As filed with the Securities and Exchange Commission on February 12, 2003
1933 Act File No. 333-102033
1940 Act File No. 811-21235
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. 3 .................... X
Post-Effective Amendment No. ....................
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 8 ..................................... 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 & Oshinsky, LLP
2101 L Street, N.W.
Washington, D.C. 20037
Approximate Date of Proposed Public Offering: As soon as possible after the
effectiveness of the Registration Statement.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that the Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Title of Amount Being Proposed Proposed Maximum
Securities Registered Maximum Offering Aggregate Offering
Being Price Per Unit Price
Registered
AMPS 2,147 shares $25,000/share $53,675,000
Amount of Registration Fee
$4,938.10*
* $4,938.10 of which was previously paid on December 20, 2002 and February
10, 2003.
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 Prospectus Summary
4. Financial Highlights Financial Highlights (unaudited)
5. Plan of Distribution Outside Front Cover Page; Prospectus Summary;
Underwriting
6. Selling Shareholders Not Applicable
7. Use of Proceeds Use of Proceeds; The Fund's Investments
8. General Description of the Outside Front Cover Page; The Fund's
Investments;
Registrant Risks; Description of the AMPS
9. Management Management of the Fund
10. Capital Stock, Long-Term Debt Description of the AMPS; Description of Common
and Other Securities Shares; Certain Provisions in the Agreement and
Declaration of Trust; Tax Matters
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 Cover Page (SAI)
History
17. Investment Objective and Fundamental Investment Objective, Policy
and
Policies Limitations; Non-fundamental Investment
Limitations
18. Management Management of the Fund (SAI)
19. Control Persons and Principal Management of the Fund (SAI)
Holders of Securities
20. Investment Adisory and Other Management of the Fund (SAI)
Services
21. Brokerage Allocation and Other Brokerage Transactions (SAI)
Practices
22. Tax Status Tax Matters
23. Financial Statements Financial Statements (SAI)
FEDERATED PREMIER MUNICIPAL INCOME FUND
STATEMENT OF ADDITIONAL INFORMATION
Federated Premier Municipal Income Fund (the "Fund") is a recently
organized, diversified, closed-end management investment company. This Statement
of Additional Information relating to the Fund's Auction Market Preferred Shares
Series A (the "AMPS") does not constitute a prospectus, but should be read in
conjunction with the prospectus relating thereto dated , 2003. This Statement of
Additional Information does not include all information that a prospective
investor should consider before purchasing AMPS, and investors should obtain and
read the prospectus prior to purchasing such AMPS. 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........................................................6
Investment Strategies..................................................6
Fundamental Investment Objective, Policy And Limitations...............7
Non-Fundamental Investment Limitations.................................6
Investment Securities..................................................9
Management Of The Fund................................................16
Brokerage Transactions................................................23
Additional Information Concerning
The Auctions For AMPS.................................................24
Description Of Common Shares..........................................26
Repurchase Of Common Shares...........................................26
Tax Matters...........................................................28
Experts...............................................................33
Additional Information................................................33
Independent Auditors' Report..........................................34
Financial Statements..................................................32
Appendix A Statement Of Preferences Of Auction Market ..............AA-1
Appendix B Investment Ratings.......................................BB-1
This Statement of Additional Information is dated February , 2003.
50
USE OF PROCEEDS
Pending investment in tax exempt securities that meet the Fund's investment
objective and policies, the net proceeds of the offering will be invested in
high-quality, short-term tax exempt money market securities or in high-quality
tax exempt securities with relatively low volatility, such as pre-refunded and
intermediate-term bonds, to the extent such securities are available. If
necessary to invest fully the net proceeds of the offering immediately, the Fund
may also purchase, as temporary investments, short-term taxable investments the
income on which is subject to federal regular income tax, and securities of
other open- or closed-end investment companies that invest primarily in tax
exempt securities of the type in which the Fund may invest directly.
INVESTMENT STRATEGIES
Under normal circumstances, the Fund will maintain a dollar-weighted
average portfolio maturity of 15 to 30 years and a dollar-weighted average
duration of 7 to 13 years.
The Fund's average portfolio maturity represents an average based on the
actual stated maturity dates of the debt securities in the Fund's portfolio,
except that: (1) variable-rate securities are deemed to mature at the next
interest-rate adjustment date, unless subject to a demand feature; (2)
variable-rate securities subject to a demand feature are deemed to mature on the
longer of the next interest-rate adjustment date or the date on which principal
can be recovered through demand; (3) floating-rate securities subject to a
demand feature are deemed to mature on the date on which the principal can be
recovered through demand; and (4) securities being hedged with futures contracts
may be deemed to have a longer maturity, in the case of purchases of futures
contracts, and a shorter maturity, in the case of sales of futures contracts,
than they would otherwise be deemed to have. In addition, a security that is
subject to redemption at the option of the issuer on a particular date ("call
date"), which is prior to the security's stated maturity, may be deemed to
mature on the call date rather than on its stated maturity date. The call date
of a security will be used to calculate average portfolio maturity when the
Adviser reasonably anticipates, based upon information available to it, that the
issuer will exercise its right to redeem the security. The average portfolio
maturity of the Fund is dollar weighted based upon the market value of the
Fund's securities at the time of calculation.
The Fund cannot accurately predict its portfolio turnover rate but
anticipates that its annual portfolio turnover rate will not exceed 100%. The
Fund generally will not trade securities for the purpose of realizing short-term
profits, but it will adjust its portfolio as it deems advisable in view of
prevailing or anticipated market conditions to accomplish its investment
objective. Other than for consideration of tax consequences, frequency of
portfolio turnover will not be a limiting factor if the Fund considers it
advantageous to purchase or sell securities.
FUNDAMENTAL INVESTMENT OBJECTIVE, POLICY AND LIMITATIONS
The following fundamental investment objective, policy and limitations may
not be changed by the Fund's Board without the approval of the holders of a
majority of (1) the outstanding Common Shares and AMPS and any preferred shares
that may in the future be issued voting together as a class, and (2) the
outstanding AMPS and any preferred shares that may in the future be issued,
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
regular federal income tax.
Investment Policy
The Fund will invest its assets so that at least 80% of the income that it
distributes will be exempt from federal income tax, including AMT.
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, policy 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 LIMITATIONS
The Fund is also subject to the following non-fundamental investment
limitations, which may be changed by the Board without shareholder approval.
Short Sales
The Fund will not make any short sale of securities except in conformity
with applicable laws, rules and regulations and unless after giving effect to
such sale, the market value of all securities sold short does not exceed 25% of
the value of the Fund's total assets and the Fund's aggregate short sales of a
particular class of securities does not exceed 25% of the then outstanding
securities of that class.
Investing in Other Investment Companies
The Fund may purchase securities of open-end or closed-end investment
companies in compliance with the 1940 Act or any exemptive relief obtained
thereunder.
Exercise of Control
The Fund will not purchase securities of companies for the purpose of
exercising control.
INVESTMENT SECURITIES
The following information supplements the discussion of the Fund's
investment securities that are described in the prospectus.
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a
specified rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The Fund may invest in tax exempt securities, which pay interest that is
not subject to regular income taxes, including AMT. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
Following is a description of non-principal tax exempt securities in which
the Fund may invest.
Variable Rate Demand Instruments. Variable rate demand instruments are tax
exempt securities that require the issuer or a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The securities
also pay interest at a variable rate intended to cause the securities to trade
at their face value. The Fund treats demand instruments as short-term securities
because their variable interest rate adjusts in response to changes in market
rates, even though their stated maturity may extend beyond 13 months.
Municipal Notes. Municipal notes are short-term tax exempt securities. Many
municipalities issue such notes to fund their current operations before
collecting taxes or other municipal revenues. Municipalities may also issue
notes to fund capital projects prior to issuing long-term bonds. The issuers
typically repay the notes at the end of their fiscal year, either with taxes,
other revenues or proceeds from newly issued notes or bonds.
Tax Increment Financing Bonds. Tax increment financing (TIF) bonds are
payable from increases in taxes or other revenues attributable to projects
financed by the bonds. For example, a municipality may issue TIF bonds to
redevelop a commercial area. The TIF bonds would be payable solely from any
increase in sales taxes collected from merchants in the area. The bonds could
default if merchants' sales, and related tax collections, failed to increase as
anticipated.
Municipal Mortgage Back Securities. Municipal mortgage backed securities
are special revenue bonds the proceeds of which may be used to provide mortgage
loans for single family homes or to finance multifamily housing. Municipal
mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates, maturities
and other terms. Municipal mortgage backed securities generally have fixed
interest rates.
PACS. PACs (planned amortization classes) are a sophisticated form of
mortgage backed security issued with a companion class. PACs receive principal
payments and prepayments at a specified rate. In addition, PACs will receive the
companion classes' share of principal payments, if necessary, to cover a
shortfall in the prepayment rate. This helps PACs to control prepayment risks by
increasing the risks to their companion classes.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of credit,
bond insurance and surety bonds. Credit enhancement also includes arrangements
where securities or other liquid assets secure payment of a fixed income
security. If a default occurs, these assets may be sold and the proceeds paid to
a security's holders. Each form of credit enhancement reduces credit risks by
providing another source of payment for a fixed income security.
Structured Notes
The Fund may invest in "structured" notes, which are privately negotiated
debt obligations where the principal and/or interest is determined by reference
to the performance of a benchmark asset, market or interest rate, such as
selected securities, an index of securities or specified interest rates or the
differential performance of two assets or markets, such as indices reflecting
taxable and tax exempt bonds. Depending on the terms of the note, the Fund may
forgo all or part of the interest and principal that would be payable on a
comparable conventional note.
The rate of return on structured notes may be determined by applying a
multiplier to the performance or differential performance of the referenced
index(es) or other assets(s). Application of a multiplier involves leverage that
will serve to magnify the potential for gain and the risk of loss.
The Fund currently intends that any use of structured notes will be for the
purpose of reducing the interest rate sensitivity of the Fund's portfolio (and
thereby decreasing the Fund's exposure to interest rate risk) and, in any event,
that the interest income on the notes will normally be exempt from federal
income tax. The Fund will only invest in structured notes if it has received an
opinion of counsel for the issuer or the advice of another authority believed by
the Adviser to be reliable that the interest income on the notes will be exempt
from federal income tax. Like other sophisticated strategies, the Fund's use of
structured notes may not work as intended; for example, the change in value of
the structured notes may not match very closely the change in the value of bonds
that the structured notes were purchased to hedge.
Derivative Contracts
Derivative contracts are financial instruments that require payments based
upon changes in the values of designated or underlying securities, currencies,
commodities, financial indices or other assets or instruments. Some derivative
contracts such as futures, forwards and options require payments relating to a
future trade involving the underlying asset. Other derivative contracts such as
swaps require payments relating to the income or returns from the underlying
asset or instrument. The other party to a derivative contract is referred to as
a counterparty.
Many derivative contracts are traded on securities or commodities
exchanges. In this case, the exchange sets all the terms of the contract except
for the price. Investors make payments due under their contracts through the
exchange. Most exchanges require investors to maintain margin accounts through
their brokers to cover their potential obligations to the exchange. Parties to
the contract make (or collect) daily payments to the margin accounts to reflect
losses (or gains) in the value of their contracts. This protects investors
against potential defaults by the counterparty. Trading contracts on an exchange
also allows investors to close out their contracts by entering into offsetting
contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open even if it is losing money on
the contract, and to make any payments required under the contract even if it
has to sell portfolio securities at unfavorable prices to do so. Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.
The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset or
instrument, derivative contracts may increase or decrease the Fund's exposure to
interest rate risks, and may also expose the Fund to liquidity, leverage and tax
risks. OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.
The Fund may trade in the following types of derivative contracts, as well
as combinations of these contracts, including, but not limited to, options on
futures contracts, options on forward contracts and options on swaps.
Futures Contracts. Futures contracts provide for the future sale by one
party and purchase by another party of a specified amount of an underlying asset
or instrument at a specified price, date and time. Entering into a contract to
buy an underlying asset is commonly referred to as buying a contract or holding
a long position in the asset. Entering into a contract to sell an underlying
asset is commonly referred to as selling a contract or holding a short position
in the asset. Futures contracts are considered to be commodity contracts.
Futures contracts traded OTC are frequently referred to as forward contracts.
The Fund may buy or sell the interest rate futures contracts and index
financial futures contracts. The Fund may also buy or sell futures contracts on
tax exempt securities and U.S. government and agency securities.
Options. Options are rights to buy or sell an underlying asset or
instrument for a specified price (the exercise price) during, or at the end of,
a specified period. A call option gives the holder (buyer) the right to buy the
underlying asset or instrument from the seller (writer) of the option. A put
option gives the holder the right to sell the underlying asset or instrument to
the writer of the option. The writer of the option receives a payment, or
premium, from the buyer, which the writer keeps regardless of whether the buyer
uses or exercises the option. If the Fund writes options on futures contracts,
it will be subject to margin requirements similar to those applied to futures
contracts.
Swaps. Swaps are contracts in which two parties agree to pay each other
(swap) the returns derived from underlying assets or instruments with differing
characteristics. Most swaps do not involve the delivery of the underlying assets
or instruments by either party, and the parties might not own the assets or
instruments underlying the swap. The payments are usually made on a net basis so
that, on any given day, the Fund would receive (or pay) only the amount by which
its payment under the contract is less than (or exceeds) the amount of the other
party's payment. Swap agreements are sophisticated instruments that can take
many different forms, and are known by a variety of names including caps, floors
and collars. Common swap agreements that the Fund may use include:
Interest Rate Swaps. Interest rate swaps are contracts in which one party
agrees to make regular payments equal to a fixed or floating interest rate times
a stated, notional principal amount of fixed income securities, in return for
payments equal to a different fixed or floating rate times the same notional
principal amount, for a specific period. For example, a $10 million LIBOR swap
would require one party to pay the equivalent of the London Interbank Offer Rate
of interest (which fluctuates) on $10 million notional principal amount in
exchange for the right to receive the equivalent of a stated fixed rate of
interest on $10 million notional principal amount.
Caps and Floors. Caps and floors are contracts in which one party agrees to
make payments only if an interest rate or index goes above (cap) or below
(floor) a certain level in return for a fee from the other party.
Total Return Swaps. Total return swaps are contracts in which one party
agrees to make payments of the total return from the underlying asset or
instrument during the specified period, in return for payments equal to a fixed
or floating rate of interest or the total return from another underlying asset
or instrument.
Municipal Market Data Rate Locks. The Fund may purchase and sell Municipal
Market Data Rate Locks ("MMD Rate Locks"). An MMD Rate Lock permits the Fund to
lock in a specified municipal interest rate for a portion of its portfolio to
preserve a return on a particular investment or a portion of its portfolio as a
duration management technique or to protect against any increase in the price of
securities to be purchased at a later date. The Fund will ordinarily use these
transactions as a hedge or for duration or risk management although it is
permitted to enter into them to enhance income or gain. An MMD Rate Lock is a
contract between the Fund and an MMD Rate Lock provider pursuant to which the
parties agree to make payments to each other on a notional amount, contingent
upon whether the Municipal Market Data AAA General Obligation Scale is above or
below a specified level on the expiration date of the contract. For example, if
the Fund buys an MMD Rate Lock and the Municipal Market Data AAA General
Obligation Scale is below the specified level on the expiration date, the
counterparty to the contract will make a payment to the Fund equal to the
specified level minus the actual level, multiplied by the notional amount of the
contract. If the Municipal Market Data AAA General Obligation Scale is above the
specified level on the expiration date, the Fund will make a payment to the
counterparty equal to the actual level minus the specified level, multiplied by
the notional amount of the contract. In entering into MMD Rate Locks, there is a
risk that municipal yields will move in the direction opposite the direction
anticipated by the Fund.
Short Sales
The Fund may make short sales of securities as part of its overall
portfolio management strategy and to offset potential declines in long positions
in securities in the Fund's portfolio. A short sale is a transaction in which
the Fund sells a security it does not own in anticipation that the market price
of that security will decline. Although short sale transactions are not
currently available with respect to municipal bonds, the Fund may engage in
short sales on taxable bonds and on futures contracts with respect to Municipal
Bonds and taxable bonds.
When the Fund makes a short sale on a security, it must borrow the security
sold short and deliver it to the broker-dealer through which it made the short
sale as collateral for its obligation to deliver the security upon conclusion of
the sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any accrued interest and dividends on such borrowed
securities.
If the price of the security sold short increases between the time of the
short sale and the time the Fund replaces the borrowed security, the Fund will
incur a loss; conversely, if the price declines, the Fund will realize a capital
gain. Any gain will be decreased, and any loss increased, by the transaction
costs described above. The successful use of short selling may be adversely
affected by imperfect correlation between movements in the price of the security
sold short and the securities being hedged.
To the extent that the Fund engages in short sales, it will provide
collateral to the broker-dealer. A short sale is "against the box" to the extent
that the Fund contemporaneously owns, or has the right to obtain at no added
cost, securities identical to those sold short. The Fund may also engage in
so-called "naked" short sales (i.e., short sales that are not "against the
box"), in which case the Fund's losses could theoretically be unlimited in cases
where the Fund is unable for whatever reason to close out its short position.
The Fund has the flexibility to engage in short selling to the extent permitted
by the 1940 Act and rules and interpretations thereunder.
Investing In Securities Of Other Investment Companies
The Fund may invest its assets in securities of other open-end or
closed-end investment companies, including the securities of affiliated
investment companies, as an efficient means of carrying out its investment
policies and managing its uninvested cash.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities:
Treasury Securities. Treasury securities are direct obligations of the
federal government of the United States.
Agency Securities. Agency securities are issued or guaranteed by a federal
agency or other government sponsored entity ("GSE") acting under federal
authority. The United States supports some GSEs with its full faith and credit.
Other GSEs receive support through federal subsidies, loans or other benefits. A
few GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities.
Bank Instruments. Bank instruments are unsecured interest bearing deposits
with banks. Bank instruments include bank accounts, time deposits, certificates
of deposit and banker's acceptances.
Corporate Debt Securities. Corporate debt securities are fixed income
securities issued by businesses. Notes, bonds, debentures and commercial paper
are the most prevalent types of corporate debt securities.
Commercial Paper. Commercial paper is an issuer's obligation with a
maturity of less than nine months. Companies typically issue commercial paper to
pay for current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If the
issuer cannot continue to obtain liquidity in this fashion, its commercial paper
may default. The short maturity of commercial paper reduces both the market and
credit risks as compared to other debt securities of the same issuer.
Repurchase Agreements. Repurchase agreements are transactions in which the
Fund buys a security from a dealer or bank and agrees to sell the security back
at a mutually agreed upon time and place. The repurchase price exceeds the sale
price, reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
MANAGEMENT OF THE FUND
Board of Trustees
The Board is responsible for managing the Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders. The
following tables give information about each Board member and the senior
officers of the Fund. Where required, the tables separately list Board members
who are "interested persons" of the Fund (i.e., "Interested" Board members) and
those who are not (i.e., "Independent" Board members). Unless otherwise noted,
the address of each person listed is Federated Investors Tower, 1001 Liberty
Avenue, Pittsburgh, PA. The Federated Fund Complex consists of 44 investment
companies (comprising 138 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--nine portfolios; Riggs Funds--eight portfolios; and WesMark Funds--five
portfolios.
Interested Trustees Background And Compensation
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Name Birth Date Principal Occupation(s) for Past Five Years, Aggregate Total
Address Other Directorships Held and Previous Positions Compensation Compensation
Positions Held From From
with Fund Fund + Fund and
Federated
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 $148,500.00
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 $163,350.00
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, University of
Trail Pittsburgh. Previous Position: Senior Partner,
Pittsburgh, PA Ernst & Young LLP.
TRUSTEE(1)(2)
John T. Conroy, Principal Occupations: Director or Trustee of $0 $163,350.00
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 $163,350.00
Constantakis the Federated Fund Complex; Previous
Birth Date: Position: Partner, Andersen Worldwide SC.
September3, Other Directorships Held: Director, Michael
1939 175 Baker Corporation (engineering and energy
Woodshire Drive services worldwide).
Pittsburgh, PA
TRUSTEE (1)(2)
John F. Principal Occupation: Director or Trustee of $0 $148,500.00
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 $148,500.00
Birth Date: the Federated Fund Complex; Management
March16, 1942 Consultant.
One Royal Palm Other Directorships Held: Board of Overseers,
Way 100 Royal Babson College
Palm Way Palm
Beach, FL Previous Positions: Representative,
TRUSTEE(1)(2) Commonwealth of Massachusetts General Court;
President, State Street Bank and Trust Company
and State Street Corporation (retired);
Director, VISA USA and VISA 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 $163,350.00
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 $178,200.00
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 $148,500.00
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 $148,500.00
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.
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
--------------------------------------------------------------------------------------
Board Committee Committee Functions Meetings
Committee Members Held
During
Last
Fiscal
Year
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Executive John F. In between meetings of the full Board, the None
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 One
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 as of December 31, 2002
--------------------------------------------
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 $50,001-
Donahue 10O,000 Over $100,000
Lawrence D. Ellis, $0 Over $100,000
M.D.
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
The Trustees and Officers of the Fund beneficially and as a group owned
less than 1% of the outstanding Shares of the Fund as of January 31, 2003.
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 AMPS, any other preferred shares
that may be issued in the future or borrowings that may be outstanding, minus
the sum of accrued liabilities other than indebtedness attributable to financial
leverage. The liquidation preference of AMPS or any other preferred shares that
may be issued in the future is not a liability.
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.
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.
ADDITIONAL INFORMATION CONCERNING
THE AUCTIONS FOR AMPS
General
Securities Depository. The Depository Trust Company ("DTC") will act as the
Securities Depository with respect to the AMPS. One certificate for all of the
AMPS will be registered in the name of Cede & Co., as nominee of the Securities
Depository. Such certificate will bear a legend to the effect that such
certificate is issued subject to the provisions restricting transfers of AMPS
contained in the Statement of Preferences of Auction Market Preferred Shares.
The Fund will also issue stop-transfer instructions to the transfer agent for
AMPS. Prior to the commencement of the right of holders of AMPS to elect a
majority of the Fund's trustees, as described under "Description of the
AMPS--Voting Rights" in the prospectus, Cede & Co. will be the holder of record
of the AMPS and owners of AMPS will not be entitled to receive certificates
representing their ownership interest in such shares.
DTC, a New York-chartered limited purpose trust company, performs services
for its participants, some of whom (and/or their representatives) own DTC. DTC
maintains lists of its participants and will maintain the positions (ownership
interests) held by each such participant in shares of AMPS, whether for its own
account or as a nominee for another person.
Concerning the Auction Agent
The auction agent will act as agent for the Fund in connection with
auctions. In the absence of bad faith or negligence on its part, the auction
agent will not be liable for any action taken, suffered or omitted or for any
error of judgment made by it in the performance of its duties under the auction
agency agreement between the Fund and the auction agent and will not be liable
for any error of judgment made in good faith unless the auction agent was
negligent in ascertaining the pertinent facts.
