statements of the Fund at December 16, 2002, and for the day
then ended, appearing in this Statement of Additional Information have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
A Registration Statement on Form N-2, including amendments thereto,
relating to the shares offered hereby, has been filed by the Fund with the
Securities and Exchange Commission, Washington, D.C. The prospectus and this
Statement of Additional Information do not contain all of the information set
forth in the Registration Statement, including any exhibits and schedules
thereto. For further information with respect to the Fund and the shares offered
hereby, reference is made to the Registration Statement. Statements contained in
the prospectus and this Statement of Additional Information as to the contents
of any contract or other document referred to are not necessarily complete and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. A copy of the Registration
Statement may be inspected without charge on the EDGAR Database at the
Commission's website at http://www.sec.gov or at the Commission's principal
office in Washington, D.C., and copies of all or any part thereof may be
obtained from the Commission upon the payment of certain fees prescribed by the
Commission. The Fund changed its name from Federated Municipal Income Fund to
Federated Premier Municipal Income Fund on December 16, 2002.
INDEPENDENT AUDITORS' REPORT
Report of Ernst & Young LLP, Independent Auditors
To the Shareholders and
Board of Trustees of
Federated Premier Municipal Income Fund
We have audited the accompanying statement of assets and liabilities of
Federated Premier Municipal Income Fund (the Fund) as of December 16, 2002, and
the statement of operations for the day then ended. These financial statements
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Federated Premier Municipal
Income Fund at December 16, 2002, the results of its operations for the day then
ended, in conformity with accounting principles generally accepted in the United
States of America.
[GRAPHIC OMITTED]
Boston, Massachusetts
December 16, 2002
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
December 16, 2002
Assets:
Cash $100,005
Receivable from Investment Adviser 148,000
Total Assets 248,005
Liabilities:
Accrued Organizational Expenses (148,000)
Total Liabilities (148,000)
Net Assets (6,667 shares of $0.01 par value shares of beneficial interest
issued and outstanding; 4,000,000 shares authorized) $100,005
Net Asset Value Per Share $15
STATEMENT OF OPERATIONS
One day ended December 16, 2002
Investment Income $ 0
Organizational Expenses 148,000
Less: reimbursements from Investment Adviser (148,000)
Net Expenses 0
Net Investment Income $ 0
NOTES TO FINANCIAL STATEMENTS
1. Organization
Federated Premier Municipal Income Fund ("the Fund") was organized as a
Delaware Business Trust on October 16, 2002. The Fund has had no operations to
date other than matters relating to its organization and registration as a
diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended, and the sale and issuance to Federated
Investment Management Company ("the Investment Adviser"), a wholly owned
subsidiary of Federated Investors, Inc., of 6,667 shares of beneficial interest
at an aggregate purchase price of $100,005. The Investment Adviser has agreed to
reimburse the amount which the aggregate of all of the Fund's organizational
expenses and all offering costs (other than the sales load) exceeds $0.03 per
share.
2. Accounting Policies
The preparation of financial statements in accordance 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 estimates.
3. Investment Adviser and Related Parties
The Fund has entered into an Investment Management Agreement (the
"Agreement") with the Investment Adviser to serve as investment manager to the
Fund. Pursuant to the Agreement, the Fund pays the Investment Adviser an annual
management fee, payable monthly, at the annual rate of 0.55 % of the Fund's
average daily net assets, not inclusive of any assets attributable to any
preferred shares that may be issued.
In order to reduce fund expenses, the Investment Adviser has contractually
agreed to waive a portion of its management fee at the annual rate of 0.20% of
the Fund's average daily net assets, not inclusive of any net assets
attributable to any preferred shares that may be issued, from the commencement
of operations through December 31, 2007, and for a declining amount thereafter
through December 31, 2010.
4. Federal Income Taxes
The Fund intends to comply with the provisions of the Internal Revenue
Code, as amended, applicable to regulated investment companies and to distribute
to shareholders each year substantially all of its income. Accordingly, no
provision for federal tax is necessary. In addition, by distributing
substantially all of its ordinary income and long-term capital gains, if any,
during each calendar year, the Fund intends not to be subject to federal excise
tax.
5. Contingent Receivable from Investment Adviser
In the event that the public offering of the Fund does not occur, the
Investment Adviser has agreed to reimburse the Fund for all organizational
expenses.
APPENDIX A
RATINGS OF INVESTMENTS
Standard and Poor's Long-Term Debt Rating Definitions
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B--Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC--Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC--The rating CC typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC debt rating.
C--The rating C typically is applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating. The C rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
Moody's Investors Service Long-Term Bond Rating Definitions
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 principal 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.
AA--Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated BAA are considered as medium- grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA--Bonds which are BA are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA--Bonds which are rated CA represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest-rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Fitch Ratings Long-Term Debt Rating Definitions
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are imminent default in payment of interest or principal.
Moody's Investors Service Commercial Paper Ratings
Prime-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
Leading market positions in well-established industries; High rates of return on
funds employed; Conservative capitalization structure with moderate reliance on
debt and ample asset protection; Broad margins in earning coverage of fixed
financial charges and high internal cash generation; and Well-established access
to a range of financial markets and assured sources of alternate liquidity.
Prime-2--Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Standard and Poor's Commercial Paper Ratings
A-1--This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
Fitch Ratings Commercial Paper Rating Definitions
FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded
as having the strongest degree of assurance for timely payment.
FITCH-2--(Very Good Grade) Issues assigned this rating reflect an assurance
of timely payment only slightly less in degree than the strongest issues.
Addresses
federated PREMIER municipal INCOME trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Underwriter
Merrill Lynch, Pierce, Fenner & Smith Incorporated
4 World Financial Center
New York, NY 10080
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P. O. Box 8600
Boston, MA 02266-8600
Transfer Agency and Dividend Disbursing Agent
EquiServe Trust Company, N.A.
P.O. Box 43011
Providence, RI 02940-3011
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
CUSIP 31423P108
Exhibit (a) (ii) under Form N-2
FEDERATED PREMIER MUNICIPAL INCOME FUND
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
Dated as of December 16, 2002
-iii-
TABLE OF CONTENTS
Page
ARTICLE I
Name and Definitions
1.1 Name............................................................. 1
1.2 Definitions...................................................... 1
ARTICLE II
Trustees
2.1 Number and Qualification......................................... 3
2.2 Term and Election................................................ 3
2.3 Resignation and Removal.......................................... 3
2.4 Vacancies........................................................ 4
2.5 Meetings......................................................... 4
2.6 Trustee Action by Written Consent................................ 5
2.7 Officers......................................................... 5
ARTICLE III
Powers and Duties of Trustees
3.1 General.......................................................... 5
3.2 Investments...................................................... 5
3.3 Legal Title...................................................... 5
3.4 Issuance and Repurchase of Shares................................ 5
3.5 Borrow Money or Utilize Leverage................................. 5
3.6 Delegation; Committees........................................... 6
3.7 Collection and Payment........................................... 6
3.8 Expenses......................................................... 6
3.9 By-Laws.......................................................... 6
3.10 Miscellaneous Powers............................................. 6
3.11 Further Powers................................................... 7
ARTICLE IV
Advisory, Management and Distribution Arrangements
4.1 Advisory and Management Arrangements............................. 7
4.2 Distribution Arrangements........................................ 7
4.3 Other Arrangements............................................... 7
4.4 Parties to Contracts............................................. 8
ARTICLE V
Limitations of Liability and Indemnification
5.1 No Personal Liability of Shareholders, Trustees, etc............. 8
5.2 Mandatory Indemnification........................................ 9
5.3 No Bond Required of Trustees..................................... 10
5.4 No Duty of Investigation; Notice in Trust Instruments, etc....... 10
5.5 Reliance on Experts, etc......................................... 10
5.6 Insurance........................................................ 10
5.7 Derivative Actions............................................... 10
ARTICLE VI
Shares of Beneficial Interest
6.1 Beneficial Interest.............................................. 11
6.2 Other Securities................................................. 11
6.3 Rights of Shareholders........................................... 11
6.4 Trust Only....................................................... 11
6.5 Issuance of Shares............................................... 11
6.6 Register of Shares............................................... 12
6.7 Transfer Agent and Registrar..................................... 12
6.8 Transfer of Shares............................................... 12
6.9 Notices.......................................................... 12
ARTICLE VII
Custodians
7.1 Appointment and Duties........................................... 12
7.2 Central Certificate System....................................... 13
ARTICLE VIII
Redemption
8.1 Redemptions...................................................... 13
8.2 Disclosure of Holding............................................ 13
ARTICLE IX
Determination of Net Asset Value, Net Income and Distributions
9.1 Net Asset Value.................................................. 13
9.2 Distributions to Shareholders.................................... 14
9.3 Power to Modify Foregoing Procedures............................. 14
9.4 Dividend Reinvestment Plan....................................... 14
ARTICLE X
Shareholders
10.1 Meetings of Shareholders......................................... 14
10.2 Voting........................................................... 15
10.3 Notice of Meeting................................................ 15
10.4 Quorum and Required Vote......................................... 15
10.5 Proxies, etc..................................................... 15
10.6 Reports.......................................................... 16
10.7 Shareholder Action by Written Consent............................ 16
10.8 Record Dates..................................................... 16
10.9 Additional Provisions............................................ 17
ARTICLE XI
Duration; Termination of Trust; Amendment; Mergers, Etc
11.1 Duration......................................................... 17
11.2 Termination...................................................... 17
11.3 Amendment Procedure.............................................. 18
11.4 Merger, Consolidation and Sale of Assets......................... 18
11.5 Subsidiaries..................................................... 18
11.6 Conversion....................................................... 19
11.7 Certain Transactions............................................. 19
ARTICLE XII
Miscellaneous
12.1 Filing........................................................... 20
12.2 Resident Agent................................................... 20
12.3 Governing Law.................................................... 21
12.4 Counterparts..................................................... 21
12.5 Reliance by Third Parties........................................ 21
12.6 Provisions in Conflict with Law or Regulation.................... 21
Federated Premier Municipal Income Fund
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made as of the 16th
day of December, 2002, by the Trustees hereunder, and by the holders of shares
of beneficial interest issued hereunder as hereinafter provided.
WHEREAS, this Trust has been formed to carry on business of an investment
company;
WHEREAS, this Trust is authorized to issue an unlimited number of its
shares of beneficial interest all in accordance with the provisions hereinafter
set forth;
WHEREAS, the Trustees have agreed to manage all property coming into their
hands as Trustees of a Delaware statutory trust in accordance with the
provisions hereinafter set forth; and
WHEREAS, the parties hereto intend that the Trust created by this
Declaration and the Certificate of Trust filed with the Secretary of State of
the State of Delaware on October 16, 2002, as amended, shall constitute a
statutory trust under the Delaware Statutory Trust Act and that this Declaration
shall constitute the governing instrument of such statutory trust.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities, and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the benefit of the holders from time to time
of shares of beneficial interest in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
1.1 Name. This Trust shall be known as the "Federated Premier Municipal
Income Fund" and the Trustees shall conduct the business of the Trust under that
name, or any other name or names as they may from time to time determine.
1.2 Definitions. As used in this Declaration, the following terms shall
have the following meanings:
"1940 Act" shall mean the Investment Company Act of 1940 and the rules and
regulations thereunder and exemptions granted therefrom, all as adopted or
amended from time to time.
"Affiliated Person" shall have the meaning given to it in Section 2(a)(3)
of the 1940 Act when used with reference to a specified person.
"Assignment" shall have the meaning given to it in Section 2(a)(4) of the
1940
Act.
"By-Laws" shall mean the By-Laws of the Trust as amended from time to time
by the Trustees.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Commission" shall mean the Securities and Exchange Commission.
"Declaration" shall mean this Amended and Restated Agreement and
Declaration of Trust, as amended, supplemented or amended and restated from time
to time.
"DBTA" shall mean the Delaware Statutory Trust Act, 12 Del. C.ss.ss. 3801,
et. seq., as amended from time to time.
"Delaware General Corporation Law" means the Delaware General Corporation
Law, 8 Del. C.ss.ss. 100, et. seq., as amended from time to time.
"Fundamental Policies" shall mean the investment policies and restrictions
as set forth from time to time in any Prospectus or contained in any current
Registration Statement of the Trust filed with the Commission or as otherwise
adopted by the Trustees and the Shareholders in accordance with the requirements
of the 1940 Act and designated as fundamental policies therein as they may be
amended from time to time in accordance with the requirements of the 1940 Act.
"Interested Person" shall have the meaning given to it in Section 2(a)(19)
of the 1940 Act.
"Investment Adviser" or "Adviser" shall mean a party furnishing services to
the Trust pursuant to any contract described in Section 4.1 hereof.
"Majority Shareholder Vote" shall mean a vote of "a majority of the
outstanding voting securities" (as such term is defined in the 1940 Act) of the
Trust with each class and series of Shares voting together as a single class,
except to the extent otherwise required by the 1940 Act or this Declaration with
respect to any one or more classes or series of Shares, in which case the
applicable proportion of such classes or series of Shares voting as a separate
class or series, as case may be, also will be required.
"Person" shall mean and include individuals, corporations, partnerships,
trusts, limited liability companies, associations, joint ventures and other
entities, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Principal Underwriter" shall have the meaning given to it in Section
2(a)(29) of the 1940 Act.
"Prospectus" shall mean the Prospectus of the Trust, if any, as in effect
from time to time under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shareholders" shall mean as of any particular time the holders of record
of outstanding Shares of the Trust, at such time.
"Shares" shall mean the transferable units of beneficial interest into
which the beneficial interest in the Trust shall be divided from time to time
and includes fractions of Shares as well as whole Shares. In addition, Shares
also means any preferred shares or preferred units of beneficial interest which
may be issued from time to time, as described herein. All references to Shares
shall be deemed to be Shares of any or all series or classes as the context may
require.
"Trust" shall mean the Delaware statutory trust established by this
Declaration, as amended from time to time.
"Trust Property" shall mean as of any particular time any and all property,
real or personal, tangible or intangible, which at such time is owned or held by
or for the account of the Trust or the Trustees in such capacity.
"Trustees" shall mean the signatories to this Declaration, so long as they
shall continue in office in accordance with the terms hereof, and all other
persons who at the time in question have been duly elected or appointed and have
qualified as trustees in accordance with the provisions hereof and are then in
office.
ARTICLE II
Trustees
2.1 Number and Qualification. Prior to a public offering of Shares there
may be a sole Trustee. Thereafter, the number of Trustees shall be determined by
a written instrument signed by a majority of the Trustees then in office,
provided that the number of Trustees shall be no less than 3 or more than 25. No
reduction in the number of Trustees shall have the effect of removing any
Trustee from office prior to the expiration of his term. An individual nominated
as a Trustee shall be at least 21 years of age and not older than 80 years of
age at the time of nomination and not under legal disability. Trustees need not
own Shares and may succeed themselves in office.
2.2 Term and Election. The Board of Trustees shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall consist,
as nearly as may be possible, of one-third of the total number of trustees
constituting the entire Board of Trustees. Within the limits above specified,
the number of the Trustees in each class shall be determined by resolution of
the Board of Trustees. The term of office of the first class shall expire on the
date of the first annual meeting of Shareholders or special meeting in lieu
thereof following the effective date of the Registration Statement relating to
the Shares under the Securities Act. The term of office of the second class
shall expire on the date of the second annual meeting of Shareholders or special
meeting in lieu thereof following the effective date of the Registration
Statement relating to the Shares under the Securities Act. The term of office of
the third class shall expire on the date of the third annual meeting of
Shareholders or special meeting in lieu thereof following the effective date of
the Registration Statement relating to the Shares under the Securities Act. Upon
expiration of the term of office of each class as set forth above, the number of
Trustees in such class, as determined by the Board of Trustees, shall be elected
for a term expiring on the date of the third annual meeting of Shareholders or
special meeting in lieu thereof following such expiration to succeed the
Trustees whose terms of office expire. The Trustees shall be elected at an
annual meeting of the Shareholders or special meeting in lieu thereof called for
that purpose, except as provided in Section 2.4 of this Article, and each
Trustee elected shall hold office until his or her successor shall have been
elected and shall have qualified. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office, or removal, of a Trustee.
2.3 Resignation and Removal. Any of the Trustees may resign their trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by such Trustee and delivered or mailed to the Trustees or the Chairman,
if any, the President or the Secretary and such resignation shall be effective
upon such delivery, or at a later date according to the terms of the instrument.
Any of the Trustees may be removed (provided the aggregate number of Trustees
after such removal shall not be less than the minimum number required by Section
2.1 hereof) for cause only, and not without cause, and only by action taken by a
majority of the remaining Trustees followed by the holders of at least
seventy-five percent (75%) of the Shares then entitled to vote in an election of
such Trustee. Upon the resignation or removal of a Trustee, each such resigning
or removed Trustee shall execute and deliver such documents as the remaining
Trustees shall require for the purpose of conveying to the Trust or the
remaining Trustees any Trust Property held in the name of such resigning or
removed Trustee. Upon the incapacity or death of any Trustee, such Trustee's
legal representative shall execute and deliver on such Trustee's behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.
2.4 Vacancies. Whenever a vacancy in the Board of Trustees shall occur, the
remaining Trustees may fill such vacancy by appointing an individual having the
qualifications described in this Article by a written instrument signed by a
majority of the Trustees then in office or may leave such vacancy unfilled or
may reduce the number of Trustees; provided the aggregate number of Trustees
after such reduction shall not be less than the minimum number required by
Section 2.1 hereof; provided, further, that if the Shareholders of any class or
series of Shares are entitled separately to elect one or more Trustees, a
majority of the remaining Trustees or the sole remaining Trustee elected by that
class or series may fill any vacancy among the number of Trustees elected by
that class or series. Any vacancy created by an increase in Trustees may be
filled by the appointment of an individual having the qualifications described
in this Article made by a written instrument signed by a majority of the
Trustees then in office. No vacancy shall operate to annul this Declaration or
to revoke any existing agency created pursuant to the terms of this Declaration.
Whenever a vacancy in the number of Trustees shall occur, until such vacancy is
filled as provided herein, the Trustees in office, regardless of their number,
shall have all the powers granted to the Trustees and shall discharge all the
duties imposed upon the Trustees by this Declaration.
2.5 Meetings. Meetings of the Trustees shall be held from time to time upon
the call of the Chairman, if any, or the President or such other persons as may
be specified in the By-Laws. Regular meetings of the Trustees may be held
without call or notice at a time and place fixed by the By-Laws or by resolution
of the Trustees. Notice of any other meeting shall be given to the Trustees
before the meeting at the time and in the manner specified in the By-Laws, but
may be waived in writing by any Trustee either before or after such meeting. The
attendance of a Trustee at a meeting shall constitute a waiver of notice of such
meeting except where a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting has
not been properly called or convened. A quorum for all meetings of the Trustees
shall be one-third, but not less than two, of the Trustees or such greater
number as may be specified in the By-Laws. Unless provided otherwise in this
Declaration and except as required under the 1940 Act, any action of the
Trustees may be taken at a meeting by vote of a majority of the Trustees present
(a quorum being present) or without a meeting by written consent of a majority
of the Trustees.
Any committee of the Trustees, including an executive committee, if any,
may act with or without a meeting. A quorum for all meetings of any such
committee shall be one-third, but not less than two, of the members thereof.
Unless provided otherwise in this Declaration, any action of any such committee
may be taken at a meeting by vote of a majority of the members present (a quorum
being present) or without a meeting by written consent of all of the members.
With respect to actions of the Trustees and any committee of the Trustees,
Trustees who are Interested Persons in any action to be taken may be counted for
quorum purposes under this Section and shall be entitled to vote to the extent
not prohibited by the 1940 Act.
All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other; participation in a meeting pursuant to any such
communications system shall constitute presence in person at such meeting.
2.6 Trustee Action by Written Consent. Any action which may be taken by
Trustees by vote may be taken without a meeting if that number of the Trustees,
or members of a committee, as the case may be, required for approval of such
action at a meeting of the Trustees or of such committee at which all members of
the Board or such committee are present consent to the action in writing and the
written consents are filed with the records of the meetings of Trustees. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Trustees.
2.7 Officers. The Trustees shall elect a President, a Secretary and a
Treasurer and may elect a Chairman who shall serve at the pleasure of the
Trustees or until their successors are elected. The Trustees may elect or
appoint or may authorize the Chairman, if any, or President to appoint such
other officers or agents with such powers as the Trustees may deem to be
advisable. A Chairman shall, and the President, Secretary and Treasurer may, but
need not, be a Trustee.
ARTICLE III
Powers and Duties of Trustees
3.1 General. The Trustees shall have exclusive and absolute control over
the Trust Property and over the business of the Trust to the same extent as if
the Trustees were the sole owners of the Trust Property and business in their
own right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees may perform such acts as in their sole discretion are
proper for conducting the business of the Trust. The enumeration of any specific
power herein shall not be construed as limiting the aforesaid power. Such powers
of the Trustees may be exercised without order of or resort to any court.
3.2 Investments. The Trustees shall have power, subject to the Fundamental
Policies in effect from time to time with respect to the Trust to:
(a) manage, conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise acquire,
hold, pledge, sell, assign, transfer, exchange, distribute or otherwise deal in
or dispose of any and all sorts of property, tangible or intangible, including
but not limited to securities of any type whatsoever, whether equity or
non-equity, of any issuer, evidences of indebtedness of any person and any other
rights, interests, instruments or property of any sort and to exercise any and
all rights, powers and privileges of ownership or interest in respect of any and
all such investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto, with
power to designate one or more Persons to exercise any of said rights, powers
and privileges in respect of any of said investments. The Trustees shall not be
limited by any law limiting the investments which may be made by fiduciaries.
3.3 Legal Title. Legal title to all of the Trust Property shall at all
times be considered to be vested in the Trust, except that the Board of Trustees
shall have the power to cause legal title to any Trust Property to be held by or
in the name of any Person as nominee, on such terms as the Board of Trustees may
determine, in accordance with applicable law.
3.4 Issuance and Repurchase of Shares. The Trustees shall have the power to
issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue,
dispose of, transfer, and otherwise deal in, Shares, including Shares in
fractional denominations, and, subject to the more detailed provisions set forth
in Articles VIII and IX, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property whether
capital or surplus or otherwise.
3.5 Borrow Money or Utilize Leverage. Subject to the Fundamental Policies
in effect from time to time with respect to the Trust, the Trustees shall have
the power to borrow money or otherwise obtain credit or utilize leverage to the
maximum extent permitted by law or regulation as such may be needed from time to
time and to secure the same by mortgaging, pledging or otherwise subjecting as
security the assets of the Trust, including the lending of portfolio securities,
and to endorse, guarantee, or undertake the performance of any obligation,
contract or engagement of any other person, firm, association or corporation.
3.6 Delegation; Committees. The Trustees shall have the power, consistent
with their continuing exclusive authority over the management of the Trust and
the Trust Property, to delegate from time to time to such of their number or to
officers, employees or agents of the Trust the doing of such things and the
execution of such instruments either in the name of the Trust or the names of
the Trustees or otherwise as the Trustees may deem expedient, to at least the
same extent as such delegation is permitted to directors of corporations formed
under the Delaware General Corporation Law and is permitted by the 1940 Act, as
well as any further delegations the Trustees may determine to be desirable,
expedient or necessary in order to effect the purpose hereof. The Trustees may
designate an executive committee which shall have all authority of the entire
Board of Trustees except such committee cannot declare dividends except to the
extent specifically delegated by the Board of Trustees and cannot authorize
removal of a trustee or any merger, consolidation or sale of substantially all
of the assets of the Trust.
3.7 Collection and Payment. The Trustees shall have power to collect all
property due to the Trust; to pay all claims, including taxes, against the Trust
Property or the Trust, the Trustees or any officer, employee or agent of the
Trust; to prosecute, defend, compromise or abandon any claims relating to the
Trust Property or the Trust, or the Trustees or any officer, employee or agent
of the Trust; to foreclose any security interest securing any obligations, by
virtue of which any property is owed to the Trust; and to enter into releases,
agreements and other instruments.
3.8 Expenses. The Trustees shall have power to incur and pay out of the
assets or income of the Trust any expenses which in the opinion of the Trustees
are necessary or incidental to carry out any of the purposes of this
Declaration, and the business of the Trust, and to pay reasonable compensation
from the funds of the Trust to themselves as Trustees. The Trustees shall fix
the compensation of all officers, employees and Trustees. The Trustees may pay
themselves such compensation for special services, including legal,
underwriting, syndicating and brokerage services, as they in good faith may deem
reasonable and reimbursement for expenses reasonably incurred by themselves on
behalf of the Trust.
3.9 By-Laws. The Trustees shall have the exclusive authority to adopt and
from time to time amend or repeal By-Laws for the conduct of the business of the
Trust.
3.10 Miscellaneous Powers. The Trustees shall have the power to: (a) employ
or contract with such Persons as the Trustees may deem desirable for the
transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) purchase, and pay
for out of Trust Property, insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisors, distributors,
selected dealers or independent contractors of the Trust against all claims
arising by reason of holding any such position or by reason of any action taken
or omitted by any such Person in such capacity, whether or not constituting
negligence, or whether or not the Trust would have the power to indemnify such
Person against such liability; (d) establish pension, profit-sharing, share
purchase, and other retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (e) make donations, irrespective of
benefit to the Trust, for charitable, religious, educational, scientific, civic
or similar purposes; (f) to the extent permitted by law, indemnify any Person
with whom the Trust has dealings, including without limitation any advisor,
administrator, manager, transfer agent, custodian, distributor or selected
dealer, or any other person as the Trustees may see fit to such extent as the
Trustees shall determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the fiscal year of the Trust and the method
in which its accounts shall be kept; (i) notwithstanding the Fundamental
Policies of the Trust, convert the Trust to a master- feeder structure;
provided, however, the Trust obtains the approval of shareholders holding at
least a majority of the Trust's Shares present at a meeting of Shareholders at
which a quorum is present and (j) adopt a seal for the Trust but the absence of
such seal shall not impair the validity of any instrument executed on behalf of
the Trust.
3.11 Further Powers. The Trustees shall have the power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, and in
any and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such instruments as
they deem necessary, proper or desirable in order to promote the interests of
the Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by the Board of
Trustees in good faith shall be conclusive. In construing the provisions of this
Declaration, the presumption shall be in favor of a grant of power to the
Trustees. Neither the Trust nor the Trustees shall be required to obtain any
court order to deal with any of the Trust Property or take any other action
hereunder.
ARTICLE IV
Service Contracts
4.1 Advisory and Management Arrangements. Subject to such requirements and
restrictions as may be set forth in the By-Laws and/or the 1940 Act, the Board
of Trustees may, at any time and from time to time, contract for exclusive or
nonexclusive advisory, management and/or administrative services for the Trust
or for any Series with any corporation, trust, association or other
organization, including any Affiliated Person; and any such contract may contain
such other terms as the Board of Trustees may determine, including without
limitation, authority for the Investment Adviser or administrator to determine
from time to time without prior consultation with the Board of Trustees what
securities and other instruments or property shall be purchased or otherwise
acquired, owned, held, invested or reinvested in, sold, exchanged, transferred,
mortgaged, pledged, assigned, negotiated, or otherwise dealt with or disposed
of, and what portion, if any, of the Trust Property shall be held uninvested and
to make changes in the Trust's or a particular Series' investments, or such
other activities as may specifically be delegated to such party.
4.2 Distribution Arrangements. Subject to compliance with the 1940 Act, the
Board of Trustees may retain underwriters and/or placement agents to sell Trust
Shares. The Board of Trustees may in its discretion from time to time enter into
one or more contracts, providing for the sale of the Shares of the Trust,
whereby the Trust may either agree to sell such Shares to the other party to the
contract or appoint such other party its sales agent for such Shares. In either
case, the contract shall be on such terms and conditions as the Board of
Trustees may in its discretion determine, not inconsistent with the provisions
of this Article IV or the By-Laws; and such contract may also provide for the
repurchase or sale of Shares of the Trust by such other party as principal or as
agent of the Trust and may provide that such other party may enter into selected
dealer agreements with registered securities dealers and brokers and servicing
and similar agreements with persons who are not registered securities dealers to
further the purposes of the distribution or repurchase of the Shares of the
Trust.
4.3 Other Arrangements. The Board of Trustees is further empowered, at any
time and from time to time, to contract with any Persons to provide such other
services to the Trust, as the Board of Trustees determines to be in the best
interests of the Trust, including appointing it or them to act as the custodian,
transfer agent, dividend disbursing agent, fund accountant, and/or shareholder
servicing agent for the Trust or one or more of the series or classes of its
Shares.
4.4 Parties to Contracts. The fact that:
(i) any of the Shareholders, Trustees, employees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee, manager,
Adviser, Principal Underwriter, distributor, or Affiliated Person or agent of or
for any corporation, trust, association, or other organization, or for any
parent or Affiliated Person of any organization with which an Adviser's,
management or administration contract, or Principal Underwriter's or
distributor's contract, or custodian, transfer, dividend disbursing, fund
accounting, shareholder servicing or other type of service contract may have
been or may hereafter be made, or that any such organization, or any parent or
Affiliated Person thereof, is a Shareholder or has an interest in the Trust, or
that
(ii) any corporation, trust, association or other organization with which
an Adviser's, management or administration contract or Principal Underwriter's
or distributor's contract, or custodian, transfer, dividend disbursing, fund
accounting, shareholder servicing or other type of service contract may have
been or may hereafter be made also has an Adviser's, management or
administration contract, or Principal Underwriter's or distributor's contract,
or custodian, transfer, dividend disbursing, shareholder servicing or other
service contract with one or more other corporations, trusts, associations, or
other organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee, employee or officer of the Trust from voting upon or
executing the same, or create any liability or accountability to the Trust or
its Shareholders, provided that the establishment of and performance under each
such contract is permissible under the provisions of the 1940 Act.
ARTICLE V
Limitations of Liability and Indemnification
5.1 No Personal Liability of Shareholders, Trustees, etc. No Shareholder of
the Trust shall be subject in such capacity to any personal liability whatsoever
to any Person in connection with Trust Property or the acts, obligations or
affairs of the Trust. As provided in the DBTA, Shareholders shall have the same
limitation of personal liability as is extended to stockholders of a private
corporation for profit incorporated under the Delaware General Corporation Law.
No Trustee or officer of the Trust shall be subject in such capacity to any
personal liability whatsoever to any Person, save only liability to the Trust or
its Shareholders arising from bad faith, willful misfeasance, gross negligence
or reckless disregard for his duty to such Person; and, subject to the foregoing
exception, all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust. If any Shareholder, Trustee or officer, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such liability, subject to
the foregoing exception, he shall not, on account thereof, be held to any
personal liability. Any repeal or modification of this Section 5.1 shall not
adversely affect any right or protection of a Trustee or officer of the Trust
existing at the time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.
The Trustees may provide that every note, bond, contract, instrument,
certificate or undertaking made or issued by the Trustees or by any officer or
officers shall give notice that a Certificate of Trust in respect of the Trust
is on file with the Secretary of State of the State of Delaware and may recite
to the effect that the same was executed or made by or on behalf of the Trust or
by them as Trustee or Trustees or as officer or officers, and not individually,
and that the obligations of any instrument made or issued by the Trustees or by
any officer or officers of the Trust are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property of
the Trust The omission of any statement to such effect from such instrument
shall not operate to bind any Trustee or Trustees or officer or officers or
Shareholder or Shareholders individually.
5.2 Mandatory Indemnification. (a) The Trust hereby agrees to indemnify
each person who at any time serves as a Trustee or officer of the Trust (each
such person being an "indemnitee") against any liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and reasonable counsel fees reasonably incurred by such
indemnitee in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, before any court or administrative
or investigative body in which he may be or may have been involved as a party or
otherwise or with which he may be or may have been threatened, while acting in
any capacity set forth in this Article V by reason of his having acted in any
such capacity, except with respect to any matter as to which he shall not have
acted in good faith in the reasonable belief that his action was in the best
interest of the Trust or, in the case of any criminal proceeding, as to which he
shall have had reasonable cause to believe that the conduct was unlawful,
provided, however, that no indemnitee shall be indemnified hereunder against any
liability to any person or any expense of such indemnitee arising by reason of
(i) willful misfeasance, (ii) bad faith, (iii) gross negligence, or (iv)
reckless disregard of the duties involved in the conduct of his position (the
conduct referred to in such clauses (i) through (iv) being sometimes referred to
herein as "disabling conduct"). Notwithstanding the foregoing, with respect to
any action, suit or other proceeding voluntarily prosecuted by any indemnitee as
plaintiff, indemnification shall be mandatory only if the prosecution of such
action, suit or other proceeding by such indemnitee (1) was authorized by a
majority of the Trustees or (2) was instituted by the indemnitee to enforce his
or her rights to indemnification hereunder in a case in which the indemnitee is
found to be entitled to such indemnification. The rights to indemnification set
forth in this Declaration shall continue as to a person who has ceased to be a
Trustee or officer of the Trust and shall inure to the benefit of his or her
heirs, executors and personal and legal representatives. No amendment or
restatement of this Declaration or repeal of any of its provisions shall limit
or eliminate any of the benefits provided to any person who at any time is or
was a Trustee or officer of the Trust or otherwise entitled to indemnification
hereunder in respect of any act or omission that occurred prior to such
amendment, restatement or repeal.
(b) Notwithstanding the foregoing, no indemnification shall be made
hereunder unless there has been a determination (i) by a final decision on the
merits by a court or other body of competent jurisdiction before whom the issue
of entitlement to indemnification hereunder was brought that such indemnitee is
entitled to indemnification hereunder or, (ii) in the absence of such a
decision, by (1) a majority vote of a quorum of those Trustees who are neither
"interested persons" of the Trust (as defined in Section 2(a)(19) of the 1940
Act) nor parties to the proceeding ("Disinterested Non-Party Trustees"), that
the indemnitee is entitled to indemnification hereunder, or (2) if such quorum
is not obtainable or even if obtainable, if such majority so directs,
independent legal counsel in a written opinion concludes that the indemnitee
should be entitled to indemnification hereunder. All determinations to make
advance payments in connection with the expense of defending any proceeding
shall be authorized and made in accordance with the immediately succeeding
paragraph (c) below.
(c) The Trust shall make advance payments in connection with the expenses
of defending any action with respect to which indemnification might be sought
hereunder if the Trust receives a written affirmation by the indemnitee of the
indemnitee's good faith belief that the standards of conduct necessary for
indemnification have been met and a written undertaking to reimburse the Trust
unless it is subsequently determined that the indemnitee is entitled to such
indemnification and if a majority of the Trustees determine that the applicable
standards of conduct necessary for indemnification appear to have been met. In
addition, at least one of the following conditions must be met: (i) the
indemnitee shall provide adequate security for his undertaking, (ii) the Trust
shall be insured against losses arising by reason of any lawful advances, or
(iii) a majority of a quorum of the Disinterested Non-Party Trustees, or if a
majority vote of such quorum so direct, independent legal counsel in a written
opinion, shall conclude, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is substantial reason to
believe that the indemnitee ultimately will be found entitled to
indemnification.
(d) The rights accruing to any indemnitee under these provisions shall not
exclude any other right which any person may have or hereafter acquire under
this Declaration, the By-Laws of the Trust, any statute, agreement, vote of
stockholders or Trustees who are "disinterested persons" (as defined in Section
2(a)(19) of the 1940 Act) or any other right to which he or she may be lawfully
entitled.
(e) Subject to any limitations provided by the 1940 Act and this
Declaration, the Trust shall have the power and authority to indemnify and
provide for the advance payment of expenses to employees, agents and other
Persons providing services to the Trust or serving in any capacity at the
request of the Trust to the full extent corporations organized under the
Delaware General Corporation Law may indemnify or provide for the advance
payment of expenses for such Persons, provided that such indemnification has
been approved by a majority of the Trustees.
5.3 No Bond Required of Trustees. No Trustee shall, as such, be obligated
to give any bond or other security for the performance of any of his duties
hereunder.
5.4 No Duty of Investigation; Notice in Trust Instruments, etc. No
purchaser, lender, transfer agent or other person dealing with the Trustees or
with any officer, employee or agent of the Trust shall be bound to make any
inquiry concerning the validity of any transaction purporting to be made by the
Trustees or by said officer, employee or agent or be liable for the application
of money or property paid, loaned, or delivered to or on the order of the
Trustees or of said officer, employee or agent. Every obligation, contract,
undertaking, instrument, certificate, Share, other security of the Trust, and
every other act or thing whatsoever executed in connection with the Trust shall
be conclusively taken to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust. The Trustees may maintain
insurance for the protection of the Trust Property, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable or is required by the 1940
Act.
5.5 Reliance on Experts, etc. Each Trustee and officer or employee of the
Trust shall, in the performance of its duties, be fully and completely justified
and protected with regard to any act or any failure to act resulting from
reliance in good faith upon the books of account or other records of the Trust,
upon an opinion of counsel, or upon reports made to the Trust by any of the
Trust's officers or employees or by any advisor, administrator, manager,
distributor, selected dealer, accountant, appraiser or other expert or
consultant selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.
5.6 Insurance. To the fullest extent permitted by applicable law, the
officers and Trustees shall be entitled and have the authority to purchase with
Trust Property, insurance for liability and for all expenses reasonably incurred
or paid or expected to be paid by a Trustee or officer in connection with any
claim, action, suit or proceeding in which such Person becomes involved by
virtue of such Person's capacity or former capacity with the Trust, whether or
not the Trust would have the power to indemnify such Person against such
liability under the provisions of this Article.
5.7. Derivative Actions. Subject to the requirements set forth in Section
3816 of the DBTA, a Shareholder or Shareholders may bring a derivative action on
behalf of the Trust only if the Shareholder or Shareholders first make a
pre-suit demand upon the Board of Trustees to bring the subject action unless an
effort to cause the Board of Trustees to bring such action is excused. A demand
on the Board of Trustees shall only be excused if a majority of the Board of
Trustees, or a majority of any committee established to consider the merits of
such action, has a material personal financial interest in the action at issue.
A Trustee shall not be deemed to have a material personal financial interest in
an action or otherwise be disqualified from ruling on a Shareholder demand by
virtue of the fact that such Trustee receives remuneration from his service on
the Board of Trustees of the Trust or on the boards of one or more investment
companies with the same or an affiliated investment advisor or underwriter.
ARTICLE VI
Shares of Beneficial Interest
6.1 Beneficial Interest. The interest of the beneficiaries hereunder shall
be divided into an unlimited number of transferable shares of beneficial
interest, par value $.01 per share. All Shares issued in accordance with the
terms hereof, including, without limitation, Shares issued in connection with a
dividend in Shares or a split of Shares, shall be fully paid and nonassessable
when the consideration determined by the Trustees (if any) therefor shall have
been received by the Trust.
6.2 Other Securities. The Trustees may, subject to the Fundamental Policies
and the requirements of the 1940 Act, authorize and issue such other securities
of the Trust as they determine to be necessary, desirable or appropriate, having
such terms, rights, preferences, privileges, limitations and restrictions as the
Trustees see fit, including preferred interests, debt securities or other senior
securities. To the extent that the Trustees authorize and issue preferred shares
of any class or series, they are hereby authorized and empowered to amend or
supplement this Declaration as they deem necessary or appropriate, including to
comply with the requirements of the 1940 Act or requirements imposed by the
rating agencies or other Persons, all without the approval of Shareholders. Any
such supplement or amendment shall be filed as is necessary. The Trustees are
also authorized to take such actions and retain such persons as they see fit to
offer and sell such securities.
6.3 Rights of Shareholders. The Shares shall be personal property giving
only the rights in this Declaration specifically set forth. The ownership of the
Trust Property of every description and the right to conduct any business herein
before described are vested exclusively in the Trustees, and the Shareholders
shall have no interest therein other than the beneficial interest conferred by
their Shares, and they shall have no right to call for any partition or division
of any property, profits, rights or interests of the Trust nor can they be
called upon to share or assume any losses of the Trust or, subject to the right
of the Trustees to charge certain expenses directly to Shareholders, as provided
in the last sentence of Section 3.8, suffer an assessment of any kind by virtue
of their ownership of Shares. The Shares shall not entitle the holder to
preference, preemptive, appraisal, conversion or exchange rights (except as
specified in this Section 6.3, in Section 11.4 or as specified by the Trustees
when creating the Shares, as in preferred shares).
6.4 Trust Only. It is the intention of the Trustees to create only the
relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
6.5 Issuance of Shares. The Trustees, in their discretion, may from time to
time without vote of the Shareholders issue Shares including preferred shares
that may have been established pursuant to Section 6.2, in addition to the then
issued and outstanding Shares and Shares held in the treasury, to such party or
parties and for such amount and type of consideration, including cash or
property, at such time or times, and on such terms as the Trustees may
determine, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. The Trustees may from time to time divide or
combine the Shares into a greater or lesser number without thereby changing the
proportionate beneficial interest in such Shares. Issuances and redemptions of
Shares may be made in whole Shares and/or l/l,000ths of a Share or multiples
thereof as the Trustees may determine.
6.6 Register of Shares. A register shall be kept at the offices of the
Trust or any transfer agent duly appointed by the Trustees under the direction
of the Trustees which shall contain the names and addresses of the Shareholders
and the number of Shares held by them respectively and a record of all transfers
thereof. Separate registers shall be established and maintained for each class
or series of Shares. Each such register shall be conclusive as to who are the
holders of the Shares of the applicable class or series of Shares and who shall
be entitled to receive dividends or distributions or otherwise to exercise or
enjoy the rights of Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or distribution, nor to have notice given to him as
herein provided, until he has given his address to a transfer agent or such
other officer or agent of the Trustees as shall keep the register for entry
thereon. The Trustees, in their discretion, may authorize the issuance of share
certificates and promulgate appropriate fees therefor and rules and regulations
as to their use.
6.7 Transfer Agent and Registrar. The Trustees shall have power to employ a
transfer agent or transfer agents, and a registrar or registrars, with respect
to the Shares. The transfer agent or transfer agents may keep the applicable
register and record therein, the original issues and transfers, if any, of the
said Shares. Any such transfer agents and/or registrars shall perform the duties
usually performed by transfer agents and registrars of certificates of stock in
a corporation, as modified by the Trustees.
6.8 Transfer of Shares. Shares shall be transferable on the records of the
Trust only by the record holder thereof or by its agent thereto duly authorized
in writing, upon delivery to the Trustees or a transfer agent of the Trust of a
duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
applicable register of the Trust. Until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes hereof
and neither the Trustees nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the applicable register of Shares as the holder of
such Shares upon production of the proper evidence thereof to the Trustees or a
transfer agent of the Trust, but until such record is made, the Shareholder of
record shall be deemed to be the holder of such for all purposes hereof, and
neither the Trustees nor any transfer agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
6.9 Notices. Any and all notices to which any Shareholder hereunder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the applicable register of the Trust.
ARTICLE VII
Custodians
7.1 Appointment and Duties. The Trustees shall at all times employ a
custodian or custodians, meeting the qualifications for custodians for portfolio
securities of investment companies contained in the 1940 Act, as custodian with
respect to the assets of the Trust. Any custodian shall have authority as agent
of the Trust with respect to which it is acting as determined by the custodian
agreement or agreements, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the By-Laws of the Trust and the
1940 Act:
(1) to hold the securities owned by the Trust and deliver the same upon
written order;
(2) to receive any receipt for any moneys due to the Trust and deposit the
same in its own banking department (if a bank) or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts of the
Trust and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net income or
net asset value of the Trust;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian.
The Trustees may also authorize each custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall meet the qualifications for custodians
contained in the 1940 Act.
7.2 Central Certificate System. Subject to such rules, regulations and
orders as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other Person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class of any issuer deposited within the
system are treated as fungible and may be transferred or pledged by bookkeeping
entry without physical delivery of such securities, provided that all such
deposits shall be subject to withdrawal only upon the order of the Trust.
