As filed with the Securities and Exchange Commission on July 28, 2003
1940 Act File No. 811-21235
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 11 .................................... 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
It is proposed that this filing will become effective immediately upon
filing.
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)
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 December 19, 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....................................4
Investment Securities..................................................5
Management Of The Fund................................................12
Brokerage Transactions................................................19
Description Of Shares.................................................20
Repurchase Of Common Shares...........................................20
Tax Matters...........................................................22
Performance And Related 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
This Statement of Additional Information is dated December 19,
2002 (revised June 30, 2003 and July 28, 2003).
34
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. 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.
Illiquid Securities
The Fund will not purchase securities for which there is no readily
available market, or enter into repurchase agreements or purchase time
deposits maturing in more than seven days, if immediately after and as a
result, the value of such securities would exceed, in the aggregate, 15%
of the Fund's net assets.
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 Compensation Fund 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 Compensation Compensation
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 Compensation Compensation
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 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. This financial statement is the responsibility of the Fund's
management. Our responsibility is to express an opinion on this financial
statement 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 statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement. 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 statement referred to above present fairly,
in all material respects, the financial position of Federated Premier
Municipal Income Fund at December 16, 2002, 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 $100,003
Deferred Offering Costs 200,000
Total Assets 300,003
Liabilities:
Offering Costs Payable (200,000)
Total Liabilities (200,000)
Net Assets (6,981 shares of $0.01 par value shares of beneficial interest
issued and outstanding; unlimited authorized shares)
$100,003
Net Asset Value Per Share
$14.33
Maximum Offering Price Per Share (100/95.50 of $14.33)
$15.00
NOTES TO FINANCIAL STATEMENTS
1. Organization
Federated Premier Municipal Income Fund ("the Fund") was organized as a
Delaware Statutory 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
6,981 shares of beneficial interest at an aggregate purchase price of
$100,003.
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 daily, at the annual rate of 0.55 % of
the Fund's average daily net assets.
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.
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services.
The fee paid to FServ is based on a scale that ranges from 0.150% to
0.075% of the average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors, Inc., subject to a $125,000 minimum
per portfolio and $30,000 per each additional class.
4. Organization Expenses and Offering Costs
Based on an estimated Fund offering of 5,850,000 shares, organization
expenses and offering costs are estimated to be $461,114. The Investment
Advisor has agreed to pay i) all organizational costs; and ii) the amount
by which the aggregate of all of the Fund's offering costs (other than
sales load) exceed $0.03 per share. Such amount to be paid by the
Investment Adviser is $285,614. The Fund will pay offering costs
estimated at $175,500 from the proceeds of the offering. Offering costs
paid by the Fund will be charged as a reduction of paid-in capital at the
completion of the Fund offering.
5. 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.
6. 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 offering costs.
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 FUND
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
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits.
Financial Statements:
Part A: Financial Highlights (unaudited) dated February 3, 2003
Part B: Audited Statement of Assets and Liabilities dated December
16, 2002
Financial Highlights (unaudited) dated February 3, 2003
Portfolio of Investments (unaudited) dated February 3, 2003
Statement of Assets and Liabilities (unaudited) dated
February 3, 2003
Statement of Operations (unaudited) dated February 3, 2003
Statement of Changes in Net Assets (unaudited) dated
February 3, 2003
Exhibits:
(a) (i) Copy of Amended and Restated Declaration of Trust
of the Registrant; (3)
(ii)Conformed copy of Amended and Restated Certificate
of Trust of the Registrant; (4)
(iii) Copy of Statement of Preferences of the
Registrant (incorporated by reference to Appendix A of
Registrant's Statement of Additional Information;
(b) Copy of Amended and Restated By-Laws of the Registrant;
(3)
(c) Not applicable;
(d) Form of Stock Certificate of the Registrant; (3)
(i) Form of Preferred Shares certificate of the
Registrant; (6)
(e) Copy of Registrant's dividend reinvestment plan; (3)
(f) Not applicable;
(g) Conformed copy of Investment Management Agreement of
the Registrant; (3)
____________________________________________________________
+ All exhibits are being filed electronically.
3. Response is incorporated to Registrant's Pre-Effective Amendment No. 3 to
its Registration Statement filed on Form N-2 on December 17, 2002 (File
Nos. 333-100605 and 811-21235).
4. Response is incorporated to Registrant's Pre-Effective Amendment No.
4 to its Registration Statement filed on Form N-2 on December 19, 2002
(File Nos. 333-100605 and 811-21235).
6. Response is incorporated to Registrant's Pre-Effective Amendment No. 3
to its Registration Statement (Preferred Shares) filed on Form N-2 on
February 12, 2003 (File Nos. 333-102033 and 811-21235).