The auction agent may rely upon, as evidence of the identities of the
holders of AMPS, the auction agent's registry of holders, the results of
auctions and notices from any Broker-Dealer (or other person, if permitted by
the Fund) with respect to transfers described under "The Auction--Secondary
Market Trading and Transfers of AMPS" in the prospectus and notices from the
Fund. The auction agent is not required to accept any such notice for an auction
unless it is received by the auction agent by 3:30 p.m., New York City time, on
the business day preceding such auction.
The auction agent may terminate its auction agency agreement with the Fund
upon notice to the Fund on a date no earlier than 45 days after such notice. If
the auction agent should resign, the Fund will use its best efforts to enter
into an agreement with a successor auction agent. The Fund may remove the
auction agent provided that prior to such removal the Fund shall have entered
into such an agreement with a successor auction agent.
Broker-Dealers
The auction agent after each auction for AMPS will pay to each
Broker-Dealer, from funds provided by the Fund, a service charge at the annual
rate of 1/4 of 1%, in the case of any auction before a rate period of seven
days, or a percentage agreed to by the Fund and the Broker-Dealer in the case of
any auction before a special rate period, of the purchase price of the AMPS
placed by such Broker-Dealer at such auction. The Fund may request the auction
agent to terminate one or more Broker-Dealer agreements at any time, provided
that at least one Broker-Dealer agreement is in effect after such termination.
The Broker-Dealer agreement provides that a Broker-Dealer, other than an
affiliate of the Fund, may submit orders in auctions for its own account. Any
Broker-Dealer that is an affiliate of the Fund may submit orders in auctions,
but only if such orders are not for its own account. If a Broker-Dealer submits
an order for its own account in any auction, it might have an advantage over
other bidders because it would have knowledge of all orders submitted by it in
that auction; such Broker-Dealer, however, would not have knowledge of orders
submitted by other Broker-Dealers in that auction.
DESCRIPTION OF COMMON SHARES
A description of Common Shares is contained in the prospectus. 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.
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 holders of AMPS, of other classes or series of shares, as
it determines 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 AMPS.
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 AMPS are outstanding, the
Fund may not purchase, redeem or otherwise acquire any of its Common Shares
unless (1) all accrued AMPS 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 AMPS (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 events or conditions 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 AMPS 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 acquiring, holding and disposing of AMPS. 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 (2) 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 earnings 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 holders of AMPS 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 holders of AMPS.
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 AMPS 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 holders of AMPS 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 holders of
AMPS as items of interest excluded from their gross income, each holder of AMPS
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
holders of AMPS to be subject to or result in an increased liability under the
AMT. The Fund will annually supply holders of AMPS a report indicating the
amount and nature of amounts distributed to them.
The redemption, sale or exchange of AMPS normally will result in capital
gain or loss to holders of AMPS who hold their AMPS as capital assets.
Generally, a holder of AMPS 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 preferred 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 holders of AMPS. 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 AMPS 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 AMPS
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 AMPS if the holder of AMPS purchases other AMPS
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 AMPS 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 AMPS held for six months or less will be disallowed to the
extent of any exempt-interest dividends received with respect to such AMPS 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 AMPS.
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 Bush Administration
has announced a tax proposal which would accelerate the changes in tax rates and
apply the maximum 35% tax rate in 2003. ---------
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.
If at any time when the Fund's AMPS are outstanding the Fund fails to meet
the Preferred Shares Basic Maintenance Amount or the Investment Company Act
Preferred Shares Asset Coverage, the Fund will be required to suspend
distributions to holders of its Common Shares until such maintenance amount or
asset coverage, as the case may be, is restored. See "Description of the
AMPS--Dividends and Rate Periods-Restrictions on Dividends and Other
Distributions" in the prospectus. This may prevent the Fund from distributing at
least an amount equal to the sum of 90% of its investment company taxable income
(determined without regard to dividends paid) and 90% of its net tax exempt
income, and may therefore jeopardize the Fund's qualification for taxation as a
regulated investment company or cause the Fund to incur a tax liability or a
non-deductible 4% excise tax on the undistributed taxable income, including net
capital gain, or both. Upon failure to meet the Preferred Shares Basic
Maintenance Amount or the Investment Company Act Preferred Shares Asset
Coverage, the Fund will be required to redeem AMPS in order to maintain or
restore such maintenance amount or asset coverage and avoid the adverse
consequences to the Fund and its shareholders of failing to qualify as a
regulated investment company. There can be no assurance, however, that any such
redemption would achieve such objectives.
The Fund may, at its option, redeem AMPS in whole or in part, and is
required to redeem AMPS to the extent required to maintain the Preferred Shares
Basic Maintenance Amount and the Investment Company Act Preferred Shares Asset
Coverage. Gain or loss, if any, resulting from a redemption of AMPS will be
taxed as gain or loss from the sale or exchange of AMPS under Section 302 of the
Code rather than as a dividend, but only if the redemption distribution (a) is
deemed not to be essentially equivalent to a dividend, (b) is in complete
redemption of an shareholder's interest in the Fund, (c) is substantially
disproportionate with respect to the shareholder or (d) with respect to a
non-corporate shareholder, is in partial liquidation of the shareholder's
interest in the Fund. For purposes of (a), (b) and (c) above, a holder of AMPS
ownership of Common Shares will be taken into account.
Based in part on a lack of present intention on the part of the Fund to
redeem the AMPS at any time in the future, the Fund intends to take the position
that under present law the AMPS will constitute stock, rather than debt of the
Fund. It is possible, however, that the Internal Revenue Service could take a
contrary position asserting for example that the AMPS constitutes debt of the
Fund. If that position was upheld, distributions in the AMPS would be considered
interest, taxable as ordinary income regardless of the taxable earnings of the
Fund.
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. Holders of AMPS 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.
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.
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][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.
FEDERATED PREMIER MUNICIPAL INCOME FUND
FINANCIAL HIGHLIGHTS
(For a Common Share Outstanding Throughout the Period)
Period Ended February 3
(Unaudited) 2003 1
Net Asset Value, Beginning of $14.32
Period
Income From Investment
Operations:
Net investment income 0.06 2
Net realized and unrealized
loss on investments (0.04)
Total from investment
operations 0.02
Capital charge with respect to
issuance of common shares (0.03)
Net Asset Value, End of Period $14.31
Market Value, End of Period $14.55
Total Investment Return3 (3.00)%
Ratios to Average Net Assets:
Expenses 0.55 %
Net investment income 3.81 %
Expense waiver/reimbursement4 0.35 %
Supplemental Data:
Net assets, end of period (000 $87,421
omitted)
Portfolio turnover 16 %
(1) Reflects operations for the period from December 20, 2002 (commencement of
investment operations) to February 3, 2003.
--------------------------------------------------------------------------------
(2) Calculated using average shares outstanding.
(3) Total investment return is calculated assuming a purchase of common shares
at the current market price on the first day and a sale at the current
market price on the last day of the period reported. Dividends and
distributions, if any, are assumed for purposes of this calculation to be
reinvested at prices obtained under the Fund's dividend reinvestment plan.
Total investment return does not reflect brokerage commissions or sales
charges. Returns for a period less than one year are not annualized.
(4) This voluntary expense decrease is reflected in both the expense and the
net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
PORTFOLIO OF INVESTMENTS
--------------------------------------------------------------------------------
Federated Premier Municipal Income Fund
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
February 3, 2003 (Unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Principal Amount Value
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LONG-TERM MUNICIPALS - 103.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Alabama - 4.6%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$2,000,000 Alabama Water PCA, Revolving Fund Loan $ 1,992,180
Revenue Bonds (Series 2003A), 4.80% (AMBAC
INS)/(Original Issue Yield: 4.90%), 8/15/2022
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Jefferson County, AL Sewer Revenue Bonds
2,000,000 (Series 2002D), 5.25%, 2/1/2026 2,062,600
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
4,054,780
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Arizona - 2.6%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Salt River, AZ Agricultural Improvements and
1,500,000 Power System Distribution, Electric System 1,513,365
Revenue Bonds (Series 2002A), 5.00% (Salt
River Project), 1/1/2031
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Tempe, AZ IDA, Senior Living Revenue Bonds
750,000 (Series A), 6.75% (Friendship Village of 717,360
Tempe), 12/1/2030
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
2,230,725
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
California - 8.6%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
California State Department of Water
2,000,000 Resources Power Supply Program, Power Supply 2,040,900
Revenue Bonds (Series A), 5.375% (Original
Issue Yield: 5.48%), 5/1/2022
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
California State Public Works Board,
3,000,000 Department of General Services, Revenue 3,001,170
Bonds, 5.000%, 12/1/2027
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Golden State, CA Tobacco Securitization
2,000,000 Corp., Tobacco Settlement Revenue Bonds 1,950,880
(Series 2003A1), 6.75%, 6/1/2039
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
La Verne, CA, Revenue Certificates of
500,000 Participation (Series 2003B), 6.625% 494,845
(Brethren Hillcrest Homes)/(Original Issue
Yield: 6.70%), 2/15/2025
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
7,487,795
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Colorado - 1.1%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Colorado Health Facilities Authority, Revenue
1,000,000 Bonds (Series 2002A), 6.125% (Covenant 998,520
Retirement Communities, Inc.)/(Original Issue
Yield: 6.40%), 12/1/2033
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Connecticut - 3.2%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Connecticut State Transportation
2,750,000 Infrastructure Authority, Transportation 2,826,148
Infrastructure Special Tax Revenue Bonds
(Series 2002B), 5.00% (AMBAC INS), 12/1/2022
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
District of Columbia - 2.7%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
District of Columbia, (Series 2000) Weekly
2,500,000 VRDNs (Public Welfare Foundation, 2,399,300
Inc.)/(SunTrust Bank LOC)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Florida - 4.4%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Capital Trust Agency, FL, Revenue Bonds
1,000,000 (Series 2001), 10.00% (Seminole Tribe of 1,028,230
Florida Convention and Resort Hotel
Facilities), 10/1/2033
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Citrus County, FL Hospital Board Revenue
1,490,000 Bonds, 6.375% (Citrus Memorial Hospital), 1,472,373
8/15/2032
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Harbor Bay, FL Community Development
1,320,000 District, Special Assessment Revenue Bonds, 1,320,330
6.75%, 5/1/2034
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
3,820,933
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Georgia - 3.6%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Athens, GA Housing Authority, Lease Revenue
1,500,000 Bonds, 5.25% (University of Georgia-East 1,556,460
Campus)/(AMBAC INS), 12/1/2023
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Athens, GA Housing Authority, Student Housing
1,500,000 Lease Revenue Bonds , 5.25% (University of 1,572,060
Georgia-East Campus)/(AMBAC INS), 12/1/2021
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
3,128,520
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Hawaii - 1.1%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Hawaii State Department of Budget and
1,000,000 Finance, Special Purpose Revenue Bonds 983,420
(Series 2003A), 8.00% (Kahala Nui Project),
11/15/2033
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Illinois - 2.3%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Chicago, IL Special Assessment , Improvement
1,000,000 Revenue Bonds , 6.75% (Lakeshore East 997,960
Project)/(Original Issue Yield: 6.769%),
12/1/2032
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Illinois Educational Facilities Authority
1,000,000 Revenue Bonds (Series 2003A), 5.70% 974,920
(Augustana College), 10/1/2032
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
1,972,880
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Kentucky - 2.3%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Kentucky Economic Development Finance
2,000,000 Authority, Health System Revenue Bonds 2,051,380
(Series 2000A), 6.625% (Norton Healthcare,
Inc.), 10/1/2028
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Massachusetts - 4.7%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Commonwealth of Massachusetts, Construction
3,000,000 Loan LT GO Bonds (Series 2002E), 5.25% (FGIC 3,135,450
INS), 1/1/2022
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Commonwealth of Massachusetts, Development
1,000,000 Financing Agency Revenue Bonds, 5.75% 969,250
(Pharmacy & Allied Health Sciences), 7/1/2033
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
4,104,700
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Michigan - 2.3%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cornell Township, MI Economic Development
2,000,000 Revenue Bonds, 5.875% (Meadwestvaco-Escanaba 2,002,760
Project), 5/1/2018
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Missouri - 1.1%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Missouri State Finance Board, Infrastructure
1,000,000 Facilities Revenue Bonds (Series 2003A), 1,000,290
5.50%, 12/1/2032
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Mississippi - 2.6%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Lowndes County, MS Solid Waste Disposal and
2,000,000 Pollution Control Revenue Bonds, 6.70% 2,236,140
(Weyerhauser Co. Project), 4/1/2022
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
North Carolina - 1.2%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Haywood County, NC Industrial Facilities and
1,000,000 Pollution Control Financing Authority, 1,009,980
Revenue Bonds, 6.00% (Champion International
Corp. Project), 3/1/2020
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
North Dakota - 2.3%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Ward County, ND Health Care Facilities
2,000,000 Revenue Bonds, 6.25% (Trinity Obligated 2,012,960
Group), 7/1/2026
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Pennsylvania - 5.1%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Allegheny County, PA HDA, Health System
1,000,000 Revenue Bonds (Series 2000), 9.25% (West Penn 1,099,770
Allegheny Health System)/(Original Issue
Yield: 9.70%), 11/15/2030
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cumberland County, PA Municipal Authority,
1,295,000 Retirement Community Revenue Bonds (Series 1,268,103
2002A), 7.25% (Wesley Affiliated Services,
Inc. Obligated Group)/(Original Issue Yield:
7.50%), 1/1/2035
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Pennsylvania State Higher Education
2,000,000 Facilities Authority, Revenue Bonds, Series 2,064,880
A, 6.00% (UPMC Health System)/(Original Issue
Yield: 6.16%), 1/15/2031
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
4,432,753
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
South Carolina - 5.2%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
South Carolina Jobs-EDA, Health System
2,500,000 Revenue Bonds (Series A), 5.625% (Bon Secours 2,478,925
Health System)/(Original Issue Yield: 5.84%),
11/15/2030
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
South Carolina State Public Service
2,000,000 Authority, Refunding Revenue Bonds (Series 2,067,040
2002D), 5.00% (FSA INS), 1/1/2020
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
4,545,965
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Tennessee - 7.8%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Johnson City, TN Health and Educational
2,000,000 Facilities Board, Hospital Revenue Bonds, 2,169,300
7.50%,7/1/2025
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Knox County, TN Health Education & Housing
1,500,000 Facilities Board, Revenue Bonds , 6.375% 1,527,615
(Baptist Health System of East
Tennessee)/(Original Issue Yield: 6.50%),
4/15/2022
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Knox County, TN Health Education & Housing
1,000,000 Facilities Board, Revenue Bonds , 6.50% 1,021,170
(Baptist Health System of East
Tennessee)/(Original Issue Yield: 6.50%),
4/15/2031
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shelby County, TN Health Education & Housing
2,000,000 Facilities Board, Revenue Bonds , 6.50% 2,112,940
(Methodist Healthcare)/(Original Issue Yield:
6.60%), 9/1/2026
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
6,831,025
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Texas - 7.6%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Leander, TX Independent School District,
1,900,000 Refunding UT GO Bonds , 5.375% (PSFG INS), 2,048,314
8/15/2017
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
North Central Texas Health Facilities
1,000,000 Development Revenue Bonds (Series 1999A), 1,020,420
7.50% (Retirement Facilities, Northwest
Senior Housing), 11/15/2029
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Spring Branch, TX Independent School
2,000,000 District, Refunding LT GO Bonds , 5.20% (PSFG 2,076,800
INS)/(Original Issue Yield: 5.23%), 2/1/2020
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Texas State University System, Refunding
1,500,000 Revenue Bonds , 5.00% (FSA INS), 3/15/2020 1,540,260
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
6,685,794
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Utah - 6.2%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Emery County, UT Pollution Control Revenue
3,400,000 Bonds, Daily VRDNs (Pacificorp 3,400,000
Project)/(AMBAC INS)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Utah Transit Authority, Sales Tax Revenue
2,000,000 Bonds (Series 2002A), 5.00% (FSA INS), 2,011,640
6/15/2027
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
5,411,640
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Virginia - 3.8%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Hampton, VA Convention Center, Revenue Bonds,
1,280,000 5.125%, 1/15/2028 1,308,198
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Peninsula Ports Authority, VA, Residential Care Facilit972,870
1,000,000 Revenue Bonds, 7.375% (Virginia Baptist Homes), 12/1/2032
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Richmond, VA, UT GO Bonds (Series 2002A),
1,000,000 5.00% (FSA INS), 7/15/2019 1,047,670
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
3,328,738
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Washington - 9.7%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Everett, WA, LT GO Refunding Bonds, 5.00%
1,000,000 (MBIA Insurance Corp. INS), 12/1/2020 1,029,280
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Seattle, WA Municipal Light & Power,
3,915,000 Improvement & Refunding Revenue Bonds , 3,956,616
5.125% (FSA INS)/(Original Issue Yield:
5.30%), 3/1/2026
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Tobacco Settlement Authority, WA, Tobacco
1,500,000 Settlement Asset Backed Revenue Bonds , 1,452,780
6.625% (Original Issue Yield: 6.875%),
6/1/2032
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Washington State, UT GO Bonds (Series B),
2,000,000 5.00% (FSA INS)/(Original Issue Yield: 2,042,460
5.05%), 1/1/2021
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
8,481,136
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Wisconsin - 6.9%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Wisconsin State HEFA, Health Facilities
4,000,000 Revenue Bonds (Series A), 5.25% (Ministry 4,041,560
Health Care)/(MBIA INS)/(Original Issue
Yield: 5.38%), 2/15/2032
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Wisconsin State HEFA, Health Facilities
1,000,000 Revenue Bonds, 6.00% (Synergyhealth, 992,620
Inc.)/(Original Issue Yield: 6.100%),
11/15/2023
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Wisconsin State HEFA, Health Facilities
1,000,000 Revenue Bonds, 7.25% (Community Memorial 978,910
Hospital, Inc. Project)/(Original Issue
Yield: 7.45%), 1/15/2033
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
6,013,090
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL LONG-TERM MUNICIPALS (IDENTIFIED COST $90,272,90,051,372
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The cost of investments for federal tax purposes amounts to
1 $90,272,010. The net unrealized depreciation of investments
on a federal tax basis amounts to $220,638 which is comprised
of $158,065 appreciation and $378,703 depreciation at
February 3, 2003.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Note: The categories of investments are shown as a percentage of net assets
($87,420,823) at February 3, 2003.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The following acronyms were used throughout this portfolio:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AMBAC --American Municipal Bond Assurance Corporation
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EDA --Economic Development Authority
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FGIC --Financial Guaranty Insurance Corporation
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FSA --Financial Security Assurance
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GO --General Obligation
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GTD --Guaranteed
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
HDA --Hospital Development Authority
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
HEFA --Health and Education Facilities Authority
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
IDA --Industrial Development Authority
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INS --Insured
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LOC --Letter of Credit
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
LT --Limited Tax
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MBIA --Municipal Bond Insurance Association
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PCA --Pollution Control Authority
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UT --Unlimited Tax
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
VRDNs --Variable Rate Demand Notes
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FEDERATED PREMIER MUNICIPAL INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
February 3, 2003 (Unaudited)
Assets:
Total investments in securities, at value
(identified cost $90,272,010) $90,051,372
Cash 7,787
Receivable for investments sold 1,244,348
Income receivable 1,052,814
Total assets 92,356,321
Liabilities:
Payable for investments purchased $ 4,899,838
Accrued expenses 35,660
Total liabilities 4,935,498
Net assets for 6,106,981 shares outstanding $ 87,420,823
Net Assets Consist of:
Paid in capital $ 87,268,792
Net unrealized depreciation of investments (220,638 )
Accumulated net realized loss on
investments (4,072 )
Undistributed net investment income 376,741
Total Net Assets $ 87,420,823
Net Asset Value Per Share
$87,420,823 / 6,106,981 shares outstanding $14.31
Market Value Per Share $14.55
See Notes which are an integral part of the Financial Statements
--------------------------------------------------------------------------------
FEDERATED PREMIER MUNICIPAL INCOME FUND
STATEMENT OF OPERATIONS
Period Ended February 3, 2003 (Unaudited) (1)
Investment Income:
Interest $431,031
Expenses:
Investment adviser fee $54,290
Administrative personnel and
services fee 14,726
Custodian fees 543
Transfer and dividend
disbursing agent fees and
expenses 3,455
Auditing fees 2,122
Legal fees 987
Portfolio accounting fees 5,430
Printing and postage 1,974
Insurance premiums 148
Miscellaneous 5,083
Total expenseS 88,758
Waivers and Expense Reduction:
Waiver of investment adviser fee $ (19,742 )
Waiver of administrative
personnel and services fee (14,726 )
Total waivers and expense
reduction (34,468 )
Net expenses 54,290
Net investment income 376,741
Realized and Unrealized Gain
(Loss) on Investments:
Net realized loss on
investments (4,072 )
Net change in unrealized
depreciation of investments (220,638 )
Net realized and unrealized
loss on investments (224,710 )
Change in net assets resulting
from operations $ 152,031
(1) Reflects operations for the period from December 20, 2002 (commencement of
investment operations) to February 3, 2003.
================================================================================
See Notes which are an integral part of the Financial Statements
FEDERATED PREMIER MUNICIPAL INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
Period
Ended
February
3, 2003
(1)
Unaudited
Increase (Decrease) in Net Assets
Operations:
Net investment income $376,741
Net realized loss on investments (4,072 )
Net change in unrealized depreciation of
investments (220,638 )
Change in net assets resulting from operations 152,031
Distributions to Shareholders:
Distributions from net investment income --
Share Transactions:
Net proceeds from the issuance of common shares 87,268,792
Change in net assets 87,420,823
Net Assets:
Beginning of period --
End of period (including undistributed net
investment income of $376,741) $ 83,420,823
(1) Reflects operations for the period from December 20, 2002 (commencement of
investment operations) to February 4, 2003.
================================================================================
See Notes which are an integral part of the Financial Statements
Federated Premier Municipal Income Fund
NOTES TO FINANCIAL STATEMENTS
February 3, 2003 (Unaudited)
--------------------------------------------------------------------------------
ORGANIZATION
Federated Premier Municipal Income Fund (the "Fund") was organized as a
Delaware statutory trust on October 16, 2002 and is registered under the
Investment Company Act of 1940, as amended (the "Act") as a diversified,
closed-end management investment company. The investment objective of the Fund
is to provide current income exempt from federal regular income tax, including
alternative minimum tax.