ARTICLE VIII
Redemption
8.1 Redemptions. The Shares of the Trust are not redeemable by the holders.
8.2 Disclosure of Holding. The holders of Shares or other securities of the
Trust shall upon demand disclose to the Trustees in writing such information
with respect to direct and indirect ownership of Shares or other securities of
the Trust as the Trustees deem necessary to comply with the provisions of the
Code, the 1940 Act or other applicable laws or regulations, or to comply with
the requirements of any other taxing or regulatory authority.
ARTICLE IX
Determination of Net Asset Value, Net Income and Distributions
9.1 Net Asset Value. The net asset value of each outstanding Share of the
Trust shall be determined at such time or times on such days as the Trustees may
determine, in accordance with the 1940 Act. The method of determination of net
asset value shall be determined by the Trustees and shall be as set forth in the
Prospectus or as may otherwise be determined by the Trustees. The power and duty
to make the net asset value calculations may be delegated by the Trustees and
shall be as generally set forth in the Prospectus or as may otherwise be
determined by the Trustees.
9.2 Distributions to Shareholders. (a) The Trustees shall from time to time
distribute ratably among the Shareholders of any class of Shares, or any series
of any such class, in accordance with the number of outstanding full and
fractional Shares of such class or any series of such class, such proportion of
the net profits, surplus (including paid-in surplus), capital, or assets held by
the Trustees as they may deem proper or as may otherwise be determined in
accordance with this Declaration. Any such distribution may be made in cash or
property (including without limitation any type of obligations of the Trust or
any assets thereof) or Shares of any class or series or any combination thereof,
and the Trustees may distribute ratably among the Shareholders of any class of
shares or series of any such class, in accordance with the number of outstanding
full and fractional Shares of such class or any series of such class, additional
Shares of any class or series in such manner, at such times, and on such terms
as the Trustees may deem proper or as may otherwise be determined in accordance
with this Declaration.
(b) Distributions pursuant to this Section 9.2 may be among the
Shareholders of record of the applicable class or series of Shares at the time
of declaring a distribution or among the Shareholders of record at such later
date as the Trustees shall determine and specify.
(c) The Trustees may always retain from the net profits such amount as they
may deem necessary to pay the debts or expenses of the Trust or to meet
obligations of the Trust, or as they otherwise may deem desirable to use in the
conduct of its affairs or to retain for future requirements or extensions of the
business.
(d) Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
9.3 Power to Modify Foregoing Procedures. Notwithstanding any of the
foregoing provisions of this Article IX, the Trustees may prescribe, in their
absolute discretion except as may be required by the 1940 Act, such other bases
and times for determining the per share asset value of the Trust's Shares or net
income, or the declaration and payment of dividends and distributions as they
may deem necessary or desirable for any reason, including to enable the Trust to
comply with any provision of the 1940 Act, or any securities exchange or
association registered under the Securities Exchange Act of 1934, or any order
of exemption issued by the Commission, all as in effect now or hereafter amended
or modified.
9.4. Dividend Reinvestment Plan. The Trustees may establish a dividend
reinvestment plan for any class or series of Shares providing for the automatic
reinvestment of cash dividends on the Shares of such class or series in
additional shares of such class or series or of another class or series of
Shares. Unless otherwise determined by the Trustees, all dividends on Shares of
any class or series for which such a dividend reinvestment plan has been
established shall automatically be reinvested under such plan unless the holder
of such shares shall affirmatively elect, in such manner as specified by the
Trust, not to participate in the dividend reinvestment plan.
ARTICLE X
Shareholders
10.1 Meetings of Shareholders. The Trust shall hold annual meetings of the
Shareholders (provided that the Trust's initial annual meeting of Shareholders
may occur up to one year after the completion of its initial fiscal year). A
special meeting of Shareholders may be called at any time by a majority of the
Trustees or the President and shall be called by any Trustee for any proper
purpose upon written request of Shareholders of the Trust holding in the
aggregate not less than 51% of the outstanding Shares of the Trust or class or
series of Shares having voting rights on the matter, such request specifying the
purpose or purposes for which such meeting is to be called. Any shareholder
meeting, including a Special Meeting, shall be held within or without the State
of Delaware on such day and at such time as the Board of Trustees shall
designate.
10.2 Voting. Shareholders shall have no power to vote on any matter except
matters on which a vote of Shareholders is required by applicable law, this
Declaration or resolution of the Trustees. Except as otherwise provided herein,
any matter required to be submitted to Shareholders and affecting one or more
classes or series of Shares shall require approval by the required vote of all
the affected classes and series of Shares voting together as a single class;
provided, however, that as to any matter with respect to which a separate vote
of any class or series of Shares is required by the 1940 Act, such requirement
as to a separate vote by that class or series of Shares shall apply in addition
to a vote of all the affected classes and series voting together as a single
class. Shareholders of a particular class or series of Shares shall not be
entitled to vote on any matter that affects only one or more other classes or
series of Shares. There shall be no cumulative voting in the election or removal
of Trustees.
10.3 Notice of Meeting. Notice of all meetings of Shareholders, stating the
time, place and purposes of the meeting, shall be given by the Trustees to each
Shareholder of record entitled to vote thereat at the time and in the manner
specified in the By-Laws. Only the business stated in the notice of the meeting
shall be considered at such meeting. Any adjourned meeting may be held as
adjourned one or more times without further notice not later than 180 days after
the record date.
10.4 Quorum and Required Vote. (a) Except where a higher quorum is required
by applicable law, the By-Laws or this Declaration, the holders of one third
(33-1/3%) of the Shares entitled to vote on any matter at a meeting present in
person or by proxy shall constitute a quorum at such meeting of the Shareholders
for purposes of conducting business on such matter. The absence from any
meeting, in person or by proxy, of a quorum of Shareholders for action upon any
given matter shall not prevent action at such meeting upon any other matter or
matters which may properly come before the meeting, if there shall be present
thereat, in person or by proxy, a quorum of Shareholders in respect of such
other matters.
(b) Subject to any provision of applicable law or stock exchange rules,
this Declaration or a resolution of the Trustees specifying a greater or a
lesser vote requirement for the transaction of any item of business at any
meeting of Shareholders, (i) in all matters other than the election of Trustees,
the affirmative vote of a majority of votes cast by the Shareholders entitled to
vote on the subject matter at a meeting at which a quorum is present shall be
the act of the Shareholders entitled to vote with respect to such matter, and
(ii) in an election of Trustees, the qualified nominees receiving the highest
numbers of votes cast by the shareholders entitled to vote at a meeting at which
a quorum is present, up to the number of Trustees to be elected at such meeting,
shall be elected.
10.5 Proxies, etc. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote by properly executed proxy, provided that no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote
shall be taken. Pursuant to a resolution of a majority of the Trustees, proxies
may be solicited in the name of one or more Trustees or one or more of the
officers or employees of the Trust. No proxy shall be valid after the expiration
of 11 months from the date thereof, unless otherwise provided in the proxy. Only
Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the charge or management of such Share,
he may vote by his guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.
10.6 Reports. The Trustees shall cause to be prepared at least annually and
more frequently to the extent and in the form required by law, regulation or any
exchange on which Trust Shares are listed a report of operations containing a
balance sheet and statement of income and undistributed income of the Trust
prepared in conformity with generally accepted accounting principles and an
opinion of an independent public accountant on such financial statements. Copies
of such reports shall be mailed to all Shareholders of record within the time
required by the 1940 Act, and in any event within a reasonable period preceding
the meeting of Shareholders. The Trustees shall, in addition, furnish to the
Shareholders at least semi-annually to the extent required by law, interim
reports containing an unaudited balance sheet of the Trust as of the end of such
period and an unaudited statement of income and surplus for the period from the
beginning of the current fiscal year to the end of such period.
10.7 Shareholder Action by Written Consent. Any action which may be taken
at any meeting of Shareholders may be taken without a meeting and without prior
notice if a consent or consents in writing setting forth the action so taken is
signed by the holders of Shares having not less than the minimum number of votes
that would be necessary to authorize or take that action at a meeting at which
all Shares entitled to vote on that action were present and voted. All such
consents shall be filed with the secretary of the Trust and shall be maintained
in the Trust's records. Any Shareholder giving a written consent or the
Shareholder's proxy-holders or a transferee of the Shares or a personal
representative of the Shareholder or its respective proxy-holder may revoke the
consent by a writing received by the secretary of the Trust before written
consents of the number of Shares required to authorize the proposed action have
been filed with the secretary.
If the consents of all Shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
Shareholders shall not have been received, the secretary shall give prompt
notice of the action taken without a meeting to such Shareholders. This notice
shall be given in the manner specified in the By-Laws.
10.8 Record Dates. For purposes of determining the Shareholders entitled to
notice of any meeting or to vote or entitled to give consent to action without a
meeting, the Board of Trustees may fix in advance a record date which shall not
be more than 120 days nor less than 10 days before the date of any such meeting.
If the Board of Trustees does not so fix a record date:
(a) The record date for determining Shareholders entitled to notice of or
to vote at a meeting of Shareholders shall be at the close of business on the
business day before the notice is given or, if notice is waived, at the close of
business on the business day which is five (5) business days before the day on
which the meeting is held.
(b) The record date for determining Shareholders entitled to give consent
to action in writing without a meeting, (i) when no prior action by the Board of
Trustees has been taken, shall be the day on which the first written consent is
given, or (ii) when prior action of the Board of Trustees has been taken, shall
be at the close of business on the day on which the Board of Trustees adopts the
resolution taking such prior action.
For the purpose of determining the Shareholders of any Series or class who
are entitled to receive payment of any dividend or of any other distribution,
the Board of Trustees may from time to time fix a date, which shall be before
the date for the payment of such dividend or such other distribution, as the
record date for determining the Shareholders of such Series or class having the
right to receive such dividend or distribution. Nothing in this Section shall be
construed as precluding the Board of Trustees from setting different record
dates for different Series or classes.
10.9 Additional Provisions. The By-Laws may include further provisions for
Shareholders' votes, meetings and related matters.
ARTICLE XI
Duration; Termination of Trust; Amendment; Mergers, Etc.
11.1 Duration. Subject to possible termination in accordance with the
provisions of Section 11.2 hereof, the Trust created hereby shall have perpetual
existence.
11.2 Termination. (a) The Trust may be dissolved, after a majority of the
Trustees have approved a resolution therefor, upon approval by not less than 75%
of the Shares of each class or series outstanding and entitled to vote, voting
as separate classes or series, unless such resolution has been approved by 80%
of the Trustees, in which case approval by a Majority Shareholder Vote shall be
required. Upon the dissolution of the Trust:
(i) The Trust shall carry on no business except for the purpose of winding
up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust and all
of the powers of the Trustees under this Declaration shall continue until the
affairs of the Trust shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust, collect its assets, sell, convey, assign,
exchange, merge where the Trust is not the survivor, transfer or otherwise
dispose of all or any part of the remaining Trust Property to one or more
Persons at public or private sale for consideration which may consist in whole
or in part in cash, securities or other property of any kind, discharge or pay
its liabilities, and do all other acts appropriate to liquidate its business;
provided that any sale, conveyance, assignment, exchange, merger in which the
Trust is not the survivor, transfer or other disposition of all or substantially
all the Trust Property of the Trust shall require approval of the principal
terms of the transaction and the nature and amount of the consideration by
Shareholders with the same vote as required to open-end the Trust.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly each,
among the Shareholders according to their respective rights.
(b) After the winding up and termination of the Trust and distribution to
the Shareholders as herein provided, a majority of the Trustees shall execute
and lodge among the records of the Trust an instrument in writing setting forth
the fact of such termination and shall execute and file a certificate of
cancellation with the Secretary of State of the State of Delaware. Upon
termination of the Trust, the Trustees shall thereupon be discharged from all
further liabilities and duties hereunder, and the rights and interests of all
Shareholders shall thereupon cease.
11.3 Amendment Procedure. (a) Except as provided in subsection (b) of this
Section 11.3, this Declaration may be amended, after a majority of the Trustees
have approved a resolution therefor, by the affirmative vote of the holders of
not less than a majority of the affected Shares. The Trustees also may amend
this Declaration without any vote of Shareholders of any class of series to
divide the Shares of the Trust into one or more classes or additional classes,
or one or more series of any such class or classes, to change the name of the
Trust or any class or series of Shares, to make any change that does not
adversely affect the relative rights or preferences of any Shareholder, as they
may deem necessary, or to conform this Declaration to the requirements of the
1940 Act or any other applicable federal laws or regulations including pursuant
to Section 6.2 or the requirements of the regulated investment company
provisions of the Code, but the Trustees shall not be liable for failing to do
so.
(b) No amendment may be made to Section 2.1, Section 2.2, Section 2.3,
Section 3.9, Section 5.1, Section 5.2, Section 11.2(a), this Section 11.3,
Section 11.4, Section 11.6 or Section 11.7 of this Declaration and no amendment
may be made to this Declaration which would change any rights with respect to
any Shares of the Trust by reducing the amount payable thereon upon liquidation
of the Trust or by diminishing or eliminating any voting rights pertaining
thereto (except that this provision shall not limit the ability of the Trustees
to authorize, and to cause the Trust to issue, other securities pursuant to
Section 6.2), except after a majority of the Trustees have approved a resolution
therefor, by the affirmative vote of the holders of not less than 75% of the
Shares of each affected class or series outstanding, voting as separate classes
or series, unless such amendment has been approved by 80% of the Trustees, in
which case approval by a Majority Shareholder Vote shall be required. Nothing
contained in this Declaration shall permit the amendment of this Declaration to
impair the exemption from personal liability of the Shareholders, Trustees,
officers, employees and agents of the Trust or to permit assessments upon
Shareholders.
(c) An amendment duly adopted by the requisite vote of the Board of
Trustees and, if required, the Shareholders as aforesaid, shall become effective
at the time of such adoption or at such other time as may be designated by the
Board of Trustees or Shareholders, as the case may be. A certification in
recordable form signed by a majority of the Trustees setting forth an amendment
and reciting that it was duly adopted by the Trustees and, if required, the
Shareholders as aforesaid, or a copy of the Declaration, as amended, in
recordable form, and executed by a majority of the Trustees, shall be conclusive
evidence of such amendment when lodged among the records of the Trust or at such
other time designated by the Board.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act, covering the first public
offering of Shares of the Trust shall have become effective, this Declaration
may be terminated or amended in any respect by the affirmative vote of a
majority of the Trustees or by an instrument signed by a majority of the
Trustees.
11.4 Merger, Consolidation and Sale of Assets. Except as provided in
Section 11.7, the Trust may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of the Trust Property or the property, including its good
will, upon such terms and conditions and for such consideration when and as
authorized by two- thirds of the Trustees and approved by a Majority Shareholder
Vote and any such merger, consolidation, sale, lease or exchange shall be
determined for all purposes to have been accomplished under and pursuant to the
statutes of the State of Delaware.
11.5 Subsidiaries. Without approval by Shareholders, the Trustees may cause
to be organized or assist in organizing one or more corporations, trusts,
partnerships, associations or other organizations to take over all of the Trust
Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer all or a portion
of the Trust Property to any such corporation, trust, limited liability company,
association or organization in exchange for the shares or securities thereof, or
otherwise, and to lend money to, subscribe for the shares or securities of, and
enter into any contracts with any such corporation, trust, limited liability
company, partnership, association or organization, or any corporation,
partnership, trust, limited liability company, association or organization in
which the Trust holds or is about to acquire shares or any other interests.
11.6 Conversion. Notwithstanding any other provisions of this Declaration
or the By-Laws of the Trust, a favorable vote of a majority of the Trustees then
in office followed by the favorable vote of the holders of not less than 75% of
the Shares of each affected class or series outstanding, voting as separate
classes or series, shall be required to approve, adopt or authorize an amendment
to this Declaration that makes the Shares a "redeemable security" as that term
is defined in the 1940 Act, unless such amendment has been approved by 80% of
the Trustees, in which case approval by a Majority Shareholder Vote shall be
required. Upon the adoption of a proposal to convert the Trust from a
"closed-end company" to an "open-end company" as those terms are defined by the
1940 Act and the necessary amendments to this Declaration to permit such a
conversion of the Trust's outstanding Shares entitled to vote, the Trust shall,
upon complying with any requirements of the 1940 Act and state law, become an
"open-end" investment company. Such affirmative vote or consent shall be in
addition to the vote or consent of the holders of the Shares otherwise required
by law, or any agreement between the Trust and any national securities exchange.
11.7 Certain Transactions. (a) Notwithstanding any other provision of this
Declaration and subject to the exceptions provided in paragraph (d) of this
Section, the types of transactions described in paragraph (c) of this Section
shall require the affirmative vote or consent of a majority of the Trustees then
in office followed by the affirmative vote of the holders of not less than 75%
of the Shares of each affected class or series outstanding, voting as separate
classes or series, when a Principal Shareholder (as defined in paragraph (b) of
this Section) is a party to the transaction. Such affirmative vote or consent
shall be in addition to the vote or consent of the holders of Shares otherwise
required by law or by the terms of any class or series of preferred stock,
whether now or hereafter authorized, or any agreement between the Trust and any
national securities exchange.
(b) The term "Principal Shareholder" shall mean any corporation, Person or
other entity which is the beneficial owner, directly or indirectly, of 5% or
more of the outstanding Shares of any class or series and shall include any
affiliate or associate, as such terms are defined in clause (ii) below, of a
Principal Shareholder. For the purposes of this Section, in addition to the
Shares which a corporation, Person or other entity beneficially owns directly,
(a) any corporation, Person or other entity shall be deemed to be the beneficial
owner of any Shares (i) which it has the right to acquire pursuant to any
agreement or upon exercise of conversion rights or warrants, or otherwise (but
excluding share options granted by the Trust) or (ii) which are beneficially
owned, directly or indirectly (including Shares deemed owned through application
of clause (i) above), by any other corporation, Person or entity with which it
or its "affiliate" or "associate" (as defined below) has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of Shares, or which is its "affiliate" or "associate" as those terms
are defined in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, and (b) the outstanding Shares shall include
Shares deemed owned through application of clauses (i) and (ii) above but shall
not include any other Shares which may be issuable pursuant to any agreement, or
upon exercise of conversion rights or warrants, or otherwise.
(c) This Section shall apply to the following transactions:
(i) The merger or consolidation of the Trust or any subsidiary of the Trust
with or into any Principal Shareholder.
(ii) The issuance of any securities of the Trust to any Principal
Shareholder for cash (other than pursuant to any automatic dividend reinvestment
plan).
(iii) The sale, lease or exchange of all or any substantial part of the
assets of the Trust to any Principal Shareholder (except assets having an
aggregate fair market value of less than $1,000,000, aggregating for the purpose
of such computation all assets sold, leased or exchanged in any series of
similar transactions within a twelve-month period.)
(iv) The sale, lease or exchange to the Trust or any subsidiary thereof, in
exchange for securities of the Trust, of any assets of any Principal Shareholder
(except assets having an aggregate fair market value of less than $1,000,000,
aggregating for the purposes of such computation all assets sold, leased or
exchanged in any series of similar transactions within a twelve-month period).
(d) The provisions of this Section shall not be applicable to (i) any of
the transactions described in paragraph (c) of this Section if 80% of the
Trustees shall by resolution have approved a memorandum of understanding with
such Principal Shareholder with respect to and substantially consistent with
such transaction, in which case no shareholder vote shall be required by this
Section, or (ii) any such transaction with any entity of which a majority of the
outstanding shares of all classes and series of a stock normally entitled to
vote in elections of directors is owned of record or beneficially by the Trust
and its subsidiaries.
(e) The Board of Trustees shall have the power and duty to determine for
the purposes of this Section on the basis of information known to the Trust
whether (i) a corporation, person or entity beneficially owns 5% or more of the
outstanding Shares of any class or series, (ii) a corporation, person or entity
is an "affiliate" or "associate" (as defined above) of another, (iii) the assets
being acquired or leased to or by the Trust or any subsidiary thereof constitute
a substantial part of the assets of the Trust and have an aggregate fair market
value of less than $1,000,000, and (iv) the memorandum of understanding referred
to in paragraph (d) hereof is substantially consistent with the transaction
covered thereby. Any such determination shall be conclusive and binding for all
purposes of this Section.
ARTICLE XII
Miscellaneous
12.1 Filing. (a) This Declaration and any amendment or supplement hereto
shall be filed in such places as may be required or as the Trustees deem
appropriate. Each amendment or supplement shall be accompanied by a certificate
signed and acknowledged by a Trustee stating that such action was duly taken in
a manner provided herein, and shall, upon insertion in the Trust's minute book,
be conclusive evidence of all amendments contained therein. A restated
Declaration, containing the original Declaration and all amendments and
supplements theretofore made, may be executed from time to time by a majority of
the Trustees and shall, upon insertion in the Trust's minute book, be conclusive
evidence of all amendments and supplements contained therein and may thereafter
be referred to in lieu of the original Declaration and the various amendments
and supplements thereto.
(b) The Trustees hereby authorize and direct a Certificate of Trust, in the
form attached hereto as Exhibit A, to be executed and filed with the Office of
the Secretary of State of the State of Delaware in accordance with the Delaware
Statutory Trust Act.
12.2 Resident Agent. The Trust shall maintain a resident agent in the State
of Delaware, which agent shall be Delaware GCL Services LLC, #3 S. American
Avenue, Dover, Delaware 19901. The Trustees may designate a successor resident
agent, provided, however, that such appointment shall not become effective until
written notice thereof is delivered to the office of the Secretary of the State.
12.3 Governing Law. This Declaration is executed by the Trustees and
delivered in the State of Delaware and with reference to the laws thereof, and
the rights of all parties and the validity and construction of every provision
hereof shall be subject to and construed according to laws of said State and
reference shall be specifically made to the Delaware General Corporation Law as
to the construction of matters not specifically covered herein or as to which an
ambiguity exists, although such law shall not be viewed as limiting the powers
otherwise granted to the Trustees hereunder and any ambiguity shall be viewed in
favor of such powers.
12.4 Counterparts. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
12.5 Reliance by Third Parties. Any certificate executed by an individual
who, according to the records of the Trust, or of any recording office in which
this Declaration may be recorded, appears to be a Trustee hereunder, certifying
to: (a) the number or identity of Trustees or Shareholders, (b) the name of the
Trust, (c) the due authorization of the execution of any instrument or writing,
(d) the form of any vote passed at a meeting of Trustees or Shareholders, (e)
the fact that the number of Trustees or Shareholders present at any meeting or
executing any written instrument satisfies the requirements of this Declaration,
(f) the form of any By Laws adopted by or the identity of any officers elected
by the Trustees, or (g) the existence of any fact or facts which in any manner
relate to the affairs of the Trust, shall be conclusive evidence as to the
matters so certified in favor of any person dealing with the Trustees and their
successors.
12.6 Provisions in Conflict with Law or Regulation. (a) The provisions of
this Declaration are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions is in conflict with the 1940 Act,
the regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Declaration; provided, however, that
such determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
Exhibit (b) (i) under Form N-2
AMENDED AND RESTATED
BY-LAWS
of
FEDERATED PREMIER MUNICIPAL INCOME FUND
A Delaware Statutory Trust
Dated as of December 16, 2002
INTRODUCTION
A. Agreement and Declaration of Trust. These by-laws shall be subject to
the Agreement and Declaration of Trust, as from time to time, in effect (the
"Declaration of Trust"), of Federated Premier Municipal Income Fund, a Delaware
statutory trust (the "Trust"). In the event of any inconsistency between the
terms hereof and the terms of the Declaration of Trust, the terms of the
Declaration of Trust shall control.
B. Definitions. Capitalized terms used herein and not herein defined are
used as defined in the Declaration of Trust.
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICES. The Trustees shall fix and, from time to
time, may change the location of the principal executive office of the Trust at
any place within or outside the State of Delaware.
Section 2. DELAWARE OFFICE. The Trustees shall establish a registered
office in the State of Delaware and shall appoint a registered agent for service
of process in the State of Delaware.
Section 3. OTHER OFFICES. The Board may at any time establish branch or
subordinate offices at any place or places where the Trust intends to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at any
place within or outside the State of Delaware designated by the Board. In the
absence of any such designation by the Board, shareholders' meetings shall be
held at the principal executive office of the Trust. For purposes of these
By-Laws, the term "shareholder" shall mean a record owner of shares of the
Trust.
Section 2. CALL OF MEETING. Meetings of the shareholders shall be called as
provided in Section 10.1 of the Declaration.
Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article II not less than seven (7) nor more than one hundred twenty (120)
days before the date of the meeting. The notice shall specify (i) the place,
date and hour of the meeting, and (ii) the general nature of the business to be
transacted. The notice of any meeting at which trustees are to be elected also
shall include the name of any nominee or nominees who at the time of the notice
are intended to be presented for election. Except with respect to adjournments
as provided herein, no business shall be transacted at such meeting other than
that specified in the notice.
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first-class mail,
courier, telegraphic, facsimile or electronic mail, or other written
communication, charges prepaid, addressed to the shareholder at the address of
that shareholder appearing on the books of the Trust or its transfer agent or
given by the shareholder to the Trust for the purpose of notice. If no such
address appears on the Trust's books or is given, notice shall be deemed to have
been given if sent to that shareholder by first-class mail, courier,
telegraphic, facsimile or electronic mail, or other written communication to the
Trust's principal executive office. Notice shall be deemed to have been given at
the time when delivered personally, deposited in the mail or with a courier, or
sent by telegram, facsimile, electronic mail or other means of written
communication.
If any notice addressed to a shareholder at the address of that shareholder
appearing on the books of the Trust is returned to the Trust marked to indicate
that the notice to the shareholder cannot be delivered at that address, all
future notices or reports shall be deemed to have been duly given without
further mailing, or substantial equivalent thereof, if such notices shall be
available to the shareholder on written demand of the shareholder at the
principal executive office of the Trust for a period of one year from the date
of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting shall be executed by the secretary, assistant secretary,
transfer agent, or solicitation agent of the Trust giving the notice and shall
be filed and maintained in the records of the Trust. Such affidavit shall, in
the absence of fraud, be prima facie evidence of the facts stated therein.
Section 5. ADJOURNED MEETING; NOTICE. Any shareholders' meeting, whether or
not a quorum is present, may be adjourned from time to time (and at any time
during the course of the meeting) by a majority of the votes cast by those
shareholders present in person or by proxy, or by the chairman of the meeting.
Any adjournment may be with respect to one or more proposals, but not
necessarily all proposals, to be voted or acted upon at such meeting and any
adjournment will not delay or otherwise affect the effectiveness and validity of
a vote or other action taken at a shareholders' meeting prior to adjournment.
When any shareholders' meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed or unless the
adjournment is for more than one hundred eighty (180) days from the record date
set for the original meeting, in which case the Board shall set a new record
date. If notice of any such adjourned meeting is required pursuant to the
preceding sentence, it shall be given to each shareholder of record entitled to
vote at the adjourned meeting in accordance with the provisions of Sections 3
and 4 of this Article II. At any adjourned meeting, the Trust may transact any
business that might have been transacted at the original meeting.
Section 6. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of the
Declaration of Trust and these By-Laws, as in effect at such time. The
shareholders' vote may be by voice vote or by ballot; provided, however, that
any election of trustees must be by ballot if demanded by any shareholder before
the voting has begun. Any shareholder may vote part of the shares in favor of
the proposal and refrain from voting the remaining shares or vote them against
the proposal, but if the shareholder fails to specify the number of shares which
the shareholder is voting affirmatively, it will be conclusively presumed that
the shareholder's approving vote is with respect to the total shares that the
shareholder is entitled to vote on such proposal.
Abstentions and broker non-votes will be included for purposes of
determining whether a quorum is present at a shareholders' meeting. Abstentions
and broker non-votes will be treated as votes present at a shareholders'
meeting, but will not be treated as votes cast. Abstentions and broker
non-votes, therefore, will have no effect on proposals which require a plurality
or majority of votes cast for approval, but will have the same effect as a vote
"against" on proposals requiring a majority or other specified percentage of
outstanding voting securities for approval.
Section 7. QUORUM. Except when a larger quorum is required by applicable
law, the Declaration of Trust or these By-Laws, thirty-three and one-third
percent (33-1/3%) of the shares outstanding and entitled to vote present in
person or represented by proxy at a shareholders' meeting shall constitute a
quorum at such meeting. When a separate vote by one or more series or classes is
required, thirty-three and one-third percent (33-1/3%) of the outstanding shares
of each such series or class entitled to vote present in person or represented
by proxy at a shareholders' meeting shall constitute a quorum of such series or
class.
Section 8. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The
transactions of a meeting of shareholders, however called and noticed and
wherever held, shall be valid as though transacted at a meeting duly held after
regular call and notice if a quorum is present either in person or by proxy.
Attendance by a person at a meeting shall also constitute a waiver of notice of
that meeting with respect to that person, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened and except that such attendance is not a
waiver of any right to object to the consideration of matters not included in
the notice of the meeting if that objection is expressly made at the beginning
of the meeting. Whenever notice of a meeting is required to be given to a
shareholder under the Declaration of Trust or these By-Laws, a written waiver
thereof, executed before or after the meeting by such shareholder or his or her
attorney thereunto authorized and filed with the records of the meeting, shall
be deemed equivalent to such notice.
Section 9. PROXIES. Every shareholder entitled to vote for trustees or on
any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the shareholder and filed
with the secretary of the Trust; provided, that an alternative to the execution
of a written proxy may be permitted as provided in the second paragraph of this
Section 9. A proxy shall be deemed signed if the shareholder's name is placed on
the proxy (whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the shareholder or the shareholder's attorney-in-fact. A validly
executed proxy which does not state that it is irrevocable shall continue in
full force and effect unless (i) revoked by the shareholder executing it by a
written notice delivered to the Trust prior to the exercise of the proxy or by
the shareholder's execution of a subsequent proxy or attendance and vote in
person at the meeting; or (ii) written notice of the death or incapacity of the
shareholder is received by the Trust before the proxy's vote is counted;
provided, however, that no proxy shall be valid after the expiration of eleven
(11) months from the date of the proxy unless otherwise provided in the proxy.
The revocability of a proxy that states on its face that it is irrevocable shall
be governed by the provisions of the General Corporation Law of the State of
Delaware.
With respect to any shareholders' meeting, the Board may act to permit the
Trust to accept proxies by any electronic, telephonic, computerized,
telecommunications or other reasonable alternative to the execution of a written
instrument authorizing the proxy to act, provided the shareholder's
authorization is received within eleven (11) months before the meeting. A proxy
with respect to shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest with the challenger.
Section 10. INSPECTORS OF ELECTION. Before any meeting of shareholders, the
Board may appoint any person other than nominees for office to act as inspector
of election at the meeting or its adjournment. If no inspector of election is so
appointed, the chairman of the meeting may, and on the request of any
shareholder or a shareholder's proxy shall, appoint an inspector of election at
the meeting. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may, and on the request of any
shareholder or a shareholder's proxy shall, appoint a person to fill the
vacancy.
The inspector shall:
(a) determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising in
connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result of voting or consents; and
(g) do any other acts that may be proper to conduct the election or vote
with fairness to all shareholders.
ARTICLE III
TRUSTEES
Section 1. VACANCIES. Vacancies in the Board may be filled by a majority of
the remaining trustees, though less than a quorum, or by a sole remaining
trustee, unless the Board calls a meeting of shareholders for the purpose of
filling such vacancies. In the event that all Trustee offices become vacant, an
authorized officer of the Investment Adviser shall serve as the sole remaining
Trustee effective upon the vacancy in the office of the last Trustee, subject to
the provisions of the 1940 Act. In such case, the Investment Adviser, as the
sole remaining Trustee, shall, as soon as practicable, fill all of the vacancies
on the Board; provided, however, that the percentage of Trustees who are not
Interested Persons of the Trust shall be no less than that permitted by the 1940
Act. Thereupon, the Investment Adviser shall resign as Trustee and a meeting of
the Shareholders shall be called, as required by the 1940 Act, for the election
of Trustees.
Section 2. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of the
Board may be held at any place within or outside the State of Delaware that has
been designated from time to time by the Board. In the absence of such a
designation, regular meetings shall be held at the principal executive office of
the Trust. Subject to any applicable requirements of the 1940 Act, any meeting,
regular or special, may be held by conference telephone or similar communication
equipment, so long as all trustees participating in the meeting can hear one
another, and all such trustees shall be deemed to be present in person at such
meeting for purposes of the DBTA and, to the extent permitted, the 1940 Act.
Section 3. REGULAR MEETINGS. Regular meetings of the Board shall be held
without call at such time as shall from time to time be fixed by the Board. Such
regular meetings may be held without notice.
Section 4. SPECIAL MEETINGS. Special meetings of the Board for any purpose
or purposes may be called at any time by the chairman of the Board, the
president, any vice president, the secretary or any trustee.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each trustee or sent by first-class mail, courier
or telegram, charges prepaid, or by facsimile or electronic mail, addressed to
each trustee at that trustee's address as it is shown on the records of the
Trust. In case the notice is mailed, it shall be deposited in the United States
mail at least seven (7) days before the time of the holding of the meeting. In
case the notice is delivered personally, by telephone, by courier, to the
telegraph company, or by express mail, facsimile, electronic mail or similar
service, it shall be delivered at least forty-eight (48) hours before the time
of the holding of the meeting. Any oral notice given personally or by telephone
may be communicated either to the trustee or to a person at the office of the
trustee who the person giving the notice has reason to believe will promptly
communicate it to the trustee. The notice need not specify the purpose of the
meeting or the place if the meeting is to be held at the principal executive
office of the Trust.
Section 5. ACTION WITHOUT A MEETING. Unless the 1940 Act requires that a
particular action be taken only at a meeting at which the Trustees are present
in person, any action to be taken by the Trustees at a meeting may be taken
without such meeting by the written consent of a majority of the Trustees then
in office. Any such written consent may be executed and given by telecopy or
similar electronic means. Such written consents shall be filed with the minutes
of the proceedings of the Trustees. If any action is so taken by the Trustees by
the written consent of less than all of the Trustees, prompt notice of the
taking of such action shall be furnished to each Trustee who did not execute
such written consent, provided that the effectiveness of such action shall not
be impaired by any delay or failure to furnish such notice.
Section 6. QUORUM. A majority of the authorized number of Trustees shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Sections 8 and 9 of this Article III. Every act or decision done or
made by a majority of the Trustees present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board, subject to the
provisions of the Declaration of Trust. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
Trustees if any action taken is approved by at least a majority of the required
quorum for that meeting.
Section 7. WAIVER OF NOTICE. Notice of any meeting need not be given to any
Trustee who either before or after the meeting signs a written waiver of notice,
a consent to holding the meeting, or an approval of the minutes. The waiver of
notice or consent need not specify the purpose of the meeting. All such waivers,
consents, and approvals shall be filed with the records of the Trust or made a
part of the minutes of the meeting. Notice of a meeting shall also be deemed
given to any Trustee who attends the meeting without protesting before or at its
commencement about the lack of notice to that Trustee.
Section 8. ADJOURNMENT. A majority of the Trustees present, whether or not
constituting a quorum, may adjourn any matter at any meeting to another time and
place.
Section 9. NOTICE OF ADJOURNMENT. Notice of the time and place of holding
an adjourned meeting need not be given unless the meeting is adjourned for more
than seven (7) days, in which case notice of the time and place shall be given
before the time of the recommencement of an adjourned meeting to the Trustees
who were present at the time of the adjournment.
Section 10. FEES AND COMPENSATION OF TRUSTEES. Trustees and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board. This Section 10 shall not be construed to preclude any trustee from
serving the Trust in any other capacity as an officer, agent, employee, or
otherwise and receiving compensation for those services.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF TRUSTEES. The Board may, by resolution adopted by
a majority of the authorized number of Trustees, designate one or more
committees as set forth in the Declaration of Trust, to serve at the pleasure of
the Board. The Board may designate one or more Trustees or other persons as
alternate members of any committee who may replace any absent member at any
meeting of the committee. Any committee, to the extent provided in the
resolution of the Board, shall have the authority of the Board, except with
respect to:
(a) the approval of any action which under the Declaration of Trust or
applicable law also requires shareholders' approval or requires approval by a
majority of the entire Board or certain members of the Board;
(b) the filling of vacancies on the Board or on any committee. However, a
committee may nominate trustees and, if required by the 1940 Act, elect trustees
who are not "interested persons" as defined in the 1940 Act;
(c) the fixing of compensation of the trustees for serving on the Board or
on any committee;
(d) the amendment or repeal of the Declaration of Trust or of these By-Laws
or the adoption of a new Declaration of Trust or new By-Laws; or
(e) the amendment or repeal of any resolution of the Board which by its
express terms is not so amendable or repealable.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of any
committee shall be governed by and held and taken in accordance with the
provisions of the Declaration of Trust and Article III of these By-Laws, with
such changes in the context thereof as are necessary to substitute the committee
and its members for the Board and its members, except that the time of regular
meetings of any committee may be determined either by the Board or by the
committee. Special meetings of any committee may also be called by resolution of
the Board, and notice of special meetings of any committee shall also be given
to all alternate members who shall have the right to attend all meetings of the
committee. The Board may adopt rules for the government of any committee not
inconsistent with the provisions of these By-Laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the Trust shall be a president, a
secretary, and a treasurer. The Trust may also have, at the discretion of the
Board, one or more vice chairmen, one or more vice presidents, one or more
assistant vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article V. Any number of offices may be
held by the same person. Any officer may be, but need not be, a Trustee or
Shareholder.
Section 2. ELECTION OF OFFICERS. The officers of the Trust shall be chosen
by the Board, and each shall serve at the pleasure of the Board, subject to the
rights, if any, of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board may appoint and may empower the
president to appoint such other officers as the business of the Trust may
require, each of whom shall hold office for such period, have such authority and
perform such duties as are provided in these By-Laws or as the Board may from
time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if
any, of an officer under any contract of employment, any officer may be removed,
either with or without cause, by the Board at any regular or special meeting of
the Board, or by an officer upon whom such power of removal may be conferred by
the Board.
Any officer may resign at any time by giving written notice to the Trust.
Any resignation shall take effect at the date of the receipt of that notice or
at any later time specified in such notice. Unless otherwise specified in such
notice, the acceptance of the resignation shall not be necessary to make it
effective. Any resignation is without prejudice to the rights, if any, of the
Trust under any contract to which the officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of death,
resignation, removal, disqualification or other cause shall be filled in the
manner prescribed in these By-Laws for regular appointment to that office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the Board shall, if
present, preside at meetings of the Board and the shareholders and exercise and
perform such other powers and duties as may be from time to time assigned to the
chairman by the Board or prescribed by these By-Laws. In the absence,
resignation, disability or death of the president, the chairman shall exercise
all the powers and perform all the duties of the president until his or her
return, such disability shall be removed or a new president shall have been
elected.
Section 7. VICE CHAIRMAN. Any vice chairman shall perform such duties as
may be assigned to him from time to time by the Board.
Section 8. PRESIDENT. Subject to such supervisory powers, if any, as may be
given by the Board to the chairman of the Board, the president shall be the
principal operating and executive officer of the Trust and shall, subject to the
control of the Board, have general supervision, direction and control of the
business and the officers of the Trust. In the absence of the chairman of the
Board, the president or his designee shall preside at all meetings of the
shareholders and at all meetings of the Board. The president shall have the
general powers and duties of management usually vested in the office of
president of a corporation and shall have such other powers and duties as may be
prescribed by the Board or these By-Laws.
Section 9. VICE PRESIDENTS. In the absence or disability of the president
and the chairman of the Board, the executive vice presidents or vice presidents,
if any, in order of their rank as fixed by the Board or if not ranked, a vice
president designated by the Board, shall perform all the duties of the president
and when so acting shall have all powers of, and be subject to all the
restrictions upon, the president. The executive vice president or vice
presidents, whichever the case may be, shall have such other powers and perform
such other duties as from time to time may be prescribed for them respectively
by the Board, these By-Laws, the president or the chairman of the Board.
Section 10. SECRETARY. The secretary shall keep or cause to be kept at the
principal executive office of the Trust or such other place as the Board may
direct a book of minutes of all meetings and actions of trustees, committees of
trustees and shareholders with the time and place of holding, whether regular or
special, and if special, how authorized, the notice given, the names of those
present at trustees' meetings or committee meetings, the number of shares
present or represented at shareholders' meetings, and the proceedings.
The secretary shall cause to be kept at the principal executive office of
the Trust or at the office of the Trust's administrator, transfer agent or
registrar, as determined by resolution of the Board, a share register or a
duplicate share register showing the names of all shareholders and their
addresses, the number, series and classes of shares held by each, the number and
date of certificates, if any, issued for the same and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give or cause to be given notice of all meetings of the
shareholders and of the Board required by these By-Laws or by applicable law to
be given and shall have such other powers and perform such other duties as may
be prescribed by the Board or by these By-Laws.
Section 11. TREASURER. The treasurer shall be the principal financial
officer of the Trust and shall keep and maintain or cause to be kept and
maintained adequate and correct books and records of accounts of the properties
and business transactions of the Trust, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings
and shares. The books of account shall at all reasonable times be open to
inspection by any trustee.
The treasurer shall deposit all monies and other valuables in the name and
to the credit of the Trust with such depositories as may be designated by the
Board. The treasurer shall disburse the funds of the Trust as may be ordered by
the Board, shall render to the president and trustees, whenever they request it,
an account of all of the treasurer's transactions as principal financial officer
and of the financial condition of the Trust and shall have other powers and
perform such other duties as may be prescribed by the Board or these By-Laws.
ARTICLE VI
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The Trust shall
keep at its offices or at the office of its transfer or other duly authorized
agent, records of its Shareholders, that provide the names and addresses of all
Shareholders and the number, series and classes, if any, of Shares held by each
Shareholder. Such records may be inspected during the Trust's regular business
hours by any Shareholder, or its duly authorized representative, upon reasonable
written demand to the Trust, for any purpose reasonably related to such
Shareholder's interest as a Shareholder.
Section 2. MAINTENANCE AND INSPECTION OF DECLARATION OF TRUST AND BY-LAWS.
The Trust shall keep at its offices the original or a copy of the Declaration of
Trust and these By-Laws, as amended or restated from time to time, where they
may be inspected during the Trust's regular business hours by any Shareholder,
or its duly authorized representative, upon reasonable written demand to the
Trust, for any purpose reasonably related to such Shareholder's interest as a
Shareholder.
Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The accounting
books and records and minutes of proceedings of the Shareholders, the Board, any
committee of the Board or any advisory committee shall be kept at such place or
places designated by the Board or, in the absence of such designation, at the
offices of the Trust. The minutes and the accounting books and records shall be
kept either in written form or in any other form capable of being converted into
written form.
If information is requested by a Shareholder, the Board, or, in case the
Board does not act, the president, any vice president or the secretary, shall
establish reasonable standards governing, without limitation, the information
and documents to be furnished and the time and the location, if appropriate, of
furnishing such information and documents. Costs of providing such information
and documents shall be borne by the requesting Shareholder. The Trust shall be
entitled to reimbursement for its direct, out-of-pocket expenses incurred in
declining unreasonable requests (in whole or in part) for information or
documents.
The Board, or, in case the Board does not act, the president, any vice
president or the secretary, may keep confidential from Shareholders for such
period of time as the Board or such officer, as applicable, deems reasonable any
information that the Board or such officer, as applicable, reasonably believes
to be in the nature of trade secrets or other information that the Board or such
officer, as the case may be, in good faith believes would not be in the best
interests of the Trust to disclose or that could damage the Trust or its
business or that the Trust is required by law or by agreement with a third party
to keep confidential.
Section 4. INSPECTION BY TRUSTEES. Every Trustee shall have the absolute
right during the Trust's regular business hours to inspect all books, records,
and documents of every kind and the physical properties of the Trust. This
inspection by a Trustee may be made in person or by an agent or attorney and the
right of inspection includes the right to copy and make extracts of documents.