(h) Conformed Copy of Master Agreement Among Underwriters; (3)
(i)Conformed copy of Purchase
Agreement (Common
Shares); (6)
(ii)Form of Standard Dealer Agreement of Merrill
Lynch and Co.; (3)
(iii)Conformed copy of Additional Compensation
Agreement; (6)
(iv)Form of Purchase Agreement (Preferred Shares); (6)
(i) Not applicable;
(j) Conformed copy of custodian agreement; (3)
(i)Copy of Global Custody Fee Schedule; (3)
(ii) Copy of Addendum to Global Custody Fee
Schedule; (3)
(iii) Copy of Portfolio Recordkeeping Fee Schedule; (3)
(iv) Copy of Domestic Custody Fee Schedule; (3)
(k) Conformed copy of Amended and Restated Agreement for Fund
Accounting Services, Administrative Services,
Transfer Agency Services and Custody Services
Procurement; (3)
(i)Conformed copy of Indemnification Agreement
(Common Shares) between the Registrant and the
Adviser; (6)
(ii)Conformed copy of Transfer Agency Agreement of
the Registrant; (6)
(iii)Form of Auction Agency Agreement; (6)
(iv)Form of Broker/Dealer
Agreement; (6)
(v)Form of Indemnification Agreement (Preferred
Shares) between the Registrant and the Adviser; (6)
(vi) Form of Depository Trust Company Letter of
Representations; (6)
(l) Conformed copy of Opinion and Consent of Counsel as
to legality of shares being registered; (5)
(m) Not applicable;
(n) Conformed copy of Consent of Independent Auditors;
(5)
(o) Not applicable;
(p) Form of Letter Agreement between the Registrant and the
Adviser to Purchase Shares; (4)
(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. (3)
Item 25. Marketing Arrangements
Reference is made to the Master Agreement Among Underwriters filed
as exhibit (h) to Pre-Effective Amendment No. 3 on December 17,
2002.
________________________________________________________
+ All exhibits are being filed electronically.
3. Response is incorporated to Registrant's Pre-Effective Amendment No. 3 to
its Registration Statement filed on Form N-2 on December 17, 2002 (File
Nos. 333-100605 and 811-21235).
4. Response is incorporated to Registrant's Pre-Effective Amendment No.
4 to its Registration Statement filed on Form N-2 on December 19, 2002
(File Nos. 333-100605 and 811-21235).
5. Response is incorporated to Registrant's Pre-Effective Amendment No.
2 to its Registration Statement (Preferred Shares) filed on Form N-2 on
February 10, 2003 (File Nos. 333-102033 and 811-21235).
6. Response is incorporated to Registrant's Pre-Effective Amendment No.
3 to its Registration Statement (Preferred Shares) filed on Form N-2 on
February 12, 2003 (File Nos. 333-102033 and 811-21235).
Item 26. Other Expenses of Issuance and Distribution*
Registration Fee: $4,938.10
Rating Fees: $65,000.00
Printing: $5,000.00
Legal fees and expenses: $110,000.00
*Estimated
Item 27. Persons Controlled by or Under Common Control with the Fund:
None
Item 28. Number of Holders of Securities
As of June 13, 2003, set forth below is information concerning
record holders of the Fund's securities:
Title of Class Number of Record Holders
Common Shares 32
AMPS 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
and Trustee: Keith M. Schappert
Executive Vice Presidents: Stephen F. Auth
William D. Dawson, III
Senior Vice Presidents: Joseph M. Balestrino
David A. Briggs
Jonathan C. Conley
Christopher F. Corapi
Deborah A. Cunningham
Linda A. Duessel
Mark E. Durbiano
James E. Grefenstette
Robert M. Kowit
Jeffrey A. Kozemchak
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 M. Bruns
Robert E. Cauley
Regina Chi
Ross M. Cohen
Fred B. Crutchfield
Lee R. Cunningham, II
Alexandre de Bethmann
B. Anthony Delserone, Jr.
Donald T. Ellenberger
Eamonn G. Folan
John T. Gentry
David P. Gilmore
Curtis R. Gross
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
J. Andrew Kirschler
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
Stephen J. Wagner
Paige M. Wilhelm
Richard M. Winkowski, Jr.
Lori A. Wolff
George B. Wright
Assistant Vice Presidents: Lori Andrews
Catherine A. Arendas
Nicholas P. Besh
Hanan Callas
David W. Cook
James R. Crea, Jr.
Karol M. Crummie
David Dao
Richard J. Gallo
Kathyrn P. Glass
Igor Golalic
James Grant
Anthony Han
Carol B. Kayworth
Angela A. Kohler
Robert P. Kozlowski
Ted T. Lietz, Sr.
Monica Lugani
Tracey L. Lusk
Ann Manley
Theresa K. Miller
Karl Mocharko
Bob Nolte
Rae Ann Rice
Jennifer G. Setzenfand
Diane R. Startari
Kyle D. Stewart
Mary Ellen Tesla
Nichlas S. Tripodes
Michael R. Tucker
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 28th day of
July, 2003.
FEDERATED PREMIER MUNICIPAL INCOME FUND
BY: /s/ Leslie K. Ross
Leslie K. Ross, Assistant Secretary
Attorney in Fact for John F. Donahue
July 28, 2003
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 July 28, 2003
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