Prior to commencing operations on December 20, 2002, the Fund had no
operations other than matters relating to their organization and registration
and the sales and issuance of 6,981 shares of common stock to Federated
Investment Management Company. The Fund issued 5,850,000 shares of common stock
in its initial public offering on December 20, 2002. These shares were issued at
$15.00 per share before underwriting discount of $0.68 per share. Offering costs
of $175,709 (representing $0.03 per share) were offset against proceeds of the
offering and have been charged to paid-in capital. The Investment Adviser has
paid all offering cost (other than sales load) and organizational expenses
exceeding $0.03 per share of the Fund. An additional 250,000 shares were issued
on February 3, 2003 at $15.00 per share.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles
("GAAP") in the United States of America.
Investment Valuation
Municipal bonds are valued by an independent pricing service, taking into
consideration yield, liquidity, risk, credit quality, coupon, maturity, type of
issue, and any other factors or market data the pricing service deems relevant.
Short-term securities are valued at the prices provided by an independent
pricing service. However, short-term securities with remaining maturities of 60
days or less at the time of purchase may be valued at amortized cost, which
approximates fair market value. Securities for which no quotations are readily
available are valued at fair value as determined in good faith using methods
approved by the Board of Trustees (the "Trustees").
Investment Income, Expenses and Distributions
Interest income and expenses are accrued daily. All discount/premiums are
accreted/amortized for financial reporting purposes as required. Dividend income
and distributions to shareholders are recorded on the ex-dividend date. Non-cash
dividends included in dividend income, if any, are recorded at fair value.
Federal Taxes
It is the Fund's policy to comply with the provisions of the Internal
Revenue Code, as amended, (the "Code"), 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.
When-Issued and Delayed Delivery Transactions
The Fund may engage in when-issued or delayed delivery transactions. The
Fund records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date. Losses may occur on these transactions due to changes in market
conditions or the failure of counterparties to perform under the contract.
Restricted Securities
Restricted securities are securities that may only be resold upon
registration under federal securities laws or in transactions exempt from such
registration. In some cases, the issuer of restricted securities has agreed to
register such securities for resale, at the issuer's expense either upon demand
by the Fund or in connection with another registered offering of the securities.
Many restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Trustees. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no market
prices are available, at the fair value as determined in good faith using
methods approved by the Trustees.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts of assets,
liabilities, expenses and revenues reported in the financial statements. Actual
results could differ from those estimated.
Other
Investment transactions are accounted for on a trade date basis.
CAPITAL STOCK
At February 3, 2003, there is an unlimited number of par value shares
($0.01 per share) authorized. Of the 6,106,981 common shares outstanding at
February 3, 2003, the advisor owned 6,981 shares.
INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The Fund has entered into an Investment Management Agreement (the
"Agreement") with the Federated Investment Management Company (the "Adviser") to
serve as investment manager to the Fund. Pursuant to the Agreement, the Fund
pays the Adviser an annual management fee, payable daily, at the annual rate of
0.55% of the Fund's managed assets.
In order to reduce fund expenses, the Adviser has contractually agreed to
waive a portion of its investment adviser fee at the annual rate of 0.20% of the
averaged daily value of the Fund's managed assets, not inclusive of any 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.
Administrative Fee
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on 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. FServ may voluntarily choose to waive any
portion of its fee. FServ can modify or terminate this voluntary waiver at any
time at its sole discretion.
Transfer and Dividend Disbursing Agent Fees and Expenses
EquiServe Trust Company, N.A. ("EquiServe") serves as transfer and dividend
disbursing agent for the Fund. The fee paid to EquiServe is based on the size,
type and number of accounts and transactions made by shareholders.
Portfolio Accounting Fees
FServ maintains the Fund's accounting records for which it receives a fee.
The fee is based on the level of the Fund's average daily net assets for the
period, plus out-of-pocket expenses.
Interfund Transactions
During the period ended February 3, 2003, the Fund engaged in purchase and
sale transactions with funds that have a common investment adviser (or
affiliated investment advisers), common Trustees/Trustees, and/or common
Officers. These purchase and sale transactions complied with Rule 17a-7 under
the Act and amounted to $36,477,250 and $55,960,000, respectively.
General
Certain of the Officers and Trustees of the Corporation are Officers and
Trustees or Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities (and
in-kind contributions), for the period ended February 3, 2003, were as follows:
--------------------------------------------------------------------------------
Purchases $ 98,863,982
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Sales $ 11,974,404
--------------------------------------------------------------------------------
AA-57105258
APPENDIX A
FEDERATED PREMIER MUNICIPAL INCOME FUND
STATEMENT OF PREFERENCES OF
AUCTION MARKET PREFERRED SHARES
("AMPS")
TABLE OF CONTENTS
Definitions.............................................................. AA-2
Part I................................................................... AA-19
1. Number of Authorized Shares........................................... AA-19
2. Dividends............................................................. AA-19
3. Gross-up Payments..................................................... AA-23
4. Designation of Special Rate Periods................................... AA-24
5. Voting Rights......................................................... AA-26
6. Investment Company Act Preferred Shares Asset Coverage................ AA-30
7. Preferred Shares Basic Maintenance Amount............................. AA-30
8. Reserved.............................................................. AA-31
9. Restrictions on Dividends and Other Distributions..................... AA-32
10.............................................Rating Agency Restrictions AA-33
11.............................................................Redemption AA-38
12.....................................................Liquidation Rights AA-41
13..........................................................Miscellaneous AA-42
Part II.................................................................. AA-43
1. Orders................................................................ AA-43
2. Submission of Orders by Broker-Dealers to Auction Agent............... AA-45
3. Determination of Sufficient Clearing Bids, Winning Bid Rate and AA-47
Applicable Rate.......................................................
4. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares.............................................. AA-49
5. Notification of Allocations........................................... AA-51
6. Auction Agent......................................................... AA-51
7. Transfer of AMPS...................................................... AA-52
8. Global Certificate.................................................... AA-52
Exhibit A................................................................ AA-54
FEDERATED PREMIER MUNICIPAL INCOME FUND, a Delaware statutory trust (the
"Fund"), certifies that:
First: Pursuant to authority expressly vested in the Board of Trustees of
the Fund by Article VI of the Fund's Agreement and Declaration of Trust, as
amended and restated (which, as hereafter restated, amended and supplemented
from time to time is, together with this Statement, herein called the
"Declaration"), the Board of Trustees has, by resolution, authorized the
issuance of shares of the Fund's authorized preferred shares, liquidation
preference $25,000 per share, having such designation or designations as to
series as is set forth in Section 1 of Exhibit A hereto and such number of
shares per such series as is set forth in Section 2 of Exhibit A hereto.
Second: The preferences, rights, voting powers, restrictions, limitations
as to dividends, qualifications, and terms and conditions of redemption, of the
shares of each series of preferred shares now or hereafter described in Section
1 of Exhibit A hereto ("AMPS") are as follows (each such series being referred
to herein as a series of AMPS, and shares of all such series being referred to
herein individually and collectively as AMPS).
DEFINITIONS
Except as otherwise specifically provided in Section 3 of Exhibit A hereto,
as used in this Statement, the following terms shall have the following meanings
(with terms defined in the singular having comparable meanings when used in the
plural and vice versa), unless the context otherwise requires:
(1) "'AA' FINANCIAL COMPOSITE COMMERCIAL PAPER RATE," on any date for any
Rate Period of shares of a series of AMPS, shall mean (i) (A) in the case of any
Minimum Rate Period or any Special Rate Period of fewer than 49 Rate Period
Days, the interest equivalent of the 30-day rate; provided, however, that if
such Rate Period is a Minimum Rate Period and the "AA" Financial Composite
Commercial Paper Rate is being used to determine the Applicable Rate for shares
of such series when all of the Outstanding shares of such series are subject to
Submitted Hold Orders, then the interest equivalent of the seven- day rate, and
(B) in the case of any Special Rate Period of (1) 49 or more but fewer than 70
Rate Period Days, the interest equivalent of the 60-day rate; (2) 70 or more but
fewer than 85 Rate Period Days, the arithmetic average of the interest
equivalent of the 60-day and 90-day rates; (3) 85 or more but fewer than 99 Rate
Period Days, the interest equivalent of the 90-day rate; (4) 99 or more but
fewer than 120 Rate Period Days, the arithmetic average of the interest
equivalent of the 90-day and 120-day rates; (5) 120 or more but fewer than 141
Rate Period Days, the interest equivalent of the 120-day rate; (6) 141 or more
but fewer than 162 Rate Period Days, the arithmetic average of the interest
equivalents of the 120-day and 180-day rates; and (7) 162 or more but fewer than
183 Rate Period Days, the interest equivalent of the 180-day rate, in each case
on commercial paper placed on behalf of issuers whose corporate bonds are rated
"AA" by S&P or the equivalent of such rating by S&P or another rating agency, as
made available on a discount basis or otherwise by the Board of Governors of the
Federal Reserve System ("Federal Reserve") for the Business Day next preceding
such date; or (ii) in the event that the Federal Reserve does not make available
any such rate, then the arithmetic average of such rates, as quoted on a
discount basis or otherwise, by the Commercial Paper Dealers to the Auction
Agent for the close of business on the Business Day next preceding such date. If
any Commercial Paper Dealer does not quote a rate required to determine the "AA"
Financial Composite Commercial Paper Rate, the "AA" Financial Composite
Commercial Paper Rate shall be determined on the basis of the quotation or
quotations furnished by the remaining Commercial Paper Dealer or Commercial
Paper Dealers and any Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers selected by the Fund to provide such rate or rates not
being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as
the case may be, or, if the Fund does not select any such Substitute Commercial
Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial
Paper Dealer or Commercial Paper Dealers. For purposes of this definition, the
"interest equivalent" of a rate stated on a discount basis (a "discount rate")
for commercial paper of a given days' maturity shall be equal to the quotient
(rounded upwards to the next higher one-thousandth (.001) of 1%) of (A) the
discount rate divided by (B) the difference between (x) 1.00 and (y) a fraction,
the numerator of which shall be the product of the discount rate times the
number of days in which such commercial paper matures and the denominator of
which shall be 360.
(2) "ACCOUNTANT'S CONFIRMATION" shall have the meaning specified in
paragraph (c) of Section 7 of Part I of this Statement.
(3) "AFFILIATE" shall mean, for purposes of the definition of
"Outstanding," any Person known to the Auction Agent to be controlled by, in
control of or under common control with the Fund; provided, however, that no
Broker-Dealer controlled by, in control of or under common control with the Fund
shall be deemed to be an Affiliate, nor shall any Person, or any Person
controlled by, in control of or under common control with such Person, one of
the trustees, directors or executive officers of which is a Trustee of the Fund
be deemed to be an Affiliate solely because such trustee, director or executive
officer is also a Trustee of the Fund.
(4) "AGENT MEMBER" shall mean a member of or participant in the Securities
Depository that will act on behalf of a Bidder.
(5) "AMPS" shall have the meaning set forth on the first page of this
Statement.
(6) "APPLICABLE RATE" shall have the meaning specified in subparagraph (e)
(i) of Section 2 of Part I of this Statement.
(7) "AUCTION" shall mean each periodic implementation of the Auction
Procedures.
(8) "AUCTION AGENCY AGREEMENT" shall mean the agreement between the Fund
and the Auction Agent which provides, among other things, that the Auction Agent
will follow the Auction Procedures for purposes of determining the Applicable
Rate for shares of a series of AMPS so long as the Applicable Rate for shares of
such series is to be based on the results of an Auction.
(9) "AUCTION AGENT" shall mean the entity appointed as such by a resolution
of the Board of Trustees or the Executive Committee of the Board of Trustees in
accordance with Section 6 of Part II of this Statement.
(10) "AUCTION DATE," with respect to any Rate Period, shall mean the
Business Day next preceding the first day of such Rate Period.
(11) "AUCTION PROCEDURES" shall mean the procedures for conducting Auctions
set forth in Part II of this Statement.
(12) "AVAILABLE AMPS" shall have the meaning specified in paragraph (a) of
Section 3 of Part II of this Statement.
(13) "BENCHMARK RATE" shall have the meaning specified in paragraph
(b)(iii) of Section 3 of Part II of this Statement.
(14) "BENEFICIAL OWNER," with respect to shares of a series of AMPS, means
a customer of a Broker-Dealer who is listed on the records of that Broker-Dealer
(or, if applicable, the Auction Agent) as a holder of shares of such series.
(15) "BID" and "BIDS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement.
(16) "BIDDER" and "BIDDERS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement; provided, however, that
neither the Fund nor any affiliate thereof shall be permitted to be a Bidder in
an Auction, except that any Broker-Dealer that is an affiliate of the Fund may
be a Bidder in an Auction, but only if the Orders placed by such Broker-Dealer
are not for its own account.
(17) "BOARD OF TRUSTEES" shall mean the Board of Trustees of the Fund or
any duly authorized committee thereof.
(18) "BROKER-DEALER" shall mean any broker-dealer, commercial bank or other
entity permitted by law to perform the functions required of a Broker-Dealer in
Part II of this Statement, that is a member of, or a participant in, the
Securities Depository or is an affiliate of such member or participant, has been
selected by the Fund and has entered into a Broker-Dealer Agreement that remains
effective.
(19) "BROKER-DEALER AGREEMENT" shall mean an agreement among the Fund, the
Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to
follow the procedures specified in Part II of this Statement.
(20) "BUSINESS DAY" shall mean a day on which the New York Stock Exchange
is open for trading and which is neither a Saturday, Sunday nor any other day on
which banks in The City of New York, New York, are authorized by law to close.
(21) "CODE" means the Internal Revenue Code of 1986, as amended.
(22) "COMMERCIAL PAPER DEALERS" shall mean Merrill Lynch Money Markets
Inc., Lehman Brothers Inc. and Goldman Sachs Group, Inc., and any other
commercial paper dealer selected by the Fund as to which Moody's, Fitch or any
substitute rating agency then rating the AMPS shall not have objected or, in
lieu of any thereof, their respective affiliates or successors, if such entity
is a commercial paper dealer.
(23) "COMMON SHARES" shall mean the common shares of beneficial interest,
par value $.01 per share, of the Fund.
(24) "CURE DATE" shall mean the Preferred Shares Basic Maintenance Cure
Date or the Investment Company Act Cure Date, as the case may be.
(25) "DATE OF ORIGINAL ISSUE," with respect to shares of a series of AMPS,
shall mean the date on which the Fund initially issued such shares.
(26) "DECLARATION" shall have the meaning specified on the first page of
this Statement.
(27) "DEPOSIT SECURITIES" shall mean cash and Municipal Obligations rated
at least P-1, MIG-1 or VMIG-1 by Moody's, or F1 by Fitch.
(28) "DISCOUNTED VALUE," as of any Valuation Date, shall mean, (i)(a) with
respect to a Moody's Eligible Asset that is not currently callable as of such
Valuation Date at the option of the issuer thereof, the quotient of the Market
Value thereof divided by the applicable Moody's Discount Factor, or (b) with
respect to a Moody's Eligible Asset that is currently callable as of such
Valuation Date at the option of the issuer thereof, the quotient of (1) the
lesser of the Market Value or next call price thereof, including any call
premium, divided by (2) the applicable Moody's Discount Factor, and (ii) with
respect to a Fitch Eligible Asset that is not currently callable as of such
Valuation Date at the option of the issuer thereof, the quotient of the Market
Value thereof divided by the applicable Fitch Discount Factor, or (b) with
respect to a Fitch Eligible Asset that is currently callable as of such
Valuation Date at the option of the issuer thereof, the quotient of (1) the
lesser of the Market Value or next call price thereof, including any call
premium, divided by (2) the applicable Fitch Discount Factor.
(29) "DIVIDEND PAYMENT DATE," with respect to shares of a series of AMPS,
shall mean any date on which dividends are payable on shares of such series
pursuant to the provisions of paragraph (d) of Section 2 of Part I of this
Statement.
(30) "DIVIDEND PERIOD," with respect to shares of a series of AMPS, shall
mean the period from and including the Date of Original Issue of shares of such
series to but excluding the initial Dividend Payment Date for shares of such
series and any period thereafter from and including one Dividend Payment Date
for shares of such series to but excluding the next succeeding Dividend Payment
Date for shares of such series.
(31) "EXISTING HOLDER," with respect to shares of a series of AMPS, shall
mean a Broker-Dealer (or any such other Person as may be permitted by the Fund)
that is listed on the records of the Auction Agent as a holder of shares of such
series.
(32) "EXPOSURE PERIOD" shall mean the period commencing on a given
Valuation Date and ending 49 days thereafter.
(33) "FAILURE TO DEPOSIT," with respect to shares of a series of AMPS,
shall mean a failure by the Fund to pay to the Auction Agent, not later than
12:00 noon, New York City time, (A) on the Business Day next preceding any
Dividend Payment Date for shares of such series, in funds available on such
Dividend Payment Date in The City of New York, New York, the full amount of any
dividend (whether or not earned or declared) to be paid on such Dividend Payment
Date on any share of such series or (B) on the Business Day next preceding any
redemption date in funds available on such redemption date for shares of such
series in The City of New York, New York, the Redemption Price to be paid on
such redemption date for any share of such series after notice of redemption is
mailed pursuant to paragraph (c) of Section 11 of Part I of this Statement;
provided, however, that the foregoing clause (B) shall not apply to the Fund's
failure to pay the Redemption Price in respect of AMPS when the related Notice
of Redemption provides that redemption of such shares is subject to one or more
conditions precedent and any such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such Notice of
Redemption.
(34) "FEDERAL TAX RATE INCREASE" shall have the meaning specified in the
definition of "Fitch Volatility Factor" and "Moody's Volatility Factor."
(35) "FITCH" shall mean Fitch Ratings and its successors.
(36) "FITCH DISCOUNT FACTOR" shall mean, for purposes of determining the
Discounted Value of any Fitch Eligible Asset, the percentage determined by
reference to the rating on such asset and the shortest Exposure Period set forth
opposite such rating that is the same length as or is longer than the Exposure
Period, in accordance with the table set forth below.
RATING CATEGORY
Exposure Period AAA* AA* A* BBB* F1** UNRATED***
7 weeks.............. 151% 159% 166% 173% 136% 225%
8 weeks or less but
greater than 7 weeks. 154% 161% 168% 176% 137% 231%
9 weeks or less but
greater than 8 weeks. 158% 163% 170% 177% 138% 240%
___________
* Fitch rating (or, if not rated by Fitch, see the definition of "Fitch
Eligible Asset" below).
** Municipal Obligations rated F1 by Fitch (or, if not rated by Fitch, see
the definition of "Fitch Eligible Asset" below), which do not mature or have a
demand feature at par exercisable in 30 days and which do not have a long-term
rating.
*** Municipal Obligations rated less than BBB by Fitch (or, if not rated by
Fitch, see the definition of "Fitch Eligible Asset" below) or unrated.
Notwithstanding the foregoing, (i) the Fitch Discount Factor for short-term
Municipal Obligations will be 115%, so long as such Municipal Obligations are
rated at least F2 by Fitch (or, if not rated by Fitch, rated MIG-1, VMIG-1 or
P-1 by Moody's or at least A-1+ or SP-1+ by S&P) and mature or have a demand
feature at par exercisable in 30 days or less, and (ii) no Fitch Discount Factor
will be applied to cash or to Receivables for Municipal Obligations Sold.
(37).. "FITCH ELIGIBLE ASSET" shall mean cash, Receivables for Municipal
Obligations Sold or a Municipal Obligation that (i) pays interest in cash, (ii)
does not have its Fitch rating, as applicable, suspended by Fitch, and (iii) is
part of an issue of Municipal Obligations of at least $10,000,000. Municipal
Obligations issued by any one issuer and rated BB or lower or not rated (for the
purposes of this definition only, "Other Securities") may comprise no more than
4% of total Fitch Eligible Assets; such Other Securities, if any, together with
any Municipal Obligations issued by the same issuer and rated BBB by Fitch may
comprise no more than 6% of total Fitch Eligible Assets; such Other Securities
and BBB-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by the same issuer and rated A by Fitch, may comprise no more
than 10% of total Fitch Eligible Assets; and such Other Securities, and BBB and
A-rated Municipal Obligations, if any, together with any Municipal Obligations
issued by the same issuer and rated AA by Fitch, may comprise no more than 20%
of total Fitch Eligible Assets. For purposes of the foregoing sentence (i) any
Municipal Obligation backed by the guaranty, letter of credit or insurance
issued by a third party shall be deemed to be issued by such third party if the
issuance of such third party credit is the sole determinant of the rating on
such Municipal Obligation; and (ii) any Municipal Obligation for which the
nominal issuer is a conduit for a third party the obligations of which are the
sole source of revenues for the payment of such Municipal Obligation shall be
deemed to be issued by such third party. Other Securities issued by issuers
located within a single state or territory may comprise no more than 12% of
total Fitch Eligible Assets; such Other Securities, if any, together with any
Municipal Obligations issued by issuers located within the same state or
territory and rated BBB by Fitch, may comprise no more than 20% of total Fitch
Eligible Assets; such Other Securities, BBB-rated
Municipal Obligations, if any, together with any Municipal Obligations
issued by issuers located within the same state or territory and rated A by
Fitch, may comprise no more than 40% of total Fitch Eligible Assets; and such
Other Securities and BBB and A-rated Municipal Obligations, if any, together
with any Municipal Obligations issued by issuers located within the same state
or territory and rated AA by Fitch, may comprise no more than 60% of total Fitch
Eligible Assets. For purposes of applying the foregoing requirements and
applying the applicable Fitch Discount Factor, if a Municipal Obligation is not
rated by Fitch but is rated by Moody's and S&P, such Municipal Obligation
(excluding short-term Municipal Obligations) will be deemed to have the Fitch
rating which is the lower of the Moody's and S&P rating. If a Municipal
Obligation is not rated by Fitch but is rated by Moody's or S&P, such Municipal
Obligation (excluding short-term
Municipal Obligations) will be deemed to have such rating. For the purposes
of applying the foregoing percentage test requirements, Eligible Assets shall be
calculated without including cash; and Municipal Obligations rated F1 by Fitch
or, if not rated by Fitch, rated MIG-1, VMIG-1 or P-1 by Moody's; or, if not
rated by Moody's, rated A-1+/AA or SP-1+/AA by S&P shall be considered to have a
long-term rating of A. When the Fund sells a Municipal Obligation and agrees to
repurchase such Municipal Obligation at a future date, such Municipal Obligation
shall be valued at its Discounted Value for purposes of determining Fitch
Eligible Assets, and the amount of the repurchase price of such Municipal
Obligation shall be included as a liability for purposes of calculating the
Preferred Shares Basic Maintenance Amount. When the Fund purchases a Fitch
Eligible Asset and agrees to sell it at a future date, such Fitch Eligible Asset
shall be valued at the amount of cash to be received by the Fund upon such
future date, provided that the counterparty to the transaction has a long-term
debt rating of at least A by Fitch and the transaction has a term of no more
than 30 days; otherwise, such Fitch Eligible Asset shall be valued at the
Discounted Value of such Fitch Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a Fitch
Eligible Asset for purposes of determining the Preferred Shares Basic
Maintenance Amount to the extent it is (i) subject to any material lien,
mortgage, pledge, security interest or security agreement of any kind
(collectively, "Liens"), except for (a) Liens which are being contested in good
faith by appropriate proceedings and which Fitch (if Fitch is then rating the
AMPS) has indicated to the Fund will not affect the status of such asset as a
Fitch Eligible Asset, (b) Liens for taxes that are not then due and payable or
that can be paid thereafter without penalty, (c) Liens to secure payment for
services rendered or cash advanced to the Fund by the Fund's investment adviser,
custodian or the Auction Agent, (d) Liens by virtue of any repurchase agreement,
and (e) Liens in connection with any futures margin account; or (ii) deposited
irrevocably for the payment of any liabilities for purposes of determining the
Preferred Shares Basic Maintenance Amount.