ARTICLE VII
DIVIDENDS
Section 1. DECLARATION OF DIVIDENDS. Dividends upon the shares of
beneficial interest of the Trust may, subject to the provisions of the
Declaration of Trust, if any, be declared by the Board at any regular or special
meeting, pursuant to applicable law. Dividends may be paid in cash, in property,
or in shares of the Trust.
Section 2. RESERVES. Before payment of any dividend, there may be set aside
out of any funds of the Trust available for dividends such sum or sums as the
Board may, from time to time, in its absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Trust, or for such other purpose as
the Board shall deem to be in the best interests of the Trust, and the Board may
abolish any such reserve in the manner in which it was created.
ARTICLE VIII
GENERAL MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts,
or other orders for payment of money, notes or other evidences of indebtedness
issued in the name of or payable to the Trust shall be signed or endorsed by
such person or persons and in such manner as from time to time shall be
determined by the Board or as may be contracted to service providers.
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board, except as
otherwise provided in these By-Laws, may authorize any officer or officers or
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the Trust and this authority may be general or confined
to specific instances; and unless so authorized or ratified by the Board or
within the agency power of an officer, no officer, agent, or employee shall have
any power or authority to bind the Trust by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
Section 3. CERTIFICATES FOR SHARES. No certificates for shares of
beneficial interest in any series shall be issued except as the Board of
Trustees may otherwise determine from time to time. Should the Board of Trustees
authorize the issuance of such certificates, a certificate or certificates for
shares of beneficial interest in any series of the Trust may be issued to a
shareholder upon the shareholder's request when such shares are fully paid. All
certificates shall be signed in the name of the Trust by the chairman of the
Board or the president or vice president and by the treasurer or an assistant
treasurer or the secretary or any assistant secretary, certifying the number of
shares and the series and class of shares owned by the shareholders. Any or all
of the signatures on the certificate may be facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed on a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
Trust with the same effect as if such person were an officer, transfer agent or
registrar at the date of issue. Notwithstanding the foregoing, the Trust may
adopt and use a system of issuance, recordation and transfer of its shares by
electronic or other means.
Section 4. LOST CERTIFICATES. Except as provided in Section 3 or this
Section 4, no new certificates for shares shall be issued to replace an old
certificate unless the latter is surrendered to the Trust and cancelled at the
same time. The Board may, in case any share certificate or certificate for any
other security is lost, stolen, or destroyed, authorize the issuance of a
replacement certificate on such terms and conditions as the Board may require,
including a provision for indemnification of the Trust secured by a bond or
other adequate security sufficient to protect the Trust against any claim that
may be made against it, including any expense or liability on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY TRUST. The
chairman of the Board, the president or any vice president or any other person
authorized by resolution of the Board or by any of the foregoing designated
officers, is authorized to vote or represent on behalf of the Trust any and all
shares of any corporation, partnership, trust, or other entity, foreign or
domestic, standing in the name of the Trust. The authority granted may be
exercised in person or by a proxy duly executed by such designated person.
Section 6. TRANSFER OF SHARES. Shares of the Trust shall be transferable
only on the record books of the Trust by the person in whose name such shares
are registered, or by his or her duly authorized attorney or representative. In
all cases of transfer by an attorney-in-fact, the original power of attorney, or
an official copy thereof duly certified, shall be deposited and remain with the
Trust, its transfer agent or other duly authorized agent. In case of transfers
by executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be presented to the Trust,
transfer agent or other duly authorized agent, and may be required to be
deposited and remain with the Trust, its transfer agent or other duly authorized
agent. No transfer shall be made unless and until the certificate issued to the
transferor, if any, shall be delivered to the Trust, its transfer agent or other
duly authorized agent, properly endorsed.
Section 7. HOLDERS OF RECORD. The Trust shall be entitled to treat the
holder of record of any share or shares of the Trust as the owner thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
the Trust shall have express or other notice thereof.
Section 8. FISCAL YEAR. The fiscal year of the Trust shall be established,
re-established or changed from time to time by resolution of the Board. The
fiscal year of the Trust shall be the taxable year of the Trust.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT. These By-Laws may be restated and/or amended at any
time, without the approval of the shareholders, by an instrument in writing
signed by, or a resolution of, a majority of the then Board.
Exhibit (e) under Form N-2
FEDERATED PREMIER MUNICIPAL INCOME FUND
TERMS AND CONDITIONS OF THE DIVIDEND REINVESTMENT PLAN
Registered holders ("Common Shareholders") of common shares of beneficial
interest (the "Common Shares") of Federated Premier Municipal Income Fund (the
"Trust") will automatically be enrolled (the "Participants") in its Dividend
Reinvestment Plan (the "Plan") and are advised as follows:
1. THE PLAN AGENT. EquiServe Trust Company, N.A. (the "Agent") will act as
Agent for each Participant. The Agent will open an account for each Participant
under the Plan in the same name in which his or her outstanding Common Shares
are registered.
2. CASH OPTION. The Trust will declare its income dividends and capital
gains distributions ("Distributions") payable in Common Shares, or, at the
option of Common Shareholders, in cash. Therefore, each Participant will have
all Distributions on his or her Common Shares automatically reinvested in
additional Common Shares, unless such Participant elects to receive such
Distributions in cash by contacting the Agent.
3. MARKET PREMIUM ISSUANCES. If on the payment date for a Distribution, the
net asset value per Common Share is equal to or less than the market price per
Common Share plus estimated processing fees (which include any applicable
brokerage commissions the Agent is required to pay), the Agent shall receive
newly issued Common Shares ("Additional Common Shares"), including fractions,
from the Trust for each Participant's account. The number of Additional Common
Shares to be credited shall be determined by dividing the dollar amount of the
Distribution by the greater of (i) the net asset value per Common Share on the
payment date, or (ii) 95% of the market price per Common Share on the payment
date.
4. MARKET DISCOUNT PURCHASES. If the net asset value per Common Share
exceeds the market price plus estimated processing fees (which include any
applicable brokerage commissions the Agent is required to pay) on the payment
date for a Distribution, the Agent shall endeavor to apply the amount of such
Distribution on each Participant's Common Shares to purchase Common Shares on
the open market. Such purchases will be made on or shortly after the payment
date for such Distribution but in no event will purchases be made on or after
the ex-dividend date for the next Distribution. The weighted average price plus
estimated processing fees (which include any applicable brokerage commissions
the Agent is required to pay) of all Common Shares purchased by the Agent as
Agent shall be the price per Common Share allocable to each Participant. If,
before the Agent has completed its purchases, the market price plus estimated
processing fees (which include any applicable brokerage commissions the Agent is
required to pay) exceeds the net asset value of the Common Shares as of the
payment date, the purchase price paid by the Agent may exceed the net asset
value of the Common Shares, resulting in the acquisition of fewer Common Shares
than if such Distribution had been paid in Common Shares issued by the Trust. If
the Agent is unable to invest the full Distribution amount in purchases in the
open market or if the market discount shifts to a market premium during the
purchase period then the Agent may cease making purchases (when should EquiServe
begin issuing shares: the instant we are notified of a market premium or at the
close of business later that day if a market premium environment persists?) in
the open market and may invest the uninvested portion of the Distribution in
newly issued Common Shares received by the Trust at the net asset value per
Common Share at the close of business provided that, if the net asset value is
less than or equal to 95% of the then current market price per Common Share, the
dollar amount of the Distribution will be divided by 95% of the market price on
the payment date. Participants should note that they will not be able to
instruct the Agent to purchase Common Shares at a specific time,a specific
price, or through a specific broker-dealer. Open-market purchases may be made on
any securities exchange where Common Shares are traded, in the over-the-counter
market or in negotiated transactions, and may be on such terms as to price,
delivery and otherwise as the Agent shall determine.
5. VALUATION. The market price of Common Shares on a particular date shall
be the last sales price on the securities exchange (the "Exchange") where the
Common Shares are listed on that date, or, if there is no sale on such Exchange
on that date, then the mean between the closing bid and asked quotations on such
Exchange on such date will be used. The net asset value per Common Share on a
particular date shall be the amount calculated on that date (or if not
calculated on such date, the amount most recently calculated) by or on behalf of
the Trust in accordance with the Trust's current prospectus.
6. SAFEKEEPING. In order to protect against loss, theft or destruction,
Participants may deposit Common Shares registered in their own names and held in
certificate form into their Plan accounts. Certificates, along with a letter of
instruction, should be sent to the Agent by registered mail, insured for 2% of
their market value. Participants should not endorse their certificates. There
are no fees for this service.
7. TAXATION. The automatic reinvestment of Distributions does not relieve
Participants of any taxes which may be payable on Distributions. Participants
will receive tax information annually for their personal records and to help
them prepare their federal income tax return. For further information as to tax
consequences of participation in the Plan, Participants should consult with
their own tax advisors.
8. LIABILITY OF AGENT. The Agent shall at all times act in good faith and
agrees to use its best efforts within reasonable limits to ensure the accuracy
of all services performed under this Agreement and to comply with applicable
law, but assumes no responsibility and shall not be liable for loss or damage
due to errors unless such error is caused by the Agent's negligence, bad faith,
or willful misconduct or that of its employees. Each Participant's uninvested
funds held by the Agent will not bear interest. The Agent shall have no
liability in connection with any inability to purchase Common Shares within the
time provided, or with the timing of any purchases effected. The Agent shall
have no responsibility for the value of Common Shares acquired. The Agent may
commingle Participants' funds.
9. RECORDKEEPING. The Agent may hold each Participant's Common Shares
acquired pursuant to the Plan together with the Common Shares of other Common
Shareholders of the Trust acquired pursuant to the Plan in non-certificated form
in the Agent's name or that of the Agent's nominee. Distributions on fractional
shares will be credited to each Participant's account. Each Participant will be
sent a confirmation by the Agent of each acquisition made for his or her account
as soon as practicable, but in no event later than 60 days, after the date
thereof. Upon a Participant's request, the Agent will deliver to the
Participant, without charge, a certificate or certificates for the full Common
Shares. Although each Participant may from time to time have an undivided
fractional interest in a Common Share of the Trust, no certificates for a
fractional share will be issued. Participants may request a certificate by
calling the Agent at 1-800-730-6001, writing to the Agent at EquiServe Trust
Company, N.A., P.O. Box 43010, Providence RI 02940-3010, or completing and
returning the transaction form attached to each Plan statement. The Agent will
issue certificates as soon as possible but in no event more than 5 business days
after receipt of a Participant's request. Similarly, Participants may request to
sell a portion of the Common Shares held by the Agent in their Plan accounts by
calling the Agent, writing to the Agent, or completing and returning the
transaction form attached to each Plan statement. The Agent will sell such
Common Shares through a broker-dealer selected by the Agent within 5 business
days of receipt of the request. The sale price will equal the weighted average
price of all Common Shares sold through the Plan on the day of the sale, less
any service and processing fees (which include applicable brokerage commissions
the Agent is required to pay). Participants should note that the Agent is unable
to accept instructions to sell on a specific date, a specific price, or through
a specific broker-dealer. Any share dividends or split shares distributed by the
Trust on Common Shares held by the Agent for Participants will be credited to
their accounts. In the event that the Trust makes available to its Common
Shareholders rights to purchase additional Common Shares, the Common Shares held
for each Participant under the Plan will be added to other Common Shares held by
the Participant in calculating the number of rights to be issued to each
Participant.
10. PROXY MATERIALS. The Agent will forward to each Participant any proxy
solicitation material. The Agent will vote any Common Shares held for a
Participant first in accordance with the instructions set forth on proxies
returned by such Participant to the Trust, and then with respect to any proxies
not returned by such Participant to the Trust, in the same proportion as the
Agent votes the proxies returned by the Participants to the Trust.
11. BROKERS, NOMINEE HOLDERS, ETC. In the case of shareholders such as
banks, brokers or nominees that hold Common Shares for others who are the
beneficial owners, the Agent will administer the Plan on the basis of the number
of Common Shares certified by the record shareholder as representing the total
amount registered in such shareholder's name and held for the account of
beneficial owners who are to participate in the Plan.
12. FEES. The Agent's service fee for handling Distributions will be paid
by the Trust. Each Participant will be charged his or her pro rata share of
processing fees (which include applicable brokerage commissions the Agent is
required to pay) on all open-market purchases. If a Participant elects to have
the Agent sell part or all of his or her Common Shares and remit the proceeds,
such Participant will subject to a $15.00 service fee and a $0.12 per share sold
processing fee (which include applicable brokerage commissions the Agent is
required to pay). The Participant will not be charged any other fees for this
service.
13. TERMINATION IN THE PLAN. Each registered Participant may terminate his
or her account under the Plan by notifying the Agent in writing at at EquiServe
Trust Company, N.A., P.O. Box 43010, Providence RI 02940-3010, by calling the
Agent at 1-800-730-6001 or by completing and returning the transaction form
attached to each Plan statement. Such termination will be effective with respect
to a particular Distribution if the Participant's notice is received by the
Agent at least ten days prior to such Distribution record date. The Plan may be
terminated by the Agent or the Trust upon notice in writing mailed to each
Participant at least 60 days prior to the effective date of the termination.
Upon any termination, the Agent will cause a certificate or certificates to be
issued for the full shares held for each Participant under the Plan and cash
adjustment for any fraction of a Common Share at the then current market value
of the Common Shares to be delivered to him or her without charge. If preferred,
a Participant may request the sale of all of the Common Shares held by the Agent
in his or her Plan account in order to terminate participation in the Plan. If a
Participant has terminated his or her participation in the Plan but continues to
have Common Shares registered in his or her name, he or she may re-enroll in the
Plan at any time by calling the Agent at 1-800-730-6001.
14. AMENDMENT OF THE PLAN. These terms and conditions may be amended by the
Agent or the Trust at any time but, except when necessary or appropriate to
comply with applicable law or the rules or policies of the Securities and
Exchange Commission or any other regulatory authority, only by mailing to each
Participant appropriate written notice at least 30 days prior to the effective
date thereof. The amendment shall be deemed to be accepted by each Participant
unless, prior to the effective date thereof, the Agent receives notice of the
termination of the Participant's account under the Plan. Any such amendment may
include an appointment by the Agent of a successor Agent, subject to the prior
written approval of the successor Agent by the Trust.
15. APPLICABLE LAW. These terms and conditions shall be governed by the
laws of DELAWARE.
Exhibit (g) under Form N-2
INVESTMENT MANAGEMENT AGREEMENT
This Agreement is made this 1st day of December, 2002, between Federated
Investment Management Company, a Delaware statutory trust having its principal
place of business in Pittsburgh, Pennsylvania (the "Adviser"), and Federated
Premier Intermediate Municipal Income Fund, aNULL Delaware statutory trust
having its principal place of business in Pittsburgh, Pennsylvania (the
"Trust").
WHEREAS the Trust is a closed-end management investment company as that
term is defined in the Investment Company Act of 1940, as amended, and is
registered as such with the Securities and Exchange Commission; and
WHEREAS Adviser is engaged in the business of rendering investment advisory
and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as
follows:
1. The Trust hereby appoints Adviser as its investment adviser, and Adviser
accepts the appointment. Subject to the direction of the Trustees, Adviser shall
provide investment research and supervision of the investments of the Trust and
conduct a continuous program of investment evaluation and of appropriate sale or
other disposition and reinvestment of the Trust's assets.
2. Adviser, in its supervision of the investments of the Trust, will be
guided by the Trust's investment objective and policies and the provisions and
restrictions contained in the Declaration of Trust and By-Laws of the Trust and
as set forth in the Registration Statement and exhibits as may be on file with
the Securities and Exchange Commission.
3. The Trust shall pay or cause to be paid all of its expenses, including,
without limitation, the expenses of organizing the Trust and continuing its
existence; fees and expenses of Trustees and officers of the Trust; fees for
investment advisory services and administrative personnel and services; expenses
incurred in the distribution of its shares ("Shares"), including expenses of
administrative support services; fees and expenses of preparing and printing its
Registration Statements under the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, and any amendments thereto; expenses of
registering and qualifying the Trust and Shares of the Trust under federal and
state laws and regulations; expenses of preparing, printing, and distributing
prospectuses (and any amendments thereto) to shareholders; interest expense,
taxes, fees, and commissions of every kind; expenses of issue (including cost of
Share certificates), purchase and repurchase of Shares; charges and expenses of
custodians, transfer agents, dividend disbursing agents, shareholder servicing
agents, and registrars; printing and mailing costs, auditing, accounting, and
legal expenses; reports to shareholders and governmental officers and
commissions; expenses of meetings of Trustees and shareholders and proxy
solicitations therefor; insurance expenses; association membership dues and such
nonrecurring items as may arise, including all losses and liabilities incurred
in administering the Trust. The Trust also will pay extraordinary expenses as
may arise including expenses incurred in connection with litigation,
proceedings, and claims and the legal obligations of the Trust to indemnify its
officers and Trustees and agents with respect thereto.
4. The Trust shall pay to Adviser, for all services rendered to the Trust
by Adviser hereunder, the fees set forth in the exhibits attached hereto.
5. The net asset value of the Trust's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses of the
Trust) to the extent that the Trust's expenses exceed such lower expense
limitation as the Adviser may, by notice to the Trust, voluntarily declare to be
effective.
7. This Agreement shall begin as of the date of execution of the exhibit
and shall continue in effect for two years from the date of this Agreement set
forth above and thereafter for successive periods of one year, subject to the
provisions for termination and all of the other terms and conditions hereof if:
(a) such continuation shall be specifically approved at least annually by the
vote of a majority of the Trustees of the Trust, including a majority of the
Trustees who are not parties to this Agreement or interested persons of any such
party cast in person at a meeting called for that purpose; and (b) Adviser shall
not have notified the Trust in writing at least sixty (60) days prior to the
anniversary date of this Agreement in any year thereafter that it does not
desire such continuation.
8. Notwithstanding any provision in this Agreement, it may be terminated at
any time with respect to the Trust, without the payment of any penalty, by the
Trustees or by a vote of the shareholders of the Trust on sixty (60) days'
written notice to Adviser.
9. This Agreement may not be assigned by Adviser and shall automatically
terminate in the event of any assignment. Adviser may employ or contract with
such other person, persons, corporation, or corporations at its own cost and
expense as it shall determine in order to assist it in carrying out this
Agreement.
10. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the obligations or duties under this Agreement on the part
of Adviser, Adviser shall not be liable to the Trust or to any shareholder for
any act or omission in the course of or connected in any way with rendering
services or for any losses that may be sustained in the purchase, holding, or
sale of any security.
11. This Agreement may be amended at any time by agreement of the parties
provided that the amendment shall be approved both by the vote of a majority of
the Trustees of the Trust including a majority of the Trustees who are not
parties to this Agreement or interested persons of any such party to this
Agreement (other than as Trustees of the Trust) cast in person at a meeting
called for that purpose.
12. The Trust is hereby expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust of the Adviser and agrees
that the obligations assumed by the Adviser pursuant to this Agreement shall be
limited in any case to the Adviser and its assets and, except to the extent
expressly permitted by the Investment Company Act of 1940, as amended, the Trust
shall not seek satisfaction of any such obligation from the shareholders of the
Adviser, the Trustees, officers, employees, or agents of the Adviser, or any of
them.
13. Adviser agrees to maintain the security and confidentiality of
nonpublic personal information (NPI") of Trust customers and consumers, as those
terms are defined in Regulation S-P, 17 CFR Part 248. Adviser agrees to use and
redisclose such NPI for the limited purposes of processing and servicing
transactions; for specific law enforcement and miscellaneous purposes; and to
service providers or in connection with joint marketing arrangements directed by
the Trust, in each instance in furtherance of fulfilling Adviser's obligations
under this Agreement and consistent with the exceptions provided in 17 CFR
Sections 248.14, 248.15 and 248.13, respectively.
14. The parties hereto acknowledge that Federated Investors, Inc., has
reserved the right to grant the non-exclusive use of the name Federated Premier
Intermediate Municipal Income Fund or any derivative thereof to any other
investment company, investment company portfolio, investment adviser,
distributor or other business enterprise, and to withdraw from the Trust the use
of the name Federated Premier Intermediate Municipal Income Fund. The name
Federated Premier Intermediate Municipal Income Fund will continue to be used by
the Trust so long as such use is mutually agreeable to Federated Investors, Inc.
and the Trust.
15. This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
16. This Agreement will become binding on the parties hereto upon their
execution of the attached exhibits to this Agreement.
EXHIBIT A
to the
Investment Management Agreement
Federated Premier Intermediate Municipal Income Fund
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to 0.55% of the
average daily value of managed assets of the Trust. Managed assets means the
total assets of the Trust (including assets atributable to any preferred shares
or borrowings that may be outstanding) minus the sum of accrued liabilities
(other than debt representing financial leverage).
The portion of the fee based upon the average daily managed assets of the
Fund shall be accrued daily at the rate of 1/365th of 0.55 of 1% applied to the
daily managed assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
The Adviser will waive its investment advisory fees in the the amounts, and
for the time periods, set forth below:
Twelve Month Percentage Waived
Period Ending (as a percentage of
Average Daily Managed
Month, Day, Year* Assets)
December 31, 2003 0.20%
December 31, 2004 0.20%
December 31, 2005 0.20%
December 31, 2006 0.20%
December 31, 2007 0.20%
December 31, 2008 0.15%
December 31, 2009 0.10%
December 31, 2010 0.05%
*From the commencement of operations
Witness the due execution hereof this 1st day of December, 2002.
Federated Premier Intermediate Municipal Income Fund
By: /s/ John W. McGonigle
Name: John W. McGonigle
Title: Executive Vice President
Federated Investment Management Company
By: /s/ Keith M. Schappert
Name: Keith M. Schappert
Title: President & CEO
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, dated as of December 1, 2002, that
Federated Premier Intermediate Municipal Income Fund, a statutory trust duly
organized under the laws of the State of Delaware (the "Trust"), does hereby
nominate, constitute and appoint Federated Investment Management Company, a
business trust duly organized under the laws of the State of Delaware (the
"Adviser"), to act hereunder as the true and lawful agent and attorney-in-fact
of the Trust, for the specific purpose of executing and delivering all such
agreements, instruments, contracts, assignments, bond powers, stock powers,
transfer instructions, receipts, waivers, consents and other documents, and
performing all such acts, as the Adviser may deem necessary or reasonably
desirable, related to the acquisition, disposition and/or reinvestment of the
funds and assets of the Trust in accordance with Adviser's supervision of the
investment, sale and reinvestment of the funds and assets of the Trust pursuant
to the authority granted to the Adviser as investment adviser of each Fund under
that certain investment advisory contract dated December 1, 2002 by and between
the Adviser and the Trust (such investment advisory contract, as may be amended,
supplemented or otherwise modified from time to time is hereinafter referred to
as the "Investment Management Agreement").
The Adviser shall exercise or omit to exercise the powers and authorities
granted herein in each case as the Adviser in its sole and absolute discretion
deems desirable or appropriate under existing circumstances. The Trust hereby
ratifies and confirms as good and effectual, at law or in equity, all that the
Adviser, and its officers and employees, may do by virtue hereof. However,
despite the above provisions, nothing herein shall be construed as imposing a
duty on the Adviser to act or assume responsibility for any matters referred to
above or other matters even though the Adviser may have power or authority
hereunder to do so. Nothing in this Limited Power of Attorney shall be construed
(i) to be an amendment or modification of, or supplement to, the Investment
Management Agreement, (ii) to amend, modify, limit or denigrate any duties,
obligations or liabilities of the Adviser under the terms of the Investment
Management Agreement or (iii) exonerate, relieve or release the Adviser from any
losses, obligations, penalties, actions, judgments and suits and other costs,
expenses and disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Adviser (x) under the terms of the
Investment Management Agreement or (y) at law, or in equity, for the performance
of its duties as the investment adviser of the Trust.
The Trust hereby agrees to indemnify and save harmless the Adviser and its
trustees, officers and employees (each of the foregoing an "Indemnified Party"
and collectively the "Indemnified Parties") against and from any and all losses,
obligations, penalties, actions, judgments and suits and other costs, expenses
and disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against an Indemnified Party, other than as a
consequence of gross negligence or willful misconduct on the part of an
Indemnified Party, arising out of or in connection with this Limited Power of
Attorney or any other agreement, instrument or document executed in connection
with the exercise of the authority granted to the Adviser herein to act on
behalf of the Trust, including without limitation the reasonable costs, expenses
and disbursements in connection with defending such Indemnified Party against
any claim or liability related to the exercise or performance of any of the
Adviser's powers or duties under this Limited Power of Attorney or any of the
other agreements, instruments or documents executed in connection with the
exercise of the authority granted to the Adviser herein to act on behalf of the
Trust, or the taking of any action under or in connection with any of the
foregoing. The obligations of the Trust under this paragraph shall survive the
termination of this Limited Power of Attorney with respect to actions taken by
the Adviser on behalf of the Trust during the term of this Limited Power of
Attorney.
Any person, partnership, corporation or other legal entity dealing with the
Adviser in its capacity as attorney-in-fact hereunder for the Trust is hereby
expressly put on notice that the Adviser is acting solely in the capacity as an
agent of the Trust and that any such person, partnership, corporation or other
legal entity must look solely to the Trust in question for enforcement of any
claim against the Trust, as the Adviser assumes no personal liability whatsoever
for obligations of the Trust entered into by the Adviser in its capacity as
attorney-in-fact for the Trust.
Each person, partnership, corporation or other legal entity which deals
with the Trust through the Adviser in its capacity as agent and attorney-in-fact
of the Trust, is hereby expressly put on notice (i) that all persons or entities
dealing with the Trust must look solely to the assets of the Trust for
enforcement of any claim against the Trust, as the Trustees, officers and/or
agents of such Trust, the shareholders of the various classes of shares of the
Trust assume no personal liability whatsoever for obligations entered into on
behalf of the Trust.
Liability for or recourse under or upon any undertaking of the Adviser
pursuant to the power or authority granted to the Adviser under this Limited
Power of Attorney under any rule of law, statute or constitution or by the
enforcement of any assessment or penalty or by legal or equitable proceedings or
otherwise shall be limited only to the assets of the Trust.
The Trust hereby agrees that no person, partnership, corporation or other
legal entity dealing with the Adviser shall be bound to inquire into the
Adviser's power and authority hereunder and any such person, partnership,
corporation or other legal entity shall be fully protected in relying on such
power or authority unless such person, partnership, corporation or other legal
entity has received prior written notice from the Trust that this Limited Power
of Attorney has been revoked. This Limited Power of Attorney shall be revoked
and terminated automatically upon the cancellation or termination of the
Investment Management Agreement between the Trust and the Adviser. Except as
provided in the immediately preceding sentence, the powers and authorities
herein granted may be revoked or terminated by the Trust at any time provided
that no such revocation or termination shall be effective until the Adviser has
received actual notice of such revocation or termination in writing from the
Trust.
This Limited Power of Attorney constitutes the entire agreement between the
Trust and the Adviser, may be changed only by a writing signed by both of them,
and shall bind and benefit their respective successors and assigns; provided,
however, the Adviser shall have no power or authority hereunder to appoint a
successor or substitute attorney in fact for the Trust.
This Limited Power of Attorney shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania without reference
to principles of conflicts of laws. If any provision hereof, or any power or
authority conferred upon the Adviser herein, would be invalid or unexercisable
under applicable law, then such provision, power or authority shall be deemed
modified to the extent necessary to render it valid or exercisable while most
nearly preserving its original intent, and no provision hereof, or power or
authority conferred upon the Adviser herein, shall be affected by the invalidity
or the non-exercisability of another provision hereof, or of another power or
authority conferred herein.
This Limited Power of Attorney may be executed in as many identical
counterparts as may be convenient and by the different parties hereto on
separate counterparts. This Limited Power of Attorney shall become binding on
the Trust when the Trust shall have executed at least one counterpart and the
Adviser shall have accepted its appointment by executing this Limited Power of
Attorney. Immediately after the execution of a counterpart original of this
Limited Power of Attorney and solely for the convenience of the parties hereto,
the Trust and the Adviser will execute sufficient counterparts so that the
Adviser shall have a counterpart executed by it and the Trust, and the Trust
shall have a counterpart executed by the Trust and the Adviser. Each counterpart
shall be deemed an original and all such taken together shall constitute but one
and the same instrument, and it shall not be necessary in making proof of this
Limited Power of Attorney to produce or account for more than one such
counterpart.
IN WITNESS WHEREOF, the Trust has caused this Limited Power of Attorney to
be executed by its duly authorized officer as of the date first written above.
Federated Premier Intermediate Municipal Income Fund
By: /s/ John W. McGonigle
Name: John W. McGonigle
Title: Executive Vice President
Accepted and agreed to this
December 1, 2002
Federated Investment Management Company
By: /s/ Keith M. Schappert
Name: Keith M. Schappert
Title: President & CEO
Exhibit (h) under Form N-2
MASTER AGREEMENT AMONG UNDERWRITERS
April 15, 1985
Merrill Lynch & Co
MERRILL LYNCH PIERCE FENNER
& SMITH INCORPORATED
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, N. Y. 10281-1305
Dear Sirs:
We understand that from time to time you may act as Representative or as
one of the Representatives of the several underwriters of offerings of
securities of various issuers. This Agreement shall apply to any offering of
securities in which we elect to act as an underwriter after receipt of an
invitation from you which shall identify the issuer, contain information
regarding certain terms of the securities to be offered and specify the amount
of our proposed participation and the names of other Representatives, if any,
and that our participation as an underwriter in the offering shall be subject to
the provisions of this Agreement. Your invitation will include instructions for
our acceptance of such invitation. At or prior to the time of an offering, you
will advise us, to the extent applicable, as to the expected offering date, the
expected closing date, the initial offering price, the interest or dividend rate
(or the method by which such rate is to be determined), the conversion price,
the underwriting discount, the management fee, the selling concession and the
reallowance, except that if the offering price of the securities is to be
determined as contemplated by Rule 430A under the Securities Act of 1933 (such
procedure being hereinafter referred to as "430A Pricing"), you shall so advise
us and shall specify the maximum underwriting discount, management fee and
selling concession. Such information may be conveyed by you in one or more
communications (such communications received by us with respect to the offering
are hereinafter collectively referred to as the "Invitation"). If the Purchase
Agreement (as hereinafter defined) provides for the granting of an option to
purchase additional securities to cover over-allotments or otherwise (an
"over-allotment option"), you will notify us, in the Invitation, of such option
and of our maximum obligation upon exercise of such option.
This Agreement, as amended or supplemented by the Invitation, shall become
effective with respect to our participation in an offering of securities if you
receive our oral or written acceptance and you do not receive a written
communication revoking our acceptance prior to the time and date specified in
the Invitation (our unrevoked acceptance after expiration of such time and date
being hereinafter referred to as our "Acceptance"). Our Acceptance will
constitute our confirmation that, except as otherwise stated, in such
Acceptance, each statement included in the Master Underwriters' Questionnaire
set forth as Exhibit A hereto (or otherwise furnished to us) is correct. The
issuer of the securities in any offering of securities made pursuant to this
Agreement is hereinafter referred to as the "Issuer". If the Purchase Agreement
does not provide for an over-allotment option, the securities to be purchased
are hereinafter referred to as the "Securities"; if the Purchase Agreement
provides for an over-allotment option, the securities the Underwriters (as
hereinafter defined) are initially obligated to purchase pursuant to the
Purchase Agreement are hereinafter called the "Initial Securities" and any
additional securities which may be purchased upon exercise of the over-allotment
option are hereinafter called the "Option Securities", with the Initial
Securities and all or any part of the Option Securities being hereinafter
collectively referred to as the "Securities". Any underwriters of Securities
under this Agreement, including the Representatives (as hereinafter defined),
are hereinafter collectively referred to as the "Underwriters". All references
herein to "you" or to the "Representatives" shall mean Merrill Lynch, Pierce,
Fenner & Smith Incorporated and the other firms, if any, which are named as
Representatives in the Invitation. The Securities to be offered may, but need
not, be registered for a delayed or continuous offering pursuant to Rule 415
under the Securities Act of 1933 (the "1933 Act"). The following provisions of
this Agreement shall apply separately to each individual offering of Securities.
This Agreement may be supplemented or amended by you by written notice to us
and, except for supplements or amendments set forth in an Invitation relating to
a particular offering of Securities, any such supplement or amendment to this
Agreement shall be effective with respect to any offering of Securities to which
this Agreement applies after this Agreement is so amended or supplemented.
Section 1. Purchase Agreement: Authority of Representatives. We authorize
you to execute and deliver a purchase agreement and any amendment or supplement
thereto and any associated Terms Agreement or other similar agreement
(collectively, the "Purchase Agreement") on our behalf with the Issuer and/or
any selling securityholder with respect to the Securities in such form as you
determine. We will be bound by all terms of the Purchase Agreement as executed.
We understand that changes may be made in those who are to be Underwriters, and
in the amount of Securities to be purchased by them, but the amount of
Securities to be purchased by us in accordance with the terms of this Agreement,
including the maximum amount of Option Securities, if any, which we may become
obligated to purchase by reason of the exercise of any over-allotment option
provided in the Purchase Agreement, shall not be changed without our consent
except as provided in the Purchase Agreement.
As Representatives of the Underwriters, you are authorized to take such
action as you deem necessary or advisable to carry out this Agreement, the
Purchase Agreement and the purchase and sale of the Securities, and to agree to
any waiver or modification of any provision of the Purchase Agreement. To the
extent applicable, you are also authorized to determine (i) the amount of Option
Securities, if any, to be purchased by the Underwriters pursuant to any
over-allotment option and (ii) with respect to offerings using 430A Pricing, the
initial offering price and the price at which the Securities are to be purchased
in accordance with the Purchase Agreement. It is understood and agreed that
Merrill Lynch, Pierce, Fenner & Smith Incorporated may act on behalf of all
Representatives.
It is understood that, if so specified in the Invitation, arrangements may
be made for the sale of Securities by the Issuer pursuant to delayed delivery
contracts (hereinafter referred to as "Delayed Delivery Contracts"). References
herein to delayed delivery and Delayed Delivery Contracts apply only to
offerings to which delayed delivery is applicable. The term "underwriting
obligation", as used in this Agreement with respect to any Underwriter shall
refer to the amount of Securities, including any Option Securities (plus such
additional Securities as may be required by the Purchase Agreement in the event
of a default by one or more of the Underwriters) which such Underwriter is
obligated to purchase pursuant to the provisions of the Purchase Agreement,
without regard to any reduction in such obligation as a result of Delayed
Delivery Contracts which may be entered into by the Issuer.
If the Securities consist in whole or in part of debt obligations maturing
serially, the serial Securities being purchased by each Underwriter pursuant to
the Purchase Agreement will consist, subject to adjustment as provided in the
Purchase Agreement, of serial Securities of each maturity in a principal amount
which bears the same proportion to the aggregate principal amount of the serial
Securities of such maturity to be purchased by all the Underwriters as the
respective principal amount of serial Securities set forth opposite such
Underwriter's name in the Purchase Agreement bears to the aggregate principal
amount of the serial Securities to be purchased by all the Underwriters.
Section. 2 Registration Statement and Prospectus: Offering Circular. In the
case of an Invitation regarding an offer of Securities registered under the 1933
Act (a "Registered Offering"), you will furnish to us to the extent made
available to you by the Issuer copies of any registration statement or
registration statements relating to the Securities which may be filed with the
Securities and Exchange Commission (the "Commission") pursuant to the 1933 Act
and each amendment thereto (excluding exhibits but including any documents
incorporated by reference therein). Such registration statement(s) as amended,
and the prospectus(es) relating to the sale of Securities by the Issuer
constituting a part thereof, including all documents incorporated therein by
reference as from time to time amended or supplemented by the filing of
documents pursuant to the Securities Exchange Act of 1934 (the "1934 Act"), the
1933 Act or otherwise are referred to herein as the "Registration Statement" and
the "Prospectus", respectively; provided, however, that a supplement to the
Prospectus filed with the Commission pursuant to Rule 424 under the 1933 Act
with respect to an offering of Securities (a "Prospectus Supplement") shall be
deemed to have supplemented the Prospectus only with respect to the offering of
Securities to which it relates.
With respect to Securities for which no Registration Statement is filed
with the Commission, you will furnish to us, to the extent made available to you
by the Issuer, copies of any private placement memorandum, offering circular or
other offering materials to be used in connection with the offering of the
Securities and of each amendment thereto (the "Offering Circular").
Section 3. Offering. The sale of the securities to the public shall
commence as soon as you deem advisable. We will not sell any Securities until
they are released by you for that purpose. When notified by you that the
Securities are released for sale, we will offer in conformity with the terms of
the offering set forth in the Prospectus or Offering Circular, such of the
Securities to be purchased by us as are not reserved for the account for sale to
Selected Dealers and others pursuant to Section 5. After the initial offering,
the offering price and the concession and discount therefrom may be changed by
you by notice to the Underwriters, and we agree to be bound by any such change.
If, in accordance with the terms of offering set forth in the Prospectus or
Offering Circular, the offering of the Securities is not at a fixed price but at
varying prices set by individual Underwriters based on market prices or at
negotiated prices, the provisions above relating to your right to change the
offering price and concession and discount to dealers shall not apply, and other
references to this Section and elsewhere in this Agreement to the offering price
or Selected Dealers' concession shall be deemed to mean the prices and
concessions determined by you from time to time in your discretion. Unless
otherwise permitted in the invitation, we will not sell any Securities to any
account over which we have discretionary authority. We will also comply with any
other restrictions which may be set forth in the Invitation.
The initial public advertisement, if any, with respect to the Securities
shall appear on such date, and shall include the names of such of the
Underwriters as you may determine.
Section 4. Delayed Delivery Arrangements. We authorize you to act on our
behalf in making all arrangements for the solicitation of offers to purchase
Securities from the Issuer pursuant to Delayed Delivery Contracts, and we agree
that all such arrangements will be made only through you (directly or through
Underwriters or Selected Dealers). You may allow to Selected Dealers in respect
to such Securities a commission equal to the concession allowed to Selected
Dealers pursuant to Section 5.
The obligations of the Underwriters shall be reduced in the aggregate by
the principal amount of Securities covered by Delayed Delivery Contracts made by
the Issuer, the obligation of each Underwriter to be reduced by the principal
amount of such Securities, if any, allocated by you to such Underwriter. Your
determination of the allocation of Securities covered by Delayed Delivery
Contracts among the several Underwriters shall be final and conclusive, and we
agree to be bound by any notice delivered by you to the Issuer setting forth the
amount of the reduction in our obligation as a result of Delayed Delivery
Contracts.
Upon receiving payment from the Issuer of the fee for arranging Delayed
Delivery Contracts, you will credit our account with the portion of such fee
applicable to the Securities covered by Delayed Delivery Contracts allocated to
us. You will charge our account with any commission allocated to Selected
Dealers in respect of Securities covered by Delayed Delivery Contracts allocated
to us.
Section 5. Offering to Selected Dealers and Others: Management of Offering.
We authorize you for our account, to reserve for sale and sell to dealers
("Selected Dealers"), among whom any of the Underwriters may be included, such
amount of Securities to be purchased by us as you shall determine. Reservations
for sales to Selected Dealers for our account need not be in proportion to our
underwriting obligation, but sales of Securities reserved for our account of
sale to Selected Dealers shall be made as nearly as practicable in the ratio
which the amount of Securities reserved for our account bears to the aggregate
amount of Securities reserved for the account of all Underwriters, as calculated
from day to day. Sales to Selected Dealers may be made under the Merrill Lynch,
Pierce, Fenner & Smith Incorporated Standard Dealer Agreement, or otherwise. The
price to Selected Dealers initially shall be the offering price less a
concession not in excess of the Selected Dealers concession set forth in the
Invitation. Selected Dealers shall be actually engaged in the investment banking
or securities business and shall be either (i) members in good standing of the
National Association of Securities Dealers, Inc. (the "NASD"), or (ii) dealers
with their principal place of business located outside the United States, its
territories and its possessions and not registered under the 1934 Act who agree
to make no sales within the United States, its territories or its possessions or
to persons who are nationals thereof or residents therein or (iii) banks that
are not eligible for membership in the NASD. Each Selected Dealer shall agree to
comply with the provisions of Section 24 of Article III of the Rules of Fair
Practice of the NASD, and each foreign Selected Dealer or bank who is not a
member of the NASD also shall agree to comply with the NASD, with the provisions
of Sections 8 and 36 of Article III of such Rules of Fair Practice, and to
comply with Section 25 of Article III thereof as that Section applies to a
non-member foreign dealer or bank.
With your consent, the Underwriters may allow, and Selected Dealers may
reallow, a discount on sales to any dealer who meets the above NASD requirements
in an amount not in excess of the amount set forth in the Invitation. Upon your
request, we will advise you of the identity of any dealer to whom we allow such
a discount and any Underwriter or Selected Dealer from whom we receive such a
discount.
We also authorize you, for our account, to reserve for sale and to sell
Securities to be purchased by us at the offering price to others, including
institutions and retail purchasers. Except for such sales which are designated
by a purchaser to be for the account of a particular Underwriter, such
reservations and sales shall be made as nearly as practicable in proportion to
our underwriting obligation, unless you agree to a smaller proportion at our
request.
At or before the time the Securities are released for sale, you shall
notify us of the amount of Securities which have not been reserved for our
account for sale to Selected Dealers and others and which is to be retained by
us for direct sale.
We will from time to time, upon your request, report to you in the amount
of Securities retained by us for direct sale which remains unsold and, upon your
request, deliver to you for our account, or sell to you for the account of one
or more of the Underwriters, such amount of unsold Securities as you may
designate at the offering price less an amount determined by you not in excess
of the concession to Selected Dealers. You may also repurchase Securities from
other Underwriters and Selected Dealers, for the account of one or more of the
Underwriters, at prices determined by you not in excess of the offering prices
less the concession to Selected Dealers.
You may from time to time deliver to any Underwriter, for carrying
pur4poses or for sale by such Underwriter, any of the Securities then reserved
for sale to, but not purchased and paid for by Selected Dealers or others as
above provided, but to the extent that Securities are so delivered or sale by
such Underwriter, the amount of Securities then reserved for the account of such
Underwriter shall be correspondingly reduced. Securities delivered for carrying
purposes only shall be delivered to you upon demand.
The Underwriters and Selected Dealers may, with your consent, purchase
Securities from and sell Securities to each other at the offering price less a
concession not in excess of the concession to Selected Dealers.
Section 6. Repurchase of Securities Not Effectively Placed. In recognition
of the importance of distributing the Securities to bona fide investors, we
agree to repurchase on demand any Securities sold by us, except through you,
which are purchased by you in the open market or otherwise during a period
terminating as provided in Section 16, at a price equal to the cost of such
purchase, including accrued interest, amortization of original issue discount or
dividends, commissions and transfer and other taxes, if any, on redelivery. The
certificates delivered to us need not be identical certificates delivered to you
in respect of the Securities purchased. In lieu of requiring repurchase, you
may, in your discretion, sell such Securities for our account at such prices,
upon such terms and to such persons, including any of the other Underwriters, as
you may determine, charging the amount of any loss and expense, or crediting the
amount of any net profit, resulting from such sale, to our account, or you may
charge our account with an amount determined by you not in excess of the
concession to Selected Dealers.
Section 7. Stabilization and Over-Allotment. In order to facilitate the
sale of the Securities, we authorize you, in your discretion, to purchase and
sell Securities or any other securities of the Issuer or any guarantor of the
Securities specified in the Invitation in the open market or otherwise, for long
or short account, at such prices as you may determine, and, in arranging for
sales to Selected Dealers or others, to over-allot. You may liquidate any long
position or cover any short position incurred pursuant to this Section at such
prices as you may determine. You shall make such purchases and sales (including
over-allotments) for the accounts of the Underwriters as nearly as practicable
in proportion to their respective underwriting obligations. It is understood
that, in connection with any particular offering of Securities to which this
Agreement applies, you may have made purchases of securities of the Issuer or
securities of any guarantor of the Securities (or stabilizing purposes prior to
the time when we become an Underwriter, and we agree that any such securities so
purchased shall be treated as having been purchased for the respective accounts
of the Underwriters pursuant to the foregoing authorization. At the close of
business on any day our net commitment, either for long or short account,
resulting from such purchases or sales (including over-allotments) shall not
exceed 20% (or such other amount as may be specified in the Invitation) of our
underwriting obligation, except that such percentage may be increased with the
approval of a majority in interest of the Underwriters. We will take up at cost
on demand any Securities or other securities of the Issuer or any securities of
any guarantor of the Securities so sold or over-allotted for our account,
including accrued interest, amortization of original issue discount or
dividends, and we will pay to you on demand the amount of any losses or expenses
incurred for our account pursuant to this Section. In the event of default by
any Underwriter in respect of its obligations under this Section, each
non-defaulting Underwriter shall assume its share of the obligations of such
defaulting Underwriter in the proportion that its underwriting obligation bears
to the underwriting obligations of all non-defaulting Underwriters without
relieving such defaulting Underwriter of its liability hereunder.