(38) "FITCH HEDGING TRANSACTIONS" shall have the meaning specified in
paragraph (b)(1) of Section 10 of Part I of this Statement.
(39) "FITCH VOLATILITY FACTOR" shall mean, as of any Valuation Date, (i) in
the case of any Minimum Rate Period, any Special Rate Period of 28 Rate Period
Days or fewer, or any Special Rate Period of 57 Rate Period Days or more, a
multiplicative factor equal to 275%, except as otherwise provided in the last
sentence of this definition; (ii) in the case of any Special Rate Period of more
than 28 but fewer than 36 Rate Period Days, a multiplicative factor equal to
203%; (iii) in the case of any Special Rate Period of more than 35 but fewer
than 43 Rate Period Days, a multiplicative factor equal to 217%; and (iv) in the
case of any Special Rate Period of more than 42 but fewer than 50 Rate Period
Days, a multiplicative factor equal to 226%; and (v) in the case of any special
Rate Period of more than 49 but fewer than 57 Rate Period Days, a multiplicative
factor equal to 235%. If, as a result of the enactment of changes to the Code,
the greater of the maximum marginal Federal individual income tax rate
applicable to ordinary income and the maximum marginal Federal corporate income
tax rate applicable to ordinary income will increase, such increase being
rounded up to the next five percentage points (the "Federal Tax Rate Increase"),
until the effective date described in (i) above in this definition instead shall
be determined by reference to the following table:
Federal Tax Rate Increase Fitch Volatility Factor
5% 295%
10% 317%
15% 341%
20% 369%
25% 400%
30% 436%
35% 477%
40% 525%
(40) "FORWARD COMMITMENTS" shall have the meaning specified in paragraph
(a)(iv) of Section 10 of Part I of this Statement.
(41) "FUND" shall mean the entity named on the first page of this
Statement, which is the issuer of the AMPS.
(42) "GROSS-UP PAYMENT" means payment to a Holder of AMPS of an amount
which, when taken together with the aggregate amount of Taxable Allocations made
to such Holder to which such Gross-up Payment relates, would cause such Holder's
dividends in dollars (after Federal income tax consequences) from the aggregate
of such Taxable Allocations and the related Gross-up Payment to be at least
equal to the dollar amount of the dividends which would have been received by
such Holder if the amount of such aggregate Taxable Allocations had been
excludable from the gross income of such Holder. Such Gross-up Payment shall be
calculated (i) without consideration being given to the time value of money;
(ii) assuming that no Holder of AMPS is subject to the Federal alternative
minimum tax with respect to dividends received from the Fund; and (iii) assuming
that each Taxable Allocation and each Gross-up Payment (except to the extent
such Gross-up Payment is designated as an exempt-interest dividend under Section
852(b)(5) of the Code or successor provisions) would be taxable in the hands of
each Holder of AMPS at the maximum marginal regular Federal individual income
tax rate applicable to ordinary income or net capital gain, as applicable, or
the maximum marginal regular Federal corporate income tax rate applicable to
ordinary income or net capital gain, as applicable, whichever is greater, in
effect at the time such Gross-up Payment is made.
(43) "HOLDER," with respect to shares of a series of AMPS, shall mean the
registered holder of such shares as the same appears on the record books of the
Fund.
(44) "HOLD ORDER" and "HOLD ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(45) "INDEPENDENT ACCOUNTANT" shall mean a nationally recognized
accountant, or firm of accountants, that is with respect to the Fund an
independent public accountant or firm of independent public accountants under
the Securities Act of 1933, as amended from time to time.
(46) "INITIAL RATE PERIOD," with respect to shares of a series of AMPS,
shall have the meaning specified with respect to shares of such series in
Section 5 of Exhibit A hereto.
(47) "INTEREST EQUIVALENT" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.
(48) "INVESTMENT COMPANY ACT" shall mean the Investment Company Act of
1940, as amended from time to time.
(49) "INVESTMENT COMPANY ACT CURE DATE," with respect to the failure by the
Fund to maintain the Investment Company Act Preferred Shares Asset Coverage (as
required by Section 6 of Part I of this Statement) as of the last Business Day
of each month, shall mean the last Business Day of the following month.
(50) "INVESTMENT COMPANY ACT PREFERRED SHARES ASSET COVERAGE" shall mean
asset coverage, as defined in Section 18(h) of the Investment Company Act, of at
least 200% with respect to all outstanding senior securities of the Fund which
are shares of beneficial interest, including all outstanding AMPS (or such other
asset coverage as may in the future be specified in or under the Investment
Company Act as the minimum asset coverage for senior securities which are shares
or stock of a closed-end investment company as a condition of declaring
dividends on its common shares or stock).
(51) "KENNY INDEX," shall mean the Kenny S&P 30 day High Grade Index or any
successor index (provided, however, that any such successor index must be
approved by Moody's (if Moody's is then rating the AMPS) and Fitch (if Fitch is
then rating the AMPS)), made available by Kenny S&P Evaluation Services or any
successor thereto, based upon 30-day yield evaluations at par of short-term
bonds the interest on which is excludable for regular Federal income tax
purposes under the Code of "high grade" component issuers selected by Kenny S&P
Evaluation Services or any such successor from time to time in its discretion,
which component issuers shall include, without limitation, issuers of general
obligation bonds, but shall exclude any bonds the interest on which constitutes
an item of tax preference under Section 57 (a)(5) of the Code, or successor
provisions, for purposes of the "alternative minimum tax."
(52) "LATE CHARGE" shall have the meaning specified in subparagraph (e) (1)
(B) of Section 2 of Part I of this Statement.
(53) "LIQUIDATION PREFERENCE," with respect to a given number of AMPS,
means $25,000 times that number.
(54) "MARKET VALUE" of any asset of the Fund shall be the market value
thereof determined by J.J. Kenny or any other pricing service or services
designated by the Board of Trustees of the Fund, provided that the Fund obtains
written assurance from Moody's and Fitch, if Moody's and Fitch are then rating
the AMPS, and from any substitute rating agency then rating the AMPS that such
designation will not impair the rating then assigned by Moody's, Fitch or such
substitute rating agency to the AMPS (the "Pricing Service"). Market Value of
any asset shall include any interest accrued thereon. The Pricing Service shall
value portfolio securities at the mean between the quoted bid and ask price or
the yield equivalent when quotations are not readily available. Securities for
which quotations are not readily available shall be valued at fair value as
determined by the Pricing Service using methods which include consideration of:
yields or prices of municipal obligations of comparable quality, type of issue,
coupon, maturity and rating; indications as to value from dealers; and general
market conditions. The Pricing Service may employ electronic data processing
techniques and/or a matrix system to determine valuations. If the Pricing
Service fails to provide the Market Value of any Municipal Obligation, such
Municipal Obligation shall be valued at the lower of two bid quotations (one of
which shall be in writing) obtained by the Fund from two dealers who are members
of the National Association of Securities Dealers, Inc. and are making a market
in such Municipal Obligations. Futures contracts and options are valued at
closing prices for such instruments established by the exchange or board of
trade on which they are traded, or if market quotations are not readily
available, are valued at fair value as determined by the Pricing Service or if
the Pricing Service is not able to value such instruments, they shall be valued
at fair value on a consistent basis using methods determined in good faith by
the Board of Trustees.
(55) "MAXIMUM POTENTIAL GROSS-UP PAYMENT LIABILITY," as of any Valuation
Date, shall mean the aggregate amount of Gross-up Payments that would be due if
the Fund were to make Taxable Allocations, with respect to any taxable year,
estimated based upon dividends paid and the amount of undistributed realized net
capital gains and other taxable income earned by the Fund, as of the end of the
calendar month immediately preceding such Valuation Date, and assuming such
Gross-up Payments are fully taxable.
(56) "MAXIMUM RATE," for shares of a series of AMPS on any Auction Date for
shares of such series, shall mean:
(i) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of this Statement, the
product of (A) the Reference Rate on such Auction Date for the next Rate Period
of shares of such series and (B) the Rate Multiple on such Auction Date, unless
shares of such series have or had a Special Rate Period (other than a Special
Rate Period of 28 Rate Period Days or fewer) and an Auction at which Sufficient
Clearing Bids existed has not yet occurred for a Minimum Rate Period of shares
of such series after such Special Rate Period, in which case the higher of:
(A) the dividend rate on shares of such series for the then-ending Rate
Period; and
(B) the product of (1) the higher of (x) the Reference Rate on such Auction
Date for a Rate Period equal in length to the then-ending Rate Period of shares
of such series, if such then-ending Rate Period was 364 Rate Period Days or
fewer, or the Treasury Note Rate on such Auction Date for a Rate Period equal in
length to the then-ending Rate Period of shares of such series, if such
then-ending Rate Period was more than 364 Rate Period Days, and (y) the
Reference Rate on such Auction Date for a Rate Period equal in length to such
Special Rate Period of shares of such series, if such Special Rate Period was
364 Rate Period Days or fewer, or the Treasury Note Rate on such Auction Date
for a Rate Period equal in length to such Special Rate Period, if such Special
Rate Period was more than 364 Rate Period Days and (2) the Rate Multiple on such
Auction Date; or
(ii) in the case of any Auction Date which is the Auction Date immediately
prior to the first day of any proposed Special Rate Period designated by the
Fund pursuant to Section 4 of Part I of this Statement, the product of (A) the
highest of (1) the Reference Rate on such Auction Date for a Rate Period equal
in length to the then-ending Rate Period of shares of such series, if such
then-ending Rate Period was 364 Rate Period Days or fewer, or the Treasury Note
Rate on such Auction Date for a Rate Period equal in length to the then-ending
Rate Period of shares of such series, if such then-ending Rate Period was more
than 364 Rate Period Days, (2) the Reference Rate on such Auction Date for the
Special Rate Period for which the Auction is being held if such Special Rate
Period is 364 Rate Period Days or fewer or the Treasury Note Rate on such
Auction Date for the Special Rate Period for which the Auction is being held if
such Special Rate Period is more than 364 Rate Period Days, and (3) the
Reference Rate on such Auction Date for Minimum Rate Periods and (B) the Rate
Multiple on such Auction Date.
(57) "MINIMUM RATE PERIOD" shall mean any Rate Period consisting of 7 Rate
Period Days.
(58) "MOODY'S" shall mean Moody's Investors Service, Inc., a Delaware
corporation, and its successors.
(59) "MOODY'S DISCOUNT FACTOR" shall mean, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined by
reference to the rating on such asset and the shortest Exposure Period set forth
opposite such rating that is the same length as or is longer than the Exposure
Period, in accordance with the table set forth below:
RATING CATEGORY
Exposure Period Aaa* Aa* A* Baa* Other**(V)MIG-1***SP-1+**** UNRATED****
7 weeks........... 151% 159% 166% 173% 187% 136% 148% 225%
8 weeks or less
but greater than 154% 161% 168% 176% 190% 137% 149% 231%
7 weeks...........
9 weeks or less
but greater than 158% 163% 170% 177% 192% 138% 150% 240%
8 weeks...........
___________
* Moody's rating.
** Municipal Obligations not rated by Moody's but rated BBB by S&P.
*** Municipal Obligations rated MIG-1 or VMIG-1, which do not mature or have a
demand feature at par exercisable in 30 days and which do not have a
long-term rating.
**** Municipal Obligations not rated by Moody's but rated A-1+ or SP-1+ by S&P,
which do not mature or have a demand feature at par exercisable in 30 days
and which do not have a long-term rating.
*****Municipal Obligations rated less than Baa3 by Moody's or less than BBB by
S&P or not rated by Moody's or S&P. These Municipal Obligations may not
exceed 10% of Moody's Eligible Assets.
Notwithstanding the foregoing, (i) the Moody's Discount Factor for short-
term Municipal Obligations will be 115%, so long as such Municipal Obligations
are rated at least MIG-1, VMIG-l or P-1 by Moody's and mature or have a demand
feature at par exercisable in 30 days or less or 125% as long as such Municipal
Obligations are rated at least A-1+/AA or SP-1+/AA by S&P and mature or have a
demand feature at par exercisable in 30 days or less and (ii) no Moody's
Discount Factor will be applied to cash or to Receivables for Municipal
Obligations Sold.
(60) "MOODY'S ELIGIBLE ASSET" shall mean cash, Receivables for Municipal
Obligations Sold or a Municipal Obligation that (i) pays interest in cash, (ii)
does not have its Moody's rating, as applicable, suspended by Moody's, and (iii)
is part of an issue of Municipal Obligations of at least $10,000,000. Municipal
Obligations issued by any one issuer and rated BBB or lower by S&P, or Ba or
lower by Moody's or not rated by S&P or Moody's (for the purposes of this
definition only, "Other Securities") may comprise no more than 4% of total
Moody's Eligible Assets; such Other Securities, if any, together with any
Municipal Obligations issued by the same issuer and rated Baa by Moody's or A by
S&P, may comprise no more than 6% of total Moody's Eligible Assets; such Other
Securities, Baa and A-rated Municipal Obligations, if any, together with any
Municipal Obligations issued by the same issuer and rated A by Moody's or AA by
S&P, may comprise no more than 10% of total Moody's Eligible Assets; and such
Other Securities, Baa, A and AA-rated Municipal Obligations, if any, together
with any Municipal Obligations issued by the same issuer and rated Aa by Moody's
or AAA by S&P, may comprise no more than 20% of total Moody's Eligible Assets.
For purposes of the foregoing sentence (i) any Municipal Obligation backed by
the guaranty, letter of credit or insurance issued by a third party shall be
deemed to be issued by such third party if the issuance of such third party
credit is the sole determinant of the rating on such Municipal Obligation; and
(ii) any Municipal Obligation for which the nominal issuer is a conduit for a
third party the obligations of which are the sole source of revenues for the
payment of such Municipal Obligation shall be deemed to be issued by such third
party. Other Securities issued by issuers located within a single state or
territory may comprise no more than 12% of total Moody's Eligible Assets; such
Other Securities, if any, together with any Municipal Obligations issued by
issuers located within the same state or territory and rated Baa by Moody's or A
by S&P, may comprise no more than 20% of total Moody's Eligible Assets; such
Other Securities, Baa and A-rated Municipal Obligations, if any, together with
any Municipal Obligations issued by issuers located within the same state or
territory and rated A by Moody's or AA by S&P, may comprise no more than 40% of
total Moody's Eligible Assets; and such Other Securities, Baa, A and AA-rated
Municipal Obligations, if any, together with any Municipal Obligations issued by
issuers located within the same state or territory and rated Aa by Moody's or
AAA by S&P, may comprise no more than 60% of total Moody's Eligible Assets. For
purposes of applying the foregoing requirements, a Municipal Obligation shall be
deemed to be rated BBB by S&P if rated BBB-, BBB or BBB+ by S&P, Moody's
Eligible Assets shall be calculated without including cash, and Municipal
Obligations rated MIG-1, VMIG- 1 or P-1 or, if not rated by Moody's, rated
A-1+/AA or SP-1+/AA by S&P, shall be considered to have a long-term rating of A.
When the Fund sells a Municipal Obligation and agrees to repurchase such
Municipal Obligation at a future date, such Municipal Obligation shall be valued
at its Discounted Value for purposes of determining Moody's Eligible Assets, and
the amount of the repurchase price of such Municipal Obligation shall be
included as a liability for purposes of calculating the Preferred Shares Basic
Maintenance Amount. When the Fund purchases a Moody's Eligible Asset and agrees
to sell it at a future date, such Eligible Asset shall be valued at the amount
of cash to be received by the Fund upon such future date, provided that the
counterparty to the transaction has a long-term debt rating of at least A2 from
Moody's and the transaction has a term of no more than 30 days; otherwise, such
Eligible Asset shall be valued at the Discounted Value of such Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset to the extent it is (i) subject to any material lien, mortgage,
pledge, security interest or security agreement of any kind (collectively,
"Liens"), except for (a) Liens which are being contested in good faith by
appropriate proceedings and which Moody's has indicated to the Fund will not
affect the status of such asset as a Moody's Eligible Asset, (b) Liens for taxes
that are not then due and payable or that can be paid thereafter without
penalty, (c) Liens to secure payment for services rendered or cash advanced to
the Fund by the Fund's investment adviser, custodian or the Auction Agent, (d)
Liens by virtue of any repurchase agreement or (e) Liens in connection with any
futures margin account; or (ii) deposited irrevocably for the payment of any
liabilities for purposes of determining the Preferred Shares Basic Maintenance
Amount.
(61) "MOODY'S HEDGING TRANSACTIONS" shall have the meaning specified in
paragraph (a)(i) of Section 10 of Part I of this Statement.
(62) "MOODY'S VOLATILITY FACTOR" shall mean, as of any Valuation Date, (i)
in the case of any Minimum Rate Period, any Special Rate Period of 28 Rate
Period Days or fewer, or any Special Rate Period of 57 Rate Period Days or more,
a multiplicative factor equal to 275%, except as otherwise provided in the last
sentence of this definition; (ii) in the case of any Special Rate Period of more
than 28 but fewer than 36 Rate Period Days, a multiplicative factor equal to
203%; (iii) in the case of any Special Rate Period of more than 35 but fewer
than 43 Rate Period Days, a multiplicative factor equal to 217%; (iv) in the
case of any Special Rate Period of more than 42 but fewer than 50 Rate Period
Days, a multiplicative factor equal to 226%; and (v) in the case of any Special
Rate Period of more than 49 but fewer than 57 Rate Period Days, a multiplicative
factor equal to 235%. If, as a result of the enactment of changes to the Code,
the greater of the maximum marginal Federal individual income tax rate
applicable to ordinary income and the maximum marginal Federal corporate income
tax rate applicable to ordinary income will increase, such increase being
rounded up to the next five percentage points (the "Federal Tax Rate Increase"),
until the effective date of such increase, the Moody's Volatility Factor in the
case of any Rate Period described in (i) above in this definition instead shall
be determined by reference to the following table:
Volatility
Federal Tax Rate Increase Factor
5%......................... 295%
10%........................ 317%
15%........................ 341%
20%........................ 369%
25%........................ 400%
30%........................ 436%
35%........................ 477%
40%........................ 525%
--------------------------------------------------------------------------------
(63).. "MUNICIPAL INDEX" shall have the meaning specified in paragraph
(a)(i) of Section 10 of Part I of this Statement.
(64) "MUNICIPAL OBLIGATIONS" shall mean any and all instruments that pay
interest or make other distributions that are exempt from regular Federal income
tax and in which the Fund may invest consistent with the investment policies and
restrictions contained in its registration statement on Form N-2 (333-102033)
("Registration Statement"), as the same may be amended from time to time.
(65) "NOTICE OF REDEMPTION" shall mean any notice with respect to the
redemption of AMPS pursuant to paragraph (c) of Section 11 of Part I of this
Statement.
(66) "NOTICE OF SPECIAL RATE PERIOD" shall mean any notice with respect to
a Special Rate Period of AMPS pursuant to subparagraph (d)(i) of Section 4 of
Part I of this Statement.
(67) "ORDER" and "ORDERS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement.
(68) "OUTSTANDING" shall mean, as of any Auction Date with respect to
shares of a series of AMPS, the number of shares of such series theretofore
issued by the Fund except, without duplication, (i) any shares of such series
theretofore cancelled or delivered to the Auction Agent for cancellation or
redeemed by the Fund, (ii) any shares of such series as to which the Fund or any
Affiliate thereof shall be an Existing Holder and (iii) any shares of such
series represented by any certificate in lieu of which a new certificate has
been executed and delivered by the Fund.
(69) "PERSON" shall mean and include an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.
(70) "POTENTIAL BENEFICIAL OWNER," with respect to shares of a series of
AMPS, shall mean a customer of a Broker-Dealer that is not a Beneficial Owner of
shares of such series but that wishes to purchase shares of such series, or that
is a Beneficial Owner of shares of such series that wishes to purchase
additional shares of such series.
(71) "POTENTIAL HOLDER," with respect to shares of a series of AMPS, shall
mean a Broker-Dealer (or any such other person as may be permitted by the Fund)
that is not an Existing Holder of shares of such series or that is an Existing
Holder of shares of such series that wishes to become the Existing Holder of
additional shares of such series.
(72) "PREFERRED SHARES BASIC MAINTENANCE AMOUNT," as of any Valuation Date,
shall mean the dollar amount equal to the sum of (i)(A) the product of the
number of AMPS outstanding on such date multiplied by $25,000 (plus the product
of the number of shares of any other series of preferred shares outstanding on
such date multiplied by the liquidation preference of such shares), plus any
redemption premium applicable to the AMPS (or other preferred shares) then
subject to redemption; (B) the aggregate amount of dividends that will have
accumulated at the respective Applicable Rates (whether or not earned or
declared) to (but not including) the first respective Dividend Payment Dates for
the AMPS outstanding that follow such Valuation Date (plus the aggregate amount
of dividends, whether or not earned or declared, that will have accumulated in
respect of other outstanding preferred shares to, but not including, the first
respective dividend payment dates for such other shares that follow such
Valuation Date); (C) the aggregate amount of dividends that would accumulate on
shares of each series of the AMPS outstanding from such first respective
Dividend Payment Date therefor through the 49th day after such Valuation Date,
at the Maximum Rate (calculated as if such Valuation Date were the Auction Date
for the Rate Period commencing on such Dividend Payment Date) for a Minimum Rate
Period of shares of such series to commence on such Dividend Payment Date,
assuming, solely for purposes of the foregoing, that if on such Valuation Date
the Fund shall have delivered a Notice of Special Rate Period to the Auction
Agent pursuant to Section 4(d)(i) of this Part I with respect to shares of such
series, such Maximum Rate shall be the higher of (a) the Maximum Rate for the
Special Rate Period of shares of such series to commence on such Dividend
Payment Date and (b) the Maximum Rate for a Minimum Rate Period of shares of
such series to commence on such Dividend Payment Date, multiplied by the
Volatility Factor applicable to a Minimum Rate Period, or, in the event the Fund
shall have delivered a Notice of Special Rate Period to the Auction Agent
pursuant to section 4(d)(i) of this Part I with respect to shares of such series
designating a Special Rate Period consisting of 56 Rate Period Days or more, the
Volatility Factor applicable to a Special Rate Period of that length (plus the
aggregate amount of dividends that would accumulate at the maximum dividend rate
or rates on any other preferred shares outstanding from such respective dividend
payment dates through the 56th day after such Valuation Date, as established by
or pursuant to the respective statements establishing and fixing the rights and
preferences of such other preferred shares) (except that (1) if such Valuation
Date occurs at a time when a Failure to Deposit (or, in the case of preferred
shares other than the AMPS, a failure similar to a Failure to Deposit) has
occurred that has not been cured, the dividend for purposes of calculation would
accumulate at the current dividend rate then applicable to the shares in respect
of which such failure has occurred and (2) for those days during the period
described in this subparagraph (C) in respect of which the Applicable Rate in
effect immediately prior to such Dividend Payment Date will remain in effect
(or, in the case of preferred shares other than the AMPS, in respect of which
the dividend rate or rates in effect immediately prior to such respective
dividend payment dates will remain in effect), the dividend for purposes of
calculation would accumulate at such Applicable Rate (or other rate or rates, as
the case may be) in respect of those days); (D) the amount of anticipated
expenses of the Fund for the 90 days subsequent to such Valuation Date; (E) the
amount of the Fund's Maximum Potential Gross-up Payment Liability in respect of
AMPS (and similar amounts payable in respect of other preferred shares pursuant
to provisions similar to those contained in Section 3 of Part I of this
Statement) as of such Valuation Date; (F) the amount of any indebtedness or
obligations of the Fund senior in right of payment to the AMPS; and (G) any
current liabilities as of such Valuation Date to the extent not reflected in any
of (i)(A) through (i)(F) (including, without limitation, any payables for
Municipal Obligations purchased as of such Valuation Date and any liabilities
incurred for the purpose of clearing securities transactions) less (ii) the
value (i.e., for purposes of current Moody's guidelines, the face value of cash,
short-term Municipal Obligations rated MIG-1, VMIG-1 or P-1, and short-term
securities that are the direct obligation of the U.S. Government, provided in
each case that such securities mature on or prior to the date upon which any of
(i) (A) through (i) (G) become payable, otherwise the Moody's Discounted Value)
of any of the Fund's assets irrevocably deposited by the Fund for the payment of
any of (i)(A) through (i)(G).
(73) "PREFERRED SHARES BASIC MAINTENANCE CURE DATE," with respect to the
failure by the Fund to satisfy the Preferred Shares Basic Maintenance Amount (as
required by paragraph (a) of Section 7 of Part I of this Statement) as of a
given Valuation Date, shall mean the seventh Business Day following such
Valuation Date.
(74) "PREFERRED SHARES BASIC MAINTENANCE REPORT" shall mean a report signed
by the President, Treasurer or any Senior Vice President or Vice President of
the Fund which sets forth, as of the related Valuation Date, the assets of the
Fund, the Market Value and the Discounted Value thereof (seriatim and in
aggregate), and the Preferred Shares Basic Maintenance Amount.
(75) "PRICING SERVICE" shall have the meaning specified in the definition
of "Market Value" above.
(76) "QUARTERLY VALUATION DATE" shall mean the last Business Day of each
February, May, August and November of each year, commencing on the date set
forth in Section 6 of Exhibit A hereto.
(77) "RATE MULTIPLE," for a series of AMPS on any Auction Date for such
series, shall mean the percentage, determined as set forth in the columns below
(depending on whether the Fund has notified the Auction Agent of its intent to
allocate income taxable for Federal income tax purposes to shares of such series
prior to the Auction establishing the Applicable Rate for such series as
provided in this Statement) based on the lower of the prevailing ratings of
shares of such series by Moody's or Fitch in effect at the close of business on
the Business Day next preceding such Auction Date:
PREVAILING RATING APPLICABLE APPLICABLE PERCENTAGE
PERCENTAGE- -
NO NOTIFICATION NOTIFICATION
MOODY'S FITCH
Aa3 or higher AA- or higher 110% 150%
A3 to A1 A- to A+ 125% 160%
Baa3 to Baa1 BBB- to BBB+ 150% 250%
Ba3 to Ba1 BB- to BB+ 200% 275%
Below Ba3 Below BB- 250% 300%
--------------------------------------------------------------------------------
If such shares are rated by only one such rating agency, the prevailing rating
will be determined without reference to the rating of any other rating agency.
If neither Moody's nor Fitch shall make such a rating available, the Rate
Multiple shall be based on the equivalent rating or ratings by S&P and/or
another nationally recognized statistical rating organization (as that term is
used in the rules and regulations of the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended from time, to time) that
acts as a substitute rating agency in respect of the AMPS of such series, and
the Fund shall take all reasonable action to enable at least one such rating
agency to provide a rating for the AMPS.
(78) "RATE PERIOD," with respect to shares of a series of AMPS, shall mean
the Initial Rate Period of shares of such series and any Subsequent Rate Period,
including any Special Rate Period, of shares of such series.
(79) "RATE PERIOD DAYS," for any Rate Period or Dividend Period, means the
number of days that would constitute such Rate Period or Dividend Period but for
the application of paragraph (d) of Section 2 of Part I of this Statement or
paragraph (b) of Section 4 of Part I of this Statement.
(80) "RECEIVABLES FOR MUNICIPAL OBLIGATIONS SOLD" shall mean for purposes
of calculation of Moody's Eligible Assets and Fitch Eligible Assets as of any
Valuation Date, no more than the aggregate of the following: (i) the book value
of receivables for Municipal Obligations sold as of or prior to such Valuation
Date if such receivables are due within five business days of such Valuation
Date, and if the trades which generated such receivables are (x) settled through
clearing house firms with respect to which the Fund has received prior written
authorization from Moody's (if Moody's is then rating the AMPS) and Fitch (if
Fitch is then rating the AMPS) or (y) with counterparties having a Moody's
long-term debt rating of at least Baa3 (if Moody's is then rating the AMPS) and
a Fitch long-term debt rating of at least BBB (if Fitch is then rating the
AMPS); and (ii) the Discounted Value of Municipal Obligations sold as of or
prior to such Valuation Date which generated receivables, if such receivables
are due within five business days of such Valuation Date but do not comply with
either of the conditions specified in (i) above.
(81) "REDEMPTION PRICE" shall mean the applicable redemption price
specified in paragraph (a) or (b) of Section 11 of Part I of this Statement.
(82) "REFERENCE RATE" shall mean (i) the "AA" Financial Composite
Commercial Paper Rate in the case of Minimum Rate Periods and Special Rate
Periods of fewer than 183 Rate Period Days; and (ii) the Treasury Bill Rate in
the case of Special Rate Periods of more than 182 Rate Period Days but fewer
than 365 Rate Period Days.
(83) "REGISTRATION STATEMENT" has the meaning specified in the definition
of "Municipal Obligations."
(84) "S&P" shall mean Standard & Poor's Ratings Group, and its successors.
(85) "SECURITIES DEPOSITORY" shall mean The Depository Trust Company and
its successors and assigns or any other securities depository selected by the
Fund which agrees to follow the procedures required to be followed by such
securities depository in connection with the AMPS.
(86) "SELL ORDER" and "SELL ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(87) "SPECIAL RATE PERIOD," with respect to shares of a series of AMPS,
shall have the meaning specified in paragraph (a) of Section 4 of Part I of this
Statement.
(88) "SPECIAL REDEMPTION PROVISIONS" shall have the meaning specified in
subparagraph (a)(i) of Section 11 of Part I of this Statement.
(89) "SUBMISSION DEADLINE" shall mean 1:30 P.M., New York City time, on any
Auction Date or such other time on any Auction Date by which Broker-Dealers are
required to submit Orders to the Auction Agent as specified by the Auction Agent
from time to time.
(90) "SUBMITTED BID" and "SUBMITTED BIDS" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of this Statement.
(91) "SUBMITTED HOLD ORDER" and "SUBMITTED HOLD ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.
(92) "SUBMITTED ORDER" and "SUBMITTED ORDERS" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of this Statement.
(93) "SUBMITTED SELL ORDER" and "SUBMITTED SELL ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.
(94) "SUBSEQUENT RATE PERIOD," with respect to shares of a series of AMPS,
shall mean the period from and including the first day following the Initial
Rate Period of shares of such series to but excluding the next Dividend Payment
Date for shares of such series and any period thereafter from and including one
Dividend Payment Date for shares of such series to but excluding the next
succeeding Dividend Payment Date for shares of such series; provided, however,
that if any Subsequent Rate Period is also a Special Rate Period, such term
shall mean the period commencing on the first day of such Special Rate Period
and ending on the last day of the last Dividend Period thereof.
(95) "SUBSTITUTE COMMERCIAL PAPER DEALER" shall mean any commercial paper
dealer selected by the Fund as to which Moody's, Fitch or any substitute rating
agency then rating the AMPS shall not have objected; provided, however, that
none of such entities shall be a Commercial Paper Dealer.
(96) "SUBSTITUTE U.S. GOVERNMENT SECURITIES DEALER" any U.S. Government
securities dealer selected by the Fund as to which Moody's, Fitch or any
substitute rating agency then rating the AMPS shall not have objected; provided,
however, that none of such entities shall be a U.S. Government Securities
Dealer.
(97) "SUFFICIENT CLEARING BIDS" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.
(98) "TAXABLE ALLOCATION" shall have the meaning specified in Section 3 of
Part I of this Statement.
(99) "TAXABLE INCOME" shall have the meaning specified in paragraph
(b)(iii) of Section 3 of Part II of this Statement.
(100) "TREASURY BILL" shall mean a direct obligation of the U.S. Government
having a maturity at the time of issuance of 364 days or less.
(101) "TREASURY BILL RATE," on any date for any Rate Period, shall mean (i)
the bond equivalent yield, calculated in accordance with prevailing industry
convention, of the rate on the most recently auctioned Treasury Bill with a
remaining maturity closest to the length of such Rate Period, as quoted in The
Wall Street Journal on such date for the Business Day next preceding such date;
or (ii) in the event that any such rate is not published in The Wall Street
Journal, then the bond equivalent yield, calculated in accordance with
prevailing industry convention, as calculated by reference to the arithmetic
average of the bid price quotations of the most recently auctioned Treasury Bill
with a remaining maturity closest to the length of such Rate Period, as
determined by bid price quotations as of the close of business on the Business
Day immediately preceding such date obtained from the U.S. Government Securities
Dealers to the Auction Agent.
(102) "TREASURY FUTURES" shall have the meaning specified in paragraph
(a)(i) of Section 10 of Part I of this Statement.
(103) "TREASURY NOTE" shall mean a direct obligation of the U.S. Government
having a maturity at the time of issuance of five years or less but more than
364 days.
(104) "TREASURY NOTE RATE," on any date for any Rate Period, shall mean (i)
the yield on the most recently auctioned Treasury Note with a remaining maturity
closest to the length of such Rate Period, as quoted in The Wall Street Journal
on such date for the Business Day next preceding such date; or (ii) in the event
that any such rate is not published in The Wall Street Journal, then the yield
as calculated by reference to the arithmetic average of the bid price quotations
of the most recently auctioned Treasury Note with a remaining maturity closest
to the length of such Rate Period, as determined by bid price quotations as of
the close of business on the Business Day immediately preceding such date
obtained from the U.S. Government Securities Dealers to the Auction Agent. If
any U.S. Government Securities Dealer does not quote a rate required to
determine the Treasury Bill Rate or the Treasury Note Rate, the Treasury Bill
Rate or the Treasury Note Rate shall be determined on the basis of the quotation
or quotations furnished by the remaining U.S. Government Securities Dealer or
U.S. Government Securities Dealers and any substitute U.S. Government Securities
Dealers selected by the Fund to provide such rate or rates not being supplied by
any U.S. Government Securities Dealer or U.S. Government Securities Dealers, as
the case may be, or, if the Fund does not select any such Substitute U.S.
Government Securities Dealer or Substitute U.S. Government Securities Dealers,
by the remaining U.S. Government Securities Dealer or U.S. Government Securities
Dealers.
(105) "U.S. GOVERNMENT SECURITIES DEALER" shall mean Merrill Lynch
Government Securities, Inc., Salomon Smith Barney Inc., UBS Warburg LLC, and any
other U.S. Government securities dealer selected by the Fund as to which Moody's
(if Moody's is then rating the AMPS) or Fitch (if Fitch is then rating the AMPS)
shall not have objected or their respective affiliates or successors, if such
entity is a U.S. Government securities dealer.
(106) "VALUATION DATE" shall mean, for purposes of determining whether the
Fund is maintaining the Preferred Shares Basic Maintenance Amount, the last
Business Day of each month.
(107) "VOLATILITY FACTOR" shall mean, as of any Valuation Date, the Moody's
Volatility Factor and the Fitch Volatility Factor.
(108) "VOTING PERIOD" shall have the meaning specified in paragraph (b) of
Section 5 of Part I of this Statement.
(109) "WINNING BID RATE" shall have the meaning specified in paragraph (a)
of Section 3 of Part II of this Statement.
Any additional definitions specifically set forth in Section 4 of Exhibit A
hereto shall be incorporated herein and made part hereof by reference thereto.
PART I.
1. Number of Authorized Shares.
The number of authorized shares constituting a series of the AMPS shall be
as set forth with respect to such series in Section 2 of Exhibit A hereto.
2. Dividends.
(a) Ranking. The shares of a series of the AMPS shall rank on a parity with
each other, with shares of any other series of the AMPS and with shares of any
other series of preferred shares as to the payment of dividends by the Fund.
(b) Cumulative Cash Dividends. The Holders of any series of AMPS shall be
entitled to receive, when, as and if declared by the Board of Trustees, out of
funds legally available therefor in accordance with the Declaration and
applicable law, cumulative cash dividends at the Applicable Rate for shares of
such series, determined as set forth in paragraph (e) of this Section 2, and no
more (except to the extent set forth in Section 3 of this Part I), payable on
the Dividend Payment Dates with respect to shares of such series determined
pursuant to paragraph (d) of this Section 2. Holders of AMPS shall not be
entitled to any dividend, whether payable in cash, property or shares, in excess
of full cumulative dividends, as herein provided, on AMPS. No interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on AMPS which may be in arrears, and, except to the extent
set forth in subparagraph (e)(i) of this Section 2, no additional sum of money
shall be payable in respect of any such arrearage.
(c) Dividends Cumulative From Date of Original Issue. Dividends on any
series of AMPS shall accumulate at the Applicable Rate for shares of such series
from the Date of Original Issue thereof.
(d) Dividend Payment Dates and Adjustment Thereof. The Dividend Payment
Dates with respect to shares of a series of AMPS shall be as set forth with
respect to shares of such series in Section 7 of Exhibit A hereto; provided,
however, that:
(i) if the day on which dividends would otherwise be payable on shares of
such series is not a Business Day, then such dividends shall be payable on such
shares on the first Business Day that falls after such day; provided, however,
that if the day on which dividends would otherwise be payable is not a Business
Day because the New York Stock Exchange is closed for business for more than
three consecutive normal trading days due to an act of God, natural disaster,
act of war, civil or military disturbance, act of terrorism, sabotage, riots or
a loss or malfunction of utilities or communications services, or the dividend
payable on such date cannot be paid for any such reason, then:
(A) the Dividend Payment Date for the affected Dividend Period will be the
next Business Day (determined without regard to the closure of the New York
Stock Exchange) on which the Fund and its paying agent, if any, can pay the
dividend;
(B) the affected Dividend Period will end on the day it otherwise would
have ended; and
(C) the next Dividend Period will begin and end on the dates on which it
otherwise would have begun and ended; and
(ii) notwithstanding Section 7 of Exhibit A hereto, the Fund in its
discretion may establish the Dividend Payment Dates in respect of any Special
Rate Period of shares of a series of AMPS consisting of more than 28 Rate Period
Days; provided, however, that such dates shall be set forth in the Notice of
Special Rate Period relating to such Special Rate Period, as delivered to the
Auction Agent, which Notice of Special Rate Period shall be filed with the
Secretary of the Fund; and further provided that (1) any such Dividend Payment
Date shall be a Business Day and (2) the last Dividend Payment Date in respect
of such Special Rate Period shall be the Business Day immediately following the
last day thereof, as such last day is determined in accordance with paragraph
(b) of Section 4 of this Part I.
(e) Dividend Rates and Calculation of Dividends.
(i) Dividend Rates. The dividend rate on AMPS of any series during the
period from and after the Date of Original Issue of shares of such series to and
including the last day of the Initial Rate Period of shares of such series shall
be equal to the rate per annum set forth with respect to shares of such series
under "Designation as to Series" in Section 1 of Exhibit A hereto. For each
Subsequent Rate Period of shares of such series thereafter, the dividend rate on
shares of such series shall be equal to the rate per annum that results from an
Auction for shares of such series on the Auction Date next preceding such
Subsequent Rate Period; provided, however, that if:
(A) an Auction for any such Subsequent Rate Period is not held for any
reason other than as described below, the dividend rate on shares of such series
for such Subsequent Rate Period will be the Maximum Rate for shares of such
series on the Auction Date therefor; provided, however, that if the day which
would otherwise be an Auction Date is not a Business Day because the New York
Stock Exchange is closed for business for more than three consecutive normal
trading days due to an act of God, natural disaster, act of war, civil or
military disturbance, act of terrorism, sabotage, riots or a loss or malfunction
of utilities or communications services, then the Applicable Rate for the
Subsequent Rate Period will be the Applicable Rate determined on the previous
Auction Date;
(B) any Failure to Deposit shall have occurred with respect to shares of
such series during any Rate Period thereof (other than any Special Rate Period
consisting of more than 364 Rate Period Days or any Rate Period succeeding any
Special Rate Period consisting of more than 364 Rate Period Days during which a
Failure to Deposit occurred that has not been cured), but, prior to 12:00 Noon,
New York City time, on the third Business Day next succeeding the date on which
such Failure to Deposit occurred, such Failure to Deposit shall have been cured
in accordance with paragraph (f) of this Section 2 and the Fund shall have paid
to the Auction Agent a late charge ("Late Charge") equal to the sum of (1) if
such Failure to Deposit consisted of the failure timely to pay to the Auction
Agent the full amount of dividends with respect to any Dividend Period of the
shares of such series, an amount computed by multiplying (x) 200% of the
Reference Rate for the Rate Period during which such Failure to Deposit occurs
on the Dividend Payment Date for such Dividend Period by (y) a fraction, the
numerator of which shall be the number of days for which such Failure to Deposit
has not been cured in accordance with paragraph (f) of this Section 2 (including
the day such Failure to Deposit occurs and excluding the day such Failure to
Deposit is cured) and the denominator of which shall be 360, and applying the
rate obtained against the aggregate Liquidation Preference of the outstanding
shares of such series and (2) if such Failure to Deposit consisted of the
failure timely to pay to the Auction Agent the Redemption Price of the shares,
if any, of such series for which Notice of Redemption has been mailed by the
Fund pursuant to paragraph (c) of Section 11 of this Part I, an amount computed
by multiplying (x) 200% of the Reference Rate for the Rate Period during which
such Failure to Deposit occurs on the redemption date by (y) a fraction, the
numerator of which shall be the number of days for which such Failure to Deposit
is not cured in accordance with paragraph (f) of this Section 2 (including the
day such Failure to Deposit occurs and excluding the day such Failure to Deposit
is cured) and the denominator of which shall be 360, and applying the rate
obtained against the aggregate Liquidation Preference of the outstanding shares
of such series to be redeemed, no Auction will be held in respect of shares of
such series for the Subsequent Rate Period thereof and the dividend rate for
shares of such series for such Subsequent Rate Period will be the Maximum Rate
for shares of such series on the Auction Date for such Subsequent Rate Period;
(C) any Failure to Deposit shall have occurred with respect to shares of
such series during any Rate Period thereof (other than any Special Rate Period
consisting of more than 364 Rate Period Days or any Rate Period succeeding any
Special Rate Period consisting of more than 364 Rate Period Days during which a
Failure to Deposit occurred that has not been cured), and, prior to 12:00 Noon,
New York City time, on the third Business Day next succeeding the date on which
such Failure to Deposit occurred, such Failure to Deposit shall not have been
cured in accordance with paragraph (f) of this Section 2 or the Fund shall not
have paid the applicable Late Charge to the Auction Agent, no Auction will be
held in respect of shares of such series for the first Subsequent Rate Period
thereof thereafter (or for any Rate Period thereof thereafter to and including
the Rate Period during which (1) such Failure to Deposit is cured in accordance
with paragraph (f) of this Section 2 and (2) the Fund pays the applicable Late
Charge to the Auction Agent (the condition set forth in this clause (2) to apply
only in the event Moody's is rating such shares at the time the Fund cures such
Failure to Deposit), in each case no later than 12:00 Noon, New York City time,
on the fourth Business Day prior to the end of such Rate Period), and the
dividend rate for shares of such series for each such Subsequent Rate Period
shall be a rate per annum equal to the Maximum Rate for shares of such series on
the Auction Date for such Subsequent Rate Period (but with the prevailing rating
for shares of such series, for purposes of determining such Maximum Rate, being
deemed to be "Below "Ba3"/BB-"); or
(D) any Failure to Deposit shall have occurred with respect to shares of
such series during a Special Rate Period thereof consisting of more than 364
Rate Period Days, or during any Rate Period thereof succeeding any Special Rate
Period consisting of more than 364 Rate Period Days during which a Failure to
Deposit occurred that has not been cured, and, prior to 12:00 Noon, New York
City time, on the fourth Business Day preceding the Auction Date for the Rate
Period subsequent to such Rate Period, such Failure to Deposit shall not have
been cured in accordance with paragraph (f) of this Section 2 or, in the event
Moody's is then rating such shares, the Fund shall not have paid the applicable
Late Charge to the Auction Agent (such Late Charge, for purposes of this
subparagraph (D), to be calculated by using, as the Reference Rate, the
Reference Rate applicable to a Rate Period (x) consisting of more than 182 Rate
Period Days but fewer than 365 Rate Period Days and (y) commencing on the date
on which the Rate Period during which Failure to Deposit occurs commenced), no
Auction will be held in respect of shares of such series for such Subsequent
Rate Period (or for any Rate Period thereof thereafter to and including the Rate
Period during which (1) such Failure to Deposit is cured in accordance with
paragraph (f) of this Section 2 and (2) the Fund pays the applicable Late Charge
to the Auction Agent (the condition set forth in this clause (2) to apply only
in the event Moody's is rating such shares at the time the Fund cures such
Failure to Deposit), in each case no later than 12:00 Noon, New York City time,
on the fourth Business Day prior to the end of such Rate Period), and the
dividend rate for shares of such series for each such Subsequent Rate Period
shall be a rate per annum equal to the Maximum Rate for shares of such series on
the Auction Date for such Subsequent Rate Period (but with the prevailing rating
for shares of such series, for purposes of determining such Maximum Rate, being
deemed to be "Below "Ba3"/BB-") (the rate per annum at which dividends are
payable on shares of a series of AMPS for any Rate Period thereof being herein
referred to as the "Applicable Rate" for shares of such series).