If you effect any stabilizing purchase pursuant to this Section, you shall
promptly notify us of the date and time of the first stabilizing purchase and
the date and time when stabilizing was terminated. You shall prepare and
maintain such records as are required to be maintained by you as manager
pursuant to Rule 17a-2 under the 1934 Act.
Section 8. Open Market Transactions. We represent and agree in connection
with the offering of Securities we have complied and will comply with the
provisions of Rule 10b-6 under the 1934 Act with regarding to trading in the
Securities. For purposes of the foregoing sentence, we agree that, in addition
to the Securities, other securities of the Issuer or securities of any guarantor
of the Securities or the right or option to purchase or otherwise acquire any
securities of the Issuer or any securities of any guarantor of the Securities
specified in the Invitation shall be considered securities of the same class and
series as the Securities.
Section 9. Payment and Delivery. At or before such time, on such dates and
at such places as you may specify in the Invitation, we will deliver to you a
certified or official bank check in such funds as are specified in the
Invitation, payable to the order of Merrill Lynch, Pierce, Fenner & Smith
Incorporated (unless otherwise specified in the Invitation) in an amount equal
to, as you direct, either (I) the offering price or prices plus accrued
interest, amortization of original issue discount or dividends, if any, set
forth in the Prospectus or Offering Circular less the concession to Selected
Dealers in respect of the amount of Securities to be purchased by us in
accordance with the terms of this Agreement, or (ii) the amount set forth in the
Invitation with respect tot he Securities to be purchased by us. We authorize
you to make payment for our account of the purchase price for the Securities to
be purchased by us against delivery to you of such Securities (which may be in
temporary form), and the difference between such purchase price of the
Securities and the amount of our funds delivered to you therefor shall be
credited to our account.
Delivery to us of Securities retained by us for direct sale shall be made
by you as soon as practicable after your receipt of the Securities. Upon
termination of the provisions of this Agreement as provided in Section 16, you
shall deliver to us any Securities reserved for our account for sale to Selected
Dealers and others which remain unsold at that time.
You are authorized to make appropriate arrangements for payment for and/or
delivery through the facilities of The Depository Trust company or any such
other depository or similar facility, the Securities to be purchased by us, or,
if we are not a member, settlement may be made through a correspondent that is a
member pursuant to our timely instructions to you.
Upon receiving payment for Securities sold for our account to Selected
Dealers and others, you shall remit to us an amount equal to the amount paid by
us to you in respect of such Securities and credit or charge our account with
the difference, if any, between such amount and the price at which such
Securities were sold.
In the event that the Purchase Agreement for an offering provides for the
payment of a commission or other compensation to the Underwriters, we authorize
you to receive such commission or other compensation for our account.
Section 10. Management Compensation. As compensation for your services in
the management of the offering, we will pay you an amount equal to the
management fee specified in the Invitation in respect of the Securities to be
purchased by us pursuant to the Purchase Agreement, and we authorize you to
charge our account with such amount. If there is more than one Representative,
such compensation shall be divided among the Representatives in such proportions
as they may determine.
Section 11. Authority to Borrow. We authorize you to advance your own funds
for our account, charging current interest rates, or to arrange loans for our
account or the account of the Underwriters, as you may deem necessary or
advisable for the purchase, carrying, sale and distribution of the Securities.
You may execute and deliver any notes or other instruments required in
connection therewith and may hold or pledge as security therefor all or any part
of the Securities which we or such Underwriters have agreed to purchase. The
obligations of the Underwriters under loans arranged on their behalf shall be
several in proportion to their respective participations in such loans, and not
joint. Any lender is authorized to accept your instructions as to the
disposition of the proceeds of any such loans. You shall credit each Underwriter
with the proceeds of any loans made for its account.
Section 12. Legal Qualifications. You shall inform us, upon request, of the
states and other jurisdictions of the United States in which it is believed that
the Securities are qualified for sale under, or are exempt from the requirements
of, their respective securities laws, but you assume no responsibility with
respect to our right to sell Securities in any jurisdiction. You are authorized
to file with the Department of State of the State of New York a Further State
Notice with respect to the Securities, if necessary.
If we propose to offer Securities outside the United States, its
territories or its possessions, we will take, at our own expense, such action,
if any, as may be necessary to comply with the laws of each foreign jurisdiction
in which we propose to offer Securities.
Section 13. Membership in National Association of Securities Dealers,
Foreign Underwriters and Banks. We understand that you are a member in good
standing of the NASD. We confirm that we are actually engaged in the investment
banking or securities business and are either (i) a member in good standing of
the NASD or (ii) a dealer with its principal place of business located outside
the United States, its territories and its possessions and are not registered
under the 1934 Act who hereby agrees to make no sales within the United States,
its territories or its possessions or to persons who are nationals thereof or
residents therein (except that we may participate in sales to Selected Dealers
and others under Section 5 of this Agreement) or (iii) a bank not eligible for
membership in the NASD. We hereby agree to comply with Section 24 of Article III
of the Rules of Fair Practice of the NASD, and if we are a foreign dealer or
bank and not a member of the NASD we also hereby agree to comply with the NASD's
interpretation with respect to free-riding and withholding, to comply, as though
we were a member of the NASD, with the provisions of Sections 8 and 36 of
Article III of such Rules of Fair Practice, and to comply with Section 25 of
Article III thereof as that Section applies to a non-member foreign dealer or
bank.
Section 14. Distribution of Prospectuses; Offering Circulars. We are
familiar with Securities Act of 1933 Release No. 4968 and Rule 15c-8 under the
1934 Act, relating to the distribution of preliminary and final prospectuses,
and we confirm that we will comply therewith, to the extent applicable, in
connection with any sale of Securities. You shall cause to be made available to
us, to the extent made available to you by the Issuer, such number of copies of
the Prospectus as we may reasonably request for purposes contemplated by the
1933 Act, the 1934 Act and the rules and regulations thereunder.
Our Acceptance of an Invitation relating to an offering made pursuant to an
Offering Circular shall constitute our agreement that, if requested by you, we
will furnish a copy of any amendment to a preliminary or final Offering Circular
to each person to whom we shall have furnished a previous preliminary or final
Offering Circular. Our Acceptance shall constitute our confirmation that we have
delivered and our agreement that we will deliver all preliminary and final
Offering Circulars required for compliance with the applicable federal and state
laws and the applicable rules and regulations of any regulatory body promulgated
thereunder governing the use and distribution of offering circulars by
underwriters and any additional instructions contained in the Invitation and, to
the extent consistent with such laws, rules and regulations, our Acceptance
shall constitute our confirmation that we have delivered and our agreement that
we will deliver all preliminary and final Offering Circulars which would be
required if the provisions of Rule 15c2-8 (or any successor provision) under the
1934 Act applied to such offering.
Section 15. Net Capital. The incurrence by us of our obligations hereunder
and under the Purchase Agreement in connection with the offering of the
Securities will not place us in violation of the net capital requirements of
rule 15c3-1 under the 1934 Act, or, if we are a financial institution subject to
regulation by the Board of Governors of the Federal Reserve System, the
Comptroller of the Currency or the Federal Deposit Insurance Corporation, will
not place us in violation of the capital requirements of such regulator or any
other regulator to which we are subject.
Section 16. Termination. With respect to each offering of Securities
pursuant to this Agreement, all limitations in this Agreement on the price at
which the Securities may be sold, the period of time referred to in Section 6,
the authority granted by the first sentence of Section 7, and the restrictions
contained in Section 8 shall terminate at the close of business on the 45th day
after commencement of the offering of such Securities. You may terminate any or
all of such provisions at any time prior thereto by notice to the Underwriters.
All other provisions of this Agreement shall remain operative and in full force
and effect with respect to such offering.
Section 17. Expenses and Settlement. You may charge our account with any
transfer taxes on sales of Securities made for our account and with our
proportionate share (based upon our underwriting obligation) of all other
expenses incurred by you under this Agreement or otherwise in connection with
the purchase, carrying, sale or distribution of the Securities. With respect to
each offering of Securities pursuant to this Agreement, the respective accounts
of the Underwriters shall be settled as promptly as practicable after the
termination of all the provisions of this Agreement as provided in Section 16,
but you may reserve such amounts as you may deem advisable for additional
expenses. Your determination of the amount to be paid to or by us shall be
conclusive. You may at any time make partial distributions of credit balances or
call for payment of debit balances. Any of our funds in your hands may be held
with your general funds without accountability for interest. Notwithstanding any
settlement, we will remain liable for any taxes on transfers for our account and
for our proportionate share (based upon our underwriting obligation) of all
expenses and liabilities which may be incurred by or for the accounts of the
Underwriters with respect to each offering of Securities pursuant to this
Agreement.
Section 18. Indemnification. With respect to each offering of Securities
pursuant to this Agreement, we will indemnify and hold harmless each other
Underwriter and each person, if any, who controls each other Underwriter within
the meaning of Section 15 of the 1933 Act, to the extent that and on the terms
upon which we agree to indemnify and hold harmless the Issuer and other
specified persons as set forth in the Purchase Agreement.
Section 19. Claims Against Underwriters. With respect to each offering of
Securities pursuant to this Agreement, if at any time any person other than an
Underwriter asserts a claim (including any commenced or threatened investigation
or proceeding by any governmental agency or body) against one or more of the
Underwriters or against you as Representatives of the Underwriters arising out
of an alleged untrue statement or omission in the Registration Statement (or any
amendments thereto) or in any preliminary prospectus or the Prospectus or any
amendment or supplement thereto, or in any preliminary or final Offering
Circular, or relating to any transaction contemplated by this Agreement, we
authorize you to make such investigation, to retain such counsel for the
Underwriters and to take such action in the defense of such claim as you may
deem necessary or advisable. You may settle such claim with the approval of a
majority in interest of the Underwriters. We will pay our proportionate share
(based upon our underwriting obligation) of all expenses incurred by you
(including the fees and expenses of counsel for the Underwriters) as incurred,
in investigating and defending against such claim and our proportionate share of
the aggregate liability incurred by all Underwriters in respect to such claim
(after deducting any contribution or indemnification obtained pursuant to the
Purchase Agreement, or otherwise, from persons other than Underwriters), whether
such liability is the result of a judgment against one or more of the
Underwriters or the result of any such settlement. Any Underwriter may retain
separate counsel at its own expense. A claim against or liability incurred by a
person who controls an Underwriter shall be deemed to have been made against or
incurred by such Underwriter. In the event of default by any Underwriter in
respect of its obligations under this Section, the non-defaulting Underwriters
shall be obligated to pay the full amount thereof in the proportions that their
respective underwriting obligations bear to the underwriting obligations of all
non-defaulting Underwriters without relieving such defaulting Underwriter of its
liability hereunder.
Section 20. Default by Underwriters. Default by any Underwriter in respect
of its obligations hereunder or under the Purchase Agreement shall not release
us from any of our obligations or in any way affect the liability of such
defaulting Underwriter to the other Underwriters for damages resulting from such
default. If one or more Underwriters default under the Purchase Agreement, if
provided in such Purchase Agreement you may (but shall not be obligated to)
arrange for the purchase by others, which may include yourselves or other
non-defaulting Underwriters, of all or a portion of the Securities not taken by
the defaulting Underwriters.
In the event that such arrangements are made, the respective underwriting
obligations of the non-defaulting Underwriters and the amounts of the Securities
to be purchased by others, if any, shall be taken as the basis for all rights
and obligations hereunder; but this shall not in any way affect the liability of
any defaulting Underwriter to the other Underwriters for damages resulting from
its default, nor shall any such default relieve any other Underwriter of any of
its obligations hereunder or under the Purchase Agreement except as herein or
therein provided. In addition, in the event of default by one or more
Underwriters in respect of their obligations under the Purchase Agreement to
purchase the Securities agreed to be purchased by them thereunder and, to the
extent that arrangements shall not have been made by you for any person to
assume the obligations of such defaulting Underwriter or Underwriters, we agree,
if provided in the Purchase Agreement, to assume our proportionate share, based
upon our underwriting obligation, of the obligations of each such defaulting
Underwriter (subject to the limitations contained in the Purchase Agreement)
without relieving such defaulting Underwriter of its liability therefor.
In the event of default by one or more Underwriters in respect of their
obligations under this Agreement to take up and pay for any securities
purchased, or to deliver any securities sold or overallotted, by you for the
respective accounts of the Underwriters, or to bear their proportion of expenses
or liabilities pursuant to this Agreement, and to the extent that arrangements
shall not have been made by you for any persons to assume the obligations of
such defaulting Underwriter or Underwriters, we agree to assume our
proportionate share, based upon our respective underwriting obligation, of the
obligations of each defaulting Underwriter without relieving any such defaulting
Underwriter of its liability therefor.
Section 21. Legal Responsibility. As representatives of the Underwriters,
you shall have no liability to us, except for your lack of good faith and for
obligations assumed by you in this Agreement and except that we do not waive any
rights that we may have under the 1933 Act or the rules and regulations
thereunder. No obligations not expressly assumed by you in this Agreement shall
be implied herefrom.
Nothing herein contained shall constitute the Underwriters an association,
or partners, with you, or with each other, or, except as otherwise provided
herein or in the Purchase Agreement, render any Underwriter liable for the
obligations of any other Underwriter, and the rights, obligations and
liabilities of the Underwriters are several in accordance with their respective
underwriting obligations, and not joint.
If the Underwriters are deemed to constitute a partnership for federal
income tax purposes, we elect to be excluded from the application of Subchapter
K, Chapter 1, Subtitle A of the Internal Revenue Code of 1954, as amended, and
agree not to take any position inconsistent with such election, and you, as
Representatives, are authorized, in your discretion, to execute on behalf of the
Underwriters such evidence of such election as may be required by the Internal
Revenue Service.
Unless we have promptly notified you in writing otherwise, our name as it
should appear in the Prospectus or Offering Circular and our address are set
forth on the signature pages hereof.
Section 22. Notices. Any notice from you shall be deemed to have been duly
given if mailed or transmitted to us at our address appearing below.
Section 23. Governing Law. This Agreement shall be governed by the laws of
the State of New York applicable to agreements made and to be performed in said
State. Please confirm this Agreement and deliver a copy to us.
Very truly yours,
Name of Firm:
By
Authorized Officer or Partner
Address:
Confirmed as of the date
first above written.
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By /s/ Fred F. Hessinger
Name: Fred F. Hessinger
Exhibit (h)(i) under Form N-2
Federated Premier Municipal Income Fund
(a Delaware statutory trust)
[ ] Common Shares of Beneficial Interest
(Par Value $.01 Per Share)
FORM OF PURCHASE AGREEMENT
[ ], 2002
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10080
Ladies and Gentlemen:
Federated Premier Municipal Income Fund, a Delaware statutory trust (the
"Fund") and the Fund's investment adviser, Federated Investment Management
Company, a Delaware statutory trust (the "Adviser"), each confirms its agreement
with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and each of the other Underwriters named in Schedule A hereto
(collectively, the "Underwriters", which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom Merrill
Lynch and [Co-Managers] are acting as representative (in such capacity, the
"Representative"), with respect to the issue and sale by the Fund and the
purchase by the Underwriters, acting severally and not jointly, of the
respective number of common shares of beneficial interest, par value $.01 per
share, of the Fund ("Common Shares") set forth in said Schedule A, and with
respect to the grant by the Fund to the Underwriters, acting severally and not
jointly, of the option described in Section 2(b) hereof to purchase all or any
part of [ ] additional Common Shares to cover over-allotments, if any. The
aforesaid [ ] Common Shares (the "Initial Securities") to be purchased by the
Underwriters and all or any part of the [ ] Common Shares subject to the option
described in Section 2(b) hereof (the "Option Securities") are hereinafter
called, collectively, the "Securities."
The Fund understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representative deem advisable after
this Agreement has been executed and delivered.
The Fund has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form N-2 (No. 333-100605 and No.
811-21235) covering the registration of the Securities under the Securities Act
of 1933, as amended (the "1933 Act"), including the related preliminary
prospectus or prospectuses, and a notification on Form N-8A of registration of
the Fund as an investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the rules and regulations of the Commission under
the 1933 Act and the 1940 Act (the "Rules and Regulations"). Promptly after
execution and delivery of this Agreement, the Fund will prepare and file a
prospectus in accordance with the provisions of Rule 430A ("Rule 430A") of the
Rules and Regulations and paragraph (c) or (h) of Rule 497 ("Rule 497") of the
Rules and Regulations. The information included in any such prospectus, that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective, if applicable, pursuant to paragraph (b) of Rule 430A is referred to
as "Rule 430A Information." Each prospectus used before such registration
statement became effective, and any prospectus that omitted, as applicable, the
Rule 430A Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, including in each case any statement
of additional information incorporated therein by reference, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
thereto and schedules thereto at the time it became effective and including the
Rule 430A Information, is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) of the Rules and
Regulations is herein referred to as the "Rule 462(b) Registration Statement,"
and after such filing the term "Registration Statement" shall include the Rule
462(b) Registration Statement. The final prospectus in the form first furnished
to the Underwriters for use in connection with the offering of the Securities,
including the statement of additional information incorporated therein by
reference, is herein called the "Prospectus." For purposes of this Agreement,
all references to the Registration Statement, any preliminary prospectus, the
Prospectus or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Fund and the Adviser. The Fund
and the Adviser jointly and severally represent and warrant to each Underwriter
as of the date hereof, as of the Closing Time referred to in Section 2(c)
hereof, and as of each Date of Delivery (if any) referred to in Section 2(b)
hereof, and agree with each Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the Registration
Statement and any Rule 462(b) Registration Statement has become
effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act, or order of
suspension or revocation of registration pursuant to Section 8(e) of
the 1940 Act, and no proceedings for any such purpose have been
instituted or are pending or, to the knowledge of the Fund or the
Adviser, are contemplated by the Commission, and any request on the
part of the Commission for additional information has been complied
with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any Option Securities are purchased,
at the Date of Delivery), the Registration Statement, the Rule 462(b)
Registration Statement, the notification on Form N-8A and any amendments and
supplements thereto complied and will comply in all material respects with the
requirements of the 1933 Act, the 1940 Act and the Rules and Regulations and did
not and will not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading. Neither the Prospectus nor any amendments or
supplements thereto, at the time the Prospectus or any such amendment or
supplement was issued and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment thereto,
or filed pursuant to Rule 497 under the 1933 Act, complied when so filed in all
material respects with the Rules and Regulations and each preliminary prospectus
and the Prospectus delivered to the Underwriters for use in connection with this
offering was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
If a Rule 462(b) Registration Statement is required in connection with the
offering and sale of the Securities, the Fund has complied or will comply with
the requirements of Rule 111 under the 1933 Act Regulations relating to the
payment of filing fees thereof.
(ii) Independent Accountants. The accountants who certified the statement
of assets and liabilities included in the Registration Statement are
independent public accountants as required by the 1933 Act and the
Rules and Regulations.
(iii)Financial Statements. The statement of assets and liabilities
included in the Registration Statement and the Prospectus, together
with the related notes, presents fairly the financial position of the
Fund at the date indicated; said statement has been prepared in
conformity with generally accepted accounting principles ("GAAP").
(iv) Expense Summary. The information set forth in the Prospectus in the
Fee Table has been prepared in accordance with the requirements of
Form N-2 and to the extent estimated or projected, such estimates or
projections are reasonably believed to be attainable and reasonably
based.
(v) No Material Adverse Change. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
except as otherwise stated therein, (A) there has been no material
adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Fund, whether
or not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the
Fund, other than those in the ordinary course of business, which are
material with respect to the Fund, and (C) there has been no dividend
or distribution of any kind declared, paid or made by the Fund on any
class of its capital stock.
(vi) Good Standing of the Fund. The Fund has been duly organized and is
validly existing as a statutory trust in good standing under the laws
of the State of Delaware and has statutory trust power and authority
to own, lease and operate its properties and to conduct its business
as described in the Prospectus and to enter into and perform its
obligations under this Agreement; and the Fund is duly qualified as a
foreign statutory trust to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be
in good standing would not result in a Material Adverse Effect.
(vii) No Subsidiaries. The Fund has no subsidiaries.
(viii) Investment Company Status. The Fund is duly registered with the
Commission under the 1940 Act as a closed-end diversified management
investment company, and no order of suspension or revocation of such
registration has been issued or proceedings therefor initiated or
threatened by the Commission.
(ix) Officers and Trustees. No person is serving or acting as an officer,
trustee or investment adviser of the Fund except in accordance with
the provisions of the 1940 Act and the Rules and Regulations and the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
the rules and regulations of the Commission promulgated under the
Advisers Act (the "Advisers Act Rules and Regulations"). Except as
disclosed in the Registration Statement and the Prospectus (or any
amendment or supplement to either of them), no trustee of the Fund is
an "interested person" (as defined in the 1940 Act) of the Fund or an
"affiliated person" (as defined in the 1940 Act) of any Underwriter.
(x) Capitalization. The authorized, issued and outstanding shares of
beneficial interest of the Fund are as set forth in the Prospectus.
All issued and outstanding shares of beneficial interest of the Fund
have been duly authorized and validly issued and are fully paid and
non-assessable, except as provided for in the Fund's declaration of
trust, and have been offered and sold or exchanged by the Fund in
compliance with all applicable laws (including, without limitation,
federal and state securities laws); none of the outstanding shares of
beneficial interest of the Fund was issued in violation of the
preemptive or other similar rights of any securityholder of the Fund.
(xi) Authorization and Description of Securities. The Securities to be
purchased by the Underwriters from the Fund have been duly authorized
for issuance and sale to the Underwriters pursuant to this Agreement
and, when issued and delivered by the Fund pursuant to this Agreement
against payment of the consideration set forth herein, will be validly
issued and fully paid and non-assessable, except as provided for in
the Fund's declaration of trust. The Common Shares conform to all
statements relating thereto contained in the Prospectus and such
description conforms to the rights set forth in the instruments
defining the same; no holder of the Securities will be subject to
personal liability by reason of being such a holder; and the issuance
of the Securities is not subject to the preemptive or other similar
rights of any securityholder of the Fund.
(xii)Absence of Defaults and Conflicts. The Fund is not in violation of
its declaration of trust or by-laws, or in default in the performance
or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to
which it is a party or by which it may be bound, or to which any of
the property or assets of the Fund is subject (collectively,
"Agreements and Instruments") except for such violations or defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement, the Investment Management
Agreement, the Amended and Restated Agreement for Fund Accounting
Services, Administrative Services, Transfer Agency Services and
Custody Services Procurement, the Custodian Contract and the Transfer
Agency and Service Agreement referred to in the Registration Statement
(as used herein, the "Management Agreement," the "Administration
Agreement," the "Custodian Agreement" and the "Transfer Agency and
Service Agreement," respectively) and the consummation of the
transactions contemplated herein and in the Registration Statement
(including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described in the
Prospectus under the caption "Use of Proceeds") and compliance by the
Fund with its obligations hereunder have been duly authorized by all
necessary action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Fund pursuant
to, the Agreements and Instruments (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not
result in a Material Adverse Effect), nor will such action result in
any violation of the provisions of the declaration of trust or by-laws
of the Fund or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction
over the Fund or any of its assets, properties or operations. As used
herein, a "Repayment Event" means any event or condition which gives
the holder of any note, debenture or other evidence of indebtedness
(or any person acting on such holder's behalf) the right to require
the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Fund.
(xiii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Fund or the Adviser, threatened, against or
affecting the Fund, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect,
or which might reasonably be expected to materially and adversely
affect the properties or assets of the Fund or the consummation of the
transactions contemplated in this Agreement or the performance by the
Fund of its obligations hereunder. The aggregate of all pending legal
or governmental proceedings to which the Fund is a party or of which
any of its property or assets is the subject which are not described
in the Registration Statement, including ordinary routine litigation
incidental to the business, could not reasonably be expected to result
in a Material Adverse Effect.
(xiv)Accuracy of Exhibits. There are no contracts or documents which are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto by the 1933 Act, the
1940 Act or by the Rules and Regulations which have not been so
described and filed as required.
(xv) Possession of Intellectual Property. The Fund owns or possesses, or
can acquire on reasonable terms, adequate patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks, trade
names or other intellectual property (collectively, "Intellectual
Property") necessary to carry on the business now operated by the
Fund, and the Fund has not received any notice or is not otherwise
aware of any infringement of or conflict with asserted rights of
others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Fund therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the
aggregate, would result in a Material Adverse Effect.
(xvi)Absence of Further Requirements. No filing with, or authorization,
approval, consent, license, order, registration, qualification or
decree of, any court or governmental authority or agency is necessary
or required for the performance by the Fund of its obligations
hereunder, in connection with the offering, issuance or sale of the
Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except such as have been already
obtained or as may be required under the 1933 Act, the 1940 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), or state
securities laws.
(xvii) Possession of Licenses and Permits. The Fund possesses such permits,
licenses, approvals, consents and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state,
local or foreign regulatory agencies or bodies necessary to operate
its properties and to conduct the business as contemplated in the
Prospectus; the Fund is in compliance with the terms and conditions of
all such Governmental Licenses, except where the failure so to comply
would not, singly or in the aggregate, have a Material Adverse Effect;
all of the Governmental Licenses are valid and in full force and
effect, except when the invalidity of such Governmental Licenses or
the failure of such Governmental Licenses to be in full force and
effect would not have a Material Adverse Effect; and the Fund has not
received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xviii) Advertisements. Any advertising, sales literature or other
promotional material (including "prospectus wrappers," "broker kits,"
"road show slides" and "road show scripts" and "electronic road show
presentations") prepared or approved by the Fund or the Adviser and
used in connection with the public offering of the Securities
(collectively, "sales material") does not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading. Moreover, all sales material complied and will comply in
all material respects with the applicable requirements of the 1933
Act, the 1940 Act, the Rules and Regulations and the rules and
interpretations of the National Association of Securities Dealers,
Inc. ("NASD").
(xix)Subchapter M. The Fund intends to direct the investment of the
proceeds of the offering described in the Registration Statement in
such a manner as to comply with the requirements of Subchapter M of
the Internal Revenue Code of 1986, as amended ("Subchapter M of the
Code" and the "Code," respectively), and intends to qualify as a
regulated investment company under Subchapter M of the Code.
Distribution of Offering Materials. The Fund has not distributed and, prior
to the later to occur of (A) the Closing Time and (B) completion of the
distribution of the Shares, will not distribute any offering material in
connection with the offering and sale of the Shares other than the Registration
Statement, a preliminary prospectus, the Prospectus or other materials, if any,
permitted by the 1933 Act or the 1940 Act or the Rules and Regulations.
Accounting Controls. The Fund maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management's general or specific authorization and
with the applicable requirements of the 1940 Act, the Rules and Regulations and
the Code; (B) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting principles
and to maintain accountability for assets and to maintain compliance with the
books and records requirements under the 1940 Act and the Rules and Regulations;
(C) access to assets is permitted only in accordance with management's general
or specific authorization; and (D) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
Absence of Undisclosed Payments. To the Fund's knowledge, neither the Fund
nor any employee or agent of the Fund has made any payment of funds of the Fund
or received or retained any funds, which payment, receipt or retention of funds
is of a character required to be disclosed in the Prospectus.
(xx) Material Agreements. This Agreement, the Management Agreement, the
Administration Agreement, the Custodian Agreement and the Transfer
Agency and Service Agreement have each been executed and delivered by
the Fund, as of the dates noted therein, and each complies with all
applicable provisions of the 1940 Act. Assuming due authorization,
execution and delivery by the other parties thereto with respect to
the Management Agreement, the Administration Agreement, the Custodian
Agreement and the Transfer Agency and Service Agreement, each of the
Management Agreement, the Administration Agreement, the Custodian
Agreement and the Transfer Agency and Service Agreement constitutes a
valid and binding agreement of the Fund, enforceable in accordance
with its terms, except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, and general
equitable principles (whether considered in a proceeding in equity or
at law).
(xxi)Registration Rights. There are no persons with registration rights or
other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Fund under the
1933 Act.
(xxii) NYSE Listing. The Securities have been duly authorized for listing,
upon notice of issuance, on the New York Stock Exchange ("NYSE") and
the Fund's registration statement on Form 8-A under the 1934 Act has
become effective.
(b) Representations and Warranties by the Adviser. The Adviser represents
and warrants to each Underwriter as of the date hereof, as of the Closing Time
referred to in Section 2(c) hereof, and as of each Date of Delivery (if any)
referred to in Section 2(b) hereof as follows:
(i) Good Standing of the Adviser. The Adviser has been duly organized and
is validly existing and in good standing as a statutory trust under the laws of
the State of Delaware with full statutory trust power and authority to own,
lease and operate its properties and to conduct its business as described in the
Prospectus and is duly qualified as a foreign trust to transact business and is
in good standing in each other jurisdiction in which such qualification is
required, except as would not, individually or in the aggregate, result in a
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of such Adviser, whether or not
arising in the ordinary course of business (an "Adviser Material Adverse
Effect").
(ii) Investment Adviser Status. The Adviser is duly registered and in good
standing with the Commission as an investment adviser under the
Advisers Act, and is not prohibited by the Advisers Act or the 1940
Act, or the rules and regulations under such acts, from acting under
the Management Agreement for the Fund as contemplated by the
Prospectus.
(iii)Description of Adviser. The description of the Adviser in the
Registration Statement and the Prospectus (and any amendment or
supplement to either of them) complied and comply in all material
respects with the provisions of the 1933 Act, the 1940 Act, the
Advisers Act, the Rules and Regulations and the Advisers Act Rules and
Regulations and is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
(iv) Capitalization. The Adviser has the financial resources available to
it necessary for the performance of its services and obligations as
contemplated in the Prospectus, this Agreement and under the
Management Agreement to which it is a party.
(v) Authorization of Agreements; Absence of Defaults and Conflicts. This
Agreement, the Management Agreement and the Additional Compensation
Agreement have each been duly authorized, executed and delivered by
the Adviser, and the Management Agreement and the Additional
Compensation Agreement each constitute a valid and binding obligation
of the Adviser, enforceable in accordance with its terms, except as
affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and general equitable principles
(whether considered in a proceeding in equity or at law); and neither
the execution and delivery of this Agreement, the Management Agreement
or the Additional Compensation Agreement nor the performance by the
Adviser of its obligations hereunder or thereunder will conflict with,
or result in a breach of any of the terms and provisions of, or
constitute, with or without the giving of notice or lapse of time or
both, a default under, any agreement or instrument to which the
Adviser is a party or by which it is bound, the agreement and
declaration of trust, the by-laws or other organizational documents of
the Adviser, or to the Adviser's knowledge, by any law, order, decree,
rule or regulation applicable to it of any jurisdiction, court,
federal or state regulatory body, administrative agency or other
governmental body, stock exchange or securities association having
jurisdiction over the Adviser or its properties or operations; and no
consent, approval, authorization or order of any court or governmental
authority or agency is required for the consummation by the Adviser of
the transactions contemplated by this Agreement, the Management
Agreement and the Additional Compensation Agreement, except as have
been obtained or may be required under the 1933 Act, the 1940 Act, the
1934 Act or state securities laws.
(vi) No Material Adverse Change. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
except as otherwise stated therein, there has not occurred any event
which should reasonably be expected to have a material adverse effect
on the ability of the Adviser to perform its respective obligations
under this Agreement and the Management Agreement to which it is a
party.
(vii)Absence of Proceedings. There is no action, suit, proceeding, inquiry
or investigation before or brought by any court or governmental agency
or body, domestic or foreign, now pending, or, to the knowledge of the
Adviser, threatened against or affecting the Adviser or any
"affiliated person" of the Adviser (as such term is defined in the
1940 Act) or any partners, trustees, officers or employees of the
foregoing, whether or not arising in the ordinary course of business,
which would reasonably be expected to result in any Adviser Material
Adverse Effect or materially and adversely affect the ability of the
Adviser to function as an investment adviser or perform its
obligations under the Management Agreement, or which is required to be
disclosed in the Registration Statement and the Prospectus.
(viii) Absence of Violation or Default. The Adviser is not in violation of
its agreement and declaration of trust, by-laws or other
organizational documents or in default under any agreement, indenture
or instrument, except for such violations or defaults that would not
result in an Adviser Material Adverse Effect.
(c) Officer's Certificates. Any certificate signed by any officer of the
Fund or the Adviser delivered to the Representative or to counsel for the
Underwriters shall be deemed a representation and warranty by the Fund or the
Adviser, as the case may be, to each Underwriter as to the matters covered
thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Fund agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Fund, at the
price per share set forth in Schedule B, the number of Initial Securities set
forth in Schedule A opposite the name of such Underwriter, plus any additional
number of Initial Securities which such Underwriter may become obligated to
purchase pursuant to the provisions of Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Fund hereby grants an option to the Underwriters, severally and not
jointly, to purchase up to an additional [ ] Common Shares in the aggregate at
the price per share set forth in Schedule B, less an amount per share equal to
any dividends or distributions declared by the Fund and payable on the Initial
Securities but not payable on the Option Securities. The option hereby granted
will expire 45 days after the date hereof and may be exercised in whole or in
part from time to time only for the purpose of covering over-allotments which
may be made in connection with the offering and distribution of the Initial
Securities upon notice by the Representative to the Fund setting forth the
number of Option Securities as to which the several Underwriters are then
exercising the option and the time and date of payment and delivery for such
Option Securities. Any such time and date of delivery (a "Date of Delivery")
shall be determined by the Representative, but shall not be later than seven
full business days after the exercise of said option, nor in any event prior to
the Closing Time, as hereinafter defined. If the option is exercised as to all
or any portion of the Option Securities, each of the Underwriters, acting
severally and not jointly, will purchase that proportion of the total number of
Option Securities then being purchased which the number of Initial Securities
set forth in Schedule A opposite the name of such Underwriter bears to the total
number of Initial Securities, subject in each case to such adjustments as
Merrill Lynch in its discretion shall make to eliminate any sales or purchases
of a fractional number of Option Securities.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Clifford Chance US LLP, 200 Park Avenue, New York, New York 10166 or at such
other place as shall be agreed upon by the Representative and the Fund, at 10:00
A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M.
(Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
Representative and the Fund (such time and date of payment and delivery being
herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representative
and the Fund, on each Date of Delivery as specified in the notice from the
Representative to the Fund.
Payment shall be made to the Fund by wire transfer of immediately available
funds to a bank account designated by the Fund, against delivery to the
Representative for the respective accounts of the Underwriters of certificates
for the Securities to be purchased by them. It is understood that each
Underwriter has authorized the Representative, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and registered
in such names as the Representative may request in writing at least one full
business day before the Closing Time or the relevant Date of Delivery, as the
case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representative in the City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants.
(a) The Fund and the Adviser, jointly and severally, covenant with each
Underwriter as follows:
(i) Compliance with Securities Regulations and Commission Requests. The
Fund, subject to Section 3(a)(ii), will comply with the requirements
of Rule 430A and will notify the Representative immediately, and
confirm the notice in writing, (i) when any post-effective amendment
to the Registration Statement shall become effective, or any
supplement to the Prospectus or any amended Prospectus shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii)
of any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of
the Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes.
The Fund will promptly effect the filings necessary pursuant to Rule
497 and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under
Rule 497 was received for filing by the Commission and, in the event
that it was not, it will promptly file such prospectus. The Fund will
make reasonable efforts to prevent the issuance of any stop order, or
order of suspension or revocation of registration pursuant to Section
8(e) of the 1940 Act, and, if any such stop order or order of
suspension or revocation of registration is issued, to obtain the
lifting thereof at the earliest possible moment.
(ii) Filing of Amendments. The Fund will give the Representative notice of
its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)) or any amendment,
supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the
Prospectus, will furnish the Representative with copies of any such
documents a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file or use any such document to
which the Representative or counsel for the Underwriters shall
reasonably object.
(iii)Delivery of Registration Statements. The Fund has furnished or will
deliver to the Representative and counsel for the Underwriters,
without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits
filed therewith or incorporated by reference therein) and signed
copies of all consents and certificates of experts, and will also
deliver to the Representative, without charge, a conformed copy of the
Registration Statement as originally filed and of each amendment
thereto (without exhibits) for each of the Underwriters. The copies of
the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to
the extent permitted by Regulation S-T.
(iv) Delivery of Prospectuses. The Fund has delivered to each Underwriter,
without charge, as many copies of each preliminary prospectus as such
Underwriter reasonably requested, and the Fund hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Fund
will furnish to each Underwriter, without charge, during the period
when the Prospectus is required to be delivered under the 1933 Act or
the 1934 Act, such number of copies of the Prospectus (as amended or
supplemented) as such Underwriter may reasonably request. The
Prospectus and any amendments or supplements thereto furnished to the
Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to
the extent permitted by Regulation S-T.
(v) Continued Compliance with Securities Laws. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection
with sales of the Securities, any event shall occur or condition shall
exist as a result of which it is necessary, in the opinion of counsel
for the Underwriters or for the Fund, to amend the Registration
Statement or amend or supplement the Prospectus in order that the
Prospectus will not include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances
existing at the time it is delivered to a purchaser, or if it shall be
necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement the Prospectus in
order to comply with the requirements of the 1933 Act or the Rules and
Regulations, the Fund will promptly prepare and file with the
Commission, subject to Section 3(a)(ii), such amendment or supplement
as may be necessary to correct such statement or omission or to make
the Registration Statement or the Prospectus comply with such
requirements, and the Fund will furnish to the Underwriters such
number of copies of such amendment or supplement as the Underwriters
may reasonably request.
(vi) Blue Sky Qualifications. The Fund will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states
and other jurisdictions of the United States as the Representative may
designate and to maintain such qualifications in effect for a period
of not less than one year from the later of the effective date of the
Registration Statement and any Rule 462(b) Registration Statement;
provided, however, that the Fund shall not be obligated to file any
general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which
it is not so qualified or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so
subject. In each jurisdiction in which the Securities have been so
qualified, the Fund will file such statements and reports as may be
required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from
the effective date of the Registration Statement and any Rule 462(b)
Registration Statement.
(vii)Rule 158. The Fund will timely file such reports pursuant to the 1934
Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earning statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(viii) Use of Proceeds. The Fund will use the net proceeds received by it
from the sale of the Securities in the manner specified in the
Prospectus under "Use of Proceeds."
(ix) Listing. The Fund will use its reasonable best efforts to effect the
listing of the Securities on the NYSE, subject to notice of issuance,
concurrently with the effectiveness of the Registration Statement.
(x) Restriction on Sale of Securities. During a period of 180 days from
the date of the Prospectus, the Fund will not, without the prior
written consent of Merrill Lynch, (A) directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of
Common Shares or any securities convertible into or exercisable or
exchangeable for Common Shares or file any registration statement
under the 1933 Act with respect to any of the foregoing or (B) enter
into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Shares, whether any such swap
or transaction described in clause (A) or (B) above is to be settled
by delivery of Common Shares or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (1) the
Securities to be sold hereunder or (2) Common Shares issued pursuant
to any dividend reinvestment plan.
(xi) Reporting Requirements. The Fund, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission
pursuant to the 1940 Act and the 1934 Act within the time periods
required by the 1940 Act and the Rules and Regulations and the 1934
Act and the rules and regulations of the Commission thereunder,
respectively.
(xii)Subchapter M. The Fund will comply with the requirements of
Subchapter M of the Code to qualify as a regulated investment company
under the Code.
(xiii) No Manipulation of Market for Securities. The Fund will not (a)
take, directly or indirectly, any action designed to cause or to
result in, or that might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Fund
to facilitate the sale or resale of the Securities, and (b) until the
Closing Date, or the Date of Delivery, if any, (i) sell, bid for or
purchase the Securities or pay any person any compensation for
soliciting purchases of the Securities or (ii) pay or agree to pay to
any person any compensation for soliciting another to purchase any
other securities of the Fund .
(xiv)Rule 462(b) Registration Statement. If the Fund elects to rely upon
Rule 462(b), the Fund shall file a Rule 462(b) Registration Statement
with the Commission in compliance with Rule 462(b) by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement, and the Fund
shall at the time of filing either pay to the Commission the filing
fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under
the 1933 Act.
(b) The Adviser covenants with each Underwriter that for a period of 180
days from the date of the Prospectus, the Adviser will not, without your prior
written consent which consent shall not be unreasonably withheld, act as
investment adviser to any other closed end registered investment company having
an investment objective, policies and restrictions substantially similar to
those of the Fund. For this purpose, Federated Premier Intermediate Municipal
Income Fund shall not be deemed to be substantially similar to the Fund.
SECTION 4. Payment of Expenses.
(a) Expenses. The Fund will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the preparation, printing
and filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, printing and delivery to the Underwriters of this Agreement, any
Agreement among Underwriters and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the Underwriters, including any stock or other transfer taxes
and any stamp or other duties payable upon the sale, issuance or delivery of the
Securities to the Underwriters, (iv) the fees and disbursements of the Fund's
counsel, accountants and other advisers, (v) the qualification of the Securities
under securities laws in accordance with the provisions of Section 3(a)(vi)
hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing
and delivery to the Underwriters of copies of each preliminary prospectus,
Prospectus and any amendments or supplements thereto, (vii) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Survey and
any supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Securities, (ix) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the Securities, (x) the
fees and expenses incurred in connection with the listing of the Securities on
the NYSE and (xi) the printing of any sales material. Also, the Fund shall pay
to Merrill Lynch, on behalf of the Underwriters, $.005 per share of the
securities purchased pursuant to this agreement as partial reimbursement of
expenses incurred in connection with the offering. The Adviser has agreed to pay
organizational expenses and offering costs (other than sales load) of the Fund
that exceed $.03 per Common Share.
(b) Termination of Agreement. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or Section 9(a)
hereof, the Fund and the Adviser, jointly and severally, agree that they shall
reimburse the Underwriters for all of their out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations.
The obligations of the several Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Fund and the Adviser
contained in Section 1 hereof or in certificates of any officer of the Fund or
the Adviser delivered pursuant to the provisions hereof, to the performance by
the Fund and the Adviser of their respective covenants and other obligations
hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act, no notice or order pursuant
to Section 8(e) of the 1940 Act shall have been issued, and no proceedings with
respect to either shall have been initiated or threatened by the Commission, and
any request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
Underwriters. A prospectus containing the Rule 430A Information shall have been
filed with the Commission in accordance with Rule 497 (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430A).
(b) Opinion of Counsel for Fund and the Adviser. At Closing Time, the
Representative shall have received the favorable opinions, dated as of Closing
Time, of Dickstein Shapiro Morin & Oshinsky LLP, counsel for the Fund, and Reed
Smith LLP, counsel for the Adviser, in form and substance satisfactory to
counsel for the Underwriters, together with signed or reproduced copies of such
letters for each of the other Underwriters substantially to the effect set forth
in Exhibit A hereto and to such further effect as counsel to the Underwriters
may reasonably request.
(c) Opinion of Counsel for Underwriters. At Closing Time, the
Representative shall have received the favorable opinion, dated as of Closing
Time, of Clifford Chance US LLP, counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters
with respect to the matters set forth in clauses (A) (i), (ii), (vi), (vii)
(solely as to preemptive or other similar rights arising by operation of law or
under the charter or by-laws of the Fund), (viii) through (x), inclusive, (xii),
(xiv) (solely as to the information in the Prospectus under "Description of
Shares") and the last paragraph of Exhibit A hereto. In giving such opinion such
counsel may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of New York and the federal law of the United States,
upon the opinions of counsel satisfactory to the Representative. Such counsel
may also state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Fund and certificates of public officials.