(ii) Calculation of Dividends. The amount of dividends per share payable on
shares of a series of AMPS on any date on which dividends shall be payable on
shares of such series shall be computed by multiplying the Applicable Rate for
shares of such series in effect for such Dividend Period or Dividend Periods or
part thereof for which dividends have not been paid by a fraction, the numerator
of which shall be the number of days in such Dividend Period or Dividend Periods
or part thereof and the denominator of which shall be 365 if such Dividend
Period consists of 7 Rate Period Days and 360 for all other Dividend Periods,
and applying the rate obtained against $25,000.
(f) Curing a Failure to Deposit. A Failure to Deposit shall have been cured
(if such Failure to Deposit is not solely due to the willful failure of the Fund
to make the required payment to the Auction Agent) with respect to any Rate
Period of a series of AMPS if, within the respective time periods described in
subparagraph (e)(i) of this Section 2, the Fund shall have paid to the Auction
Agent (A) all accumulated and unpaid dividends on shares of such series and (B)
without duplication, the Redemption Price for shares, if any, of such series for
which Notice of Redemption has been mailed by the Fund pursuant to paragraph (c)
of Section 11 of Part I of this Statement; provided, however, that the foregoing
clause (B) shall not apply to the Fund's failure to pay the Redemption Price in
respect of AMPS when the related Redemption Notice provides that redemption of
such shares is subject to one or more conditions precedent and any such
condition precedent shall not have been satisfied at the time or times and in
the manner specified in such Notice of Redemption.
(g) Dividend Payments by Fund to Auction Agent. The Fund shall pay to the
Auction Agent, not later than 12:00 Noon, New York City time, on the Business
Day next preceding each Dividend Payment Date for shares of a series of AMPS, an
aggregate amount of funds available on the next Business Day in The City of New
York, New York, equal to the dividends to be paid to all Holders of shares of
such series on such Dividend Payment Date.
(h) Auction Agent as Trustee of Dividend Payments by Fund. All moneys paid
to the Auction Agent for the payment of dividends (or for the payment of any
Late Charge) shall be held in trust for the payment of such dividends (and any
such Late Charge) by the Auction Agent for the benefit of the Holders specified
in paragraph (i) of this Section 2. Any moneys paid to the Auction Agent in
accordance with the foregoing but not applied by the Auction Agent to the
payment of dividends (and any such Late Charge) will, to the extent permitted by
law, be repaid to the Fund at the end of 90 days from the date on which such
moneys were so to have been applied.
(i) Dividends Paid to Holders. Each dividend on AMPS shall be paid on the
Dividend Payment Date therefor to the Holders thereof as their names appear on
the record books of the Fund on the Business Day next preceding such Dividend
Payment Date.
(j) Dividends Credited Against Earliest Accumulated but Unpaid Dividends.
Any dividend payment made on AMPS shall first be credited against the earliest
accumulated but unpaid dividends due with respect to such shares. Dividends in
arrears for any past Dividend Period may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to the Holders as their
names appear on the record books of the Fund on such date, not exceeding 15 days
preceding the payment date thereof, as may be fixed by the Board of Trustees.
(k) Dividends Designated as Exempt-Interest Dividends. Dividends on AMPS
shall be designated as exempt-interest dividends up to the amount of tax-exempt
income of the Fund, to the extent permitted by, and for purposes of, section 852
of the Code.
3. Gross-Up Payments.
Holders of AMPS shall be entitled to receive, when, as and if declared by
the Board of Trustees, out of funds legally available therefor in accordance
with the Declaration and applicable law, dividends in an amount equal to the
aggregate Gross-up Payments as follows:
(a) Taxable Allocation Without Notice. If, but only if, the Fund allocates
any net capital gain or other income taxable for Federal income tax purposes to
a dividend paid on AMPS without having given advance notice thereof to the
Auction Agent as provided in Section 5 of Part II of this Statement (such
allocation being referred to herein as a "Taxable Allocation"), whether or not
by reason of the fact that such allocation is made retroactively as a result of
the redemption of all or a portion of the outstanding AMPS or the liquidation of
the Fund, the Fund shall, during the Fund's fiscal year in which the Taxable
Allocation was made or within 90 days after the end of such fiscal year, provide
notice thereof to the Auction Agent and direct the Fund's dividend disbursing
agent to send such notice and a Gross-up Payment to each Holder of such shares
that was entitled to such dividend payment during such fiscal year at such
Holder's address as the same appears or last appeared on the record books of the
Fund.
(b) Reserved.
(c) No Gross-Up Payments in the Event of a Reallocation. The Fund shall not
be required to make Gross-up Payments with respect to any net capital gains or
other taxable income determined by the Internal Revenue Service to be allocable
in a manner different from that allocated by the Fund.
4. Designation of Special Rate Periods.
(a) Length of and Preconditions for Special Rate Period. The Fund, at its
option, may designate any succeeding Subsequent Rate Period of a series of AMPS
as a Special Rate Period consisting of a specified number of Rate Period Days
evenly divisible by seven and not more than 1,820, subject to adjustment as
provided in paragraph (b) of this Section 4. A designation of a Special Rate
Period shall be effective only if (A) notice thereof shall have been given in
accordance with paragraph (c) and subparagraph (d)(i) of this Section 4, (B) an
Auction for shares of such series shall have been held on the Auction Date
immediately preceding the first day of such proposed Special Rate Period and
Sufficient Clearing Bids shall have existed in such Auction, and (C) if any
Notice of Redemption shall have been mailed by the Fund pursuant to paragraph
(c) of Section 11 of this Part I with respect to any shares of such series, the
Redemption Price with respect to such shares shall have been deposited with the
Auction Agent. In the event the Fund wishes to designate any succeeding
Subsequent Rate Period for a series of AMPS as a Special Rate Period consisting
of more than 28 Rate Period Days, the Fund shall notify Moody's (if Moody's is
then rating such series) and Fitch (if Fitch is then rating such series) in
advance of the commencement of such Subsequent Rate Period that the Fund wishes
to designate such Subsequent Rate Period as a Special Rate Period and shall
provide Moody's (if Moody's is then rating such series) and Fitch (if Fitch is
then rating such series) with such documents as it may request.
(b) Adjustment of Length of Special Rate Period. The length of a Special
Rate Period for any series of AMPS shall be subject to adjustment as provided
for such series in Section 8 of Exhibit A.
(c) Notice of Proposed Special Rate Period. If the Fund proposes to
designate any succeeding Subsequent Rate Period of shares of a series of AMPS as
a Special Rate Period pursuant to paragraph (a) of this Section 4, not less than
20 (or such lesser number of days as may be agreed to from time to time by the
Auction Agent) nor more than 30 days prior to the date the Fund proposes to
designate as the first day of such Special Rate Period (which shall be such day
that would otherwise be the first day of a Minimum Rate Period), notice shall be
(i) published or caused to be published by the Fund in a newspaper of general
circulation to the financial community in The City of New York, New York, which
carries financial news, and (ii) mailed by the Fund by first-class mail, postage
prepaid, to the Holders of shares of such series. Each such notice shall state
(A) that the Fund may exercise its option to designate a succeeding Subsequent
Rate Period of shares of such series as a Special Rate Period, specifying the
first day thereof and (B) that the Fund will, by 11:00 A.M., New York City time,
on the second Business Day next preceding such date (or by such later time or
date, or both, as may be agreed to by the Auction Agent) notify the Auction
Agent of either (x) its determination, subject to certain conditions, to
exercise such option, in which case the Fund shall specify the Special Rate
Period designated, or (y) its determination not to exercise such option.
(d) Notice of Special Rate Period. No later than 11:00 A.M., New York City
time, on the second Business Day next preceding the first day of any proposed
Special Rate Period of a series of AMPS as to which notice has been given as set
forth in paragraph (c) of this Section 4 (or such later time or date, or both,
as may be agreed to by the Auction Agent), the Fund shall deliver to the Auction
Agent either:
(i) a notice ("Notice of Special Rate Period") stating (A) that the Fund
has determined to designate the next succeeding Rate Period of such series as a
Special Rate Period, specifying the same and the first day thereof, (B) the
Auction Date immediately prior to the first day of such Special Rate Period, (C)
that such Special Rate Period shall not commence if (1) an Auction for shares of
such series shall not be held on such Auction Date for any reason or (2) an
Auction for shares of such series shall be held on such Auction Date but
Sufficient Clearing Bids shall not exist in such Auction, (D) the scheduled
Dividend Payment Dates for shares of such series during such Special Rate Period
and (E) the Special Redemption Provisions, if any, applicable to shares of such
series in respect of such Special Rate Period, such notice to be accompanied by
a Preferred Shares Basic Maintenance Report showing that, as of the third
Business Day next preceding such proposed Special Rate Period, Moody's Eligible
Assets (if Moody's is then rating such series) and Fitch Eligible Assets (if
Fitch is then rating such series) each have an aggregate Discounted Value at
least equal to the Preferred Shares Basic Maintenance Amount as of such Business
Day (assuming for purposes of the foregoing calculation that (a) the Maximum
Rate is the Maximum Rate on such Business Day as if such Business Day were the
Auction Date for the proposed Special Rate Period, and (b) the Moody's Discount
Factors applicable to Moody's Eligible Assets and the Fitch Discount Factors
applicable to Fitch Eligible Assets are determined by reference to the first
Exposure Period longer than the Exposure Period then applicable to the Fund, as
described in the definitions of Moody's Discount Factor and Fitch Discount
Factor herein); or
(ii) a notice stating that the Fund has determined not to exercise its
option to designate a Special Rate Period of shares of such series and that the
next succeeding Rate Period of shares of such series shall be a Minimum Rate
Period.
(e) Failure to Deliver Notice of Special Rate Period. If the Fund fails to
deliver either of the notices described in subparagraphs (d)(i) or (d)(ii) of
this Section 4 (and, in the case of the notice described in subparagraph (d)(i)
of this Section 4, a Preferred Shares Basic Maintenance Report to the effect set
forth in such subparagraph (if either Moody's or Fitch is then rating the series
in question)) with respect to any designation of any proposed Special Rate
Period to the Auction Agent by 11:00 A.M., New York City time, on the second
Business Day next preceding the first day of such proposed Special Rate Period
(or by such later time or date, or both, as may be agreed to by the Auction
Agent), the Fund shall be deemed to have delivered a notice to the Auction Agent
with respect to such Special Rate Period to the effect set forth in subparagraph
(d)(ii) of this Section 4. In the event the Fund delivers to the Auction Agent a
notice described in subparagraph (d)(i) of this Section 4, it shall file a copy
of such notice with the Secretary of the Fund, and the contents of such notice
shall be binding on the Fund. In the event the Fund delivers to the Auction
Agent a notice described in subparagraph (d)(ii) of this Section 4, the Fund
will provide Moody's (if Moody's is then rating the series in question) and
Fitch (if Fitch is then rating the series in question) a copy of such notice.
5. Voting Rights.
(a) One Vote Per Share of AMPS. Except as otherwise provided in the
Declaration or as otherwise required by law, (i) each Holder of AMPS shall be
entitled to one vote for each AMPS held by such Holder on each matter submitted
to a vote of shareholders of the Fund, and (ii) the holders of outstanding
preferred shares, including the AMPS, and of Common Shares shall vote together
as a single class; provided, however, that, at any meeting of the shareholders
of the Fund held for the election of Trustees, the holders of outstanding
preferred shares, including the AMPS, represented in person or by proxy at said
meeting, shall be entitled, as a class, to the exclusion of the holders of all
other securities and classes of shares of beneficial interest of the Fund, to
elect two Trustees of the Fund, each preferred share entitling the holder
thereof to one vote. Subject to paragraph (b) of this Section 5, the holders of
outstanding Common Shares and preferred shares, voting together as a single
class, shall elect the balance of the Trustees.
(b) Voting for Additional Trustees.
(i) Voting Period. Except as otherwise provided in the Declaration or as
otherwise required by law, during any period in which any one or more of the
conditions described in subparagraphs (A) or (B) of this subparagraph (b)(i)
shall exist (such period being referred to herein as a "Voting Period"), the
number of Trustees constituting the Board of Trustees shall be automatically
increased by the smallest number that, when added to the two Trustees elected
exclusively by the holders of preferred shares, including the AMPS, would
constitute a majority of the Board of Trustees as so increased, and the holders
of preferred shares, including the AMPS, shall be entitled, voting as a class on
a one-vote-per-share basis (to the exclusion of the holders of all other
securities and classes of shares of beneficial interest of the Fund), to elect
such smallest number of additional Trustees, together with the two Trustees that
such holders are in any event entitled to elect. A Voting Period shall commence:
(A) if at the close of business on any dividend payment date accumulated
dividends (whether or not earned or declared) on any outstanding preferred
shares, including the AMPS, equal to at least two full years' dividends shall be
due and unpaid and sufficient cash or specified securities shall not have been
deposited with the Auction Agent for the payment of such accumulated dividends;
or
(B) if at any time holders of preferred shares, including the AMPS, are
entitled under the Investment Company Act to elect a majority of the Trustees of
the Fund.
If the Fund shall thereafter pay, or declare and set apart for payment (or
in the case of the AMPS deposit with the Auction Agent) all dividends
accumulated on all outstanding preferred shares, including the AMPS, through the
most recent payment date therefor, then such Voting Period shall terminate. Upon
the termination of a Voting Period, the voting rights described in this
subparagraph (b)(i) shall cease, subject always, however, to the revesting of
such voting rights in the Holders upon the further occurrence of any of the
events described in this subparagraph (b)(i).
(ii) Notice of Special Meeting. As soon as practicable after the accrual of
any right of the holders of preferred shares, including the AMPS, to elect
additional Trustees as described in subparagraph (b)(i) of this Section 5, the
Fund shall notify the Auction Agent and shall call a special meeting of such
holders by mailing a notice of such special meeting to such holders, such
meeting to be held not less than 10 nor more than 30 days after the date of
mailing of such notice. If the Fund fails to send such notice to the Auction
Agent or does not call such a special meeting, it may be called by any such
holder on like notice. The record date for determining the holders entitled to
notice of and to vote at such special meeting shall be the close of business on
the fifth Business Day preceding the day on which such notice is mailed. At any
such special meeting and at each meeting of holders of preferred shares,
including the AMPS, held during a Voting Period at which Trustees are to be
elected, such holders, voting together as a class (to the exclusion of the
holders of all other securities and classes of shares of beneficial interest of
the Fund), shall be entitled to elect the number of Trustees prescribed in
subparagraph (b)(i) of this Section 5 on a one-vote-per-share basis.
(iii) Terms of Office of Existing Trustees. The terms of office of all
persons who are Trustees of the Fund at the time of a special meeting of Holders
and holders of other preferred shares to elect Trustees shall continue,
notwithstanding the election at such meeting by the Holders and such other
holders of the number of Trustees that they are entitled to elect, and the
persons so elected by the Holders and such other holders, together with the two
incumbent Trustees elected by the Holders and such other holders of preferred
shares and the remaining incumbent Trustees elected by the holders of the Common
Shares and preferred shares, shall constitute the duly elected Trustees of the
Fund.
(iv) Terms of Office of Certain Trustees to Terminate Upon Termination of
Voting Period. Simultaneously with the termination of a Voting Period, the terms
of office of the additional Trustees elected by the Holders and holders of other
preferred shares pursuant to subparagraph (b)(i) of this Section 5 shall
terminate, the remaining Trustees shall constitute the Trustees of the Fund and
the voting rights of the Holders and such other holders to elect additional
Trustees pursuant to subparagraph (b)(i) of his Section 5 shall cease, subject
to the provisions of the last sentence of subparagraph (b)(i) of this Section 5.
(c) Holders of AMPS to Vote on Certain Other Matters.
(i) Increases in Capitalization; Bankruptcy. So long as any AMPS are
outstanding, the Fund shall not, without the affirmative vote or consent of the
Holders of at least a majority of the AMPS outstanding at the time, in person or
by proxy, either in writing or at a meeting, voting as a separate class: (a)
authorize, create or issue any class or series of shares ranking prior to or on
a parity with the AMPS with respect to the payment of dividends or the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Fund, or authorize, create or issue additional shares of any
series of AMPS (except that, notwithstanding the foregoing, but subject to the
provisions of paragraph (c)(ii) of Section 10 of this Part I, the Board of
Trustees, without the vote or consent of the Holders of AMPS, may from time to
time authorize and create, and the Fund may from time to time issue, additional
shares of any series of AMPS or classes or series of other preferred shares
ranking on a parity with AMPS with respect to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Fund if the Fund receives written confirmation from Moody's (if
Moody's is then rating the AMPS) and Fitch (if Fitch is then rating the AMPS) or
any substitute rating agency (if such agency is then rating the AMPS) that such
authorization, creation and issuance would not impair the rating then assigned
by such rating agency to the AMPS; and if, in any event, the Fund would, after
giving effect thereto, continue to maintain the Investment Company Act Preferred
Shares Asset Coverage; or (b) amend, alter or repeal the provisions of the
Declaration or this Statement, whether by merger, consolidation or otherwise, so
as to adversely affect any preference, right or power of such AMPS or the
Holders thereof; provided, however, that (i) none of the actions permitted by
the exception to (a) above will be deemed to affect such preferences, rights or
powers, (ii) a division or split of AMPS will be deemed to affect such
preferences, rights or powers only if the terms of such division or split
adversely affect the Holders of AMPS and (iii) the authorization, creation and
issuance of classes or series of shares ranking junior to the AMPS with respect
to the payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Fund, will be deemed to affect
such preferences, rights or powers only if Moody's or Fitch is then rating the
AMPS and such issuance would, at the time thereof, cause the Fund not to satisfy
the Investment Company Act Preferred Shares Asset Coverage or the Preferred
Shares Basic Maintenance Amount. So long as any AMPS are outstanding, the Fund
shall not, without the affirmative vote or consent of the Holders of at least a
majority of the AMPS outstanding at the time, in person or by proxy, either in
writing or at a meeting, voting as a separate class, file a voluntary
application for relief under Federal bankruptcy law or any similar application
under state law for so long as the Fund is solvent and does not foresee becoming
insolvent.
(ii) Investment Company Act Matters. Unless a higher percentage is provided
for in the Declaration, (A) the affirmative vote of the Holders of a "majority
of the outstanding" (as such term is defined in the Investment Company Act)
preferred stock of the Fund, including the AMPS, voting as a separate class,
shall be required to approve (A) any plan of reorganization (as such term is
used in the Investment Company Act) adversely affecting such shares and (B) any
action requiring a vote of security holders of the Fund under Section 13(a) of
the Investment Company Act. In the event a vote of Holders of AMPS is required
pursuant to the provisions of section 13(a) of the Investment Company Act, the
Fund shall, not later than ten Business Days prior to the date on which such
vote is to be taken, notify Moody's (if Moody's is then rating the AMPS) and
Fitch (if Fitch is then rating the AMPS) that such vote is to be taken and the
nature of the action with respect to which such vote is to be taken. The Fund
shall, not later than ten Business Days after the date on which such vote is
taken, notify Moody's (if Moody's is then rating the AMPS) and Fitch (if Fitch
is then rating the AMPS) of the results of such vote.
(d) Board May Take Certain Actions Without Shareholder Approval. The Board
of Trustees, without the vote or consent of the Holders of the AMPS, may from
time to time amend, alter or repeal any or all of the definitions of the terms
listed below, or any provision of this Statement viewed by Moody's or Fitch as a
predicate for any such definition, and any such amendment, alteration or repeal
will not be deemed to affect the preferences, rights or powers of AMPS or the
Holders thereof; provided that the Board of Trustees receives written
confirmation from Moody's (if Moody's is then rating the AMPS) and Fitch (if
Fitch is then rating the AMPS) that any such amendment, alteration or repeal
would not impair the ratings then assigned to the AMPS by such rating agency:
Accountant's Confirmation Maximum Potential Gross-up Payment
Liability
Deposit Securities Moody's Discount Factor
Discounted Value Moody's Eligible Asset
Exposure Period Moody's Hedging Transactions
Fitch Discount Factor Moody's Volatility Factor
Fitch Eligible Asset
Fitch Hedging Transactions Municipal Index
Fitch Volatility Factor Preferred Shares Basic Maintenance
Amount
Forward Commitments Preferred Shares Basic Maintenance
Cure Date
Preferred Shares Basic Maintenance
Report
Independent Accountant Quarterly Valuation Date
Investment Company Act Cure Date Receivables for Municipal Obligations
Sold
Investment Company Act Preferred Shares Treasury Futures
Asset Coverage Valuation Date
Market Value Volatility Factor
(e) Rights Set Forth Herein Are Sole Rights. Unless otherwise required by
law or otherwise provided in the Declaration, the Holders of AMPS shall not have
any relative rights or preferences or other special rights other than those
specifically set forth herein.
(f) No Preemptive Rights or Cumulative Voting. The Holders of AMPS shall
have no preemptive rights or rights to cumulative voting.
(g) Voting for Trustees Sole Remedy for Fund's Failure to Pay Dividends. In
the event that the Fund fails to pay any dividends on the AMPS, the exclusive
remedy of the Holders shall be the right to vote for Trustees pursuant to the
provisions of this Section 5.
(h)...Holders Entitled to Vote. For purposes of determining any rights of
the Holders to vote on any matter, whether such right is created by this
Statement, by the other provisions of the Declaration, by statute or otherwise,
no Holder shall be entitled to vote any AMPS and no AMPS shall be deemed to be
"outstanding" for the purpose of voting or determining the number of shares
required to constitute a quorum if, prior to or concurrently with the time of
determination of shares entitled to vote or shares deemed outstanding for quorum
purposes, as the case may be, the requisite Notice of Redemption with respect to
such shares shall have been mailed as provided in paragraph (c) of Section 11 of
this Part I and the Redemption Price for the redemption of such shares shall
have been deposited in trust with the Auction Agent for that purpose. No AMPS
held by the Fund or any affiliate of the Fund (except for shares held by a
Broker-Dealer that is an affiliate of the Fund for the account of its customers)
shall have any voting rights or be deemed to be outstanding for voting or other
purposes.
6. Investment Company Act Preferred Shares Asset Coverage.
The Fund shall maintain, as of the last Business Day of each month in which
any AMPS are outstanding, the Investment Company Act Preferred Shares Asset
Coverage.
7. Preferred Shares Basic Maintenance Amount.
(a) So long as AMPS are outstanding, the Fund shall maintain, on each
Valuation Date, and shall verify to its satisfaction that it is maintaining on
such Valuation Date (i) Moody's Eligible Assets having an aggregate Discounted
Value equal to or greater than the Preferred Shares Basic Maintenance Amount (if
Moody's is then rating the AMPS) and (ii) Fitch Eligible Assets having an
aggregate Discounted Value equal to or greater than the Preferred Shares Basic
Maintenance Amount (if Fitch is then rating the AMPS).
(b) On or before 5:00 P.M., New York City time, on the seventh Business Day
after a Valuation Date on which the Fund fails to satisfy the Preferred Shares
Basic Maintenance Amount, and on the seventh Business Day after the Preferred
Shares Basic Maintenance Cure Date with respect to such Valuation Date, the Fund
shall complete and deliver to Moody's (if Moody's is then rating the AMPS),
Fitch (if Fitch is then rating the AMPS) and the Auction Agent (if either
Moody's or Fitch is then rating the AMPS) a Preferred Shares Basic Maintenance
Report as of the date of such failure or such Preferred Shares Basic Maintenance
Cure Date, as the case may be, which will be deemed to have been delivered to
the Auction Agent if the Auction Agent receives a copy or telecopy, telex or
other electronic transcription thereof and on the same day the Fund mails to the
Auction Agent for delivery on the next Business Day the full Preferred Shares
Basic Maintenance Report. The Fund shall also deliver a Preferred Shares Basic
Maintenance Report as of the last Business Day of each month to the Auction
Agent (if either Moody's or Fitch is then rating the AMPS), Moody's (if Moody's
is then rating the AMPS) and Fitch (if Fitch is than rating the AMPS) on or
before the seventh Business Day after such Valuation Date. A failure by the Fund
to deliver a Preferred Shares Basic Maintenance Report pursuant to the preceding
sentence shall be deemed to be delivery of a Preferred Shares Basic Maintenance
Report indicating the Discounted Value for all assets of the Fund is less than
the Preferred Shares Basic Maintenance Amount, as of the relevant Valuation
Date.
(c) Within ten Business Days after the date of delivery of a Preferred
Shares Basic Maintenance Report in accordance with paragraph (b) of this Section
7 relating to a Quarterly Valuation Date, the Fund shall cause the Independent
Accountant to confirm in writing to Moody's (if Moody's is then rating the
AMPS), Fitch (if Fitch is then rating the AMPS) and the Auction Agent (if either
Moody's or Fitch is then rating the AMPS) (i) the mathematical accuracy of the
calculations reflected in such Report (and in any other Preferred Shares Basic
Maintenance Report, randomly selected by the Independent Accountant, that was
prepared by the Fund during the quarter ending on such Quarterly Valuation
Date), (ii) that, in such Report (and in such randomly selected Report), the
Fund determined in accordance with this Statement whether the Fund had, at such
Quarterly Valuation Date (and at the Valuation Date addressed in such randomly
selected Report), Moody's Eligible Assets (if Moody's is then rating the AMPS)
and Fitch Eligible Assets (if Fitch is then rating the AMPS) of an aggregate
Discounted Value at least equal to the Preferred Shares Basic Maintenance Amount
(such confirmation being herein called the "Accountant's Confirmation"), (iii)
with respect to the Fitch ratings on Municipal Obligations, the issuer name,
issue size and coupon rate listed in such Report, that the Independent
Accountant has sought to verify such information by reference to Bloomberg
Financial Services or another independent source approved in writing by Fitch
(if Fitch is then rating the AMPS), and the Independent Accountant shall provide
a listing in its letter of any differences, (iv) with respect to the Moody's
ratings on Municipal Obligations, the issuer name, issue size and coupon rate
listed in such Report, that the Independent Accountant has sought to verify such
information by reference to Bloomberg Financial Services or another independent
source approved in writing by Moody's (if Moody's is then rating the AMPS), and
the Independent Accountant shall provide a listing in its letter of any
differences, (v) with respect to the bid or mean price (or such alternative
permissible factor used in calculating the Market Value) provided by the
custodian of the Fund's assets to the Fund for purposes of valuing securities in
the Fund's portfolio, the Independent Accountant has traced the price used in
such Report to the bid or mean price listed in such Report as provided to the
Fund and verified that such information agrees (in the event such information
does not agree, the Independent Accountant will provide a listing in its letter
of such differences) and (vi) with respect to such confirmation to Moody's (if
Moody's is then rating the AMPS) and Fitch (if Fitch is then rating the AMPS),
that the Fund has satisfied the requirements of Section 10 of this Part I.
(d) Within ten Business Days after the date of delivery of a Preferred
Shares Basic Maintenance Report in accordance with paragraph (b) of this Section
7 relating to any Valuation Date on which the Fund failed to satisfy the
Preferred Shares Basic Maintenance Amount, and relating to the Preferred Shares
Basic Maintenance Cure Date with respect to such failure to satisfy the
Preferred Shares Basic Maintenance Amount, the Fund shall cause the Independent
Accountant to provide to Moody's (if Moody's is then rating the AMPS), Fitch (if
Fitch is then rating the AMPS) and the Auction Agent (if either Moody's or Fitch
is then rating the AMPS) an Accountant's Confirmation as to such Preferred
Shares Basic Maintenance Report.
(e) If any Accountant's Confirmation delivered pursuant to paragraph (c) or
(d) of this Section 7 shows that an error was made in the Preferred Shares Basic
Maintenance Report for a particular Valuation Date for which such Accountant's
Confirmation was required to be delivered, or shows that a lower aggregate
Discounted Value for the aggregate of all Moody's Eligible Assets (if Moody's is
then rating the AMPS) or Fitch Eligible Assets (if Fitch is then rating the
AMPS), as the case may be, of the Fund was determined by the Independent
Accountant, the calculation or determination made by such Independent Accountant
shall be final and conclusive and shall be binding on the Fund, and the Fund
shall accordingly amend and deliver the Preferred Shares Basic Maintenance
Report to Moody's (if Moody's is then rating the AMPS), Fitch (if Fitch is then
rating the AMPS) and the Auction Agent (if either Moody's or Fitch is then
rating the AMPS) promptly following receipt by the Fund of such Accountant's
Confirmation.
(f) On or before 5:00 p.m., New York City time, on the first Business Day
after the Date of Original Issue of any AMPS, the Fund shall complete and
deliver to Moody's (if Moody's is then rating the AMPS) and Fitch (if Fitch is
then rating the AMPS) a Preferred Shares Basic Maintenance Report as of the
close of business on such Date of Original Issue.
(g) On or before 5:00 p.m., New York City time, on the seventh Business Day
after either (i) the Fund shall have redeemed Common Shares or (ii) the ratio of
the Discounted Value of the Moody's Eligible Assets or the Fitch Eligible Assets
to the Preferred Shares Basic Maintenance Amount on any Valuation Date is less
than or equal to 105%, or (iii) whenever requested by Moody's or Fitch, the Fund
shall complete and deliver to Moody's (if Moody's is then rating the AMPS) or
Fitch (if Fitch is then rating the AMPS), as the case may be, a Preferred Shares
Basic Maintenance Report as of the date of such event.
8. [Reserved].
9. Restrictions on Dividends and Other Distributions.
(a) Dividends on Shares other than the AMPS. Except as set forth in the
next sentence, no dividends shall be declared or paid or set apart for payment
on the shares of any class or series of shares of beneficial interest of the
Fund ranking, as to the payment of dividends, on a parity with the AMPS for any
period unless full cumulative dividends have been or contemporaneously are
declared and paid on the shares of each series of the AMPS through its most
recent Dividend Payment Date. When dividends are not paid in full upon the
shares of each series of the AMPS through its most recent Dividend Payment Date
or upon the shares of any other class or series of shares of beneficial interest
of the Fund ranking on a parity as to the payment of dividends with the AMPS
through their most recent respective dividend payment dates, all dividends
declared upon the AMPS and any other such class or series of shares of
beneficial interest ranking on a parity as to the payment of dividends with AMPS
shall be declared pro rata so that the amount of dividends declared per share on
AMPS and such other class or series of shares of beneficial interest shall in
all cases bear to each other the same ratio that accumulated dividends per share
on the AMPS and such other class or series of shares of beneficial interest bear
to each other (for purposes of this sentence, the amount of dividends declared
per share of AMPS shall be based on the Applicable Rate for such share for the
Dividend Periods during which dividends were not paid in full).
(b) Dividends and Other Distributions with Respect to Common Shares Under
the Investment Company Act. The Board of Trustees shall not declare any dividend
(except a dividend payable in Common Shares), or declare any other distribution,
upon the Common Shares, or purchase Common Shares, unless in every such case the
AMPS have, at the time of any such declaration or purchase, an asset coverage
(as defined in and determined pursuant to the Investment Company Act) of at
least 200% (or such other asset coverage as may in the future be specified in or
under the Investment Company Act as the minimum asset coverage for senior
securities which are shares or stock of a closed-end investment company as a
condition of declaring dividends on its common shares or stock) after deducting
the amount of such dividend, distribution or purchase price, as the case may be.
(c) Other Restrictions on Dividends and Other Distributions. For so long as
any AMPS are outstanding, and except as set forth in paragraph (a) of this
Section 9 and paragraph (c) of Section 12 of this Part I, (A) the Fund shall not
declare, pay or set apart for payment any dividend or other distribution (other
than a dividend or distribution paid in shares of, or in options, warrants or
rights to subscribe for or purchase, Common Shares or other shares, if any,
ranking junior to the AMPS as to the payment of dividends and the distribution
of assets upon dissolution, liquidation or winding up) in respect of the Common
Shares or any other shares of the Fund ranking junior to or on a parity with the
AMPS as to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up, or call for redemption, redeem, purchase
or otherwise acquire for consideration any Common Shares or any other such
junior shares (except by conversion into or exchange for shares of the Fund
ranking junior to the AMPS as to the payment of dividends and the distribution
of assets upon dissolution, liquidation or winding up), or any such parity
shares (except by conversion into or exchange for shares of the Fund ranking
junior to or on a parity with AMPS as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up), unless (i)
full cumulative dividends on shares of each series of AMPS through its most
recently ended Dividend Period shall have been paid or shall have been declared
and sufficient funds for the payment thereof deposited with the Auction Agent
and (ii) the Fund has redeemed the full number of AMPS required to be redeemed
by any provision for mandatory redemption pertaining thereto, and (B) the Fund
shall not declare, pay or set apart for payment any dividend or other
distribution (other than a dividend or distribution paid in shares of, or in
options, warrants or rights to subscribe for or purchase, Common Shares or other
shares, if any, ranking junior to AMPS as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up) in respect
of Common Shares or any other shares of the Fund ranking junior to AMPS as to
the payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up, or call for redemption, redeem, purchase or otherwise
acquire for consideration any Common Shares or any other such junior shares
(except by conversion into or exchange for shares of the Fund ranking junior to
AMPS as to the payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up), unless immediately after such
transaction the Discounted Value of Moody's Eligible Assets (if Moody's is then
rating the AMPS) and Fitch Eligible Assets (if Fitch is then rating the AMPS)
would each at least equal the Preferred Shares Basic Maintenance Amount.
10. Rating Agency Restrictions.
(a) If Moody's is rating any AMPS, then:
(i) For so long as any AMPS are rated by Moody's, the Fund will not buy or
sell futures contracts, write, purchase or sell call options on futures
contracts or purchase put options on futures contracts or write call options
(except covered call options) on portfolio securities unless it receives written
confirmation from Moody's that engaging in such transactions would not impair
the ratings then assigned to such AMPS by Moody's, except that the Fund may
purchase or sell exchange-traded futures contracts based on the Bond Buyer
Municipal Bond Index (the "Municipal Index") or United States Treasury Bonds,
Bills or Notes ("Treasury Futures"), and purchase, write or sell exchange-traded
put options on such futures contracts and purchase, write or sell
exchange-traded call options on such futures contracts (collectively, "Moody's
Hedging Transactions"), subject to the following limitations:
(A) the Fund will only engage in Moody's Hedging Transactions for the
purpose of hedging against changes in the value of the Fund's portfolio
securities due to anticipated changes in interest rates or market conditions;
the amount hedged will vary from time to time and may involve the purchase and
sale of futures contracts based on the Municipal Index or Treasury Futures to
reduce or eliminate the amount hedged;
(B) the Fund will not engage in any Moody's Hedging Transaction which would
cause the Fund, at the time of such transaction, to own or have sold net
outstanding futures contracts having an aggregate Market Value exceeding 33 1/3%
of the aggregate Market Value of assets owned by the Fund; and
(C) the Fund will not enter into an option unless, after giving effect
thereto, the Fund would continue to have Moody's Eligible Assets with an
aggregate Discounted Value equal to or greater than the Preferred Shares Basic
Maintenance Amount.
(ii) For purposes of determining whether the Fund has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the Preferred
Shares Basic Maintenance Amount, the Discounted Value of Moody's Eligible Assets
which the Fund is obligated to deliver or receive pursuant to an outstanding
option shall be as follows:
(A) assets subject to call options written by the Fund which are either
exchange-traded and "readily reversible" or which expire within 49 days
after the date as of which such valuation is made shall be valued at the
lesser of:
(I) Discounted Value and
(II) the exercise price of the call option written by the Fund;
(B) assets subject to call options written by the Fund not meeting the
requirements of clause (A) of this sentence shall have no value;
(C) assets subject to put options written by the Fund shall be valued at the
lesser of:
(I) the exercise price and
(II) the Discounted Value of the subject security; and
(D) where delivery may be made to the Fund with any security of a class of
securities, the Fund shall assume that it will take delivery of the
security with the lowest Discounted Value.
(iii) For purposes of determining whether the Fund has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the Preferred
Shares Basic Maintenance Amount, the following amounts shall be subtracted from
the aggregate Discounted Value of the Moody's Eligible Assets held by the Fund:
(A) 10% of the exercise price of a written call option;
(B) the exercise price of any written put option;
(C) the settlement price of the underlying futures contract if the Fund writes
put options on a futures contract; and
(D) 105% of the Market Value of the underlying futures contracts if the Fund
writes call options on a futures contract and does not own the underlying
contract.
(iv) For so long as any AMPS are rated by Moody's, the Fund may enter into
contracts to purchase securities for a fixed price at a future date beyond
customary settlement time ("Forward Commitments"), provided that:
(A) the Fund will maintain in a segregated account with its custodian cash, cash
equivalents or short-term, fixed-income securities rated P-1, MTG-1, MIG-1, or
Baa or higher by Moody's or, if not rated by Moody's, rated A1+/AA, SP-1+/AA, A
or AA or higher by S&P, and maturing prior to the date of the Forward Commitment
with a Market Value that equals or exceeds the amount of the Fund's obligations
under any Forward Commitment to which it is from time to time a party or
long-term fixed income securities with a Market Value that equals or exceeds the
amount of the Fund's obligations under any Forward Commitment to which it is
from time to time a party; and
(B) the Fund will not enter into a Forward Commitment unless, after giving
effect thereto, the Fund would continue to have Moody's Eligible Assets with an
aggregate Discounted Value equal to or greater than the Preferred Shares Basic
Maintenance Amount.
For purposes of determining whether the Fund has Moody's Eligible Assets with an
aggregate Discounted Value that equals or exceeds the Preferred Shares Basic
Maintenance Amount, the Discounted Value of Forward Commitments will be the
Discounted Value as calculated by applying the respective Moody's Discount
Factor.
(b) If Fitch is rating any AMPS, then:
(i) For so long as any AMPS are rated by Fitch, the Fund will not buy or
sell futures contracts, write, purchase or sell call options on futures
contracts or purchase put options on futures contracts or write call options
(except covered call options) on portfolio securities unless it receives written
confirmation from Fitch that engaging in such transactions would not impair the
ratings then assigned to such AMPS by Fitch, except that the Fund may purchase
or sell exchange-traded futures contracts based on the Municipal Index or
Treasury Futures, and purchase, write or sell exchange-traded put options on
such futures contracts and purchase, write or sell exchange-traded call options
on such futures contracts (collectively, "Fitch Hedging Transactions"), subject
to the following limitations:
(A) the Fund will only engage in Fitch Hedging Transactions for the purpose
of hedging against changes in the value of the Fund's portfolio securities due
to anticipated changes in interest rates or market conditions; the amount hedged
will vary from time to time and may involve the purchase and sale of futures
contracts based on the Municipal Index or Treasury Futures to reduce or
eliminate the amount hedged;
(B) the Fund will not engage in any Fitch Hedging Transaction which would
cause the Fund, at the time of such transaction, to own or have sold net
outstanding futures contracts having an aggregate Market Value exceeding 33 1/3%
of the aggregate Market Value of assets owned by the Fund; and
(C) the Fund will not enter into an option unless, after giving effect
thereto, the Fund would continue to have Fitch Eligible Assets with an aggregate
Discounted Value equal to or greater than the Preferred Shares Basic Maintenance
Amount.
(ii) For purposes of determining whether the Fund has Fitch Eligible Assets
with an aggregate Discounted Value that equals or exceeds the Preferred Shares
Basic Maintenance Amount, the Discounted Value of Fitch Eligible Assets which
the Fund is obligated to deliver or receive pursuant to an outstanding option
shall be as follows:
(A) assets subject to call options written by the Fund which are either
exchange-traded and "readily reversible" or which expire within 49 days after
the date as of which such valuation is made shall be valued at the lesser of:
(I) Discounted Value and
(II) the exercise price of the call option written by the Fund;
(B) assets subject to call options written by the Fund not meeting the
requirements of clause (A) of this sentence shall have no value;
(C) assets subject to put options written by the Fund shall be valued at
the lesser of:
(I) the exercise price and
(II) the Discounted Value of the subject security; and
(D) where delivery may be made to the Fund with any security of a class of
securities, the Fund shall assume that it will take delivery of the security
with the lowest Discounted Value.
(iii)For purposes of determining whether the Fund has Fitch
Eligible Assets with an aggregate Discounted Value that
equals or exceeds the Preferred Shares Basic Maintenance
Amount, the following amounts shall be subtracted from the
aggregate Discounted Value of the Fitch Eligible Assets held
by the Fund:
(A) 10% of the exercise price of a written call option;
(B) the exercise price of any written put option;
(C) the settlement price of the underlying futures contract
if the Fund writes put options on a futures contract;
and
(D) 105% of the Market Value of the underlying futures
contracts if the Fund writes call options on a futures
contract and does not own the underlying contract.
(iv) For so long as any AMPS are rated by Fitch, the Fund may
enter into Forward Commitments, provided that:
(A) the Fund will maintain in a segregated account with its custodian cash,
cash equivalents or short-term, fixed-income securities rated F-1 or BBB or
higher by Fitch (or, if not rated by Fitch, rated P-1, MTG-1 or MIG-1, or Baa or
higher by Moody's) and maturing prior to the date of the Forward Commitment with
a Market Value that equals or exceeds the amount of the Fund's obligations under
any Forward Commitment to which it is from time to time a party or long-term
fixed income securities with a Market Value that equals or exceeds the amount of
the Fund's obligations under any Forward Commitment to which it is from time to
time a party; and
(B) the Fund will not enter into a Forward Commitment unless, after giving
effect thereto, the Fund would continue to have Fitch Eligible Assets with an
aggregate Discounted Value equal to or greater than the Preferred Shares Basic
Maintenance Amount.
For purposes of determining whether the Fund has Fitch Eligible Assets with
an aggregate Discounted Value that equals or exceeds the Preferred Shares Basic
Maintenance Amount, the Discounted Value of Forward Commitments will be the
Discounted Value as calculated by applying the respective Fitch Discount Factor.
(c) For so long as any AMPS are outstanding and Moody's or Fitch or both is
rating such shares, the Fund will not, unless it has received written
confirmation from Moody's or Fitch or both, as applicable, that any such action
would not impair the rating then assigned by such rating agency to such shares,
engage in any one or more of the following transactions:
(i) borrow money, except that the Fund may, without obtaining the written
confirmation described above, borrow money for the purpose of clearing
securities transactions if
(A) the Preferred Shares Basic Maintenance Amount would continue
to be satisfied after giving effect to such borrowing and
(B) such borrowing
(I) is privately arranged with a bank or other person and
is evidenced by a promissory note or other evidence of
indebtedness that is not intended to be publicly
distributed or
(II) is for "temporary purposes," is evidenced by a
promissory note or other evidence of indebtedness and
is in an amount not exceeding 5% of the value of the
total assets of the Fund at the time of the borrowing
(for purposes of the foregoing, "temporary purposes"
means that the borrowing is to be repaid within sixty
days and is not to be extended or renewed);
(ii) except as provided in Section 5 of this Part I, issue
additional shares of any series of AMPS or any class or
series of shares ranking prior to or on a parity with
AMPS with respect to the payment of dividends or the
distribution of assets upon dissolution, liquidation or
winding up of the Fund, or reissue any AMPS previously
purchased or redeemed by the Fund;
(iii) engage in any short sales of securities;
(iv) lend securities;
(v) merge or consolidate into or with any other corporation
or entity;
(vi) change the Pricing Service; or
(vii) enter into reverse repurchase agreements.
In the event any AMPS are outstanding and another nationally-recognized
statistical rating organization is rating such shares in addition to or in lieu
of Moody's or Fitch, the Fund shall comply with any restrictions imposed by such
rating agency, which restrictions may be more restrictive than those imposed by
Moody's or Fitch.
11. Redemption.
(a) Optional Redemption.
(i) Subject to the provisions of subparagraph (v) of this paragraph (a),
AMPS of any series may be redeemed, at the option of the Fund, as a whole or
from time to time in part, on the second Business Day preceding any Dividend
Payment Date for shares of such series, out of funds legally available therefor,
at a redemption price per share equal to the sum of $25,000 plus an amount equal
to accumulated but unpaid dividends thereon (whether or not earned or declared)
to (but not including) the date fixed for redemption; provided, however, that
(1) shares of a series of AMPS may not be redeemed in part if after such partial
redemption fewer than 300 shares of such series remain outstanding; (2) unless
otherwise provided in Section 9 of Exhibit A hereto, shares of a series of AMPS
are redeemable by the Fund during the Initial Rate Period thereof only on the
second Business Day next preceding the last Dividend Payment Date for such
Initial Rate Period; and (3) subject to subparagraph (ii) of this paragraph (a),
the Notice of Special Rate Period relating to a Special Rate Period of shares of
a series of AMPS, as delivered to the Auction Agent and filed with the Secretary
of the Fund, may provide that shares of such series shall not be redeemable
during the whole or any part of such Special Rate Period (except as provided in
subparagraph (iv) of this paragraph (a)) or shall be redeemable during the whole
or any part of such Special Rate Period only upon payment of such redemption
premium or premiums as shall be specified therein ("Special Redemption
Provisions").
(ii) A Notice of Special Rate Period relating to shares of a series of AMPS
for a Special Rate Period thereof may contain Special Redemption Provisions only
if the Fund's Board of Trustees, after consultation with the Broker-Dealer or
Broker-Dealers for such Special Rate Period of shares of such series, determines
that such Special Redemption Provisions are in the best interest of the Fund.