(d) Officers' Certificates. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Fund, whether or not arising in the ordinary course of business, and the
Representative shall have received a certificate of a duly authorized officer of
the Fund and of the chief financial or chief accounting officer of the Fund and
of the President or a Vice President or Managing Director of the Adviser, dated
as of Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties in Sections 1(a) and (b)
hereof are true and correct with the same force and effect as though expressly
made at and as of Closing Time, (iii) each of the Fund and the Adviser,
respectively, has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to Closing Time, and (iv) no
stop order suspending the effectiveness of the Registration Statement, or order
of suspension or revocation of registration pursuant to Section 8(e) of the 1940
Act, has been issued and no proceedings for any such purpose have been
instituted or are pending or are contemplated by the Commission.
(e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representative shall have received from Ernst & Young LLP a
letter dated such date, in form and substance satisfactory to the
Representative, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial and other information
contained in the Registration Statement and the Prospectus.
(f) Bring-down Comfort Letter. At Closing Time, the Representative shall
have received from Ernst & Young LLP a letter, dated as of Closing Time, to the
effect that they reaffirm the statements made in the letter furnished pursuant
to subsection (e) of this Section, except that the specified date referred to
shall be a date not more than three business days prior to Closing Time.
(g) Approval of Listing. At Closing Time, the Securities shall have been
approved for listing on the NYSE, subject only to official notice of issuance.
(h) Execution of Additional Compensation Agreement. At Closing Time,
Merrill Lynch shall have received the Additional Compensation Agreement, dated
the date of the Closing Time, as executed by the Adviser.
(i) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(j) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities, the representations and warranties
of the Fund contained herein and the statements in any certificates furnished by
the Fund hereunder shall be true and correct as of each Date of Delivery and, at
the relevant Date of Delivery, the Representative shall have received:
(i) Officers' Certificates. Certificates, dated such Date of Delivery, of
a duly authorized officer of the Fund and of the chief financial or
chief accounting officer of the Fund and of the President or a Vice
President or Managing Director of the Adviser confirming that the
information contained in the certificate delivered by each of them at
the Closing Time pursuant to Section 5(d) hereof remains true and
correct as of such Date of Delivery.
(ii) Opinions of Counsel for the Fund and the Adviser. The favorable
opinion of Dickstein Shapiro Morin & Oshinsky LLP, counsel for the
Fund, and Reed Smith LLP, counsel for the Adviser, in form and
substance satisfactory to counsel for the Underwriters, dated such
Date of Delivery, relating to the Option Securities to be purchased on
such Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(b) hereof.
(iii)Opinion of Counsel for the Underwriters. The favorable opinion of
Clifford Chance US LLP, counsel for the Underwriters, dated such Date
of Delivery, relating to the Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from Ernst & Young LLP, in form
and substance satisfactory to the Representative and dated such Date
of Delivery, substantially in the same form and substance as the
letter furnished to the Representative pursuant to Section 5(f)
hereof, except that the "specified date" in the letter furnished
pursuant to this paragraph shall be a date not more than five days
prior to such Date of Delivery.
(k) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Fund and the Adviser in connection with the organization and
registration of the Fund under the 1940 Act and the issuance and sale of the
Securities as herein contemplated shall be satisfactory in form and substance to
the Representative and counsel for the Underwriters.
(l) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representative by notice to the Fund at any
time at or prior to Closing Time or such Date of Delivery, as the case may be,
and such termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 1, 6, 7, 8 and 13 shall
survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Fund and the Adviser, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act, and any director, officer, employee
or affiliate thereof as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out
of any untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission; provided that (subject
to Section 6(e) below) any such settlement is effected with the
written consent of the Fund; and
(iii)against any and all expense whatsoever, as incurred (including the
fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the Fund
or the Adviser by any Underwriter through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto).
(b) Indemnification of Fund, Adviser, Trustees and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Fund and the
Adviser, their respective trustees, each of the Fund's officers who signed the
Registration Statement, and each person, if any, who controls the Fund or the
Adviser within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Fund or the Adviser by such Underwriter through Merrill Lynch expressly
for use in the Registration Statement (or any amendment thereto) or such
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) Indemnification for Marketing Materials. In addition to the foregoing
indemnification, the Fund and the Adviser also, jointly and severally, agree to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any and all loss, liability, claim, damage
and expense described in the indemnity contained in Section 6(a), as limited by
the proviso set forth therein, with respect to any sales material. The
Underwriters shall not use any marketing materials other than those prepared or
approved by the Fund.
(d) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Fund and the Adviser. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(e) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
SECTION 7. Contribution.
If the indemnification provided for in Section 6 hereof is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Fund and the Adviser on the one hand and the
Underwriters on the other hand from the offering of the Securities pursuant to
this Agreement or (ii) if the allocation provided by clause (i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Fund and the Adviser on the one hand and of the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Fund and the Adviser on the one hand
and the Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Fund and the total underwriting discount received by the Underwriters
(whether from the Fund or otherwise), in each case as set forth on the cover of
the Prospectus bear to the aggregate initial public offering price of the
Securities as set forth on such cover.
The relative fault of the Fund and the Adviser on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Fund or the Adviser or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Fund, the Adviser and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each trustee of the Fund and each director of the Adviser, respectively, each
officer of the Fund who signed the Registration Statement, and each person, if
any, who controls the Fund or the Adviser, within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Fund and the Adviser, respectively. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement
or in certificates of officers of the Fund or the Adviser submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or controlling person, or
by or on behalf of the Fund or the Adviser, and shall survive delivery of the
Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representative may terminate this Agreement,
by notice to the Fund, at any time at or prior to Closing Time (i) if there has
been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Fund or the Adviser, whether or not arising
in the ordinary course of business, or (ii) if there has occurred any material
adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representatives, impracticable or inadvisable to market the
Securities or to enforce contracts for the sale of the Securities, or (iii) if
trading in the Common Shares of the Fund has been suspended or materially
limited by the Commission or the NYSE, or if trading generally on the NYSE or
the American Stock Exchange or in the Nasdaq National Market has been suspended
or materially limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the NASD or any other governmental
authority, or a material disruption has occurred in commercial banking or
securities settlement or clearance services in the United States, or (iv) if a
banking moratorium has been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7, 8 and 13 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Underwriters.
If one or more of the Underwriters shall fail at Closing Time or a Date of
Delivery to purchase the Securities which it or they are obligated to purchase
under this Agreement (the "Defaulted Securities"), the Representative shall have
the right, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting Underwriters, or any other underwriters, to purchase all, but
not less than all, of the Defaulted Securities in such amounts as may be agreed
upon and upon the terms herein set forth; if, however, the Representative shall
not have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the number
of Securities to be purchased on such date, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
Securities to be purchased on such date, this Agreement or, with respect to any
Date of Delivery which occurs after the Closing Time, the obligation of the
Underwriters to purchase and of the Fund to sell the Option Securities to be
purchased and sold on such Date of Delivery shall terminate without liability on
the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Fund to sell the relevant Option Securities, as
the case may be, either the Representative or the Fund shall have the right to
postpone Closing Time or the relevant Date of Delivery, as the case may be, for
a period not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or arrangements.
As used herein, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 10.
SECTION 11. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be directed to the
Representative, Merrill Lynch & Co., North Tower, 4 World Financial Center, New
York, New York 10080, attention of [Equity Capital Markets]; and notices to the
Fund or the Adviser shall be directed, as appropriate, to the office of
Federated Investors, Inc., Attention: Lisa E. Peternel, Federated Investors
Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779; with copies to Dickstein
Shapiro Morin & Oshinsky LLP, Attention: Matthew G. Maloney, Esq., 2101 L Street
NW, Washington, DC 20037-1526 and to Federated Investors, Inc., Stephen A. Keen,
Esq., Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
SECTION 12. Parties.
This Agreement shall each inure to the benefit of and be binding upon the
Underwriters, the Fund, the Adviser and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Underwriters, the Fund, the
Adviser and their respective successors and the controlling persons and officers
and trustees referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Fund, the Adviser and their
respective successors, and said controlling persons and officers, trustees and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
IN SAID STATE. UNLESS OTHERWISE EXPLICITLY PROVIDED, SPECIFIED TIMES OF DAY
REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument,
along with all counterparts, will become a binding agreement among the
Underwriters, the Fund and the Adviser in accordance with its terms.
Very truly yours,
FEDERATED PREMIER MUNICIPAL INCOME FUND
By:
Name:
Title:
FEDERATED INVESTMENT MANAGEMENT COMPANY
By:
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
[other Underwriters]
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:
Authorized Signatory
For itself and as
Representative of the
other Underwriters named
in Schedule A hereto.
SCHEDULE A
Number of
Name of Underwriter Initial Securities
------------------------------------------------------------------------------
SCHEDULE B
Federated Premier Municipal Income Fund
[ ] Common Shares of Beneficial Interest
(Par Value $.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as
provided in said Section 2, shall be $15.00.
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $[ ], being an amount equal to the initial public
offering price set forth above less $[ ] per share; provided that the purchase
price per share for any Option Securities purchased upon the exercise of the
over-allotment option described in Section 2(b) shall be reduced by an amount
per share equal to any dividends or distributions declared by the Fund and
payable on the Initial Securities but not payable on the Option Securities.
Exhibit (h)(ii) under Form N-2
Revised July 16, 2001
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
4 World Financial Center
New York, N.Y. 10800
STANDARD DEALER AGREEMENT
Dear Sirs:
In connection with public offerings of securities underwritten by us, or by
a group of underwriters (the "Underwriters") represented by us, you may be
offered the opportunity to purchase a portion of such securities, as principal,
at a discount from the offering price representing a selling concession or
reallowance granted as consideration for services rendered by you in the sale of
such securities. We request that you agree to the following terms and
provisions, and make the following representations, which, together with any
additional terms and provisions set forth in any wire or letter sent to you in
connection with a particular offering, will govern all such purchases of
securities and the reoffering thereof by you.
Your subscription to, or purchase of, such securities will constitute your
reaffirmation of this Agreement.
1. When we are acting as representative (the "Representative") of the
Underwriters in offering securities to you, it should be understood that all
offers are made subject to prior sale of the subject securities, when, as and if
such securities are delivered to and accepted by the Underwriters and subject to
the approval of legal matters by their counsel. In such cases, any order from
you for securities will be strictly subject to confirmation and we reserve the
right in our uncontrolled discretion to reject any order in whole or in part.
Upon release by us, you may reoffer such securities at the offering price fixed
by us. With our consent, you may allow a discount, not in excess of the
reallowance fixed by us, in selling such securities to other dealers, provided
that in doing so you comply with the Conduct Rules of the National Association
of Securities Dealers, Inc. (the "NASD"). Upon our request, you will advise us
of the identity of any dealer to whom you allow such a discount and any
Underwriter or dealer from whom you receive such a discount. After the
securities are released for sale to the public, we may vary the offering price
and other setting terms.
2. You represent that you are a dealer actually engaged in the investment
banking or securities business and that you are either (i) a member in good
standing of the NASD or (ii) a dealer with its principal place of business
located outside the United States, its territories or possessions and not
registered under the Securities Exchange Act of 1934 (a "non-member foreign
dealer") or (iii) a bank not eligible for membership in the NASD. If you are a
non-member foreign dealer, you agree to make no sales of securities within the
United States, its territories or its possessions or to persons who are
nationals thereof or residents therein. Non-member foreign dealers and banks
agree, in making any sales, to comply with the NASD's interpretation with
respect to free-riding and withholding. In accepting a selling concession where
we are acting as Representative of the Underwriters, in accepting a reallowance
from us whether or not we are acting as such Representative, and in allowing a
discount to any other person, you agree to comply with the provisions of Rule
2740 of the Conduct Rules of the NASD, and, in addition, if you are a non-member
foreign dealer or bank, you agree to comply, as though you were a member of the
NASD, with the provisions of Rules 2730 and 2750 of such Conduct Rules and to
comply with Rule 2420 thereof as that Rule applies to a non-member foreign
dealer or bank. You represent that you are fully familiar with the above
provisions of the Conduct Rules of the NASD.
3. If the securities have been registered under the Securities Act of 1933
(the "1933 Act"), in offering and selling such securities, you are not
authorized to give any information or make any representation not contained in
the prospectus relating thereto. You confirm that you are familiar with the
rules and policies of the Securities and Exchange Commission relating to the
distribution of preliminary and final prospectuses, and you agree that you will
comply therewith in any offering covered by this Agreement. If we are acting as
Representative of the Underwriters, we will make available to you, to the extent
made available to us by the issuer of the securities, such number of copies of
the prospectus or offering documents, for securities not registered under the
1933 Act, as you may reasonably request.
4. If we are acting as Representative of the Underwriters of securities of
an issuer that is not required to file reports under the Securities Exchange Act
of 1934 (the "1934 Act"), you agree that you will not sell any of the securities
to any account over which you have discretionary authority.
5. Payment for securities purchased by you is to be made at our office, One
Liberty Plaza, 165 Broadway, New York, N.Y. 10006 (or at such other place as we
may advise), at the offering price less the concession allowed to you, on such
date as we may advise, by certified or official bank check in New York Clearing
House funds (or such other funds as we may advise), payable to our order,
against delivery of the securities to be purchased by you. We shall have
authority to make appropriate arrangements for payment for and/or delivery
through the facility of The Depository Trust Company or any such other
depository or similar facility for the securities.
6. In the event that, prior to the completion of the distribution of
securities covered by this Agreement, we purchase in the open market or
otherwise any securities delivered to you, if we are acting as Representative of
the Underwriters, you agree to repay to us for the accounts of the Underwriters
the amount of the concession allowed to you plus brokerage commissions and any
transfer taxes paid in connection with such purchase.
7. At any time prior to the completion of the distribution of securities
covered by this Agreement you will, upon our request as Representative of the
Underwriters, report to us the amount of securities purchased by you which then
remains unsold and will, upon our request, sell to us for the account of one or
more of the Underwriters such amount of such unsold securities as we may
designate, at the offering price less an amount to be determined by us not in
excess of the concession allowed to you.
8. If we are acting as Representative of the Underwriters, upon application
to us, we will inform you of the states and other jurisdictions of the United
States in which it is believed that the securities being offered are qualified
for sale under, or are exempt from the requirements of, their respective
securities laws, but we assume no responsibility with respect to your right to
sell securities in any jurisdiction. We shall have authority to file with the
Department of State of the State of New York a Further State Notice with respect
to the securities, if necessary.
9. You agree that in connection with any offering of securities covered by
this Agreement you will comply with the applicable provisions of the 1933 Act
and the 1934 Act and the applicable rules and regulations of the Securities and
Exchange Commission thereunder, the applicable rules and regulations of the
NASD, and the applicable rules of any securities exchange having jurisdiction
over the offering.
10. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to any offering covered by this
Agreement. We shall be under no liability to you except for our lack of good
faith and for obligations assumed by us in this Agreement, except that you do
not waive any rights that you may have under the 1933 Act or the rules and
regulations thereunder.
11. Any notice from us shall be deemed to have been duly given if mailed or
transmitted by any standard form of written telecommunications to you at the
above address or at such other address as you shall specify to us in writing.
12. With respect to any offering of securities covered by this Agreement,
the price restrictions contained in Paragraph 1 hereof and the provisions of
Paragraphs 6 and 7 hereof shall terminate as to such offering at the close of
business on the 45th day after the securities are released for sale or, as to
any or all such provisions, at such earlier time as we may advise. All other
provisions of this Agreement shall remain operative and in full force and effect
with respect to such offering.
13. This Agreement shall be governed by the laws of the State of New York.
Please confirm your agreement hereto by signing the enclosed duplicate copy
hereof in the place provided below and returning such signed duplicate copy to
us at World Headquarters, 4 World Financial Center, New York, N.Y. 10080,
Attention: Syndicate Operations. Upon receipt thereof, this instrument and such
signed duplicate copy will evidence the agreement between us.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
-------------------------------
Name: Mario Patella
Confirmed and accepted as of the
day of , 20
-----------------------------------------
Name of Dealer
-----------------------------------------
Authorized Officer or Partner
(if not Officer or Partner, attach copy
of
Instrument of Authorization)
Exhibit (h)(iii) under Form N-2
ADDITIONAL COMPENSATION AGREEMENT
ADDITIONAL COMPENSATION AGREEMENT (the "Agreement"), dated as of [ ], 2002,
between Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and Federated Investment Management Company ("Federated").
WHEREAS, Federated Premier Municipal Income Fund (including any successor
by merger or otherwise, the "Fund") is a newly organized, diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), and its publicly offered common shares
are registered under the Securities Act of 1933, as amended; and
WHEREAS, Federated is the investment adviser of the Fund;
WHEREAS, Merrill Lynch is acting as lead underwriter in an offering of the
Fund's common shares;
WHEREAS, Federated desires to provide additional compensation to Merrill
Lynch for acting as lead underwriter in an offering of the Fund's common shares;
and
WHEREAS, Federated desires to retain Merrill Lynch to provide after-market
support services designed to maintain the visibility of the Fund on an ongoing
basis, and Merrill Lynch is willing to render such services;
NOW, THEREFORE, in consideration of the mutual terms and conditions set
forth below, the parties hereto agree as follows:
1. (a) Federated hereby employs Merrill Lynch, for the period and on the
terms and conditions set forth herein, to provide the following services at the
reasonable request of Federated:
(1) to provide after-market support services designed to maintain the
visibility of the Fund on an ongoing basis;
(2) to provide relevant information, studies or reports regarding general
trends in the closed-end investment company and asset management industries, if
reasonably obtainable, and consult with representatives of Federated in
connection therewith; and
(3) to provide information to and consult with Federated with respect to
applicable strategies designed to address market value discounts, if any.
(b) At the request of Federated, Merrill Lynch shall limit or cease any
action or service provided hereunder to the extent and for the time period
requested by Federated; provided, however, that pending termination of this
Agreement as provided for in Section 5 hereof, any such limitation or cessation
shall not relieve Federated of its payment obligations pursuant to Section 2
hereof.
(c) Merrill Lynch will promptly notify Federated if it learns of any
material inaccuracy or misstatement in, or material omission from, any written
information, as of the date such information was published, provided by Merrill
Lynch to Federated in connection with the performance of services by Merrill
Lynch under this Agreement.
2. Federated shall pay Merrill Lynch a fee computed weekly and payable
quarterly in arrears commencing [ ], 2002 at an annualized rate of 0.10% of the
Fund's managed assets for a term as described in Section 5 hereof; provided that
the total amount of the fee hereunder plus the amount of the expense
reimbursement of $.005 per common share payable by the Fund to the underwriters
pursuant to the Purchase Agreement dated [ ], 2002, by and among the Fund,
Federated and each of the Underwriters named therein (the "Purchase Agreement")
shall not exceed 4.5% of the total price (including all Initial Securities and
Option Securities as such terms are described in the Purchase Agreement) to the
public of the Fund's common shares offered by the prospectus dated [ ], 2002;
and provided further, that in determining when this maximum fee amount has been
paid, the value of each of the quarterly payments made hereunder shall be
discounted at the annual rate of 10% to the closing date of offering. All
quarterly fees payable hereunder shall be paid to Merrill Lynch within 15 days
following the end of each calendar quarter.
3. Federated acknowledges that the services of Merrill Lynch provided for
hereunder do not include any advice as to the value of securities or regarding
the advisability of purchasing or selling any securities for the Fund's
portfolio. No provision of this Agreement shall be considered as creating, nor
shall any provision create, any obligation on the part of Merrill Lynch, and
Merrill Lynch is not hereby agreeing, to: (i) furnish any advice or make any
recommendations regarding the purchase or sale of portfolio securities or (ii)
render any opinions, valuations or recommendations of any kind or to perform any
such similar services in connection with providing the services described in
Section 1 hereof.
4. Nothing herein shall be construed as prohibiting Merrill Lynch or its
affiliates from providing similar or other services to any other clients
(including other registered investment companies or other investment managers),
so long as Merrill Lynch's services to Federated are not impaired thereby.
5. The term of this Agreement shall commence upon the date referred to
above and shall be in effect so long as Federated acts as the investment manager
to the Fund pursuant to the Investment Management Agreement (as such term is
defined in the Purchase Agreement) or other subsequent advisory agreement.
6. Federated will furnish Merrill Lynch with such information as Merrill
Lynch believes appropriate to its assignment hereunder (all such information so
furnished being the "Information"). Federated recognizes and confirms that
Merrill Lynch (a) will use and rely primarily on the Information and on
information available from generally recognized public sources in performing the
services contemplated by this Agreement without having independently verified
the same and (b) does not assume responsibility for the accuracy or completeness
of the Information and such other information. To the best of Federated's
knowledge, the Information to be furnished by Federated when delivered, will be
true and correct in all material respects and will not contain any material
misstatement of fact or omit to state any material fact necessary to make the
statements contained therein not misleading. Federated will promptly notify
Merrill Lynch if it learns of any material inaccuracy or misstatement in, or
material omission from, any Information delivered to Merrill Lynch.
7. It is understood that Merrill Lynch is being engaged hereunder solely to
provide the services described above to Federated and that Merrill Lynch is not
acting as an agent or fiduciary of, and shall have no duties or liability to the
current or future shareholders of the Fund or any other third party in
connection with its engagement hereunder, all of which are hereby expressly
waived.
8. Federated agrees that Merrill Lynch shall have no liability to Federated
or the Fund for any act or omission to act by Merrill Lynch in the course of its
performance under this Agreement, in the absence of gross negligence or willful
misconduct on the part of Merrill Lynch. Federated agrees to the indemnification
and other agreements set forth in the Indemnification Agreement attached hereto,
the provisions of which are incorporated herein by reference and shall survive
the termination, expiration or supercession of this Agreement.
9. This Agreement and any claim, counterclaim or dispute of any kind or
nature whatsoever arising out of or in any way relating to this Agreement
("Claim") shall be governed by and construed in accordance with the laws of the
State of New York.
10. No Claim may be commenced, prosecuted or continued in any court other
than the courts of the State of New York located in the City and County of New
York or in the United States District Court for the Southern District of New
York, which courts shall have exclusive jurisdiction over the adjudication of
such matters, and Federated and Merrill Lynch consent to the jurisdiction of
such courts and personal service with respect thereto. Each of Merrill Lynch and
Federated waives all right to trial by jury in any proceeding (whether based
upon contract, tort or otherwise) in any way arising out of or relating to this
Agreement. Federated agrees that a final judgment in any proceeding or
counterclaim brought in any such court shall be conclusive and binding upon
Federated and may be enforced in any other courts to the jurisdiction of which
Federated is or may be subject, by suit upon such judgment.
11. This Agreement may not be assigned by either party without the prior
written consent of the other party.
12. This Agreement (including the attached Indemnification Agreement)
embodies the entire agreement and understanding between the parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof. If any provision of this Agreement is determined to be invalid or
unenforceable in any respect, such determination will not affect such provision
in any other respect or any other provision of this Agreement, which will remain
in full force and effect. This Agreement may not be amended or otherwise
modified or waived except by an instrument in writing signed by both Merrill
Lynch and Federated.
13. All notices required or permitted to be sent under this Agreement shall
be sent, if to Federated:
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attention: [ ]
or if to Merrill Lynch:
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower, World Financial Center
New York, New York 10080
Attention: [ ]
or such other name or address as may be given in writing to the other
parties. Any notice shall be deemed to be given or received on the third day
after deposit in the US mail with certified postage prepaid or when actually
received, whether by hand, express delivery service or facsimile transmission,
whichever is earlier.
14. This Agreement may be executed in separate counterparts, each of which
is deemed to be an original and all of which taken together constitute one and
the same agreement.
IN WITHESS WHEREOF, the parties hereto have duly executed this Additional
Compensation Agreement as of the date first above written.
FEDERATED INVESTMENT MANAGEMENT MERRILL LYNCH & CO.
COMPANY MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: _____________________________ By: _____________________________
Name: Name:
Title: Title:
Merrill Lynch & Co. Indemnification Agreement
[ ], 2002
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower, World Financial Center
New York, New York 10080
Ladies and Gentlemen:
In connection with the engagement of Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") to advise and assist the
undersigned (together with its affiliates and subsidiaries, referred to as the
"Company") with the matters set forth in the Additional Compensation Agreement
dated [ ], 2002 between the Company and Merrill Lynch (the "Agreement"), in the
event that Merrill Lynch becomes involved in any capacity in any claim, suit,
action, proceeding, investigation or inquiry (including, without limitation, any
shareholder or derivative action or arbitration proceeding) (collectively, a
"Proceeding") arising out of the matters contemplated by the Agreement,
including, without limitation, related services and activities prior to the date
of the Agreement, the Company agrees to indemnify, defend and hold Merrill Lynch
harmless to the fullest extent permitted by law, from and against any losses,
claims, damages, liabilities and expenses in connection with such Proceeding,
except to the extent that such losses, claims, damages, liabilities and expenses
resulted from the gross negligence or willful misconduct of Merrill Lynch. In
addition, in the event that Merrill Lynch becomes involved in any capacity in
any Proceeding arising out of the matters contemplated by the Agreement,
including, without limitation, related services and activities prior to the date
of the Agreement, the Company will reimburse Merrill Lynch for its reasonable
legal and other expenses (including the cost of any investigation and
preparation) as such expenses are incurred by Merrill Lynch in connection
therewith; subject, however, to the obligation of Merrill Lynch to reimburse the
Company to the extent it is ultimately determined that Merrill Lynch is not
entitled to indemnification hereunder. If such indemnification were not to be
available for any reason, the Company agrees to contribute to the losses,
claims, damages, liabilities and expenses involved (i) in the proportion
appropriate to reflect the relative benefits received or sought to be received
by the Company and its stockholders and affiliates and other constituencies, on
the one hand, and Merrill Lynch, on the other hand, in the matters contemplated
by the Agreement or (ii) if (but only if and to the extent) the allocation
provided for in clause (i) is for any reason held unenforceable, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) but also the relative fault of the Company and its stockholders
and affiliates and other constituencies, on the one hand, and the party entitled
to contribution, on the other hand, as well as any other relevant equitable
considerations. The Company agrees that for the purposes of this paragraph the
relative benefits received, or sought to be received, by the Company and its
stockholders and affiliates, on the one hand, and the party entitled to
contribution, on the other hand, of a transaction as contemplated shall be
deemed to be in the same proportion that the total value received or paid or
contemplated to be received or paid by the Company or its stockholders or
affiliates and other constituencies, as the case may be, as a result of or in
connection with the transaction (whether or not consummated) for which Merrill
Lynch has been retained to perform financial services bears to the fees paid to
Merrill Lynch under the Agreement; provided, that in no event shall the Company
contribute less than the amount necessary to assure that Merrill Lynch is not
liable for losses, claims, damages, liabilities and expenses in excess of the
amount of fees actually received by Merrill Lynch pursuant to the Agreement.
Relative fault shall be determined by reference to, among other things, whether
any alleged untrue statement or omission or any other alleged conduct relates to
information provided by the Company or other conduct by the Company (or its
employees or other agents), on the one hand, or by Merrill Lynch, on the other
hand. The Company will not settle any Proceeding in respect of which indemnity
may be sought hereunder, whether or not Merrill Lynch is an actual or potential
party to such Proceeding, without Merrill Lynch's prior written consent. For
purposes of this Indemnification Agreement, Merrill Lynch shall include Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, any of its
affiliates, each other person, if any, controlling Merrill Lynch or any of its
affiliates, their respective officers, current and former directors, employees
and agents, and the successors and assigns of all of the foregoing persons. The
foregoing indemnity and contribution agreement shall be in addition to any
rights that any indemnified party may have at common law or otherwise.
The Company agrees that neither Merrill Lynch nor any of its affiliates,
directors, agents, employees or controlling persons shall have any liability to
the Company or any person asserting claims on behalf of or in right of the
Company in connection with or as a result of either Merrill Lynch's engagement
under the Agreement, including, without limitation, related services and
activities prior to the date of the Agreement, except to the extent that it
shall be determined by a court of competent jurisdiction in a judgment that has
become final in that it is no longer subject to appeal or other review that any
losses, claims, damages, liabilities or expenses incurred by the Company
resulted solely from the gross negligence or willful misconduct of Merrill Lynch
in performing the services that are the subject of the Agreement.
This INDEMNIFICATION Agreement and any claim, counterclaim or dispute of
any kind or nature whatsoever arising out of or in any way relating to this
Agreement ("Claim"), DIRECTLY OR INDIRECTLY, shall be governed by and construed
in accordance with the laws of the State of New York. Except as set forth below,
no Claim may be commenced, prosecuted or continued in any court other than the
courts of the State of New York located in the City and County of New York or in
the United States District Court for the Southern District of New York, which
courts shall have exclusive jurisdiction over the adjudication of such matters,
and the Company and Merrill Lynch consent to the jurisdiction of such courts and
personal service with respect thereto. Each of Merrill Lynch and the Company
waives all right to trial by jury in any proceeding or claim (whether based upon
contract, tort or otherwise) arising out of or in any way relating to this
Agreement. The PARTIES agree that a final judgment in any proceeding or claim
arising out of or in any way relating to this agreement brought in any such
court shall be conclusive and binding upon the parties and may be enforced in
any other courts to the jurisdiction of which the party is or may be subject, by
suit upon such judgment.
The foregoing Indemnification Agreement shall remain in full force and
effect notwithstanding any termination of Merrill Lynch's engagement. This
Indemnification Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same agreement.
Very truly yours,
FEDERATED INVESTMENT MANAGEMENT COMPANY
By: ______________________
Name:
Title:
Accepted and agreed to as of
the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By ______________________
Name:
Title:
Exhibit (j) under Form N-2
CUSTODIAN CONTRACT
Between
FEDERATED INVESTMENT COMPANIES
and
STATE STREET BANK AND TRUST COMPANY
and
FEDERATED SERVICES COMPANY
page i
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It............1
2. Duties of the Custodian With Respect to Property
of the Funds Held by the Custodian...............................2
2.1 Holding Securities.........................................2
2.2 Delivery of Securities.....................................2
2.3 Registration of Securities.................................6
2.4 Bank Accounts..............................................6
2.5 Payments for Shares........................................7
2.6 Availability of Federal Funds..............................7
2.7 Collection of Income.......................................7
2.8 Payment of Fund Moneys.....................................8
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased............................9
2.10 Payments for Repurchases or Redemptions
of Shares of a Fund........................................9
2.11 Appointment of Agents.....................................10
2.12 Deposit of Fund Assets in Securities System...............10
2.13 Segregated Account........................................12
2.14 Joint Repurchase Agreements...............................13
2.15 Ownership Certificates for Tax Purposes...................13
2.16 Proxies...................................................13
2.17 Communications Relating to Fund Portfolio Securities......13
2.18 Proper Instructions.......................................14
2.19 Actions Permitted Without Express Authority...............14
2.20 Evidence of Authority.....................................15
2.21 Notice to Trust by Custodian Regarding Cash Movement......15
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income...................15
4. Records.........................................................16
5. Opinion of Funds' Independent Public Accountants/Auditors.......16
6. Reports to Trust by Independent Public Accountants/Auditors.....17
7. Compensation of Custodian.......................................17
8. Responsibility of Custodian.....................................17
9. Effective Period, Termination and Amendment.....................19
10. Successor Custodian.............................................20
11. Interpretive and Additional Provisions..........................21
12. Massachusetts Law to Apply......................................21
13. Notices.........................................................22
14. Counterparts....................................................22
15. Limitations of Liability........................................22
CUSTODIAN CONTRACT
This Contract between those INVESTMENT COMPANIES listed on Exhibit 1, as it
may be amended from time to time, (the "Trust"), which may be Massachusetts
business trusts or Maryland corporation or have such other form of organization
as may be indicated, on behalf of the portfolios (hereinafter collectively
called the "Funds") and individually referred to as a "Fund") of the Trust,
having its principal place of business at Federated Investors Tower, Pittsburgh,
Pennsylvania, 15222-3779, and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian", and FEDERATED SERVICES COMPANY, a Delaware business trust company,
having its principal place of business at Federated Investors Tower, Pittsburgh,
Pennsylvania, 15222-3779, hereinafter called ("Company").
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets of
each of the Funds of the Trust. Except as otherwise expressly provided herein,
the securities and other assets of each of the Funds shall be segregated from
the assets of each of the other Funds and from all other persons and entities.
The Trust will deliver to the Custodian all securities and cash owned by the
Funds and all payments of income, payments of principal or capital distributions
received by them with respect to all securities owned by the Funds from time to
time, and the cash consideration received by them for shares ("Shares") of
beneficial interest/capital stock of the Funds as may be issued or sold from
time to time. The Custodian shall not be responsible for any property of the
Funds held or received by the Funds and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section 2.18),
the Custodian shall from time to time employ one or more sub-custodians upon the
terms specified in the Proper Instructions, provided that the Custodian shall
have no more or less responsibility or liability to the Trust or any of the
Funds on account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Funds Held by
the Custodian
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Fund all non-cash property, including all securities
owned by each Fund, other than securities which are maintained pursuant to
Section 2.12 in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System", or securities which are
subject to a joint repurchase agreement with affiliated funds pursuant to
Section 2.14. The Custodian shall maintain records of all receipts, deliveries
and locations of such securities, together with a current inventory thereof, and
shall conduct periodic physical inspections of certificates representing stocks,
bonds and other securities held by it under this Contract in such manner as the
Custodian shall determine from time to time to be advisable in order to verify
the accuracy of such inventory. With respect to securities held by any agent
appointed pursuant to Section 2.11 hereof, and with respect to securities held
by any sub-custodian appointed pursuant to Section 1 hereof, the Custodian may
rely upon certificates from such agent as to the holdings of such agent and from
such sub-custodian as to the holdings of such sub-custodian, it being understood
that such reliance in no way relieves the Custodian of its responsibilities
under this Contract. The Custodian will promptly report to the Trust the results
of such inspections, indicating any shortages or discrepancies uncovered
thereby, and take appropriate action to remedy any such shortages or
discrepancies.
2.2 Delivery of Securities. The Custodian shall release and deliver any
securities owned by a Fund held by the Custodian or in a Securities system
account of the Custodian only upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by the parties, and only in the
following cases:
(1) Upon sale of such securities for the account of a Fund and receipt of
payment therefor;
(2) Upon the receipt of payment in connection with any repurchase agreement
related to such securities entered into by the Trust;
(3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
(4) To the depository agent in connection with tender or other similar
offers for portfolio securities of a Fund, in accordance with the provisions of
Section 2.17 hereof;
(5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any such case,
the cash or other consideration is to be delivered to the Custodian;
(6) To the issuer thereof or its agent, for transfer into the name of a
Fund or into the name of any nominee or nominees of the Custodian or into the
name or nominee or nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.11 or into the name or nominee name of
any sub-custodian appointed pursuant to Section 1; or for exchange for a
different number of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in any such case, the
new securities are to be delivered to the Custodian;
(7) Upon the sale of such securities for the account of the Fund, to the
broker or clearing agent, against a receipt, for examination in accordance with
"street delivery custom"; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from the delivery of
such securities prior to receiving payment for such securities except as may
arise from the Custodian's own failure to act in accordance with the standard of
reasonable care or any higher standard of care imposed upon the Custodian by any
applicable law or regulation if such above-stated standard of reasonable care
were not part of this Contract;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions for
conversion contained in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
(9) In the case of warrants, rights or similar securities, the surrender
thereof in the existence of such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities for definitive securities;
provided that, in any case, the new securities and cash, if any, are to be
delivered to the Custodian;
(10) For delivery in connection with any loans of portfolio securities of a
Fund, but only against receipt of adequate collateral in the form of (a) cash,
in an amount specified by the Trust, (b) certificated securities of a
description specified by the Trust, registered in the name of the Fund or in the
name of a nominee of the Custodian referred to in Section 2.3 hereof or in
proper form for transfer, or (c) securities of a description specified by the
Trust, transferred through a Securities System in accordance with Section 2.12
hereof;
(11) For delivery as security in connection with any borrowings requiring a
pledge of assets by a Fund, but only against receipt of amounts borrowed, except
that in cases where additional collateral is required to secure a borrowing
already made, further securities may be released for the purpose;
(12) For delivery in accordance with the provisions of any agreement among
the Trust or a Fund, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") and a member
of The National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions for a Fund;
(13) For deliver in accordance with the provisions of any agreement among
the Trust or a Fund, the Custodian, and a Futures Commission Merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in connection with
transaction for a Fund;
(14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for a Fund, for delivery to such Transfer Agent or to the holders of
shares in connection with distributions in kind, in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(15) For any other proper corporate purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the
Executive Committee of the Trust on behalf of a Fund signed by an officer of the
Trust and certified by its Secretary or an Assistant Secretary, specifying the
securities to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose, and naming
the person or persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of a particular Fund or
in the name of any nominee of the Fund or of any nominee of the Custodian which
nominee shall be assigned exclusively to the Fund, unless the Trust has
authorized in writing the appointment of a nominee to be used in common with
other registered investment companies affiliated with the Fund, or in the name
or nominee name of any agent appointed pursuant to Section 2.11 or in the name
or nominee name of any sub-custodian appointed pursuant to Section 1. All
securities accepted by the Custodian on behalf of a Fund under the terms of this
Contract shall be in "street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of each Fund, subject only to draft or order by
the Custodian acting pursuant to the terms of this Contract, and shall hold in
such account or accounts, subject to the provisions hereof, all cash received by
it from or for the account of each Fund, other than cash maintained in a joint
repurchase account with other affiliated funds pursuant to Section 2.14 of this
Contract or by a particular Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of 1940, as amended,
(the "1940 Act"). Funds held by the Custodian for a Fund may be deposited by it
to its credit as Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each such bank or
trust company and the funds to be deposited with each such bank or trust company
shall be approved by vote of a majority of the Board of Trustees/Directors
("Board") of the Trust. Such funds shall be deposited by the Custodian in its
capacity as Custodian for the Fund and shall be withdrawable by the Custodian
only in that capacity. If requested by the Trust, the Custodian shall furnish
the Trust, not later than twenty (20) days after the last business day of each
month, an internal reconciliation of the closing balance as of that day in all
accounts described in this Section to the balance shown on the daily cash report
for that day rendered to the Trust.
2.5 Payments for Shares. The Custodian shall make such arrangements with
the Transfer Agent of each Fund, as will enable the Custodian to receive the
cash consideration due to each Fund and will deposit into each Fund's account
such payment as are received from the Transfer Agent. The Custodian will provide
timely notification to the Trust and the Transfer Agent of any receipt by it of
payments for Shares of the respective Fund.
2.6 Availability of Federal Funds. Upon mutual agreement between the Trust
and the Custodian, the Custodian shall make federal funds available to the Funds
as of specified times agreed upon from time to time by the Trust and the
Custodian in the amount of checks, clearing house funds, and other non-federal
funds received in payment for Shares of the Fund which are deposited into the
Funds' accounts.
2.7 Collection of Income.
(1) The Custodian shall collect on a timely basis all income and other
payments with respect to registered securities held hereunder to which each Fund
shall be entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other payments with
respect to bearer securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and shall credit such
income, as collected, to each Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for payment
all coupons and other income items requiring presentation as and when they
become due and shall collect interest when due on securities held hereunder. The
collection of income due the Funds on securities loaned pursuant to the
provisions of Section 2.2(10) shall be the responsibility of the Trust. The
Custodian will have no duty or responsibility in connection therewith, other
than to provide the Trust with such information or data as may be necessary to
assist the Trust in arranging for the timely delivery to the Custodian of the
income to which each Fund is properly entitled.
(2) The Custodian shall promptly notify the Trust whenever income due on
securities is not collected in due course and will provide the Trust with
monthly reports of the status of past due income unless the parties otherwise
agree.
2.8 Payment of Fund Moneys. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, the Custodian
shall pay out moneys of each Fund in the following cases only:
(1) Upon the purchase of securities, futures contracts or options on
futures contracts for the account of a Fund but only (a) against the delivery of
such securities, or evidence of title to futures contracts, to the Custodian (or
any bank, banking firm or trust company doing business in the United States or
abroad which is qualified under the 1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this purpose) registered in the
name of the Fund or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, (b) in the case of a purchase
effected through a Securities System, in accordance with the conditions set
forth in Section 2.12 hereof or (c) in the case of repurchase agreement entered
into between the Trust and any other party, (i) against delivery of the
securities either in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase for the account of the Fund
of securities owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from the Fund;
(2) In connection with conversion, exchange or surrender of securities
owned by a Fund as set forth in Section 2.2 hereof;
(3) For the redemption or repurchase of Shares of a Fund issued by the
Trust as set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by a Fund,
including but not limited to the following payments for the account of the Fund:
interest; taxes; management, accounting, transfer agent and legal fees; and
operating expenses of the Fund, whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
(5) For the payment of any dividends on Shares of a Fund declared pursuant
to the governing documents of the Trust;
(6) For payment of the amount of dividends received in respect of
securities sold short;
(7) For any other proper purpose, but only upon receipt of, in addition to
Proper Instruction, a certified copy of a resolution of the Executive Committee
of the Trust on behalf of a Fund signed by an officer of the Trust and certified
by its Secretary or an Assistant Secretary, specifying the amount of such
payment, setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the person or persons
to whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased. In
any and every case where payment for purchase of securities for the account of a
Fund is made by the Custodian in advance of receipt of the securities purchased,
in the absence of specific written instructions from the Trust to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by the
Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of a Fund. From such
funds as may be available for the purpose of repurchasing or redeeming Shares of
a Fund, but subject to the limitations of the Declaration of Trust/Articles of
Incorporation and any applicable votes of the Board of the Trust pursuant
thereto, the Custodian shall, upon receipt of instructions from the Transfer
Agent, make funds available for payment to holders of shares of such Fund who
have delivered to the Transfer Agent a request for redemption or repurchase of
their shares including without limitation through bank drafts, automated
clearinghouse facilities, or by other means. In connection with the redemption
or repurchase of Shares of the Funds, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders.
2.11 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the 1940 Act and any applicable state law or
regulation, to act as a custodian as its agent to carry out such of the
provisions of this Section 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities System. The Custodian may deposit
and/or maintain securities owned by the Funds in a clearing agency registered
with the Securities and Exchange Commission ("SEC") under Section 17A of the
Exchange Act, which acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance with
applicable Federal Reserve Board and SEC rules and regulations, if any, and
subject to the following provisions:
(1) The Custodian may keep securities of each Fund in a Securities System
provided that such securities are represented in an account ("Account") of the
Custodian in the Securities System which shall not include any assets of the
Custodian other than assets held as a fiduciary, custodian or otherwise for
customers;
(2) The records of the Custodian with respect to securities of the Funds
which are maintained in a Securities System shall identify by book-entry those
securities belonging to each Fund;
(3) The Custodian shall pay for securities purchased for the account of
each Fund (i) receipt if advice from the Securities System that such securities
have been transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the account of
the Fund. The Custodian shall transfer securities sold for the account of a Fund
upon (i) receipt of advice from the Securities System that payment for such
securities has been transferred to the Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the Securities System of
transfers of securities for the account of a Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be provided to the Trust at its
request. Upon request, the Custodian shall furnish the Trust confirmation of
each transfer to or from the account of a Fund in the form of a written advice
or notice and shall furnish to the Trust copies of daily transaction sheets
reflecting each day's transactions in the Securities System for the account of a
Fund;
(4) The Custodian shall provide the Trust with any report obtained by the
Custodian on the Securities System's accounting system, internal accounting
control and procedures for safeguarding securities deposited in the Securities
System;
(5) The Custodian shall have received the initial certificate, required by
Section 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to a Fund
resulting from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or of any of its
or their employees or from failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the Securities System; at the
election of the Trust, it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of any such loss or
damage if and to the extent that a Fund has not been made whole for any such
loss or damage;
(7) The authorization contained in this Section 2.12 shall not relieve the
Custodian from using reasonable care and diligence in making use of any
Securities System.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for and on
behalf of each Fund, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.12 hereof, (i) in accordance with the provisions
of any agreement among the Trust, the Custodian and a broker-dealer registered
under the Exchange Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions for a
Fund; (ii) for purpose of segregating cash or government securities in
connection with options purchased, sold or written for a Fund or commodity
futures contracts or options thereon purchased or sold for a Fund, (iii) for the
purpose of compliance by the Trust or a Fund with the procedures required by any
release or releases of the SEC relating to the maintenance of segregated
accounts by registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the Board or of the
Executive Committee signed by an officer of the Trust and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or purposes of
such segregated account and declaring such purposes to be proper corporate
purposes.
2.14 Joint Repurchase Agreements. Upon the receipt of Proper Instructions,
the Custodian shall deposit and/or maintain any assets of a Fund and any
affiliated funds which are subject to joint repurchase transaction in an account
established solely for such transactions for the Fund and its affiliated funds.
For purposes of this Section 2.14, "affiliated funds" shall include all
investment companies and their portfolios for which subsidiaries or affiliates
of Federated Investors serve as investment advisers, distributors or
administrators in accordance with applicable exemptive orders from the SEC. The
requirements of segregation set forth in Section 2.1 shall be deemed to be
waived with respect to such assets.
2.15 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
securities of a Fund held by it and in connection with transfers of securities.
2.16 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of a
Fund or a nominee of a Fund, all proxies, without indication of the manner in
which such proxies are to be voted, and shall promptly deliver to the Trust such
proxies, all proxy soliciting materials and all notices relating to such
securities.
2.17 Communications Relating to Fund Portfolio Securities. The Custodian
shall transmit promptly to the Trust all written information (including, without
limitation, pendency of calls and maturities of securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Fund and the maturity of futures contracts purchased or sold by
the Fund) received by the Custodian from issuers of the securities being held
for the Fund. With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Trust all written information received by the Custodian
from issuers of the securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer. If the Trust desires
to take action with respect to any tender offer, exchange offer or any other
similar transaction, the Trust shall notify the Custodian in writing at least
three business days prior to the date on which the Custodian is to take such
action. However, the Custodian shall nevertheless exercise its best efforts to
take such action in the event that notification is received three business days
or less prior to the date on which action is required.
2.18 Proper Instructions. Proper Instructions as used throughout this
Section 2 means a writing signed or initialed by one or more person or persons
as the Board shall have from time to time authorized. Each such writing shall
set forth the specific transaction or type of transaction involved. Oral
instructions will be deemed to be Proper Instructions if (a) the Custodian
reasonably believes them to have been given by a person previously authorized in
Proper Instructions to give such instructions with respect to the transaction
involved, and (b) the Trust promptly causes such oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of the Trust
accompanied by a detailed description of procedures approved by the Board,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board and the
Custodian are satisfied that such procedures afford adequate safeguards for a
Fund's assets.
2.19 Actions Permitted Without Express Authority. The Custodian may in its
discretion, without express authority from the Trust:
(1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Trust in such form
that it may be allocated to the affected Fund;
(2) surrender securities in temporary form for securities in definitive
form;
(3) endorse for collection, in the name of a Fund, checks, drafts and other
negotiable instruments; and
(4) in general, attend to all non-discretionary details in connection with
the sale, exchange, substitution, purchase, transfer and other dealings with the
securities and property of each Fund except as otherwise directed by the Trust.
2.20 Evidence of Authority. The Custodian shall be protected in acting upon
any instructions, notice, request, consent, certificate or other instrument or
paper reasonably believed by it to be genuine and to have been properly executed
on behalf of a Fund. The Custodian may receive and accept a certified copy of a
vote of the Board of the Trust as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any determination of or
any action by the Board pursuant to the Declaration of Trust/Articles of
Incorporation as described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written notice to the
contrary.
2.21 Notice to Trust by Custodian Regarding Cash Movement. The Custodian
will provide timely notification to the Trust of any receipt of cash, income or
payments to the Trust and the release of cash or payment by the Trust.
3. Duties of Custodian With Respect to the Books of Account and Calculation
of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of the Trust to keep the books of
account of each Fund and/or compute the net asset value per share of the
outstanding Shares of each Fund or, if directed in writing to do so by the
Trust, shall itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily the
net income of a Fund as described in the Fund's currently effective prospectus
and Statement of Additional Information ("Prospectus") and shall advise the
Trust and the Transfer Agent daily of the total amounts of such net income and,
if instructed in writing by an officer of the Trust to do so, shall advise the
Transfer Agent periodically of the division of such net income among its various
components. The calculations of the net asset value per share and the daily
income of a Fund shall be made at the time or times described from time to time
in the Fund's currently effective Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Trust and the Funds under the 1940 Act, with particular
attention to Section 31 thereof and Rules 31a-2 thereunder, and specifically
including identified cost records used for tax purposes. All such records shall
be the property of the Trust and shall at all times during the regular business
hours of the Custodian be open for inspection by duly authorized officers,
employees or agents of the Trust and employees and agents of the SEC. In the
event of termination of this Contract, the Custodian will deliver all such
records to the Trust, to a successor Custodian, or to such other person as the
Trust may direct. The Custodian shall supply daily to the Trust a tabulation of
securities owned by a Fund and held by the Custodian and shall, when requested
to do so by the Trust and for such compensation as shall be agreed upon between
the Trust and the Custodian, include certificate numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors
The Custodian shall take all reasonable action, as the Trust may from time
to time request, to obtain from year to year favorable opinions from each Fund's
independent public accountants/auditors with respect to its activities hereunder
in connection with the preparation of the Fund's registration statement,
periodic reports, or any other reports tot he SEC and with respect to any other
requirements of such Commission.
6. Reports to Trust by Independent Public Accountants/Auditors
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public accountants/auditors for
each Fund on the accounting system, internal accounting control and procedures
for safeguarding securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities System,
relating to the services provided by the Custodian for the Fund under this
Contract; such reports shall be of sufficient scope and in sufficient detail, as
may reasonably be required by the Trust, to provide reasonable assurance that
any material inadequacies would be disclosed by such examination and, of there
are no such inadequacies, the reports shall so state.
7 Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between Company and
the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in carrying
out the provisions of this Contract; provided, however, that the Custodian shall
be held to any higher standard of care which would be imposed upon the Custodian
by any applicable law or regulation if such above stated standard of reasonable
care was not part of this Contract. The Custodian shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice, provided that such action is not in violation
of applicable federal or state laws or regulations, and is in good faith and
without negligence. Subject to the limitations set forth in Section 15 hereof,
the Custodian shall be kept indemnified by the Trust but only from the assets of
the Fund involved in the issue at hand and be without liability for any action
taken or thing done by it in carrying out the terms and provisions of this
Contract in accordance with the above standards.
In order that the indemnification provisions contained in this Section 8
shall apply, however, it is understood that if in any case the Trust may be
asked to indemnify or save the Custodian harmless, the Trust shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that the Custodian will use all reasonable care to
identify and notify the Trust promptly concerning any situation which presents
or appears likely to present the probability of such a claim for
indemnification. The Trust shall have the option to defend the Custodian against
any claim which may be the subject of this indemnification, and in the event
that the Trust so elects it will so notify the Custodian and thereupon the Trust
shall take over complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which it shall seek
indemnification under this Section. The Custodian shall in no case confess any
claim or make any compromise in any case in which the Trust will be asked to
indemnify the Custodian except with the Trust's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian with
respect to redemptions effected by check shall be in accordance with a separate
Agreement entered into between the Custodian and the Trust.
If the Trust requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the reasonable opinion of the Custodian, result in the Custodian or its nominee
assigned to a Fund being liable for the payment of money or incurring liability
of some other form, the Custodian may request the Trust, as a prerequisite to
requiring the Custodian to take such action, to provide indemnity to the
Custodian in an amount and form satisfactory to the Custodian.
Subject to the limitations set forth in Sections 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee from and
against all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) (referred to herein as authorized charges) incurred or
assessed against it or its nominee in connection with the performance of this
Contract, except such as may arise from it or its nominee's own failure to act
in accordance with the standard of reasonable care or any higher standard of
care which would be imposed upon the Custodian by any applicable law or
regulation if such above-stated standard of reasonable care were not part of
this Contract. To secure any authorized charges and any advances of cash or
securities made by the Custodian to or for the benefit of a Fund for any purpose
which results in the Fund incurring an overdraft at the end of any business day
or for extraordinary or emergency purposes during any business day, the Trust
hereby grants to the Custodian a security interest in and pledges to the
Custodian securities held for the Fund by the Custodian, in an amount not to
exceed 10 percent of the Fund's gross assets, the specific securities to be
designated in writing from time to time by the Trust or the Fund's investment
adviser. Should the Trust fail to make such designation, or should it instruct
the Custodian to make advances exceeding the percentage amount set forth above
and should the Custodian do so, the Trust hereby agrees that the Custodian shall
have a security interest in all securities or other property purchased for a
Fund with the advances by the Custodian, which securities or property shall be
deemed to be pledged to the Custodian, and the written instructions of the Trust
instructing their purchase shall be considered the requisite description and
designation of the property so pledged for purposes of the requirements of the
Uniform Commercial Code. Should the Trust fail to cause a Fund to repay promptly
any authorized charges or advances of cash or securities, subject to the
provision of the second paragraph of this Section 8 regarding indemnification,
the Custodian shall be entitled to use available cash and to dispose of pledged
securities and property as is necessary to repay any such advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mail, postage prepaid to
the other party, such termination to take effect not sooner than sixty (60) days
after the date of such delivery or mailing; provided, however that the Custodian
shall not act under Section 2.12 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of the
Trust has approved the initial use of a particular Securities System as required
in each case by Rule 17f-4 under the 1940 Act; provided further, however, that
the Trust shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Declaration of
Trust/Articles of Incorporation, and further provided, that the Trust may at any
time by action of its Board (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the appropriate banking regulatory
agency or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the Trust, the
Custodian shall, upon termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder for each Fund and shall transfer to
separate accounts of the successor custodian all of each Fund's securities held
in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of the
Trust, deliver at the office of the Custodian and transfer such securities,
funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board shall have been delivered to the Custodian
on or before the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the 1940 Act, (delete "doing business ... Massachusetts"
unless SSBT is the Custodian) doing business in Boston, Massachusetts, of its
own selection, having an aggregate capital, surplus, and undivided profits, as
shown by its last published report, of not less than $100,000,000, all
securities, funds and other properties held by the Custodian and all instruments
held by the Custodian relative thereto and all other property held by it under
this Contract for each Fund and to transfer to separate accounts of such
successor custodian all of each Fund's securities held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Trust to procure the certified copy of the vote referred to or of
the Board to appoint a successor custodian, the Custodian shall be entitled to
fair compensation for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and the
Trust may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Declaration of Trust/Articles of Incorporation. No interpretive or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated Investors
Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the Custodian at address for
SSBT only: 225 Franklin Street, Boston, Massachusetts, 02110, or to such other
address as the Trust or the Custodian may hereafter specify, shall be deemed to
have been properly delivered or given hereunder to the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more counterparts,
each of which shall be deemed and original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of liability as
set forth in Article XI of the Declaration of Trust of those Trusts which are
business trusts and agrees that the obligations and liabilities assumed by the
Trust and any Fund pursuant to this Contract, including, without limitation, any
obligation or liability to indemnify the Custodian pursuant to Section 8 hereof,
shall be limited in any case to the relevant Fund and its assets and that the
Custodian shall not seek satisfaction of any such obligation from the
shareholders of the relevant Fund, from any other fund or its shareholders or
from the Trustees, Officers, employees or agents of the Trust, or any of them.
In addition, in connection with the discharge and satisfaction of any claim made
by the Custodian against the Trust, for whatever reasons, involving more than
one Fund, the Trust shall have the exclusive right to determine the appropriate
allocations of liability for any such claim between or among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed effective as of the 1st day of December, 1993.
ATTEST: INVESTMENT COMPANIES
/s/ John W. McGonigle By: /s/ John F. Donahue
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/ Ed McKenzie By: /s/ Frank Sidoti
Ed McKenzie Frank Sidoti, Jr.
Assistant Secretary Vice President
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber By: /s/ James J. Dolan
Jeannette Fisher-Garber James J. Dolan
Secretary President
Fee schedules can be found at:
Legal Research/Master contract/Kexhibit/ssbfees Current exhibits indicating
the Funds that are parties to this contract can be found at: Legal
Research/Master Contracts/Kexhibit
AMENDMENT TO CUSTODIAN CONTRACT
This Amendment to the Custodian Contract is made as of May 15, 2001 by and
between Federated Investment Companies listed on Exhibit 1 thereto (the
"Funds"), Federated Services Company (the "Company") and State Street Bank and
Trust Company (the "Custodian"). Capitalized terms used in this Amendment
without definition shall have the respective meanings given to such terms in the
Custodian Contract referred to below.
WHEREAS, the Funds, the Company and the Custodian entered into a Custodian
Contract dated as of December 1, 1993 (the "Contract");
WHEREAS, the Funds are authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets, and the Funds have made such separate series subject to the
Contract (each such series, together with all other series subsequently
established by the Fund and made subject to the Contract in accordance with the
terms thereof, shall be referred to as a "Portfolio", and, collectively, the
"Portfolios");
WHEREAS, the Funds, the Company and the Custodian desire to amend certain
provisions of the Contract to reflect, revisions to Rule 17f-5 ("Rule 17f-5")
and the adoption of Rule 17f-7 ("Rule 17f-7") promulgated under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Funds and the Custodian desire to amend and restate certain
other provisions of the Contract relating to the custody of assets of each of
the Portfolios held outside of the United States.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter contained, the parties hereby agree to amend the
Contract, pursuant to the terms thereof, as follows:
I. Articles 3 through 15 of the Contract are hereby renumbered, as of the
effective date of this Amendment, as Articles 5 through 17, respectively.
II. New Articles 3, 4 and 13A of the Contract are hereby added, as of the
effective date of this Amendment, as set forth below.
3. Provisions Relating to Rules 17f-5 and 17f-7
3.1. Definitions. Capitalized terms in this Amendment shall have the
following meanings:
"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment, economic and financial infrastructure
(including any Eligible Securities Depository operating in the country),
prevailing or developing custody and settlement practices, and laws and
regulations applicable to the safekeeping and recovery of Foreign Assets held in
custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of
Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the U.S. Securities and Exchange Commission (the "SEC")), or a foreign
branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the
requirements of a custodian under Section 17(f) of the 1940 Act; the term does
not include any Eligible Securities Depository.
"Eligible Securities Depository" has the meaning set forth in section
(b)(1) of Rule 17f-7.
"Foreign Assets" means any of the Portfolios' investments (including
foreign currencies) for which the primary market is outside the United States
and such cash and cash equivalents as are reasonably necessary to effect the
Portfolios' transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(3) of
Rule 17f-5.
3.2. The Custodian as Foreign Custody Manager.
3.2.1 Delegation to the Custodian as Foreign Custody Manager. Each Fund, by
resolution adopted by its respective Board of Directors (the "Board"), hereby
delegates to the Custodian, subject to section (b) of Rule 17f-5, the
responsibilities set forth in this Section 3.2 with respect to Foreign Assets of
the Portfolios held outside the United States, and the Custodian hereby accepts
such delegation as Foreign Custody Manager with respect to the Portfolios.
3.2.2 Countries Covered. The Foreign Custody Manager shall be responsible
for performing the delegated responsibilities defined below only with respect to
the countries and custody arrangements for each such country listed on Schedule
A to this Contract, which list of countries may be amended from time to time by
the applicable Fund with the agreement of the Foreign Custody Manager. The
Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians
selected by the Foreign Custody Manager to maintain the assets of the
Portfolios, which list of Eligible Foreign Custodians may be amended from time
to time in the sole discretion of the Foreign Custody Manager. The Foreign
Custody Manager will provide amended versions of Schedule A in accordance with
Section 3.2.5 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to
open an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by each Fund, on behalf of the applicable
Portfolios, of the applicable account opening requirements for such country, the
Foreign Custody Manager shall be deemed to have been delegated by the Board on
behalf of the Portfolios responsibility as Foreign Custody Manager with respect
to that country and to have accepted such delegation. Execution of this
Amendment by the Funds shall be deemed to be a Proper Instruction to open an
account, or to place or maintain Foreign Assets, in each country listed on
Schedule A in which the Custodian has previously placed or currently maintains
Foreign Assets pursuant to the terms of the Contract. Following the receipt of
Proper Instructions directing the Foreign Custody Manager to close the account
of a Portfolio with the Eligible Foreign Custodian selected by the Foreign
Custody Manager in a designated country, the delegation by the Board on behalf
of the Portfolios to the Custodian as Foreign Custody Manager for that country
shall be deemed to have been withdrawn and the Custodian shall immediately cease
to be the Foreign Custody Manager of the Portfolios with respect to that
country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Funds. Thirty days (or such longer period to which the parties agree in writing)
after receipt of any such notice by the applicable Fund, the Custodian shall
have no further responsibility in its capacity as Foreign Custody Manager to the
applicable Fund with respect to the country as to which the Custodian's
acceptance of delegation is withdrawn.
3.2.3 Scope of Delegated Responsibilities:
(a) Selection of Eligible Foreign Custodians. Subject to the provisions of
this Section 3.2, the Foreign Custody Manager may place and maintain the Foreign
Assets in the care of the Eligible Foreign Custodian selected by the Foreign
Custody Manager in each country listed on Schedule A, as amended from time to
time. In performing its delegated responsibilities as Foreign Custody Manager to
place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign
Custody Manager shall determine that the Foreign Assets will be subject to
reasonable care, based on the standards applicable to custodians in the country
in which the Foreign Assets will be held by that Eligible Foreign Custodian,
after considering all factors relevant to the safekeeping of such assets,
including, without limitation the factors specified in Rule 17f-5(c)(1).
(b) Contracts With Eligible Foreign Custodians. The Foreign Custody Manager
shall determine that the contract governing the foreign custody arrangements
with each Eligible Foreign Custodian selected by the Foreign Custody Manager
will satisfy the requirements of Rule 17f-5(c)(2).
(c) Monitoring. In each case in which the Foreign Custody Manager maintains
Foreign Assets with an Eligible Foreign Custodian selected by the Foreign
Custody Manager, the Foreign Custody Manager shall establish a system to monitor
(i) the appropriateness of maintaining the Foreign Assets with such Eligible
Foreign Custodian and (ii) the contract governing the custody arrangements
established by the Foreign Custody Manager with the Eligible Foreign Custodian.
In the event the Foreign Custody Manager determines that the custody
arrangements with an Eligible Foreign Custodian it has selected are no longer
appropriate, the Foreign Custody Manager shall notify the Board in accordance
with Section 3.2.5 hereunder.
3.2.4 Guidelines for the Exercise of Delegated Authority. For purposes of
this Section 3.2, the Board shall be deemed to have considered and determined to
accept such Country Risk as is incurred by placing and maintaining the Foreign
Assets in each country for which the Custodian is serving as Foreign Custody
Manager of the Portfolios.
3.2.5 Reporting Requirements. The Foreign Custody Manager shall report the
withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the
placement of such Foreign Assets with another Eligible Foreign Custodian by
providing to the Board an amended Schedule A at the end of the calendar quarter
in which an amendment to such Schedule has occurred. The Foreign Custody Manager
shall make written reports notifying the Board of any other material change in
the foreign custody arrangements of the Portfolios described in this Section 3.2
after the occurrence of the material change.
3.2.6 Standard of Care as Foreign Custody Manager of a Portfolio. In
performing the responsibilities delegated to it, the Foreign Custody Manager
agrees to exercise reasonable care, prudence and diligence such as a person
having responsibility for the safekeeping of assets of management investment
companies registered under the 1940 Act would exercise.
3.2.7 Representations with Respect to Rule 17f-5. The Foreign Custody
Manager represents to the Funds that it is a U.S. Bank as defined in section
(a)(7) of Rule 17f-5. The Funds represent to the Custodian that the Board has
determined that it is reasonable for the Board to rely on the Custodian to
perform the responsibilities delegated pursuant to this Contract to the
Custodian as the Foreign Custody Manager of the Portfolios.
3.2.8 Effective Date and Termination of the Custodian as Foreign Custody
Manager. The Board's delegation to the Custodian as Foreign Custody Manager of
the Portfolios shall be effective as of the date hereof and shall remain in
effect until terminated at any time, without penalty, by written notice from the
terminating party to the non-terminating party. Termination will become
effective thirty (30) days after receipt by the non-terminating party of such
notice. The provisions of Section 3.2.2 hereof shall govern the delegation to
and termination of the Custodian as Foreign Custody Manager of the Portfolios
with respect to designated countries.
3.3 Eligible Securities Depositories.
3.3.1 Analysis and Monitoring. The Custodian shall (a) provide each Fund
(or its duly-authorized investment manager or investment adviser) with an
analysis of the custody risks associated with maintaining assets with the
Eligible Securities Depositories set forth on Schedule B hereto in accordance
with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a
continuing basis, and promptly notify each Fund (or its duly-authorized
investment manager or investment adviser) of any material change in such risks,
in accordance with section (a)(1)(i)(B) of Rule 17f-7.
3.3.2 Standard of Care. The Custodian agrees to exercise reasonable care,
prudence and diligence in performing the duties set forth in Section 3.3.1.
3.4 Limitation of Liability. Each Fund represents and warrants and the
Custodian acknowledges that: (a) the Fund is a "series company" as defined in
Rule 18f-2(a) promulgated under the 1940 Act and each Portfolio is a portfolio
of assets specifically allocated to a series of shares of the applicable Fund as
contemplated by such Rule; (b) all persons extending credit to, contracting with
or having any claim against any Portfolio (including any claims arising
hereunder) shall look only to the assets specifically allocated to such
portfolio for payment under such credit, contract or claim and not to any assets
specifically allocated to another series of shares of the applicable Fund or to
any other assets of the applicable Fund; and (c) neither the shareholders nor
directors of the applicable Fund nor any of such Fund's officers, employees or
agents, whether past present or future shall be liable for such credit, contract
or claim.
4. Duties of the Custodian with Respect to Property of the Portfolios Held
Outside the United States.
4.1 Definitions. Capitalized terms in this Article 4 shall have the
following meanings:
"Foreign Securities System" means an Eligible Securities Depository listed
on Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.
4.2. Holding Securities. The Custodian shall identify on its books as
belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, provided however, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii), to the extent permitted and customary in the market in
which the account is maintained, the Custodian shall require that securities so
held by the Foreign Sub-Custodian be held separately from any assets of such
Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
4.3. Foreign Securities Systems. Foreign securities shall be maintained in
a Foreign Securities System in a designated country through arrangements
implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such
country.
4.4. Transactions in Foreign Custody Account.
4.4.1. Delivery of Foreign Assets. The Custodian or a Foreign Sub-Custodian
shall release and deliver foreign securities of the Portfolios held by the
Custodian or such Foreign Sub-Custodian, or in a Foreign Securities System
account, only upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and only in the following
cases:
(i) upon the sale of such foreign securities for the Portfolio in
accordance with commercially reasonable market practice in the country where
such foreign securities are held or traded, including, without limitation: (A)
delivery against expectation of receiving later payment; or (B) in the case of a
sale effected through a Foreign Securities System, in accordance with the rules
governing the operation of the Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other similar
offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign securities are
called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of the
Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee
of the Custodian or such Foreign Sub-Custodian) or for exchange for a different
number of bonds, certificates or other evidence representing the same aggregate
face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for examination or
trade execution in accordance with market custom; provided that in any such case
the Foreign Sub-Custodian shall have no responsibility or liability for any loss
arising from the delivery of such securities prior to receiving payment for such
securities except as may arise from the Foreign Sub-Custodian's own negligence
or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities, or pursuant to provisions for
conversion contained in such securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities, the
surrender thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts or temporary securities for definitive
securities;
(ix) for delivery as security in connection with any borrowing by the
Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts, including
delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other purpose, but only upon receipt of Proper Instructions
specifying the foreign securities to be delivered and naming the person or
persons to whom delivery of such securities shall be made.
4.4.2. Payment of Portfolio Monies. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the
respective Foreign Securities System to pay out, monies of a Portfolio in the
following cases only:
(i) upon the purchase of foreign securities for the Portfolio, unless
otherwise directed by Proper Instructions, by (A) delivering money to the seller
thereof or to a dealer therefor (or an agent for such seller or dealer) against
expectation of receiving later delivery of such foreign securities; or (B) in
the case of a purchase effected through a Foreign Securities System, in
accordance with the rules governing the operation of such Foreign Securities
System;
(ii) in connection with the conversion, exchange or surrender of foreign
securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest, taxes, investment
advisory fees, transfer agency fees, fees under this Contract, legal fees,
accounting fees, and other operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange
contracts for the Portfolio, including transactions executed with or through the
Custodian or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts, including
delivery as original margin and variation margin;
(vi) for payment of part or all of the dividends received in respect of
securities sold short;
(vii) in connection with the borrowing or lending of foreign securities;
and
(viii) for any other purpose, but only upon receipt of Proper Instructions
specifying the amount of such payment and naming the person or persons to whom
such payment is to be made.
4.4.3. Market Conditions. Notwithstanding any provision of this Contract to
the contrary, settlement and payment for Foreign Assets received for the account
of the Portfolios and delivery of Foreign Assets maintained for the account of
the Portfolios may be effected in accordance with the customary established
securities trading or processing practices and procedures in the country or
market in which the transaction occurs, including, without limitation,
delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or
an agent for such purchaser or dealer) with the expectation of receiving later
payment for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to the Board the information with respect to
custody and settlement practices in countries in which the Custodian employs a
Foreign Sub-Custodian, including without limitation information relating to
Foreign Securities Systems, described on Schedule C hereto at the time or times
set forth on such Schedule. The Custodian may revise Schedule C from time to
time, provided that no such revision shall result in the Board being provided
with substantively less information than had been previously provided hereunder.
4.5 Registration of Foreign Securities. The foreign securities maintained
in the custody of a Foreign Sub-Custodian (other than bearer securities) shall
be registered in the name of the applicable Portfolio or in the name of the
Custodian or in the name of any Foreign Sub-Custodian or in the name of any
nominee of the foregoing, and the Fund on behalf of such Portfolio agrees to
hold any such nominee harmless from any liability as a holder of record of such
foreign securities. The Custodian or a Foreign Sub-Custodian shall not be
obligated to accept securities on behalf of a Portfolio under the terms of this
Contract unless the form of such securities and the manner in which they are
delivered are in accordance with reasonable market practice.
4.6 Bank Accounts. The Custodian shall identify on its books as belonging
to each Fund cash (including cash denominated in foreign currencies) deposited
with the Custodian. Where the Custodian is unable to maintain, or market
practice does not facilitate the maintenance of, cash on the books of the
Custodian, a bank account or bank accounts shall be opened and maintained
outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian.
All accounts referred to in this Article shall be subject only to draft or order
by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant
to the terms of this Agreement to hold cash received by or from or for the
account of the Portfolio. Cash maintained on the books of the Custodian
(including its branches, subsidiaries and affiliates), regardless of currency
denomination, is maintained in bank accounts established under, and subject to
the laws of, The Commonwealth of Massachusetts.
4.7. Collection of Income. The Custodian shall use reasonable commercial
efforts to collect all income and other payments with respect to the Foreign
Assets held hereunder to which the Portfolios shall be entitled and shall credit
such income, as collected, to the applicable Portfolio. In the event that
extraordinary measures are required to collect such income, the Fund and the
Custodian shall consult as to such measures and as to the compensation and
expenses of the Custodian relating to such measures.
4.8. Shareholder Rights. With respect to the foreign securities held
pursuant to this Article 4, the Custodian will use reasonable commercial efforts
to facilitate the exercise of voting and other shareholder rights, subject
always to the laws, regulations and practical constraints that may exist in the
country where such securities are issued. Each Fund acknowledges that local
conditions, including lack of regulation, onerous procedural obligations, lack
of notice and other factors may have the effect of severely limiting the ability
of the Fund to exercise shareholder rights.
4.9. Communications Relating to Foreign Securities. The Custodian shall
transmit promptly to the Funds written information with respect to materials
received by the Custodian via the Foreign Sub-Custodians from issuers of the
foreign securities being held for the account of the Portfolios (including,
without limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith). With respect to tender or
exchange offers, the Custodian shall transmit promptly to the Funds written
information with respect to materials so received by the Custodian from issuers
of the foreign securities whose tender or exchange is sought or from the party
(or its agents) making the tender or exchange offer. The Custodian shall not be
liable for any untimely exercise of any tender, exchange or other right or power
in connection with foreign securities or other property of the Portfolios at any
time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian
is in actual possession of such foreign securities or property and (ii) the
Custodian receives Proper Instructions with regard to the exercise of any such
right or power, and both (i) and (ii) occur at least three business days prior
to the date on which the Custodian is to take action to exercise such right or
power.
4.10. Liability of Foreign Sub-Custodians.
Each agreement pursuant to which the Custodian employs a Foreign
Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian
to exercise reasonable care in the performance of its duties, and to indemnify,
and hold harmless, the Custodian from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the Foreign
Sub-Custodian's performance of such obligations. At the election of the Funds,
the Portfolios shall be entitled to be subrogated to the rights of the Custodian
with respect to any claims against a Foreign Sub-Custodian as a consequence of
any such loss, damage, cost, expense, liability or claim if and to the extent
that the Portfolios have not been made whole for any such loss, damage, cost,
expense, liability or claim.
4.11. Tax Law.
The Custodian shall have no responsibility or liability for any obligations
now or hereafter imposed on the Funds, the Portfolios or the Custodian as
custodian of the Portfolios by the tax law of the United States or of any state
or political subdivision thereof. It shall be the responsibility of the Funds to
notify the Custodian of the obligations imposed on the Funds with respect to the
Portfolios or the Custodian as custodian of the Portfolios by the tax law of
countries other than those mentioned in the above sentence, including
responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
commercially reasonable efforts to assist the Funds with respect to any claim
for exemption or refund under the tax law of countries for which each Fund has
provided such information.
4.12. Liability of Custodian.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a Sub-Custodian, the
Custodian shall be without liability to the Funds for any loss, liability, claim
or expense resulting from or caused by anything which is part of Country Risk.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian to the same extent as set forth with respect to sub-custodians
generally in the Contract and, regardless of whether assets are maintained in
the custody of a Foreign Sub-Custodian or a Foreign Securities System, the
Custodian shall not be liable for any loss, damage, cost, expense, liability or
claim resulting from nationalization, expropriation, currency restrictions, or
acts of war or terrorism, or any other loss where the Sub-Custodian has
otherwise acted with reasonable care.
13A. Deposit of Fund Assets with the Underlying Transfer Agent.
Uncertificated shares (the "Underlying Shares") of registered "investment
companies" as defined in Section 3(a)(1) of the 1940 Act, whether in the same
"group of investment companies" (as defined in Section 12(d)(1)(G)(ii) of the
1940 Act) or otherwise, including, pursuant to Section 12(d)(1)(F) of the 1940
Act (hereinafter sometimes referred to collectively as the "Underlying
Portfolios"), may be deposited and/or maintained in an account or accounts
maintained with an entity which may from time to time act as a transfer agent
for an Underlying Portfolio (the "Underlying Transfer Agent"). The Underlying
Transfer Agent shall be deemed to be acting as if it is a "securities
depository" for purposes of Rule 17f-4 under the 1940 Act. Each Fund hereby
directs the Custodian to deposit and/or maintain such securities with the
Underlying Transfer Agent, subject to the following provisions:
1) The Custodian shall keep Underlying Shares owned by a Portfolio with the
Underlying Transfer Agent provided that such securities are maintained in an
account or accounts on the books and records of the Underlying Transfer Agent in
the name of the Custodian as custodian for the Portfolio;
2) The records of the Custodian with respect to Underlying Shares which are
maintained with the Underlying Transfer Agent shall identify by book-entry those
Underlying Shares belonging to each Portfolio;
3) The Custodian shall pay for Underlying Shares purchased for the account
of a Portfolio upon (i) receipt of advice from the Portfolio's investment
adviser that such Underlying Shares have been purchased and will be transferred
to the account of the Custodian, on behalf of the Portfolio, on the books and
records of the Underlying Transfer Agent, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the account of
the Portfolio. The Custodian shall receive confirmation from the Underlying
Transfer Agent of the purchase of such securities and the transfer of such
securities to the Custodian's account with the Underlying Transfer Agent only
after such payment is made. The Custodian shall transfer Underlying Shares
redeemed for the account of a Portfolio (i) upon receipt of an advice from the
Portfolio's investment adviser that such securities have been redeemed and that
payment for such securities will be transferred to the Custodian and (ii) the
making of an entry on the records to reflect such transfer and payment for the
account of the Portfolio. The Custodian will receive confirmation from the
Underlying Transfer Agent of the redemption of such securities and payment
therefor only after such securities are redeemed. Copies of all advices from the
Portfolio's investment adviser of purchases and sales of Underlying Shares for
the account of the Portfolio shall identify the Portfolio, be maintained for the
Portfolio by the Custodian, and be provided to the investment adviser at its
request; and
4) The Custodian shall not be liable to any Fund or any Portfolio for any
loss or damage to any Fund or any Portfolio resulting from maintenance of
Underlying Shares with Underlying Transfer Agent except for losses resulting
directly from the negligence, misfeasance or willful misconduct of the Custodian
or any of its agents or of any of its or their employees.
III. Except as specifically superseded or modified herein, the terms and
provisions of the Contract shall continue to apply with full force and effect.
In the event of any conflict between the terms of the Contract prior to this
Amendment and this Amendment, the terms of this Amendment shall prevail. If the
Custodian is delegated the responsibilities of Foreign Custody Manager pursuant
to the terms of Article 3 hereof, in the event of any conflict between the
provisions of Articles 3 and 4 hereof, the provisions of Article 3 shall
prevail.
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IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and behalf by its duly authorized representative as of the
date first above written.
WITNESSED BY: STATE STREET BANK
and TRUST COMPANY
/s/ Raelene S. LaPlante By:/s/ Ronald E. Logue
Raelene S. LaPlante Name: Ronald E. Logue
V.P. & Assoc. Counsel Title: Vice Chairman
and Chief Operating Officer
WITNESSED BY: FEDERATED INVESTMENT
COMPANIES
/s/ C. Todd Gibson By:/s/ John W. McGonigle
Name: C. Todd Gibson Name: John W. McGonigle
Title: Corporate Counsel Title: Secretary
WITNESSED BY: FEDERATED SERVICES COMPANY
/s/ C. Todd Gibson By:/s/ Arthur L. Cherry
Name: C. Todd Gibson Name: Arthur L. Cherry
Title: Assistant Vice President Title: President
and Chief Executive Officer
Argentina Citibank, N.A.
Australia Westpac Banking Corporation
Austria Erste Bank der Osterreichischen
Sparkassen AG
Bahrain HSBC Bank Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank
Belgium Fortis Bank nv-sa
Bermuda The Bank of Bermuda Limited
Bolivia Citibank, N. A.
Botswana Barclays Bank of Botswana Limited
Brazil Citibank, N.A.
Bulgaria ING Bank N.V.
Canada State Street Trust Company Canada
Chile Citibank, N.A.
People's Republic The Hongkong and Shanghai
of China Banking Corporation Limited,
Shanghai and Shenzhen branches
Colombia Cititrust Colombia S.A. Sociedad Fiduciaria
Costa Rica Banco BCT S.A.
Croatia Privredna Banka Zagreb d.d
Cyprus The Cyprus Popular Bank Ltd.
Czech Republic Eeskoslovenska Obchodni
Banka, A.S.
Denmark Den Danske Bank
Ecuador Citibank, N.A.
Egypt Egyptian British Bank S.A.E.
(as delegate of The Hongkong
and Shanghai Banking Corporation
Limited)
Estonia Hansabank
Finland Merita Bank Plc.
France BNP Paribas, S.A.
Germany Dresdner Bank AG
Ghana Barclays Bank of Ghana Limited
Greece National Bank of Greece S.A.
Hong Kong Standard Chartered Bank
Hungary Citibank Rt.
Iceland Icebank Ltd.
India Deutsche Bank AG
The Hongkong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank
Ireland Bank of Ireland
Israel Bank Hapoalim B.M.
Italy BNP Paribas, Italian Branch
Ivory Coast Societe Generale de Banques
en Cote d'Ivoire
Jamaica Scotiabank Jamaica Trust and Merchant
Bank Ltd.
Japan The Fuji Bank, Limited
The Sumitomo Bank, Limited
Jordan HSBC Bank Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Kazakhstan HSBC Bank Kazakhstan
Kenya Barclays Bank of Kenya Limited
Republic of Korea The Hongkong and Shanghai Banking
Corporation Limited
Latvia A/s Hansabanka
Lebanon HSBC Bank Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Lithuania Vilniaus Bankas AB
Malaysia Standard Chartered Bank Malaysia Berhad
Mauritius The Hongkong and Shanghai
Banking Corporation Limited
Mexico Citibank Mexico, S.A.
Morocco Banque Commerciale du Maroc
Namibia Standard Bank Namibia Limited
Netherlands Fortis Bank (Nederland) N.V.
New Zealand ANZ Banking Group (New Zealand) Limited
Nigeria Stanbic Merchant Bank Nigeria Limited
Norway Christiania Bank og Kreditkasse ASA
Oman HSBC Bank Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG
Palestine HSBC Bank Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Panama BankBoston, N.A.
Peru Citibank, N.A.
Philippines Standard Chartered Bank
Poland Citibank (Poland) S.A.
Portugal Banco Comercial Portugues
Qatar HSBC Bank Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Romania ING Bank N.V.
Russia Credit Suisse First Boston AO - Moscow
(as delegate of Credit Suisse
First Boston - Zurich)
Singapore The Development Bank of Singapore Limited
Slovak Republic Eeskoslovenska Obchodni Banka, A.S.
Slovenia Bank Austria Creditanstalt d.d. - Ljubljana
South Africa Standard Bank of South Africa Limited
Spain Banco Santander Central Hispano S.A.
Sri Lanka The Hongkong and Shanghai
Banking Corporation Limited
Swaziland Standard Bank Swaziland Limited
Sweden Skandinaviska Enskilda Banken
Switzerland UBS AG
Taiwan - R.O.C. Central Trust of China
Thailand Standard Chartered Bank
Trinidad & Tobago Republic Bank Limited
Tunisia Banque Internationale Arabe de Tunisie
Turkey Citibank, N.A.
Ukraine ING Bank Ukraine
United Kingdom State Street Bank and Trust Company,
London Branch
Uruguay BankBoston, N.A.
Venezuela Citibank, N.A.
Vietnam The Hongkong and Shanghai
Banking Corporation Limited
Zambia Barclays Bank of Zambia Limited
Zimbabwe Barclays Bank of Zimbabwe Limited
Argentina Caja de Valores S.A.
AustraliaAustraclear Limited
Reserve Bank Information
andTransfer System
Austria Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium Caisse Interprofessionnelle de Depots et
de Virements de Titres, S.A.
Banque Nationale de Belgique
Brazil Companhia Brasileira de
Liquidacao e Custodia
Bulgaria Central Depository AD
Bulgarian National Bank
Canada Canadian Depository for Securities Limited
Chile Deposito Central de Valores S.A.
People's Republic Shanghai Securities Central Clearing &
of China Registration Corporation
Shenzhen Securities Central Clearing
Co., Ltd.
Colombia Deposito Centralizado de Valores
Costa Rica Central de Valores S.A.
Croatia Ministry of Finance
National Bank of Croatia
Sredisnja Depozitarna Agencija d.d.
Czech Republic Stredisko cennych papiru
Czech National Bank
Denmark Vaerdipapircentralen
(Danish Securities Center)
Egypt Misr for Clearing, Settlement,
and Depository
Estonia Eesti Vaartpaberite Keskdepositoorium
Finland Finnish Central Securities Depository
France Societe Interprofessionnelle pour la
Compensation des Valeurs Mobilieres
Germany Clearstream Banking AG, Frankfurt
Greece Bank of Greece,
System for Monitoring Transactions in
Securities in Book-Entry Form
Apothetirion Titlon AE - Central
Securities Depository
Hong Kong Central Clearing and Settlement System
Central Moneymarkets Unit
Hungary Kozponti Elszamolohaz es Ertektar
(Budapest) Rt. (KELER)
India National Securities Depository Limited
Central Depository Services India Limited
Reserve Bank of India
Indonesia Bank Indonesia
PT Kustodian Sentral Efek Indonesia
Ireland Central Bank of Ireland
Securities Settlement Office
Israel Tel Aviv Stock Exchange Clearing
House Ltd. (TASE Clearinghouse)
Italy Monte Titoli S.p.A.
Banca d'Italia
Ivory Coast Depositaire Central - Banque de Reglement
Jamaica Jamaica Central Securities Depository
Japan Japan Securities Depository Center
(JASDEC)
Bank of Japan Net System
Kazakhstan Central Depository of Securities
Kenya Central Bank of Kenya
Republic of Korea Korea Securities Depository
Latvia Latvian Central Depository
Lebanon Custodian and Clearing Center of
Financial Instruments for Lebanon
and the Middle East (Midclear) S.A.L.
Banque du Liban
Lithuania Central Securities Depository of Lithuania
Malaysia Malaysian Central Depository Sdn. Bhd.
Bank Negara Malaysia,
Scripless Securities Trading and
Safekeeping System
Mauritius Central Depository and Settlement Co. Ltd.
Bank of Mauritius
Mexico S.D. INDEVAL
(Instituto para el Deposito de Valores)
Morocco Maroclear
Netherlands Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. (NECIGEF)
New Zealand New Zealand Central Securities
Depository Limited
Nigeria Central Securities Clearing System Limited
Norway Verdipapirsentralen (Norwegian Central
Securities Depository)
Oman Muscat Depository & Securities
Registration Company, SAOC
Pakistan Central Depository Company of
Pakistan Limited
State Bank of Pakistan
Palestine Clearing Depository and Settlement,
a department of the
Palestine Stock Exchange
Peru Caja de Valores y Liquidaciones, Institucion
De Compensacion y Liquidacion de
Valores S.A
Philippines Philippine Central Depository, Inc.
Registry of Scripless Securities
(ROSS) of the Bureau of Treasury
Poland National Depository of Securities
(Krajowy Depozyt Papierow
Wartosciowych SA)
Central Treasury Bills Registrar
Portugal Central de Valores Mobiliarios
Qatar Central Clearing and Registration (CCR), a
department of the Doha Securities Market
Romania National Securities Clearing, Settlement and
Depository Company
Bucharest Stock Exchange Registry Division
National Bank of Romania
Singapore Central Depository (Pte) Limited
Monetary Authority of Singapore
Slovak Republic Stredisko cennych papierov
National Bank of Slovakia
Slovenia Klirinsko Depotna Druzba d.d.
South Africa Central Depository Limited
Share Transactions Totally Electronic
(STRATE) Ltd.
Spain Servicio de Compensacion y
Liquidacion de Valores, S.A.
Banco de Espana, Central de
Anotaciones en Cuenta
Sri Lanka Central Depository System (Pvt) Limited
Sweden Vardepapperscentralen VPC AB
(Swedish Central Securities Depository)
Switzerland SegaIntersettle AG (SIS)
Taiwan - R.O.C. Taiwan Securities Central
Depository Co., Ltd.
Thailand Thailand Securities Depository
Company Limited
Tunisia Societe Tunisienne Interprofessionelle
pour la Compensation et de Depots des
Valeurs Mobilieres
Turkey Takas ve Saklama Bankasi A.S.
(TAKASBANK)
Central Bank of Turkey
Ukraine National Bank of Ukraine
United Kingdom Central Gilts Office and
Central Moneymarkets Office
Venezuela Banco Central de Venezuela
Zambia LuSE Central Shares Depository Limited
Bank of Zambia
TRANSNATIONAL
Euroclear
Clearstream Banking AG
The Guide to Custody in World Markets An overview of safekeeping and settlement
(annually) practices and procedures in each market in which State
Street Bank and Trust Company offers custodial services.
Global Custody Network Review Information relating to the operating history
(annually) and structure of depositories and subcustodians located
in the markets in which State Street Bank and Trust
Company offers custodial services, including
transnational depositories.
Global Legal Survey With respect to each market in which State
(annually) Street Bank and Trust Company offers custodial
services, opinions relating to whether local law
restricts (i) access of a fund's independent public
accountants to books and records of a Foreign
Sub-Custodian or Foreign Securities System, (ii) the
Fund's ability to recover in the event of bankruptcy or
insolvency of a Foreign Sub-Custodian or Foreign
Securities System, (iii) the Fund's ability to recover
in the event of a loss by a Foreign Sub-Custodian or
Foreign Securities System, and (iv) the ability of a
foreign investor to convert cash and cash equivalents
to U.S. dollars.
Subcustodian Agreements Copies of the subcustodian contracts State
(annually) Street Bank and Trust Company has entered into with
each subcustodian in the markets in which State Street
Bank and Trust Company offers subcustody services to
its US mutual fund clients.
Network Bulletins (weekly): Developments of interest to investors in the markets in
which State Street Bank and Trust Company offers
custodial services.
Foreign Custody Advisories With respect to markets in which State
(as necessary): Street Bank and Trust Company offers custodial services
which exhibit special custody risks, developments which
may impact State Street's ability to deliver expected
levels of service.
State Street Bank
Custody/PortRec Fee Schedule
Federated Investors
Federated Funds
Page 22
June 30, 1996
June 30, 1996
EXHIBIT 1
See Exhibit associated with Custodian Contract
at I:\Legal Research\Master Contracts\Kexhibits
State Street letterhead
February 27, 2002
Federated Services Company
Federated Investors Tower`
Pittsburgh, PA 15222-3779
Attention: Arthur L. Cherry,
President
Re: Remote Access Services
Dear Customer:
State Street Bank and Trust Company, including its subsidiaries and
affiliates ("State Street"), has developed and utilizes proprietary accounting
and other systems in conjunction with the services which we provide to you under
the Custodian Contract, dated December 1, 1993 and as amended and in effect from
time to time. In this regard, we maintain certain information in databases under
our control and ownership which we make available to our customers (the "Remote
Access Services").
The Services
State Street agrees to provide you, the Customer, and your designated
investment advisors, consultants or other third parties authorized by State
Street who agree to abide by the terms of this Agreement ("Authorized
Designees") with access to In~SightSM as described in Exhibit A or such other
systems as may be offered from time to time (the "System") on a remote basis.
Security Procedures
You agree to comply, and to cause your Authorized Designees to comply, with
remote access operating standards and procedures and with user identification or
other password control requirements and other security procedures as may be
issued from time to time by State Street for use of the System and access to the
Remote Access Services. You agree to advise State Street immediately in the
event that you learn or have reason to believe that any person to whom you have
given access to the System or the Remote Access Services has violated or intends
to violate the terms of this Agreement and you will cooperate with State Street
in seeking injunctive or other equitable relief. You agree to discontinue use of
the System or Remote Access Services, if requested, for any security reasons
cited by State Street.
Fees
Fees and charges for the use of the System and the Remote Access Services
and related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). You shall be
responsible for any tariffs, duties or taxes imposed or levied by any government
or governmental agency by reason of the transactions contemplated by this
Agreement, including, without limitation, federal, state and local taxes, use,
value added and personal property taxes (other than income, franchise or similar
taxes which may be imposed or assessed against State Street). Any claimed
exemption from such tariffs, duties or taxes shall be supported by proper
documentary evidence delivered to State Street.
Proprietary Information/Injunctive Relief
The System and Remote Access Services described herein and the databases,
computer programs, screen formats, report formats, interactive design
techniques, formulae, processes, systems, software, know-how, algorithms,
programs, training aids, printed materials, methods, books, records, files,
documentation and other information made available to you by State Street as
part of the Remote Access Services and through the use of the System and all
copyrights, patents, trade secrets and other proprietary rights of State Street
related thereto are the exclusive, valuable and confidential property of State
Street and its relevant licensors (the "Proprietary Information"). You agree on
behalf of yourself and your Authorized Designees to keep the Proprietary
Information confidential and to limit access to your employees and Authorized
Designees (under a similar duty of confidentiality) who require access to the
System for the purposes intended. The foregoing shall not apply to Proprietary
Information in the public domain or required by laws to be made public.
You agree to use the Remote Access Services only in connection with the
proper purposes of this Agreement. You will not, and will cause your employees
and Authorized Designees not to, (i) permit any third party to use the System or
the Remote Access Services, (ii) sell, rent, license or otherwise use the System
or the Remote Access Services in the operation of a service bureau or for any
purpose other than as expressly authorized under this Agreement, (iii) use the
System or the Remote Access Services for any fund, trust or other investment
vehicle without the prior written consent of State Street, or (iv) allow or
cause any information transmitted from State Street's databases, including data
from third party sources, available through use of the System or the Remote
Access Services, to be published, redistributed or retransmitted for other than
use for or on behalf of yourself, as our Customer.
You agree that neither you nor your Authorized Designee will modify the
System in any way, enhance or otherwise create derivative works based upon the
System, nor will you or your Authorized Designees reverse engineer, decompile or
otherwise attempt to secure the source code for all or any part of the System.
You acknowledge that the disclosure of any Proprietary Information, or of
any information which at law or equity ought to remain confidential, will
immediately give rise to continuing irreparable injury to State Street
inadequately compensable in damages at law and that State Street shall be
entitled to obtain immediate injunctive relief against the breach or threatened
breach of any of the foregoing undertakings, in addition to any other legal
remedies which may be available.
Limited Warranties
State Street represents and warrants that it is the owner of and has the
right to grant access to the System and to provide the Remote Access Services
contemplated herein. Because of the nature of computer information technology,
including but not limited to the use of the Internet, and the necessity of
relying on third party sources and data and pricing information obtained from
third parties, the System and Remote Access Services are provided "AS IS", and
you and your Authorized Designees shall be solely responsible for the investment
decisions, results obtained, regulatory reports and statements produced using
the Remote Access Services. State Street and its relevant licensors will not be
liable to you or your Authorized Designees for any direct or indirect, special,
incidental, punitive or consequential damages arising out of or in any way
connected with the System or the Remote Access Services, nor shall either party
be responsible for delays or nonperformance under this Agreement arising out of
any cause or event beyond such party's control.
State Street will take reasonable steps to ensure that its products (and
those of its third-party suppliers) reflect the available state of the art
technology to offer products that are Year 2000 compliant, including, but not
limited to, century recognition of dates, calculations that correctly compute
same century and multi century formulas and date values, and interface values
that reflect the date issues arising between now and the next one-hundred years,
and if any changes are required, State Street will make the changes to its
products at no cost to you and in a commercially reasonable time frame and will
require third-party supplies to do likewise. You will do likewise for your
systems.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, STATE STREET FOR ITSELF
AND ITS RELEVANT LICENSORS EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES CONCERNING
THE SYSTEM AND THE SERVICES TO BE RENDERED HEREUNDER, WHETHER EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTIBILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
Infringement
State Street will defend or, at our option, settle any claim or action
brought against you to the extent that it is based upon an assertion that access
to the System or use of the Remote Access Services by you under this Agreement
constitutes direct infringement of any patent or copyright or misappropriation
of a trade secret, provided that you will notify State Street promptly in
writing of any such claim or proceeding and cooperate with State Street in the
defense of such claim or proceeding. Should the System or the Remote Access
Services or any part thereof become, or in State Street's opinion be likely to
become, the subject of a claim of infringement or the like under any applicable
patent, copyright or trade secret laws, State Street shall have the right, at
State Street's sole option, to (i) procure for you the right to continue using
the System or the Remote Access Services, (ii) replace or modify the System or
the Remote Access Services so that the System or the Remote Access Services
becomes noninfringing, or (iii) terminate this Agreement without further
obligation.
Termination.
Either party may terminate this Agreement (i) for any reason by giving the
other party at least one-hundred and eighty (180) days' prior written notice in
the case of notice of termination by State Street to you or thirty (30) days'
notice in the case of notice from you to State Street of termination, or (ii)
immediately for failure of the other party to comply with any material term or
condition of the Agreement by giving the other party written notice of
termination. This Agreement shall in any event terminate within ninety (90) days
after the termination of any custodian agreement applicable to you. In the event
of termination, you will return to State Street all copies of documentation and
other confidential information in your possession or in the possession of your
Authorized Designees. The foregoing provisions with respect to confidentiality
and infringement will survive termination for a period of three (3) years.
Miscellaneous
This Agreement and the exhibits hereto constitute our entire understanding
with respect to access to the System and Remote Access Services. This Agreement
cannot be modified or altered except in a writing duly executed by both of us
and shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts.
Should you wish to avail yourself of the System and the Remote Access
Services, pleas sign and return one copy of this letter. If you do not sign and
return one copy of this letter we will deem your and your Authorized Designees'
continued use of the System and the Remote Access Services to be your acceptance
of these terms.
Very truly yours,
STATE STREET BANK AND TRUST COMPANY
By: /s/ Joseph L. Hooley
Name: Joseph L. Hooley
Title: Executive Vice President
CONFIRMED AND AGREED:
FEDERATED SERVICES COMPANY
By: /s/ Richard J. Thomas
Name: Richard J. Thomas
Title: Senior Vice President & Treasurer
Date: 3/29/02
FEDERATED INVESTMENT COMPANIES,
On Exhibit 1 (as it may be revised from time to time)
of the Custodian Contract.
By: /s/ John W. McGonigle
Name: John W. McGonigle
Title: Executive Vice President
Date: 5/14/02
EXHIBIT A
IN~SIGHT
System Product Description
In~SightSM provides bilateral information, delivery, interoperability, and
on-line access to State Street. In~SightSM allows users a single point of entry
into State Street's diverse systems and applications. Reports and data from
systems such as Investment Policy MonitorSM, Multicurrency HorizonSM, Securities
Lending, Performance & Analytics and Electronic Trade Delivery can be accessed
through In~SightSM. This Internet-enabled application is designed to run from a
Web browser and perform across low-speed data lines or corporate high-speed
backbones. In~SightSM also offers users a flexible toolset, including an ad-hoc
query function, a custom graphics package, a report designer, and a scheduling
capability. Data and reports offered through In~SightSM will continue to
increase in direct proportion with the client roll out, as it is viewed as the
information delivery system that will grow with our clients.
Exhibit (j)(i) under Form N-2
STATE STREET BANK AND TRUST COMPANY
GLOBAL CUSTODY FEE SCHEDULE
------------------------------------------------------------------------------
Federated Funds
==============================================================================
I. Global Custody Services
==============================================================================
Maintain custody of fund assets. Settle portfolio purchases and sales.
Reporting buy and sell fails. Determining and collecting portfolio income. Make
cash disbursements and reporting cash transactions in local and base currency.
Monitor corporate actions. Withholding foreign taxes. File foreign tax reclaims.
Report portfolio positions.
A. Holding Fees (basis points per portfolio per annum)
B. Trading (US Dollars)
=======================================================================
Countries Holdings Trades Countries Holdings Trades
=======================================================================
Argentina 30.0 $65.00 Korea 13.0 $50.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Australia 3.0 $50.00 Luxembourg 10.0 $75.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Austria 4.0 $50.00 Malaysia 13.0 $70.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Bangladesh 40.0 $175.00 Mauritius 40.0 $150.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Belgium 6.0 $50.00 Mexico 10.0 $25.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Bolivia 40.0 $150.00 Morocco 30.0 $150.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Botswana 40.0 $150.00 Namibia 40.0 $150.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Brazil 30.0 $75.00 Netherlands 6.0 $25.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Canada 1.5 $12.00 New Zealand 6.0 $50.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Chile 30.0 $75.00 Norway 3.0 $65.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
China 21.0 $150.00 Pakistan 21.0 $150.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Columbia 40.0 $150.00 Peru 40.0 $150.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Cypress 40.0 $150.00 Philippines 13.0 $100.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Czech Republic 30.0 $150.00 Poland 30.0 $150.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Denmark 3.0 $60.00 Portugal 21.0 $100.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Ecuador 21.0 $100.00 Singapore 6.0 $65.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Egypt 30.0 $125.00 Slovak Republic 30.0 $150.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Euroclear 3.0 $25.00 South Africa 3.0 $25.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Finland 6.0 $60.00 Spain 6.0 $65.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
France 6.0 $60.00 Sri Lanka 13.0 $70.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Germany 3.0 $25.00 Swaziland 40.0 $100.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Ghana 40.0 $150.00 Sweden 3.0 $60.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Greece 30.0 $125.00 Switzerland 3.0 $50.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Hong Kong 6.0 $50.00 Taiwan 13.0 $60.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Hungary 30.0 $150.00 Thailand 10.0 $40.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
India 30.0 $175.00 Trinidad and 40.0 $150.00
Tobago
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Indonesia 13.0 $75.00 Tunisia 40.0 $150.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Ireland 3.0 $45.00 Turkey 30.0 $95.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Israel 13.0 $125.00 United Kingdom 3.0 $30.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Italy 6.0 $60.00 Uruguay 21.0 $100.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Jamaica 40.0 $150.00 Venezuela 30.0 $150.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Japan 3.0 $25.00 Zambia 40.0 $150.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Jordan 40.0 $150.00 Zimbabwe 40.0 $150.00
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Kenya 40.0 $150.00
-----------------------------------------------------------------------
==============================================================================
II. Other Transaction Charges
==============================================================================
Per Domestic Fee Schedule.
==============================================================================
III. Special Services
==============================================================================
Fees for activities of a non-recurring nature such as fund consolidations
or reorganizations, extraordinary security shipments and the preparation of
special reports will be subject to negotiation.
==============================================================================
IV. Out of Pocket Expenses
==============================================================================
A billing for the recovery of applicable out of pocket expenses on
international transactions, e.g., stamp duty, registration fees, telex messages,
etc., will be made as of the end of each month.
==============================================================================
V. Payment
==============================================================================
The above fees will be charged against the fund's custodian DDA thirty (30)
days after the invoice is mailed to the fund's offices.
==============================================================================
VI. Term of the Contract
==============================================================================
The parties agree that this fee schedule shall become effective January 1,
1997.
FEDERATED SERVICES COMPANY STATE STREET BANK AND TRUST CO.
Name: /s/ Douglas L. Hein Name: /s/ Michael E. Hagerty
Title: Sr. Vice President/Fed. Services Co. Title: Vice President
Date: April 15, 1997 Date: April 8, 1997
Exhibit (j)(ii) under Form N-2
STATE STREET
GLOBAL CUSTODY
FEE SCHEDULE
Addendum to Global Custody Fee Schedule Executed on January 1, 1997
Federated Funds
Country Holdings Charge Trading Charge
Russia 55 Basis Points $300
FEDERATED SERVICES COMPANY STATE STREET BANK & TRUST CO.
BY: /s/ Arthur Cherry BY: /s/ Michael E. Hagerty
TITLE: President & CEO TITLE: Vice President
DATE: August 25, 1997 DATE: August 13, 1997
Exhibit (j)(iii) under Form N-2
Schedule 1
STATE STREET BANK
CUSTODY /
PORTFOLIO RECORD KEEPING
FEE SCHEDULE
Federated Investors
-- Federated Funds --
I. Custody Services
---------------------------------------------------------------------------
Maintain Custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make cash
disbursements and report cash transactions. Monitor corporate actions.
ANNUAL FEES
ASSET
First $500 Million....................................1.0 Basis Point
Excess..................................................5 Basis Point
Minimum fee per year..........................................$15,000
Maximum fee per year..........................................$90,000
Wire Fees..............................................$3.50 per wire
Settlements:
Each DTC Commercial Paper....................................$9.00
Each DTC Transaction.........................................$9.00
Each Federal Reserve Book Entry Transaction (Repo)...........$4.50
Each Repo with Banks Other than State Street Bank............$7.50
Each Physical Transaction (NY/Boston, Private Placement)....$21.75
Each Option Written/Exercised/Expired.......................$18.75
Each Stock Loan Transaction.................................$12.00
Each Book Entry Muni (Sub-custody) Transaction..............$15.00
Index Fund/ETD..........................................Cost + 15%
----------------------------------------------------------------------------
II. Portfolio Record keeping / Fund Accounting Services
Maintain investment ledgers, provide selected portfolio transactions,
position and income reports. Maintain general ledger and capital stock accounts.
Prepare daily trial balance. Provide selected general ledger reports. Calculate
net asset value daily. Securities yield or market value quotations will be
provided to State Street by the fund or via State Street Bank automated pricing
services.
ANNUAL FEES
ASSET
First $250 Million...................................2.0 Basis Points
Next $250 Million.....................................1.5Basis Points
Next $250 Million.....................................1.0 Basis Point
Excess..................................................5 Basis Point
Minimum fee per year..........................................$39,000
Maximum fee per year........................................$120,000
Additional class of shares per year..........................$12,000
III. Multicurrency Horizon Remote Service
--------------------------------------------------------------------------
July 1, 1993 - July 1, 1995.................................No Charge
Post July 1, 1995.......................$5,000 per portfolio per year
....................................$ 500 per portfolio per year
for each additional
class
IV. Out-Of-Pocket Expenses
---------------------------------------------------------------------------
Pricing Fees
Telephone
Postage & Insurance
Armored carrier costs
Legal fees
Supplies related to fund records
Processing validation certificates
Forms, envelopes, Xerox copies, supplies, etc.
Travel and setup expenses related to Horizon Remote
Lease and multiplex switching lines related to Horizon Remote
V. Special Services
--------------------------------------------------------------------------------
Fees for activities of a non-recurring nature such as fund consolidation or
reorganization, extraordinary security shipments and the preparation of special
reports will be subject to negotiation.
VI. Coupon Clipping
------------------------------------------------------------------------------
Monitoring for calls and processing for each monthly issue held
Monthly Charge..................................................$5.00
VII. Balance Credit
-----------------------------------------------------------------------
A balance credit equal to 75% of the average balance in the custodian
account for the month billed times the 30-day T-Bill Rate on the last Monday of
the month billed will be applied against Section I through V above.
VIII. Term of the Contract
--------------------------------------------------------------------------------
The parties agree that this fee schedule shall become effective January 1,
1996, and will remain in effect until it is revised as a result of negotiations
initiated by either party.
FEDERATED SERVICES CO. STATE STREET BANK & TRUST CO.
By: Douglas L. Hein By: Frank J. Sidoti, Jr.
Senior Vice President Vice President
December 5, 1995 December 7, 1995
Schedule 2
STATE STREET BANK
CUSTODY FEE SCHEDULE
Federated Investors
-- Bank Proprietary Funds --
I. Custody Services
-------------------------------------------------------------------------------
Maintain Custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make cash
disbursements and report cash transactions. Monitor corporate actions.
ANNUAL FEES
ASSET
First $500 Million....................................1.0 Basis Point
Excess..................................................5 Basis Point
Minimum fee per year..........................................$15,000
Wire Fees..............................................$3.50 per wire
Settlements:
Each DTC Commercial Paper....................................$9.00
Each DTC Transaction.........................................$9.00
Each Federal Reserve Book Entry Transaction (Repo)...........$4.50
Each Repo with Banks Other than State Street Bank............$7.50
Each Physical Transaction (NY/Boston, Private Placement)....$21.75
Each Option Written/Exercised/Expired.......................$18.75
Each Stock LoanTransaction..................................$12.00
Each Book Entry Muni (Sub-custody) Transaction..............$15.00
Index Fund/ETD..........................................Cost + 15%
II. Multicurrency Horizon Remote Service
----------------------------------------------------------------------------
July 1, 1993 - July 1, 1995.................................No Charge
Post July 1, 1995.......................$5,000 per portfolio per year
....................................$ 500 per portfolio per year
for each additional
class
III. Out-Of-Pocket Expenses
Telephone
Postage & Insurance
Armored carrier costs
Legal fees
Supplies related to fund records
Processing validation certificates
Forms, envelopes, Xerox copies, supplies, etc.
IV. Special Services
----------------------------------------------------------------------------
Fees for activities of a non-recurring nature such as fund consolidation or
reorganization, extraordinary security shipments and the preparation of special
reports will be subject to negotiation.
V. Coupon Clipping
------------------------------------------------------------------------------
Monitoring for calls and processing for each monthly issue held
Monthly Charge..................................................$5.00
VI. Balance Credit
-----------------------------------------------------------------------------
A balance credit equal to 75% of the average balance in the custodian
account for the month billed times the 30-day T-Bill Rate on the last Monday of
the month billed will be applied against Section I through IV above.
VII. Term of the Contract
---------------------------------------------------------------------------
The parties agree that this fee schedule shall become effective January 1,
1996, and will remain in effect until it is revised as a result of negotiations
initiated by either party.
FEDERATED SERVICES CO. STATE STREET BANK & TRUST CO.
By: Douglas L. Hein By: Frank J. Sidoti, Jr.
Senior Vice President Vice President
December 5, 1995 December 7, 1995
Exhibit (j)(iv) under Form N-2
STATE STREET
DOMESTIC CUSTODY
FEE SCHEDULE
--------------------------------------------------------------------------
Federated Funds
I. Custody Services
--------------------------------------------------------------------------
Maintain custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make cash
disbursements and report cash transactions. Monitor corporate actions.
ANNUAL FEES
ASSET
Per Fund .25 Basis Points
Wire Fees $3.00 per wire
Settlements:
o Each DTC Transaction $5.00
o Each Federal Reserve Book Entry Transaction $3.75
o Each Repo Transaction (All Repo) $3.75
o Each Physical Transaction (NY/Boston, Private Placement) $15.00
o Each Option Written/Exercised/Expired $18.75
o Each Book Entry Muni (Sub-custody) Transaction $15.00
o Government Paydowns $5.00
o Maturity Collections $8.00
o PTC Transactions $6.00
II. Special Services
------------------------------------------------------------------------------
Fees for activities of a non-recurring nature such as fund consolidation or
reorganization, extraordinary security shipments and the preparation of special
reports will be subject to negotiation.
III. Balance Credit
-------------------------------------------------------------------------------
Municipal Funds
A balance credit equal to 75% of the average demand deposit account balance
in the custodian account for the month billed times the 30 day T-Bill Rate on
the last Monday of the month billed, will be applied against the month's
custodian bill.
Transfer Agent
A balance credit equal to 100% of the average balance in the transfer agent
demand deposit accounts, less the reserve requirement and applicable related
expenses, times 75% of the 30 average Fed Funds Rate.
IV. Payment
------------------------------------------------------------------------------
The above fees will be charged against the funds' custodian checking
account thirty (30) days after the invoice is mailed to the funds' offices.
V. Term of Contract
-----------------------------------------------------------------------------
The parties agree that this fee schedule shall become effective January 1,
1997.
FEDERATED SERVICES COMPANY STATE STREET
BY: /s/ Douglas L. Hein BY: /s/ Michael E. Hagerty
TITLE: Senior Vice President TITLE: Vice President
DATE: April 15, 1997 DATE: April 8, 1997
Exhibit (k) under Form N-2
AMENDED & RESTATED
AGREEMENT
for
FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES,
TRANSFER AGENCY SERVICES
and
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of March 1, 1996, and amended and restated as of
September 1, 1997, by and between those investment companies listed on Exhibit 1
as may be amended from time to time, having their principal office and place of
business at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 (the
"Investment Company"), on behalf of the portfolios (individually referred to
herein as a "Fund" and collectively as "Funds") of the Investment Company, and
FEDERATED SERVICES COMPANY, a Pennsylvania corporation, having its principal
office and place of business at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779 on behalf of itself and its subsidiaries (the
"Company").
WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), with authorized and issued shares of capital stock or beneficial
interest ("Shares");
WHEREAS, the Investment Company may desire to retain the Company as fund
accountant to provide fund accounting services (as herein defined) including
certain pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes") if so indicated
on Exhibit 1, and the Company desires to accept such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
administrator to provide it with administrative services (as herein defined), if
so indicated on Exhibit, and the Company desires to accept such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer agency
services (as herein defined) if so indicated on Exhibit 1, and agent in
connection with certain other activities, and the Company desires to accept such
appointment; and
WHEREAS, the Investment Company may desire to appoint the Company as its
agent to select, negotiate and subcontract for custodian services from an
approved list of qualified banks if so indicated on Exhibit 1, and the Company
desires to accept such appointment; and
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Investment Company hereby appoints the Company to provide certain
pricing and accounting services to the Funds, and/or the Classes, for the period
and on the terms set forth in this Agreement. The Company accepts such
appointment and agrees to furnish the services herein set forth in return for
the compensation as provided in Article 3 of this Section.
Article 2. The Company's Duties.
Subject to the supervision and control of the Investment Company's Board of
Trustees or Directors ("Board"), the Company will assist the Investment Company
with regard to fund accounting for the Investment Company, and/or the Funds,
and/or the Classes, and in connection therewith undertakes to perform the
following specific services;
A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent pricing
services selected by the Company in consultation with the adviser, or sources
selected by the adviser, and reviewed by the board; secondarily, if a designated
pricing service does not provide a price for a security which the Company
believes should be available by market quotation, the Company may obtain a price
by calling brokers designated by the investment adviser of the fund holding the
security, or if the adviser does not supply the names of such brokers, the
Company will attempt on its own to find brokers to price those securities;
thirdly, for securities for which no market price is available, the Pricing
Committee of the Board will determine a fair value in good faith. Consistent
with Rule 2a-4 of the 40 Act, estimates may be used where necessary or
appropriate. The Company's obligations with regard to the prices received from
outside pricing services and designated brokers or other outside sources, is to
exercise reasonable care in the supervision of the pricing agent. The Company is
not the guarantor of the securities prices received from such agents and the
Company is not liable to the Fund for potential errors in valuing a Fund's
assets or calculating the net asset value per share of such Fund or Class when
the calculations are based upon such prices. All of the above sources of prices
used as described are deemed by the Company to be authorized sources of security
prices. The Company provides daily to the adviser the securities prices used in
calculating the net asset value of the fund, for its use in preparing exception
reports for those prices on which the adviser has comment. Further, upon receipt
of the exception reports generated by the adviser, the Company diligently
pursues communication regarding exception reports with the designated pricing
agents;
B. Determine the net asset value per share of each Fund and/or Class, at
the time and in the manner from time to time determined by the Board and as set
forth in the Prospectus and Statement of Additional Information ("Prospectus")
of each Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate realized capital gains or losses of each of the Funds
resulting from sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and financial
records of the Investment Company, including for each Fund, and/or Class, as
required under Section 31(a) of the 1940 Act and the Rules thereunder in
connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records to be maintained by Rule 31a-1 under the 1940 Act in connection with the
services provided by the Company. The Company further agrees that all such
records it maintains for the Investment Company are the property of the
Investment Company and further agrees to surrender promptly to the Investment
Company such records upon the Investment Company's request;
G. At the request of the Investment Company, prepare various reports or
other financial documents in accordance with generally accepted accounting
principles as required by federal, state and other applicable laws and
regulations; and
H. Such other similar services as may be reasonably requested by the
Investment Company.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section One,
shall hereafter be referred to as "Fund Accounting Services."
Article 3. Compensation and Allocation of Expenses. A. The Funds will
compensate the Company for Fund Accounting Services in accordance with the fees
agreed upon from time to time between the parties hereto. Such fees do not
include out-of-pocket disbursements of the Company for which the Funds shall
reimburse the Company. Out-of-pocket disbursements shall include, but shall not
be limited to, the items agreed upon between the parties from time to time.
B. The Fund and/or the Class, and not the Company, shall bear the cost of:
custodial expenses; membership dues in the Investment Company Institute or any
similar organization; transfer agency expenses; investment advisory expenses;
Prospectuses, reports and notices; administrative expenses; interest on borrowed
money; brokerage commissions; taxes and fees payable to federal, state and other
governmental agencies; fees of Trustees or Directors of the Investment Company;
independent auditors expenses; legal and audit department expenses billed to the
Company for work performed related to the Investment Company, the Funds, or the
Classes; law firm expenses; organizational expenses; or other expenses not
specified in this Article 3 which may be properly payable by the Funds and/or
Classes.
C. The compensation and out-of-pocket expenses attributable to the Fund
shall be accrued by the Fund and shall be paid to the Company no less frequently
than monthly, and shall be paid daily upon request of the Company. The Company
will maintain detailed information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized officer of the
Investment Company and/or the Funds and a duly authorized officer of the
Company.
E. The fee for the period from the effective date of this Agreement with
respect to a Fund or a Class to the end of the initial month shall be prorated
according to the proportion that such period bears to the full month period.
Upon any termination of this Agreement before the end of any month, the fee for
such period shall be prorated according to the proportion which such period
bears to the full month period. For purposes of determining fees payable to the
Company, the value of the Fund's net assets shall be computed at the time and in
the manner specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time subcontract
to, employ or associate with itself such person or persons as the Company may
believe to be particularly suited to assist it in performing Fund Accounting
Services. Such person or persons may be affiliates of the Company, third-party
service providers, or they may be officers and employees who are employed by
both the Company and the Investment Company; provided, however, that the Company
shall be as fully responsible to each Fund for the acts and omissions of any
such subcontractor as it is for its own acts and omissions. The compensation of
such person or persons shall be paid by the Company and no obligation shall be
incurred on behalf of the Investment Company, the Funds, or the Classes in such
respect.
SECTION TWO: ADMINISTRATIVE SERVICES.
Article 4. Appointment.
The Investment Company hereby appoints the Company as Administrator for the
period on the terms and conditions set forth in this Agreement. The Company
hereby accepts such appointment and agrees to furnish the services set forth in
Article 5 of this Agreement in return for the compensation set forth in Article
9 of this Agreement.
Article 5. The Company's Duties.
As Administrator, and subject to the supervision and control of the Board
and in accordance with Proper Instructions (as defined hereafter) from the
Investment Company, the Company will provide facilities, equipment, and
personnel to carry out the following administrative services for operation of
the business and affairs of the Investment Company and each of its portfolios:
A. prepare, file, and maintain the Investment Company's governing documents
and any amendments thereto, including the Charter (which has already been
prepared and filed), the By-laws and minutes of meetings of the Board and
Shareholders;
B. prepare and file with the Securities and Exchange Commission and the
appropriate state securities authorities the registration statements for the
Investment Company and the Investment Company's shares and all amendments
thereto, reports to regulatory authorities and shareholders, prospectuses, proxy
statements, and such other documents all as may be necessary to enable the
Investment Company to make a continuous offering of its shares;
C. prepare, negotiate, and administer contracts (if any) on behalf of the
Investment Company with, among others, the Investment Company's investment
advisers and distributors, subject to any applicable restrictions of the Board
or the 1940 Act;
D. calculate performance data of the Investment Company for dissemination
to information services covering the investment company industry;
E. prepare and file the Investment Company's tax returns;
F. coordinate the layout and printing of publicly disseminated prospectuses
and reports;
G. perform internal audit examinations in accordance with a charter to be
adopted by the Company and the Investment Company;
H. assist with the design, development, and operation of the Investment
Company and the Funds;
I. provide individuals reasonably acceptable to the Board for nomination,
appointment, or election as officers of the Investment Company, who will be
responsible for the management of certain of the Investment Company's affairs as
determined by the Investment Company's Board; and
J. consult with the Investment Company and its Board on matters concerning
the Investment Company and its affairs.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Two,
shall hereafter be referred to as "Administrative Services."
Article 6. Records.
The Company shall create and maintain all necessary books and records in
accordance with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the Investment Company act of
1940 and the rules thereunder, as the same may be amended from time to time,
pertaining to the Administrative Services performed by it and not otherwise
created and maintained by another party pursuant to contract with the Investment
Company. Where applicable, such records shall be maintained by the Company for
the periods and in the places required by Rule 31a-2 under the 1940 Act. The
books and records pertaining to the Investment Company which are in the
possession of the Company shall be the property of the Investment Company. The
Investment Company, or the Investment Company's authorized representatives,
shall have access to such books and records at all times during the Company's
normal business hours. Upon the reasonable request of the Investment Company,
copies of any such books and records shall be provided promptly by the Company
to the Investment Company or the Investment Company's authorized
representatives.
Article 7. Duties of the Fund.
The Fund assumes full responsibility for the preparation, contents and
distribution of its own offering document and for complying with all applicable
requirements the 1940 Act, the Internal Revenue Code, and any other laws, rules
and regulations of government authorities having jurisdiction.
Article 8. Expenses.
The Company shall be responsible for expenses incurred in providing office
space, equipment, and personnel as may be necessary or convenient to provide the
Administrative Services to the Investment Company, including the compensation of
the Company employees who serve as trustees or directors or officers of the
Investment Company. The Investment Company shall be responsible for all other
expenses incurred by the Company on behalf of the Investment Company, including
without limitation postage and courier expenses, printing expenses, travel
expenses, registration fees, filing fees, fees of outside counsel and
independent auditors, or other professional services, organizational expenses,
insurance premiums, fees payable to persons who are not the Company's employees,
trade association dues, and other expenses properly payable by the Funds and/or
the Classes.
Article 9. Compensation.
For the Administrative Services provided, the Investment Company hereby
agrees to pay and the Company hereby agrees to accept as full compensation for
its services rendered hereunder an administrative fee at an annual rate per
Fund, as specified below.
The compensation and out of pocket expenses attributable to the Fund shall
be accrued by the Fund and paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will maintain
detailed information about the compensation and out of pocket expenses by the
Fund.
Max. Admin. Average Daily Net Assets
Fee of the Funds
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
(Average Daily Net Asset break-points are on a complex-wide basis)
However, in no event shall the administrative fee received during any year
of the Agreement be less than, or be paid at a rate less than would aggregate
$125,000 per Fund and $30,000 per Class. The minimum fee set forth above in this
Article 9 may increase annually upon each March 1 anniversary of this Agreement
over the minimum fee during the prior 12 months, as calculated under this
agreement, in an amount equal to the increase in Pennsylvania Consumer Price
Index (not to exceed 6% annually) as last reported by the U.S. Bureau of Labor
Statistics for the twelve months immediately preceding such anniversary.
Article 10. Responsibility of Administrator.
A. The Company shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Investment Company in connection with the
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement. The Company shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Investment Company) on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice. Any person, even though also an officer, director, trustee,
partner, employee or agent of the Company, who may be or become an officer,
director, trustee, partner, employee or agent of the Investment Company, shall
be deemed, when rendering services to the Investment Company or acting on any
business of the Investment Company (other than services or business in
connection with the duties of the Company hereunder) to be rendering such
services to or acting solely for the Investment Company and not as an officer,
director, trustee, partner, employee or agent or one under the control or
direction of the Company even though paid by the Company.
B. The Company shall be kept indemnified by the Investment Company and be
without liability for any action taken or thing done by it in performing the
Administrative Services in accordance with the above standards. In order that
the indemnification provisions contained in this Article 10 shall apply,
however, it is understood that if in any case the Investment Company may be
asked to indemnify or hold the Company harmless, the Investment Company shall be
fully and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that the Company will use all reasonable
care to identify and notify the Investment Company promptly concerning any
situation which presents or appears likely to present the probability of such a
claim for indemnification against the Investment Company. The Investment Company
shall have the option to defend the Company against any claim which may be the
subject of this indemnification. In the event that the Investment Company so
elects, it will so notify the Company and thereupon the Investment Company shall
take over complete defense of the claim, and the Company shall in such situation
initiate no further legal or other expenses for which it shall seek
indemnification under this Article. The Company shall in no case confess any
claim or make any compromise in any case in which the Investment Company will be
asked to indemnify the Company except with the Investment Company's written
consent.
SECTION THREE: Transfer Agency Services.
Article 11. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the
Investment Company hereby appoints the Company to act as, and the Company agrees
to act as, transfer agent and dividend disbursing agent for each Fund's Shares,
and agent in connection with any accumulation, open-account or similar plans
provided to the shareholders of any Fund ("Shareholder(s)"), including without
limitation any periodic investment plan or periodic withdrawal program.
Article 12. Duties of the Company.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Investment Company as
to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of shares
and promptly deliver payment and appropriate documentation therefore to the
custodian of the relevant Fund, (the "Custodian"). The Company shall notify the
Fund and the Custodian on a daily basis of the total amount of orders and
payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's current
Prospectus, the Company shall compute and issue the appropriate number of Shares
of each Fund and/or Class and hold such Shares in the appropriate Shareholder
accounts.
(3) In the event that any check or other order for the purchase of Shares
of the Fund and/or Class is returned unpaid for any reason, the Company shall
debit the Share account of the Shareholder by the number of Shares that had been
credited to its account upon receipt of the check or other order, promptly mail
a debit advice to the Shareholder, and notify the Fund and/or Class of its
action. In the event that the amount paid for such Shares exceeds proceeds of
the redemption of such Shares plus the amount of any dividends paid with respect
to such Shares, the Fund and/the Class or its distributor will reimburse the
Company on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any distribution
to Shareholders, the Company shall act as Dividend Disbursing Agent for the
Funds in accordance with the provisions of its governing document and the
then-current Prospectus of the Fund. The Company shall prepare and mail or
credit income, capital gain, or any other payments to Shareholders. As the
Dividend Disbursing Agent, the Company shall, on or before the payment date of
any such distribution, notify the Custodian of the estimated amount required to
pay any portion of said distribution which is payable in cash and request the
Custodian to make available sufficient funds for the cash amount to be paid out.
The Company shall reconcile the amounts so requested and the amounts actually
received with the Custodian on a daily basis. If a Shareholder is entitled to
receive additional Shares by virtue of any such distribution or dividend,
appropriate credits shall be made to the Shareholder's account; and
(2) The Company shall maintain records of account for each Fund and Class
and advise the Investment Company, each Fund and Class and its Shareholders as
to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption directions
and, if such redemption requests comply with the procedures as may be described
in the Fund Prospectus or set forth in Proper Instructions, deliver the
appropriate instructions therefor to the Custodian. The Company shall notify the
Funds on a daily basis of the total amount of redemption requests processed and
monies paid to the Company by the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from the
Custodian with respect to any redemption, the Company shall pay or cause to be
paid the redemption proceeds in the manner instructed by the redeeming
Shareholders, pursuant to procedures described in the then-current Prospectus of
the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption approved by the
Fund, the Company shall promptly notify the Shareholder of such fact, together
with the reason therefor, and shall effect such redemption at the price
applicable to the date and time of receipt of documents complying with said
procedures.
(4) The Company shall effect transfers of Shares by the registered owners
thereof.
(5) The Company shall identify and process abandoned accounts and uncashed
checks for state escheat requirements on an annual basis and report such actions
to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund, and/or
Class, and maintain pursuant to applicable rules of the Securities and Exchange
Commission ("SEC") a record of the total number of Shares of the Fund and/or
Class which are authorized, based upon data provided to it by the Fund, and
issued and outstanding. The Company shall also provide the Fund on a regular
basis or upon reasonable request with the total number of Shares which are
authorized and issued and outstanding, but shall have no obligation when
recording the issuance of Shares, except as otherwise set forth herein, to
monitor the issuance of such Shares or to take cognizance of any laws relating
to the issue or sale of such Shares, which functions shall be the sole
responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to applicable
rules of the SEC relating to the services to be performed hereunder in the form
and manner as agreed to by the Investment Company or the Fund to include a
record for each Shareholder's account of the following:
(a) Name, address and tax identification number (and whether such number
has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including dividends paid
and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a foreign
account or an account for which withholding is required by the
Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend address
and correspondence relating to the current maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder holding
certificates;
(h) Any information required in order for the Company to perform the
calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be maintained
pursuant to the rules of the SEC for the periods prescribed in said rules as
specifically noted below. Such record retention shall be at the expense of the
Company, and such records may be inspected by the Fund at reasonable times. The
Company may, at its option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the Company's files,
records and documents created and maintained by the Company pursuant to this
Agreement, which are no longer needed by the Company in performance of its
services or for its protection. If not so turned over to the Fund, such records
and documents will be retained by the Company for six years from the year of
creation, during the first two of which such documents will be in readily
accessible form. At the end of the six year period, such records and documents
will either be turned over to the Fund or destroyed in accordance with Proper
Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each state for
"blue sky" purposes as determined according to Proper Instructions
delivered from time to time by the Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution agreements,
allocations of sales loads, redemption fees, or other transaction- or
sales-related payments;
(f) Such other information as may be agreed upon from time to time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if required, mail
to Shareholders, such notices for reporting dividends and distributions paid as
are required to be so filed and mailed and shall withhold such sums as are
required to be withheld under applicable federal and state income tax laws,
rules and regulations.
(3) In addition to and not in lieu of the services set forth above, the
Company shall:
(a) Perform all of the customary services of a transfer agent, dividend
disbursing agent and, as relevant, agent in connection with accumulation,
open-account or similar plans (including without limitation any periodic
investment plan or periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, mailing Shareholder reports and
Prospectuses to current Shareholders, withholding taxes on accounts subject to
back-up or other withholding (including non-resident alien accounts), preparing
and filing reports on U.S. Treasury Department Form 1099 and other appropriate
forms required with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and redemptions of
Shares and other conformable transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and providing Shareholder account
information; and
(b) provide a system which will enable the Fund to monitor the total number
of Shares of each Fund (and/or Class) sold in each state ("blue sky reporting").
The Fund shall by Proper Instructions (i) identify to the Company those
transactions and assets to be treated as exempt from the blue sky reporting for
each state and (ii) verify the classification of transactions for each state on
the system prior to activation and thereafter monitor the daily activity for
each state. The responsibility of the Company for each Fund's (and/or Class's)
state blue sky registration status is limited solely to the recording of the
initial classification of transactions or accounts with regard to blue sky
compliance and the reporting of such transactions and accounts to the Fund as
provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders relating to
their Share accounts and such other correspondence as may from time to time be
addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy cards
and other material supplied to it by the Fund in connection with Shareholder
meetings of each Fund; receive, examine and tabulate returned proxies, and
certify the vote of the Shareholders;
(3) The Company shall establish and maintain faclities and procedures for
safekeeping of check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such forms and
devices.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Three,
shall hereafter be referred to as "Transfer Agency Services."
Article 13. Duties of the Investment Company.
A. Compliance
The Investment Company or Fund assume full responsibility for the
preparation, contents and distribution of their own and/or their classes'
Prospectus and for complying with all applicable requirements of the Securities
Act of 1933, as amended (the "1933 Act"), the 1940 Act and any laws, rules and
regulations of government authorities having jurisdiction.
B. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
Article 14. Compensation and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Three of this Agreement,
the Investment Company and/or the Fund agree to pay the Company an annual
maintenance fee for each Shareholder account as agreed upon between the parties
and as may be added to or amended from time to time. Such fees may be changed
from time to time subject to written agreement between the Investment Company
and the Company. Pursuant to information in the Fund Prospectus or other
information or instructions from the Fund, the Company may sub-divide any Fund
into Classes or other sub-components for recordkeeping purposes. The Company
will charge the Fund the same fees for each such Class or sub-component the same
as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Investment Company
and/or Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items agreed upon between the parties,
as may be added to or amended from time to time. In addition, any other expenses
incurred by the Company at the request or with the consent of the Investment
Company and/or the Fund, will be reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the Fund
and shall be paid to the Company no less frequently than monthly, and shall be
paid daily upon request of the Company. The Company will maintain detailed
information about the compensation and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized officer of the
Investment Company and/or the Funds and a duly authorized officer of the
Company.
SECTION FOUR: Custody Services Procurement.
Article 15. Appointment.
The Investment Company hereby appoints Company as its agent to evaluate and
obtain custody services from a financial institution that (i) meets the criteria
established in Section 17(f) of the 1940 Act and (ii) has been approved by the
Board as eligible for selection by the Company as a custodian (the "Eligible
Custodian"). The Company accepts such appointment.
Article 16. The Company and Its Duties.
Subject to the review, supervision and control of the Board, the Company
shall:
A. evaluate and obtain custody services from a financial institution that
meets the criteria established in Section 17(f) of the 1940 Act and has been
approved by the Board as being eligible for selection by the Company as an
Eligible Custodian;
B. negotiate and enter into agreements with Eligible Custodians for the
benefit of the Investment Company, with the Investment Company as a party to
each such agreement. The Company may, as paying agent, be a party to any
agreement with any such Eligible Custodian;
C. establish procedures to monitor the nature and the quality of the
services provided by Eligible Custodians;
D. monitor and evaluate the nature and the quality of services provided by
Eligible Custodians;
E. periodically provide to the Investment Company (i) written reports on
the activities and services of Eligible Custodians; (ii) the nature and amount
of disbursements made on account of the each Fund with respect to each custodial
agreement; and (iii) such other information as the Board shall reasonably
request to enable it to fulfill its duties and obligations under Sections 17(f)
and 36(b) of the 1940 Act and other duties and obligations thereof;
F. periodically provide recommendations to the Board to enhance Eligible
Custodian's customer services capabilities and improve upon fees being charged
to the Fund by Eligible Custodian; and
The foregoing, along with any additional services that Company shall agree
in writing to perform for the Fund under this Section Four, shall hereafter be
referred to as "Custody Services Procurement."
Article 17. Fees and Expenses.
A. Annual Fee
For the performance of Custody Services Procurement by the Company pursuant
to Section Four of this Agreement, the Investment Company and/or the Fund agree
to compensate the Company in accordance with the fees agreed upon from time to
time.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Investment Company
and/or Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items agreed upon between the parties,
as may be added to or amended from time to time. In addition, any other expenses
incurred by the Company at the request or with the consent of the Investment
Company and/or the Fund, will be reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the Fund
and shall be paid to the Company no less frequently than monthly, and shall be
paid daily upon request of the Company. The Company will maintain detailed
information about the compensation and out-of-pocket expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized officer of the
Investment Company and/or the Funds and a duly authorized officer of the
Company.
Article 18. Representations.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter into
this arrangement and to provide the services contemplated in Section Four of
this Agreement.
SECTION FIVE: General Provisions.
Article 19. Proper Instructions.
As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be deemed to
be Proper Instructions if (a) the Company reasonably believes them to have been
given by a person previously authorized in Proper Instructions to give such
instructions with respect to the transaction involved, and (b) the Investment
Company, or the Fund, and the Company promptly cause such oral instructions to
be confirmed in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Investment Company, or the Fund, and the Company are satisfied that such
procedures afford adequate safeguards for the Fund's assets. Proper Instructions
may only be amended in writing.
Article 20. Assignment.
Except as provided below, neither this Agreement nor any of the rights or
obligations under this Agreement may be assigned by either party without the
written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
B. With regard to Transfer Agency Services, the Company may without further
consent on the part of the Investment Company subcontract for the performance of
Transfer Agency Services with
(1) its subsidiary, Federated Shareholder Service Company, a Delaware
business trust, which is duly registered as a transfer agent pursuant
to Section 17A(c)(1) of the Securities Exchange Act of 1934, as
amended, or any succeeding statute ("Section 17A(c)(1)"); or
(2) such other provider of services duly registered as a transfer agent
under Section 17A(c)(1) as Company shall select.
The Company shall be as fully responsible to the Investment Company for the
acts and omissions of any subcontractor as it is for its own acts and omissions.
C. With regard to Fund Accounting Services, Administrative Services and
Custody Procurement Services, the Company may without further consent on the
part of the Investment Company subcontract for the performance of such services
with Federated Administrative Services, a wholly-owned subsidiary of the
Company.
D. The Company shall upon instruction from the Investment Company
subcontract for the performance of services under this Agreement with an Agent
selected by the Investment Company, other than as described in B. and C. above;
provided, however, that the Company shall in no way be responsible to the
Investment Company for the acts and omissions of the Agent.
Article 21. Documents.
A. In connection with the appointment of the Company under this Agreement,
the Investment Company shall file with the Company the following documents:
(1) A copy of the Charter and By-Laws of the Investment Company and all
amendments thereto;
(2) A copy of the resolution of the Board of the Investment Company
authorizing this Agreement;
(3) Printed documentation from the recordkeeping system representing
outstanding Share certificates of the Investment Company or the Funds;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Investment Company authorizing the
original issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments thereof
and orders relating thereto in effect with respect to the sale of
Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document and the
By-Laws of the Investment Company;
(4) Certified copies of each vote of the Board authorizing officers to
give Proper Instructions to the Custodian and agents for fund
accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Such other certifications, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the proper
performance of its duties; and
(6) Revisions to the Prospectus of each Fund.
Article 22. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Fund that:
(1) it is a corporation duly organized and existing and in good standing
under the laws of the Commonwealth of Pennsylvania;
(2) It is duly qualified to carry on its business in each jurisdiction
where the nature of its business requires such qualification, and in
the Commonwealth of Pennsylvania;
(3) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;
(4) all requisite corporate proceedings have been taken to authorize it to
enter into and perform its obligations under this Agreement;
(5) it has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement;
(6) it is in compliance with federal securities law requirements and in
good standing as an administrator and fund accountant; and
B. Representations and Warranties of the Investment Company
The Investment Company represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in good
standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform its obligations under this Agreement;
(3) All corporate proceedings required by said Charter and By-Laws have
been taken to authorize it to enter into and perform its obligations
under this Agreement;
(4) The Investment Company is an open-end investment company registered
under the 1940 Act; and
(5) A registration statement under the 1933 Act will be effective, and
appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of each Fund being
offered for sale.
Article 23. Standard of Care and Indemnification.
A. Standard of Care
With regard to Sections One, Three and Four, the Company shall be held to a
standard of reasonable care in carrying out the provisions of this Contract. The
Company shall be entitled to rely on and may act upon advice of counsel (who may
be counsel for the Investment Company) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice,
provided that such action is not in violation of applicable federal or state
laws or regulations, and is in good faith and without negligence.
B. Indemnification by Investment Company
The Company shall not be responsible for and the Investment Company or Fund
shall indemnify and hold the Company, including its officers, directors,
shareholders and their agents, employees and affiliates, harmless against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributable to:
(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or other
party contracted by or approved by the Investment Company or Fund,
(2) The reliance on or use by the Company or its agents or subcontractors
of information, records and documents in proper form which
(a) are received by the Company or its agents or subcontractors and
furnished to it by or on behalf of the Fund, its Shareholders or
investors regarding the purchase, redemption or transfer of Shares and
Shareholder account information;
(b) are received by the Company from independent pricing services or
sources for use in valuing the assets of the Funds; or
(c) are received by the Company or its agents or subcontractors from
Advisers, Sub-advisers or other third parties contracted by or
approved by the Investment Company of Fund for use in the performance
of services under this Agreement;
(d) have been prepared and/or maintained by the Fund or its affiliates or
any other person or firm on behalf of the Investment Company.
(3) The reliance on, or the carrying out by the Company or its agents or
subcontractors of Proper Instructions of the Investment Company or the Fund.
(4) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or regulations of
any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by this Article
23.B. from liability for any act or omission resulting from the Company's
willful misfeasance, bad faith, negligence or reckless disregard of its duties
or failure to meet the standard of care set forth in 23.A. above.
C. Reliance
At any time the Company may apply to any officer of the Investment Company
or Fund for instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Company
under this Agreement, and the Company and its agents or subcontractors shall not
be liable and shall be indemnified by the Investment Company or the appropriate
Fund for any action reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such action is not in
violation of applicable federal or state laws or regulations. The Company, its
agents and subcontractors shall be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Investment Company or the Fund, and
the proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this Article 23
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 24. Term and Termination of Agreement.
This Agreement shall be effective from September 1, 1997, and shall
continue until February 28, 2003 (`Term"). Thereafter, the Agreement will
continue for 18 month terms. The Agreement can be terminated by either party
upon 18 months notice to be effective as of the end of such 18 month period. In
the event, however, of willful misfeasance, bad faith, negligence or reckless
disregard of its duties by the Company, the Investment Company has the right to
terminate the Agreement upon 60 days written notice, if Company has not cured
such willful misfeasance, bad faith, negligence or reckless disregard of its
duties within 60 days. The termination date for all original or after-added
Investment companies which are, or become, a party to this Agreement. shall be
coterminous. Investment Companies that merge or dissolve during the Term, shall
cease to be a party on the effective date of such merger or dissolution.
Should the Investment Company exercise its rights to terminate, all
out-of-pocket expenses associated with the movement of records and materials
will be borne by the Investment Company or the appropriate Fund. Additionally,
the Company reserves the right to charge for any other reasonable expenses
associated with such termination. The provisions of Articles 10 and 23 shall
survive the termination of this Agreement.
Article 25. Amendment.
This Agreement may be amended or modified by a written agreement executed
by both parties.
Article 26. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Charter. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Agreement.
Article 27. Governing Law.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts
Article 28. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Investment Company at
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779, or to the
Company at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or
to such other address as the Investment Company or the Company may hereafter
specify, shall be deemed to have been properly delivered or given hereunder to
the respective address.
Article 29. Counterparts.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original.
Article 30. Limitations of Liability of Trustees and Shareholders of the
Company. The execution and delivery of this Agreement have been authorized by
the Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, and
the obligations of this Agreement are not binding upon any of the Trustees or
Shareholders of the Company, but bind only the appropriate property of the Fund,
or Class, as provided in the Declaration of Trust.
Article 31. Merger of Agreement.
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.
Article 32. Successor Agent.
If a successor agent for the Investment Company shall be appointed by the
Investment Company, the Company shall upon termination of this Agreement deliver
to such successor agent at the office of the Company all properties of the
Investment Company held by it hereunder. If no such successor agent shall be
appointed, the Company shall at its office upon receipt of Proper Instructions
deliver such properties in accordance with such instructions.
In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date when
such termination shall become effective, then the Company shall have the right
to deliver to a bank or trust company, which is a "bank" as defined in the 1940
Act, of its own selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than $2,000,000, all
properties held by the Company under this Agreement. Thereafter, such bank or
trust company shall be the successor of the Company under this Agreement.
Article 33. Force Majeure.
The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage, power
or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
Article 34. Assignment; Successors.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign all of
or a substantial portion of its business to a successor, or to a party
controlling, controlled by, or under common control with such party. Nothing in
this Article 34 shall prevent the Company from delegating its responsibilities
to another entity to the extent provided herein.
Article 35. Severability.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
Article 36. Limitations of Liability of Trustees and Shareholders of the
Investment Company.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Investment Company and signed by an authorized officer of the
Investment Company, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any of
the Trustees or Shareholders of the Investment Company, but bind only the
property of the Fund, or Class, as provided in the Declaration of Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
INVESTMENT COMPANIES
(listed on Exhibit 1)
By: /s/ S. Elliott Cohan
Name: S. Elliott Cohan
Title: Assistant Secretary
FEDERATED SERVICES COMPANY
By: /s/ Thomas J. Ward
Name: Thomas J. Ward
Title: Secretary
SCHEDULE A
STANDARD DOMESTIC FUNDS
Fund Accounting
Fee Schedule
I. Annual Fees for Portfolio Record Keeping/Fund Accounting Services
First $100 Million 3.0 Basis Points
$100 Million - $300 Million 2.0 Basis Points
$300 Million - $500 Million 1.0 Basis Points
Over $500 Million 0.5 Basis Points
Fund Minimum $39,000
Additional Class of Shares $12,000
(Plus pricing charges and other out-of-pocket expenses)
II. Out-of-Pocket Expenses
Out-of-pocket expenses include, but are not limited to, the following:
postage (including overnight courier service), statement stock, envelopes,
telephones, telecommunication charges (including FAX), travel, duplicating,
forms, supplies, microfiche, computer access charges, client specific system
enhancements ,access to the shareholder recordkeeping system, security pricing
services, variable rate change notification services, paydown factor
notification services
III. Cost of Living Increase
The minimum fee set forth in this Schedule may increase annually upon each
March 1 anniversary of this Agreement over the minimum fee during the prior 12
months, as calculated under this Schedule, in an amount equal to the increase in
Pennsylvania Consumer Price Index (not to exceed 6% annually) as last reported
by the U.S. Bureau of Labor Statistics for the twelve months immediately
preceding such anniversary.
IV. Payment
Payment is due thirty days after the date of the invoice.
V. Term of Schedule
The parties agree that this fee schedule shall become effective March 1,
1996 and will remain in effect until it is revised as a result of negotiations
initiated by either party; provided however, that the parties may agree to
review this fee schedule every twenty-four (24) months from the effective date
of the Agreement upon sixty days notice. If the parties have not agreed upon
changes during the 60 day notice period, this fee schedule will remain in
effect.
SCHEDULE A1
STANDARD GLOBAL/INTERNATIONAL FUNDS
Fund Accounting
Fee Schedule
I. Annual Fees for Portfolio Record Keeping/Fund Accounting Services
First $100 Million 3.5 Basis Points
$100 Million - $300 Million 2.5 Basis Points
$300 Million - $500 Million 1.5 Basis Points
Over $500 Million 1.0 Basis Points
Fund Minimum $48,000
Additional Class of Shares $12,000
(Plus pricing charges and other out-of-pocket expenses)
II. Out-of-Pocket Expenses
Out-of-pocket expenses include, but are not limited to, the following:
postage (including overnight courier service), statement stock, envelopes,
telephones, telecommunication charges (including FAX), travel, duplicating,
forms, supplies, microfiche, computer access charges, client specific system
enhancements ,access to the shareholder recordkeeping system, security pricing
services, variable rate change notification services, paydown factor
notification services
III. Cost of Living Increase
The minimum fee set forth in this Schedule may increase annually upon each
March 1 anniversary of this Agreement over the minimum fee during the prior 12
months, as calculated under this Schedule, in an amount equal to the increase in
Pennsylvania Consumer Price Index (not to exceed 6% annually) as last reported
by the U.S. Bureau of Labor Statistics for the twelve months immediately
preceding such anniversary.
IV. Payment
Payment is due thirty days after the date of the invoice.
V. Term of Schedule
The parties agree that this fee schedule shall become effective March 1,
1996 and will remain in effect until it is revised as a result of negotiations
initiated by either party; provided however, that the parties may agree to
review this fee schedule every twenty-four (24) months from the effective date
of the Agreement upon sixty days notice. If the parties have not agreed upon
changes during the 60 day notice period, this fee schedule will remain in
effect.
SCHEDULE A2
STANDARD OFFSHORE FUNDS
Fund Accounting
Fee Schedule
I. Annual Fees for Portfolio Record Keeping/Fund Accounting Services
First $100 Million 4.0 Basis Points
$100 Million - $300 Million 3.0 Basis Points
$300 Million - $500 Million 2.0 Basis Points
Over $500 Million 1.5 Basis Points
Fund Minimum $49,000
Additional Class of Shares $12,000
(Plus pricing charges and other out-of-pocket expenses)
II. Out-of-Pocket Expenses
Out-of-pocket expenses include, but are not limited to, the following:
postage (including overnight courier service), statement stock, envelopes,
telephones, telecommunication charges (including FAX), travel, duplicating,
forms, supplies, microfiche, computer access charges, client specific system
enhancements ,access to the shareholder recordkeeping system, security pricing
services, variable rate change notification services, paydown factor
notification services
III. Cost of Living Increase
The minimum fee set forth in this Schedule may increase annually upon each
March 1 anniversary of this Agreement over the minimum fee during the prior 12
months, as calculated under this Schedule, in an amount equal to the increase in
Pennsylvania Consumer Price Index (not to exceed 6% annually) as last reported
by the U.S. Bureau of Labor Statistics for the twelve months immediately
preceding such anniversary.
IV. Payment
Payment is due thirty days after the date of the invoice.
V. Term of Schedule
The parties agree that this fee schedule shall become effective March 1,
1996 and will remain in effect until it is revised as a result of negotiations
initiated by either party; provided however, that the parties may agree to
review this fee schedule every twenty-four (24) months from the effective date
of the Agreement upon sixty days notice. If the parties have not agreed upon
changes during the 60 day notice period, this fee schedule will remain in
effect.
SCHEDULE B
Fees and Expenses
Transfer Agency
I. Annual Maintenance Charge
The annual maintenance charge includes the processing of all transactions
and correspondence. The fee is billable on a monthly basis at the rate of 1/12
of the annual fee. A charge is made for an account in the month that an account
opens or closes.
Basic Annual per Account Fees
The individual per account charges will be billed as follows:
- Money Market Fund/Daily Accrual $16.65
- Money Market Fund/Sweep Accounts:
o under 20,000 accounts $16.65
o 20,000 - 40,000 accounts $12.00
o 40,000 - 60,000 accounts $11.00
o Over 60,000 accounts $10.00
- Fluctuating NAV/Daily Accrual $16.65
- CDSC/Declared Dividend $13.75
- Declared Dividend $8.75
Minimum Charges
- The monthly maintenance charge for each fund will be the actual account
fees or $1000, whichever is greater.
- All funds will be subject to the minimum monthly fee of $1,000 except that
the minimum will be waived for the initial six months or until the fund's
net assets exceed $50,000,000, whichever occurs first.
- The "clone" funds will be subject to a monthly minimum fee of $600.
II. Out-of-Pocket Expenses
Out-of-pocket expenses include but are not limited to postage (including
overnight courier service), statement stock, envelopes, telecommunication
charges (including Fax), travel, duplicating, forms, supplies, microfiche,
computer access charges, client specific enhancements, disaster recovery, closed
account fees, processing fees (including check encoding), and expenses incurred
at the specific direction of the fund. Postage for mass mailings is due seven
days in advance of the mailing date.
III. Cost of Living Increase
The fees and expenses set forth in this Schedule may increase annually upon
each March 1 anniversary of this Agreement over the fees and expenses during the
prior 12 months, as calculated under this Schedule, in an amount equal to the
annual percentage increase of the Boston, Massachusetts Consumer Price Index
(not to exceed 6% annually) as last reported by the U.S. Bureau of Labor
Statistics for the twelve months immediately preceding such anniversary.
IV. Payment
Payment is due thirty days after the date of the invoice.
V. Term of Schedule
The parties agree that this fee schedule shall become effective March 1,
1996 and will remain in effect until it is revised as a result of negotiations
initiated by either party; provided however, that the parties may agree to
review this fee schedule every twenty-four (24) months from the effective date
of the Agreement upon sixty days notice. If the parties have not agreed upon
changes during the 60 day notice period, this fee schedule will remain in
effect.
SCHEDULE C
Fees and Expenses
Custody Services Procurement
I. Annual Charge
For custody services procurement services provided to Funds by Company as
described in the Agreement, Company shall be paid a fee in the amount of .1
basis points of the Fund assets held by the custodian, plus Company's
out-of-pocket expenses. Such fee shall accrue daily and be paid monthly. The fee
is billable on a monthly basis.
II. Out-of-Pocket Expenses
Out-of-pocket expenses include but are not limited to postage (including
overnight courier service), envelopes, telecommunication charges (including
FAX), travel, duplicating, forms, supplies, and expenses incurred at the
specific direction of the fund.
III. Payment
Payment is due thirty days after the date of the invoice.
Current exhibits indicating the Funds that are parties to this contract can
be found at:
Legal Research/Master Contracts/Kexhibit
Amendment to
Agreement for Fund Accounting Services,
Administrative Services,
Transfer Agency Services,
and
Custody Services Procurement
between
Federated Investment Companies
and
Federated Services Company
This Amendment to the Agreement for Fund Accounting Services,
Administrative Services, Transfer Agency Services and Custody Services
Procurement ("Agreement") dated March 1, 1996, between Federated Investment
Companies listed on Exhibit 1 of Agreement ("Fund") and Federated Services
Company ("Service Provider") is made and entered into as of the 1st day of June,
2001.
WHEREAS, the Fund has entered into the Agreement with the Service Provider;
WHEREAS, the Securities and Exchange Commission has adopted Regulation S-P
at 17 CFR Part 248 to protect the privacy of individuals who obtain a financial
product or service for personal, family or household use;
WHEREAS, Regulation S-P permits financial institutions, such as the Fund,
to disclose "nonpublic personal information" ("NPI") of its "customers" and
"consumers" (as those terms are therein defined in Regulation S-P) to affiliated
and nonaffiliated third parties of the Fund, without giving such customers and
consumers the ability to opt out of such disclosure, for the limited purposes of
processing and servicing transactions (17 CFR ss. 248.14) ("Section 248.14
NPI"); for specified law enforcement and miscellaneous purposes (17 CFR ss.
248.15) ("Section 248.15 NPI") ; and to service providers or in connection with
joint marketing arrangements (17 CFR ss. 248.13) ("Section 248.13 NPI");
WHEREAS, Regulation S-P provides that the right of a customer and consumer
to opt out of having his or her NPI disclosed pursuant to 17 CFR ss. 248.7 and
17 CFR ss. 248.10 does not apply when the NPI is disclosed to service providers
or in connection with joint marketing arrangements, provided the Fund and third
party enter into a contractual agreement that prohibits the third party from
disclosing or using the information other than to carry out the purposes for
which the Fund disclosed the information (17 CFR ss. 248.13);
NOW, THEREFORE, the parties intending to be legally bound agree as follows:
0 The Fund and the Service Provider hereby acknowledge that the Fund may
disclose shareholder NPI to the Service Provider as agent of the Fund and
solely in furtherance of fulfilling the Service Provider's contractual
obligations under the Agreement in the ordinary course of business to
support the Fund and its shareholders.
1 The Service Provider hereby agrees to be bound to use and redisclose such
NPI only for the limited purpose of fulfilling its duties and obligations
under the Agreement, for law enforcement and miscellaneous purposes as
permitted in 17 CFR ss.ss. 248.15, or in connection with joint marketing
arrangements that the Funds may establish with the Service Provider in
accordance with the limited exception set forth in 17 CFR ss. 248.13.
2 The Service Provider further represents and warrants that, in accordance
with 17 CFR ss. 248.30, it has implemented, and will continue to carry out
for the term of the Agreement, policies and procedures reasonably designed
to:
o insure the security and confidentiality of records and NPI of Fund
customers,
o protect against any anticipated threats or hazards to the security or
integrity of Fund customer records and NPI, and
o protect against unauthorized access to or use of such Fund customer records
or NPI that could result in substantial harm or inconvenience to any Fund
customer.
4. The Service Provider may redisclose Section 248.13 NPI only to: (a) the
Funds and affiliated persons of the Funds ("Fund Affiliates"); (b)
affiliated persons of the Service Provider ("Service Provider Affiliates")
(which in turn may disclose or use the information only to the extent
permitted under the original receipt); (c) a third party not affiliated
with the Service Provider of the Funds ("Nonaffiliated Third Party") under
the service and processing (ss.248.14) or miscellaneous (ss.248.15)
exceptions, but only in the ordinary course of business to carry out the
activity covered by the exception under which the Service Provider received
the information in the first instance; and (d) a Nonaffiliated Third Party
under the service provider and joint marketing exception (ss.248.13),
provided the Service Provider enters into a written contract with the
Nonaffiliated Third Party that prohibits the Nonaffiliated Third Party from
disclosing or using the information other than to carry out the purposes
for which the Funds disclosed the information in the first instance.
5. The Service Provider may redisclose Section 248.14 NPI and Section 248.15
NPI to: (a) the Funds and Fund Affiliates; (b) Service Provider Affiliates
(which in turn may disclose the information to the same extent permitted
under the original receipt); and (c) a Nonaffiliated Third Party to whom
the Funds might lawfully have disclosed NPI directly.
6. The Service Provider is obligated to maintain beyond the termination date
of the Agreement the confidentiality of any NPI it receives from the Fund
in connection with the Agreement or any joint marketing arrangement, and
hereby agrees that this Amendment shall survive such termination.
WITNESS the due execution hereof this 1st day of June, 2001.
Federated Investment Companies
(as listed on Exhibit 1 of Agreement)
By:/s/ John W. McGonigle
Name: John W. McGonigle
Title: Secretary
Federated Services Company
By:/s/ Victor R. Siclari
Name: Victor R. Siclari
Title: Secretary
Exhibit (k)(i) under Form N-2
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT made as of the _____ day of December, 2002 by and
between Federated Premier Municipal Income Fund, a Delaware statutory trust (the
"Fund") and Federated Investment Management Company, a Delaware statutory trust
(the "Adviser").
WHEREAS, the Fund has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (the "Registration Statement") on
Form N-2 pursuant to the Securities Act of 1933, as amended (the "1933 Act')
(File No. 333-100605) and the Investment Company Act of 1940, as amended (the
"1940 Act") (File No. 811-21235) pursuant to which the Fund proposes to sell to
the public an aggregate of ________ shares of the Fund's common shares of
beneficial interest through several underwriters led by Merrill Lynch & Co.,
________ (collectively, the "Underwriters") in connection with an offering
pursuant to a purchase agreement (the "Purchase Agreement") to be entered into
by the Fund, the Adviser and the Underwriters. The Fund also proposes to grant
the Underwriters an option to purchase up to an additional ________ common
shares of beneficial interest solely to cover over-allotments.
WHEREAS, the Purchase Agreement contains certain provisions with respect to
the obligations and liabilities between the Fund and the Adviser on the one hand
and the Underwriters on the other.
WHEREAS, the Underwriters require the Fund and the Adviser to agree to
jointly and severally indemnify the Underwriters for certain liabilities.
WHEREAS, the Fund and the Adviser desire to set forth their understanding
and agreement concerning certain liabilities arising out of their obligations to
the Underwriters under the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
The Adviser agrees to indemnify and hold harmless the Fund, its trustees
and each of the Fund's officers who signed the Registration Statement, against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section6(a) of the Purchase Agreement, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or any amendment
thereto), including the Rule 430A Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the Fund
by the Adviser expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
An indemnified party shall give notice as promptly as reasonably
practicable to the Adviser of any action commenced against it in respect of
which indemnity may be sought hereunder, but failure to so notify shall not
relieve the Adviser from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this
Indemnification Agreement. In respect of any such proceeding, counsel shall be
selected by the Fund. The Adviser may participate at its own expense in the
defense of any such action; provided, however, that counsel to the Adviser shall
not (except with the consent of the Fund) also be counsel to the Fund. In no
event shall the Adviser be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from its own counsel in connection
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
Without the prior written consent of an indemnified party, the Adviser shall not
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Indemnification Agreement (whether or
not the indemnified party is an actual or potential party thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of the
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of the
indemnified party.
If at any time an indemnified party shall have requested the Adviser to
reimburse an indemnified party for fees and expenses of counsel, the Adviser
agrees that it shall be liable for any settlement effected without its written
consent if (i) such settlement is entered into more than 45 days after receipt
by the Adviser of the aforesaid request, (ii) the Adviser shall have received
notice of the terms of such settlement at least 30 days prior to such settlement
being entered into and (iii) the Adviser shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement.
Any notice, claim or demand hereunder shall be made in writing and if
required to be given to an indemnified party shall be sufficient if given as
provided in the Purchase Agreement for notices to the Fund and any notice, claim
or demand hereunder to be given to the Adviser shall be made in writing and
likewise shall be sufficient if given as provided in the Purchase Agreement.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.
This Agreement shall be governed by the laws of the State of New York
without regard to such jurisdiction's conflicts of laws principles.
This Agreement may be executed by one or more parties hereto in any number
of counterparts, each of which shall be deemed to be an original, but all of
which shall be deemed to be one and the same instrument.
Except as otherwise specifically defined herein, all capitalized terms used
in this Agreement shall have the meanings assigned such terms in the Purchase
Agreement.
IN WITNESS WHEREOF, the parties below have caused the foregoing to be
executed on their behalf this _____ day of December, 2002.
FEDERATED PREMIER MUNCIPAL INCOME FUND
By: _______________________________
Name:
Title:
FEDERATED INVESTMENT MANAGEMENT COMPANY
By: _______________________________
Name:
Title:
Exhibit (n) under Form N-2
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the caption "Independent
Auditors" and "Experts" in the Statement of Additional Information included in
Pre-Effective Amendment Number 3 to the Registration Statement (Form N-2,
333-100605), and to the inclusion of our report dated December 16, 2002 on the
financial statements of the Federated Premier Municipal Income Fund as of, and
for the day ended, December 16, 2002.
/s/ Ernst & Young LLP
Boston, Massachusetts
December 16, 2002
Exhibit (p) under Form N-2
FEDERATED PREMIER MUNICIPAL INCOME FUND
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
DECEMBER 16, 2002
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dear Sir or Madam:
Federated Premier Municipal Income Fund (the "Fund") hereby accepts your
offer to purchase 6,667 shares at a price of $15.00 per share for an aggregage
purchase price of $100,005.00. This agreement is subject to the understanding
that you have no present intentioni of selling or redeeming the shares so
acquired.
Very truly yours,
Federated Premier Municipal Income Fund
By:________________________
Accepted:
Federated Investment Management Company
By:________________________
Exhibit (s) under Form N-2
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretaries of FEDERATED PREMIER MUNICIPAL INCOME
FUND and each of them, their true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution for them and in their names, place
and stead, in any and all capacities, to sign any and all documents to be filed
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, the Securities Exchange Act of 1934 and the Investment Company Act of
1940, by means of the Securities and Exchange Commission's electronic disclosure
system known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/s/ John F. Donahue Chairman and Trustee December 17, 2002
John F. Donahue
/s/ J. Christopher Donahue President and Trustee December 17, 2002
J. Christopher Donahue (Principal Executive Officer)
/s/ Richard J. Thomas Treasurer December 17, 2002
Richard J. Thomas (Principal Financial Officer)
/s/ William D. Dawson, III Chief Investment Officer December 17, 2002
William D. Dawson, III
/s/ Thomas G. Bigley Trustee December 17, 2002
Thomas G. Bigley
/s/ John T. Conroy, Jr. Trustee December 17, 2002
John T. Conroy, Jr.
/s/ Nicholas P. Constantakis Trustee December 17, 2002
Nicholas P. Constantakis
/s/ John F. Cunningham Trustee December 17, 2002
John F. Cunningham
/s/ Lawrence D. Ellis, M.D. Trustee December 17, 2002
Lawrence D. Ellis, M.D.
/s/ Peter E. Madden Trustee December 17, 2002
Peter E. Madden
/s/ Charles F. Mansfield, Jr. Trustee December 17, 2002
Charles F. Mansfield, Jr.
/s/ John E. Murray, Jr. Trustee December 17, 2002
John E. Murray, Jr.
/s/ Marjorie P. Smuts Trustee December 17, 2002
Marjorie P. Smuts
/s/ John S. Walsh Trustee December 17, 2002
John S. Walsh
Sworn to and subscribed before me this 17th day of December, 2002.
/s/ Nancy H. Beatty
Notarial Seal
Nancy H. Beatty
Pittsburgh, Allegheny County
My Commission Expires December 7, 2004
Member, Pennsylvania Association of Notaries
Exhibit (d) under Form N-2
Temporary CERTIFICATE- ExchangeABLE for Engraved CERTIFICATE When Ready for
Delivery
T
This Certificate is transferable in
Canton, MA, Jersey City, NJ
and New York, NY,
Federated Premier Municipal Income Fund
Organized under the laws of the State of Delaware
See Reverse for Certain Definitions
CUSIP 31423P 10 8
This Certifies that
is the owner of
FULLY PAID AND NONASSESSABLE COMMON SHARES OF BENEFICIAL INTEREST, PAR
VALUE OF $0.01, OF
Federated Premier Municipal Income Fund, transferable on the books of the
Trust by the holder hereof in person or by duly authorized attorney upon
surrender of this Certificate properly endorsed. This Certificate and the shares
represented hereby are issued and shall be subject to all of the provisions of
the Trust, as amended from time to time, to all of which the holder by
acceptance hereof assents. This Certificate shall not be valid until
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile signatures of the duly authorized officers of the
Trust.
Secretary
President Countersigned and Registered:
EquiServe Trust Company, N.A.
Transfer Agent
and Registrar
By
Authorized OFFICER
PART C. OTHER INFORMATION.
Item 24. Exhibits:
(a) Form of Declaration of Trust of the Registrant; (1)
(i) Conformed copy of Certificate of Trust of the
Registrant; (2)
(ii) Copy of Amended and Restated Declaration of Trust
of the Registrant; +
(b) Copy of By-Laws of the Registrant; (1)
(i) Copy of Amended and Restated By-Laws of the
Registrant; +
(c) Not applicable;
(d) Form of Stock Certificate of the Registrant; +
(e) Copy of Registrant's dividend reinvestment plan; +
(f) Not applicable;
(g) Conformed copy of Investment Management Agreement of the
Registrant; +
____________________________________________________________
+ All exhibits are being filed electronically.
1. Response is incorporated to Registrant's Initial Registration Statement
filed on Form N-2 on October 17, 2002 (File Nos. 333-100605 and 811-21235).
2. Response is incorporated to Registrant's Pre-Effective Amendment No. 1 to
its Registration Statement filed on Form N-2 on November 25, 2002 (File
Nos. 333-100605 and 811-21235).
(h) Conformed Copy of Master Agreement Among Underwriters; +
(i)Form of Purchase Agreement; +
(ii)Form of Standard Dealer Agreement of Merrill Lynch
and Co.; +
(iii)Form of Additional Compensation Agreement; +
(i) Not applicable;
(j) Conformed copy of custodian agreement; +
(i)Copy of Global Custody Fee Schedule; +
(ii) Copy of Addendum to Global Custody Fee
Schedule; +
(iii) Copy of Portfolio Recordkeeping Fee Schedule; +
(iv) Copy of Domestic Custody Fee Schedule; +
(k) Conformed copy of Amended and Restated Agreement for Fund
Accounting Services, Administrative Services, Transfer
Agency Services and Custody Services Procurement; +
(i)Form of Indemnification Agreement between
the Registrant and the Adviser; +
(l) Form of Opinion and Consent of Counsel as to legality
of shares being registered (to be filed by amendment);
(m) Not applicable;
(n) Conformed copy of Consent of Independent Auditors; +
(o) Not applicable;
(p) Form of Letter Agreement between the Registrant and the
Adviser to Purchase Shares; +
(q) Not applicable;
(r) The Registrant hereby incorporates the conformed copy of
the Code of Ethics for Access Persons from Item 23(p)
of the Federated Managed Allocation Portfolios
Registration Statement on Form N-1A filed with the
Commission on January 25, 2001.
(File Nos. 33-51247 and 811-7129).
(s) Conformed copy of the Power of Attorney of the
Registrant. +
Item 25. Marketing Arrangements
Reference is made to the Master Agreement Among Underwriters filed as
exhibit (h) to this registration statement.
Item 26. Other Expenses of Issuance and Distribution
*Estimated expenses:
Registration Fee: $5,520.00
NYSE Listing Fee: $81,100.00
Printing: $28,000.00
Engraving and Printing Certificates: $16,100.00
Legal fees and expenses: $108,500.00
NASD fee: $30,500.00
*All amounts above are estimated figures.
________________________________________________________
+ All exhibits are being filed electronically.
Item 27. Persons Controlled by or Under Common Control with the Fund:
None
Item 28. Number of Holders of Securities
Title of Class Number of Record Holders
Common Shares 1
Item 29. Indemnification:
Indemnification is provided to Officers and Trustees of the Registrant
pursuant to Article V of Registrant's Declaration of Trust. The Investment
Management Agreement between the Registrant and Federated Investment Management
Company ("Adviser") provides that, in the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the obligations or duties
under the Investment Management Agreement on the part of Adviser, Adviser shall
not be liable to the Registrant or to any shareholder for any act or omission in
the course of or connected in any way with rendering services or for any losses
that may be sustained in the purchase, holding, or sale of any security.
Registrant's Trustees and Officers are covered by an Investment Trust Errors and
Omissions Policy. The Purchase Agreement between the Registrant, the Adviser and
the Underwriters named therein provides for indemnification of the Underwriters
by the Registrant and the Adviser and of the Registrant and the Adviser and
their officers and trustees for certain liabilities and also provides for
contribution under certain circumstances. The Indemnification Agreement between
the Registrant and the Adviser provides for indemnification of the Registrant
and its officers and trustees for certain liabilities.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Trustees, Officers, and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by Trustees), Officers, or controlling
persons of the Registrant in connection with the successful defense of any act,
suit, or proceeding) is asserted by such Trustees, Officers, or controlling
persons in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issues.
Insofar as indemnification for liabilities may be permitted pursuant to
Section 17 of the Investment Company Act of 1940 for Trustees, Officers, and
controlling persons of the Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is aware of the position of
the Securities and Exchange Commission as set forth in Investment Company Act
Release No. IC-11330. Therefore, the Registrant undertakes that in addition to
complying with the applicable provisions of the Declaration of Trust or
otherwise, in the absence of a final decision on the merits by a court or other
body before which the proceeding was brought, that an indemnification payment
will not be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by a majority vote of
a quorum of non-party Trustees who are not interested persons of the Registrant
or (ii) by independent legal counsel in a written opinion that the indemnitee
was not liable for an act of willful misfeasance, bad faith, gross negligence,
or reckless disregard of duties. The Registrant further undertakes that
advancement of expenses incurred in the defense of a proceeding (upon
undertaking for repayment unless it is ultimately determined that
indemnification is appropriate) against an Officer, Trustee or controlling
person of the Registrant will not be made absent the fulfillment of at least one
of the following conditions: (i) the indemnitee provides security for his
undertaking; (ii) the Registrant is insured against losses arising by reason of
any lawful advances; or (iii) a majority of a quorum of disinterested non-party
Trustees or independent legal counsel in a written opinion makes a factual
determination that there is reason to believe the indemnitee will be entitled to
indemnification.
Item 30. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment adviser, see the
section entitled "Management of the Fund" in Part A. The affiliations with the
Registrant of four of the Trustees and one of the Officers of the investment
adviser are included in Part B of this Registration Statement under "Management
of the Fund." The remaining Trustees of the investment adviser and, in
parentheses, their principal occupations are: Thomas R. Donahue, (Chief
Financial Officer, Federated Investors, Inc.), 1001 Liberty Avenue, Pittsburgh,
PA, 15222-3779 and Mark D. Olson (a principal of the firm, Mark D. Olson &
Company, L.L.C. and Partner, Wilson, Halbrook & Bayard, P.A.), 800 Delaware
Avenue, P.O. Box 2305, Wilmington, DE 19899-2305.
The remaining Officers of the investment adviser are:
Vice Chairman: ...... J. Thomas Madden
President/ Chief Executive
Officer: ...... Keith M. Schappert
Executive Vice Presidents:.... William D. Dawson, III
...... Stephen F. Auth
Senior Vice Presidents: ...... Joseph M. Balestrino
...... David A. Briggs
...... Jonathan C. Conley
...... Christopher F. Corapi
...... Deborah A. Cunningham
...... Michael P. Donnelly
...... Linda A. Duessel
...... Mark E. Durbiano
...... James E. Grefenstette
...... Robert M. Kowit
...... Jeffrey A. Kozemchak
...... Richard J. Lazarchic
...... Susan M. Nason
...... Mary Jo Ochson
...... Robert J. Ostrowski
...... Frank Semack
...... Richard Tito
...... Peter Vutz
Vice Presidents: ...... Todd A. Abraham
...... J. Scott Albrecht
Randall S. Bauer
...... Nancy J.Belz
...... G. Andrew Bonnewell
...... David Burns
...... Robert E. Cauley
...... Regina Chi
...... Ross M. Cohen
...... Fred B. Crutchfield
...... Lee R. Cunningham, II
...... Alexandre de Bethmann
Anthony Delserone, Jr.
...... Donald T. Ellenberger
...... Eamonn G. Folan
...... Kathleen M. Foody-Malus
...... Thomas M. Franks
...... John T. Gentry
...... David P. Gilmore
...... Marc Halperin
...... John W. Harris
...... Patricia L. Heagy
...... Susan R. Hill
...... Nikola A. Ivanov
...... William R. Jamison
...... Constantine J. Kartsonas
...... Nathan H. Kehm
...... John C. Kerber
...... Steven Lehman
...... Marian R. Marinack
...... Natalie F. Metz
...... Thomas J. Mitchell
...... Joseph M. Natoli
...... John L. Nichol
...... Mary Kay Pavuk
...... Jeffrey A. Petro
...... John P. Quartarolo
...... Ihab L. Salib
...... Roberto Sanchez-Dahl, Sr.
Aash M. Shah
...... John Sidawi
...... Michael W. Sirianni, Jr.
...... Christopher Smith
...... Timothy G. Trebilcock
...... Leonardo A. Vila
...... Paige M. Wilhelm
...... Richard M. Winkowski, Jr.
...... Lori A. Wolff
...... George B. Wright
Assistant Vice Presidents:.... Catherine A. Arendas
...... Angela A. Auchey
...... Nicholas P. Besh
...... Hanan Callas
...... David W. Cook
...... James R. Crea, Jr.
...... Karol M. Crummie
...... David Dao
...... Richard J. Gallo
...... James Grant
...... Anthony Han
...... Kathryn P. Heagy
...... Carol B. Kayworth
...... J. Andrew Kirschler
...... Robert P. Kozlowski
...... Ted T. Lietz, Sr.
...... Monica Lugani
...... Tracey L. Lusk
...... Theresa K. Miller
...... Bob Nolte
...... Rae Ann Rice
...... Jennifer G. Setzenfand
...... Kyle D. Stewart
...... Mary Ellen Tesla
...... Michael R. Tucker
Steven J. Wagner
Mark Weiss
Secretary: ...... G. Andrew Bonnewell
Treasurer: ...... Thomas R. Donahue
Assistant Secretaries: ...... Jay S. Neuman
...... Leslie K. Ross
Assistant Treasurer: ...... Denis McAuley, III
The business address of each of the Officers of the investment adviser is
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3779. These individuals are also officers of a majority of the investment
advisers to the investment companies in the Federated Fund Complex described in
Part B of this Registration Statement.
Item 31. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Reed Smith LLP
Investment and Asset Management Group (IAMG)
Federated Investors Tower
12th Floor
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(Notices should be sent to the Agent for Service at above address)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
EquiServe Trust Co., N.A. P.O. Box 43011
("Transfer Agent and Dividend Providence, RI 02940-3011
Disbursing Agent")
Federated Services Federated Investors Tower
Company 1001 Liberty Avenue
("Administrator") Pittsburgh, PA 15222-3779
(((
Federated Investment Federated Investors Tower
Management Company 1001 Liberty Avenue
("Adviser") Pittsburgh, PA 15222-3779
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
("Custodian")
Item 32. Management Services: Not applicable.
Item 33. Undertakings:
The Registrant undertakes to suspend the offering of shares until the
prospectus is amended if (1) subsequent to the effective date of its
registration statement, the net asset value declines more than ten percent from
its net asset value as of the effective date of the registration statement.
The Registrant undertakes that:
(a) for purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(b) for the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery within two business days of receipt
of a written or oral request, the Registrant's Statement of Additional
Information.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED PREMIER MUNICIPAL
INCOME FUND, has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Pittsburgh
and Commonwealth of Pennsylvania, on the 17th day of December, 2002.
FEDERATED PREMIER MUNICIPAL INCOME FUND
BY: /s/ Leslie K. Ross
Leslie K. Ross, Assistant Secretary
Attorney in Fact for John F. Donahue
December 17, 2002
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Leslie K. Ross Attorney In Fact December 17, 2002
Leslie K. Ross For the Persons
ASSISTANT SECRETARY Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
J. Christopher Donahue* President and Trustee
(Principal Executive Officer)
Richard J. Thomas* Treasurer
(Principal Financial Officer)
William D. Dawson, III* Chief Investment Officer
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
Nicholas P. Constantakis* Trustee
John F. Cunningham* Trustee
Lawrence D. Ellis, M.D.* Trustee
Peter E. Madden* Trustee
Charles F. Mansfield, Jr.* Trustee
John E. Murray, Jr.* Trustee
Marjorie P. Smuts* Trustee
John S. Walsh* Trustee
*by power of attorney