(iii) If fewer than all of the outstanding shares of a series of AMPS are
to be redeemed pursuant to subparagraph (i) of this paragraph (a), the number of
shares of such series to be redeemed shall be determined by the Board of
Trustees, and such shares shall be redeemed pro rata from the Holders of shares
of such series in proportion to the number of shares of such series held by such
Holders.
(iv) Subject to the provisions of subparagraph (v) of this paragraph (a),
shares of any series of AMPS may be redeemed, at the option of the Fund, as a
whole but not in part, out of funds legally available therefor, on the first
Business Day following any Dividend Period thereof included in a Rate Period
consisting of more than 364 Rate Period Days if, on the date of determination of
the Applicable Rate for shares of such series for such Rate Period, such
Applicable Rate equaled or exceeded on such date of determination the Treasury
Note Rate for such Rate Period, at a redemption price per share equal to the sum
of $25,000 plus an amount equal to accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed for
redemption.
(v) The Fund may not on any date mail a Notice of Redemption pursuant to
paragraph (c) of this Section 11 in respect of a redemption contemplated to be
effected pursuant to this paragraph (a) unless on such date (a) the Fund has
available Deposit Securities with maturity or tender dates not later than the
day preceding the applicable redemption date and having a value not less than
the amount (including any applicable premium) due to Holders of AMPS by reason
of the redemption of such shares on such redemption date and (b) the Discounted
Value of Moody's Eligible Assets (if Moody's is then rating the AMPS) and Fitch
Eligible Assets (if Fitch is then rating the AMPS) each at least equals the
Preferred Shares Basic Maintenance Amount, and would at least equal the
Preferred Shares Basic Maintenance Amount immediately subsequent to such
redemption if such redemption were to occur on such date. The Fund shall not be
required to have available Deposit Securities as described in clause (a) of this
subparagraph (v) in respect of a redemption of any shares of AMPS, as a whole or
in part, contemplated to be effected pursuant to paragraph 11(a) where such
redemption is subject to the issuance of shares of any other series of preferred
stock of the Fund. For purposes of determining in clause (b) of the preceding
sentence whether the Discounted Value of Moody's Eligible Assets and Fitch
Eligible Assets at least equals the Preferred Shares Basic Maintenance Amount,
the Moody's Discount Factor applicable to Moody's Eligible Assets and the Fitch
Discount Factor applicable to Fitch Eligible Assets shall be determined by
reference to the first Exposure Period longer than the Exposure Period then
applicable to the Fund, as described in the definitions of Moody's Discount
Factor and Fitch Discount Factor herein.
(b) Mandatory Redemption. The Fund shall redeem, at a redemption price
equal to $25,000 per share plus accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed by the
Board of Trustees for redemption, certain of the AMPS, if the Fund fails to have
either Moody's Eligible Assets or Fitch Eligible Assets with a Discounted Value
greater than or equal to the Preferred Shares Basic Maintenance Amount or fails
to maintain the Investment Company Act Preferred Shares Asset Coverage, in
accordance with the requirements of the rating agency or agencies then rating
the AMPS, and such failure is not cured on or before the Preferred Shares Basic
Maintenance Cure Date or the Investment Company Act Cure Date, as the case may
be. The number of AMPS to be redeemed shall be equal to the lesser of (i) the
minimum number of AMPS, together with all other preferred shares subject to
redemption or retirement, the redemption of which, if deemed to have occurred
immediately prior to the opening of business on the Cure Date, would have
resulted in the Fund's having Moody's Eligible Assets and Fitch Eligible Assets
with a Discounted Value greater than or equal to the Preferred Shares Basic
Maintenance Amount or maintaining the Investment Company Act Preferred Shares
Asset Coverage, as the case may be, on such Cure Date (provided, however, that
if there is no such minimum number of AMPS and other preferred shares the
redemption or retirement of which would have had such result, all AMPS then
outstanding shall be redeemed), and (ii) the maximum number of AMPS, together
with all other preferred shares subject to redemption or retirement, that can be
redeemed out of funds expected to be legally available therefor in accordance
with the Declaration and applicable law. In determining the AMPS required to be
redeemed in accordance with the foregoing, the Fund shall allocate the number
required to be redeemed to satisfy the Preferred Shares Basic Maintenance Amount
or the Investment Company Act Preferred Shares Asset Coverage, as the case may
be, pro rata among AMPS and other preferred shares (and, then, pro rata among
each series of AMPS) subject to redemption or retirement. The Fund shall effect
such redemption on the date fixed by the Fund therefor, which date shall not be
earlier than 20 days nor later than 40 days after such Cure Date, except that if
the Fund does not have funds legally available for the redemption of all of the
required number of the AMPS and other preferred shares which are subject to
redemption or retirement or the Fund otherwise is unable to effect such
redemption on or prior to 40 days after such Cure Date, the Fund shall redeem
those AMPS and other preferred shares which it was unable to redeem on the
earliest practicable date on which it is able to effect such redemption. If
fewer than all of the outstanding shares of a series of AMPS are to be redeemed
pursuant to this paragraph (b), the number of shares of such series to be
redeemed shall be redeemed pro rata from the Holders of shares of such series in
proportion to the number of shares of such series held by such Holders.
(c) Notice of Redemption. If the Fund shall determine or be required to
redeem shares of a series of AMPS pursuant to paragraph (a) or (b) of this
Section 11, it shall mail a Notice of Redemption with respect to such redemption
by first-class mail, postage prepaid, to each Holder of the AMPS to be redeemed,
at such Holder's address as the same appears on the record books of the Fund on
the record date established by the Board of Trustees. Such Notice of Redemption
shall be so mailed not less than 20 nor more than 45 days prior to the date
fixed for redemption. Each such Notice of Redemption shall state: (i) the
redemption date; (ii) the number of AMPS to be redeemed and the series thereof;
(iii) the CUSIP number for shares of such series; (iv) the Redemption Price; (v)
the place or places where the certificate(s) for such shares (properly endorsed
or assigned for transfer, if the Board of Trustees shall so require and the
Notice of Redemption shall so state) are to be surrendered for payment of the
Redemption Price; (vi) that dividends on the shares to be redeemed will cease to
accumulate on such redemption date; and (vii) the provisions of this Section 11
under which such redemption is made. If fewer than all shares of a series of
AMPS held by any Holder are to be redeemed, the Notice of Redemption mailed to
such Holder shall also specify the number of shares of such series to be
redeemed from such Holder. The Fund may provide in any Notice of Redemption
relating to a redemption contemplated to be effected pursuant to paragraph (a)
of this Section 11 that such redemption is subject to one or more conditions
precedent and that the Fund shall not be required to effect such redemption
unless each such condition shall have been satisfied at the time or times and in
the manner specified in such Notice of Redemption.
(d) No Redemption Under Certain Circumstances. Notwithstanding the
provisions of paragraphs (a) or (b) of this Section 11, if any dividends on
shares of a series of AMPS (whether or not earned or declared) are in arrears,
no shares of such series shall be redeemed unless all outstanding shares of such
series are simultaneously redeemed, and the Fund shall not purchase or otherwise
acquire any shares of such series; provided, however, that the foregoing shall
not prevent the purchase or acquisition of all outstanding shares of such series
pursuant to the successful completion of an otherwise lawful purchase or
exchange offer made on the same terms to, and accepted by, Holders of all
outstanding shares of such series.
(e) Absence of Funds Available for Redemption. To the extent that any
redemption for which Notice of Redemption has been mailed is not made by reason
of the absence of legally available funds therefor in accordance with the
Declaration and applicable law, such redemption shall be made as soon as
practicable to the extent such funds become available. Failure to redeem AMPS
shall be deemed to exist at any time after the date specified for redemption in
a Notice of Redemption when the Fund shall have failed, for any reason
whatsoever, to deposit in trust with the Auction Agent the Redemption Price with
respect to any shares for which such Notice of Redemption has been mailed;
provided, however, that the foregoing shall not apply in the case of the Fund's
failure to deposit in trust with the Auction Agent the Redemption Price with
respect to any shares where (1) the Notice of Redemption relating to such
redemption provided that such redemption was subject to one or more conditions
precedent and (2) any such condition precedent shall not have been satisfied at
the time or times and in the manner specified in such Notice of Redemption.
Notwithstanding the fact that the Fund may not have redeemed AMPS for which a
Notice of Redemption has been mailed, dividends may be declared and paid on AMPS
and shall include those AMPS for which a Notice of Redemption has been mailed.
(f) Auction Agent as Trustee of Redemption Payments by Fund. All moneys
paid to the Auction Agent for payment of the Redemption Price of AMPS called for
redemption shall be held in trust by the Auction Agent for the benefit of
Holders of shares so to be redeemed.
(g) Shares for Which Notice of Redemption Has Been Given Are No Longer
Outstanding. Provided a Notice of Redemption has been mailed pursuant to
paragraph (c) of this Section 11, upon the deposit with the Auction Agent (on
the Business Day next preceding the date fixed for redemption, in funds
available on the next Business Day in The City of New York, New York) of funds
sufficient to redeem the AMPS that are the subject of such notice, dividends on
such shares shall cease to accumulate and such shares shall no longer be deemed
to be outstanding for any purpose, and all rights of the Holders of the shares
so called for redemption shall cease and terminate, except the right of such
Holders to receive the Redemption Price, but without any interest or other
additional amount, except as provided in subparagraph (e)(i) of Section 2 of
this Part I and in Section 3 of this Part I. Upon surrender in accordance with
the Notice of Redemption of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Trustees shall so
require and the Notice of Redemption shall so state), the Redemption Price shall
be paid by the Auction Agent to the Holders of AMPS subject to redemption. In
the case that fewer than all of the shares represented by any such certificate
are redeemed, a new certificate shall be issued, representing the unredeemed
shares, without cost to the Holder thereof. The Fund shall be entitled to
receive from the Auction Agent, promptly after the date fixed for redemption,
any cash deposited with the Auction Agent in excess of (i) the aggregate
Redemption Price of the AMPS called for redemption on such date and (ii) all
other amounts to which Holders of AMPS called for redemption may be entitled.
Any funds so deposited that are unclaimed at the end of 90 days from such
redemption date shall, to the extent permitted by law, be repaid to the Fund,
after which time the Holders of AMPS so called for redemption may look only to
the Fund for payment of the Redemption Price and all other amounts to which they
may be entitled. The Fund shall be entitled to receive, from time to time after
the date fixed for redemption, any interest on the funds so deposited.
(h) Compliance with Applicable Law. In effecting any redemption pursuant to
this Section 11, the Fund shall use its best efforts to comply with all
applicable conditions precedent to effecting such redemption under the
Investment Company Act and any applicable Delaware law, but shall effect no
redemption except in accordance with the Investment Company Act and any
applicable Delaware law.
(i) Only Whole AMPS may be Redeemed. In the case of any redemption pursuant
to this Section 11, only whole AMPS shall be redeemed, and in the event that any
provision of the Declaration would require redemption of a fractional share, the
Auction Agent shall be authorized to round up so that only whole shares are
redeemed.
12. Liquidation Rights.
(a) Ranking. The shares of a series of AMPS shall rank on a parity with
each other, with shares of any other series of AMPS and with shares of any other
series of preferred shares as to the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Fund.
(b) Distributions Upon Liquidation. Upon the dissolution, liquidation or
winding up of the affairs of the Fund, whether voluntary or involuntary, the
Holders of AMPS then outstanding shall be entitled to receive and to be paid out
of the assets of the Fund available for distribution to its shareholders, before
any payment or distribution shall be made on the Common Shares or on any other
class of shares of the Fund ranking junior to the AMPS upon dissolution,
liquidation or winding up, an amount equal to the Liquidation Preference with
respect to such shares plus an amount equal to all dividends thereon (whether or
not earned or declared) accumulated but unpaid to (but not including) the date
of final distribution in same day funds, together with any payments required to
be made pursuant to Section 3 of this Part I in connection with the liquidation
of the Fund. After the payment to the Holders of the AMPS of the full
preferential amounts provided for in this paragraph (b), the Holders of AMPS as
such shall have no right or claim to any of the remaining assets of the Fund.
(c) Pro Rata Distributions. In the event the assets of the Fund available
for distribution to the Holders of AMPS upon any dissolution, liquidation, or
winding up of the affairs of the Fund, whether voluntary or involuntary, shall
be insufficient to pay in full all amounts to which such Holders are entitled
pursuant to paragraph (b) of this Section 12, no such distribution shall be made
on account of any shares of any other class or series of preferred shares
ranking on a parity with the AMPS with respect to the distribution of assets
upon such dissolution, liquidation or winding up unless proportionate
distributive amounts shall be paid on account of the AMPS, ratably, in
proportion to the full distributable amounts for which holders of all such
parity shares are respectively entitled upon such dissolution, liquidation or
winding up.
(d) Rights of Junior Shares. Subject to the rights of the holders of shares
of any series or class or classes of shares ranking on a parity with the AMPS
with respect to the distribution of assets upon dissolution, liquidation or
winding up of the affairs of the Fund, after payment shall have been made in
full to the Holders of the AMPS as provided in paragraph (b) of this Section 12,
but not prior thereto, any other series or class or classes of shares ranking
junior to the AMPS with respect to the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Fund shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the Holders
of the AMPS shall not be entitled to share therein.
(e) Certain Events not Constituting Liquidation. Neither the sale of all or
substantially all the property or business of the Fund, nor the merger or
consolidation of the Fund into or with any business trust or corporation nor the
merger or consolidation of any business trust or corporation into or with the
Fund shall be a dissolution, liquidation or winding up, whether voluntary or
involuntary, for the purposes of this Section 12.
13. Miscellaneous.
(a) Amendment of Exhibit A to Add Additional Series. Subject to the
provisions of paragraph (c)(ii) of Section 10 of this Part I, the Board of
Trustees may, by resolution duly adopted, without shareholder approval (except
as otherwise provided by this Statement or required by applicable law), amend
Exhibit A hereto to (1) reflect any amendments hereto which the Board of
Trustees is entitled to adopt pursuant to the terms of this Statement without
shareholder approval or (2) add additional series of AMPS or additional shares
of a series of AMPS (and terms relating thereto) to the series and AMPS
theretofore described therein. Each such additional series and all such
additional shares shall be governed by the terms of this Statement.
(b) Exhibit A Incorporated by Reference. Exhibit A hereto is incorporated
in and made a part of this Statement by reference thereto.
(c) No Fractional Shares. No fractional shares of AMPS shall be issued.
(d) Status of AMPS Redeemed, Exchanged or Otherwise Acquired by the Fund.
AMPS which are redeemed, exchanged or otherwise acquired by the Fund shall
return to the status of authorized and unissued preferred shares without
designation as to series.
(e) Board may Resolve Ambiguities. To the extent permitted by applicable
law, the Board of Trustees may interpret or adjust the provisions of this
Statement to resolve any inconsistency or ambiguity or to remedy any formal
defect, and may amend this Statement with respect to any series of AMPS prior to
the issuance of shares of such series.
(f) Headings not Determinative. The headings contained in this Statement
are for convenience of reference only and shall not affect the meaning or
interpretation of this Statement.
(g) Notices. All notices or communications, unless otherwise specified in
the By-Laws of the Fund or this Statement, shall be sufficiently given if in
writing and delivered in person or mailed by first-class mail, postage prepaid.
PART II.
1. Orders.
(a) Prior to the Submission Deadline on each Auction Date for shares of a
series of AMPS:
(i) each Beneficial Owner of shares of such series may submit to its
Broker-Dealer by telephone or otherwise information as to:
(A) the number of Outstanding shares, if any, of such series held by such
Beneficial Owner which such Beneficial Owner desires to continue to hold without
regard to the Applicable Rate for shares of such series for the next succeeding
Rate Period of such shares;
(B) the number of Outstanding shares, if any, of such series held by such
Beneficial Owner which such Beneficial Owner offers to sell if the Applicable
Rate for shares of such series for the next succeeding Rate Period of shares of
such series shall be less than the rate per annum specified by such Beneficial
Owner; and/or
(C) the number of Outstanding shares, if any, of such series held by such
Beneficial Owner which such Beneficial Owner offers to sell without regard to
the Applicable Rate for the next succeeding Rate Period of shares of such
series; and
(ii) one or more Broker-Dealers, using lists of Potential Beneficial
Owners, shall in good faith for the purpose of conducting a competitive Auction
in a commercially reasonable manner, contact Potential Beneficial Owners (by
telephone or otherwise), including Persons that are not Beneficial Owners, on
such lists to determine the number of shares, if any, of such series which each
such Potential Beneficial Owner offers to purchase if the Applicable Rate for
the next succeeding Rate Period of shares of such series shall not be less than
the rate per annum specified by such Potential Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, of information referred to in clause (i) (A), (i) (B), (i) (C) or
(ii) of this paragraph (a) is hereinafter referred to as an "Order" and
collectively as "Orders" and each Beneficial Owner and each Potential Beneficial
Owner placing an Order with a Broker-Dealer, and such Broker-Dealer placing an
Order with the Auction Agent, is hereinafter referred to as a "Bidder" and
collectively as "Bidders;" an Order containing the information referred to in
clause (i)(A) of this paragraph (a) is hereinafter referred to as a "Hold Order"
and collectively as "Hold Orders;" an Order containing the information referred
to in clause (i)(B) or (ii) of this paragraph (a) is hereinafter referred to as
a "Bid" and collectively as "Bids;" and an Order containing the information
referred to in clause (i)(C) of this paragraph (a) is hereinafter referred to as
a "Sell Order" and collectively as "Sell Orders."
(b) (i) A Bid by a Beneficial Owner or an Existing Holder of shares of a
series of AMPS subject to an Auction on any Auction Date shall constitute an
irrevocable offer to sell:
(A) the number of Outstanding shares of such series specified in such Bid
if the Applicable Rate for shares of such series determined on such Auction Date
shall be less than the rate specified therein;
(B) such number or a lesser number of Outstanding shares of such series to
be determined as set forth in clause (iv) of paragraph (a) of Section 4 of this
Part II if the Applicable Rate for shares of such series determined on such
Auction Date shall be equal to the rate specified therein; or
(C) the number of Outstanding shares of such series specified in such Bid
if the rate specified therein shall be higher than the Maximum Rate for shares
of such series, or such number or a lesser number of Outstanding shares of such
series to be determined as set forth in clause (iii) of paragraph (b) of Section
4 of this Part II if the rate specified therein shall be higher than the Maximum
Rate for shares of such series and Sufficient Clearing Bids for shares of such
series do not exist.
(ii) A Sell Order by a Beneficial Owner or an Existing Holder of shares of
a series of AMPS subject to an Auction on any Auction Date shall constitute an
irrevocable offer to sell:
(A) the number of Outstanding shares of such series specified in such Sell
Order; or
(B) such number or a lesser number of Outstanding shares of such series as
set forth in clause (iii) of paragraph (b) of Section 4 of this Part II if
Sufficient Clearing Bids for shares of such series do not exist; provided,
however, that a Broker-Dealer that is an Existing Holder with respect to AMPS
shall not be liable to any Person for failing to sell such shares pursuant to a
Sell Order described in the proviso to paragraph (c) of Section 2 of this Part
II if (1) such shares were transferred by the Beneficial Owner thereof without
compliance by such Beneficial Owner or its transferee Broker-Dealer (or other
transferee person, if permitted by the Fund) with the provisions of Section 7 of
this Part II or (2) such Broker-Dealer has informed the Auction Agent pursuant
to the terms of its Broker-Dealer Agreement that, according to such
Broker-Dealer's records, such Broker-Dealer believes it is not the Existing
Holder of such shares.
(iii) A Bid by a Potential Beneficial Holder or a Potential Holder of
shares of a series of AMPS subject to an Auction on any Auction Date shall
constitute an irrevocable offer to purchase:
(A) the number of Outstanding shares of such series specified in such Bid
if the Applicable Rate for shares of such series determined on such Auction Date
shall be higher than the rate specified therein; or
(B) such number or a lesser number of Outstanding shares of such series as
set forth in clause (v) of paragraph (a) of Section 4 of this Part II if the
Applicable Rate for shares of such series determined on such Auction Date shall
be equal to the rate specified therein.
(c) No Order for any number of AMPS other than whole shares shall be valid.
2. Submission of Orders by Broker-Dealers to Auction Agent.
(a) Each Broker-Dealer shall submit in writing to the Auction Agent prior
to the Submission Deadline on each Auction Date all Orders for AMPS of a series
subject to an Auction on such Auction Date obtained by such Broker-Dealer,
designating itself (unless otherwise permitted by the Fund) as an Existing
Holder in respect of shares subject to Orders submitted or deemed submitted to
it by Beneficial Owners and as a Potential Holder in respect of shares subject
to Orders submitted to it by Potential Beneficial Owners, and shall specify with
respect to each Order for such shares:
(i) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by the Fund);
(ii) the aggregate number of shares of such series that are the subject of
such Order;
(iii) to the extent that such Bidder is an Existing Holder of shares of
such series:
(A) the number of shares, if any, of such series subject to any Hold Order
of such Existing Holder;
(B) the number of shares, if any, of such series subject to any Bid of such
Existing Holder and the rate specified in such Bid; and
(C) the number of shares, if any, of such series subject to any Sell Order
of such Existing Holder; and
(iv) to the extent such Bidder is a Potential Holder of shares of such
series, the rate and number of shares of such series specified in such Potential
Holder's Bid.
(b) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent shall round such rate up to
the next highest one
thousandth (.001) of 1%.
(c) If an Order or Orders covering all of the Outstanding AMPS of a series
held by any Existing Holder is not submitted to the Auction Agent prior to the
Submission Deadline, the Auction Agent shall deem a Hold Order to have been
submitted by or on behalf of such Existing Holder covering the number of
Outstanding shares of such series held by such Existing Holder and not subject
to Orders submitted to the Auction Agent; provided, however, that if an Order or
Orders covering all of the Outstanding shares of such series held by any
Existing Holder is not submitted to the Auction Agent prior to the Submission
Deadline for an Auction relating to a Special Rate Period consisting of more
than 28 Rate Period Days, the Auction Agent shall deem a Sell Order to have been
submitted by or on behalf of such Existing Holder covering the number of
outstanding shares of such series held by such Existing Holder and not subject
to Orders submitted to the Auction Agent.
(d) If one or more Orders of an Existing Holder is submitted to the Auction
Agent covering in the aggregate more than the number of Outstanding AMPS of a
series subject to an Auction held by such Existing Holder, such Orders shall be
considered valid in the following order of priority:
(i) all Hold Orders for shares of such series shall be considered valid,
but only up to and including in the aggregate the number of Outstanding shares
of such series held by such Existing Holder, and if the number of shares of such
series subject to such Hold Orders exceeds the number of Outstanding shares of
such series held by such Existing Holder, the number of shares subject to each
such Hold Order shall be reduced pro rata to cover the number of Outstanding
shares of such series held by such Existing Holder;
(ii) (A) any Bid for shares of such series shall be considered valid up to
and including the excess of the number of Outstanding shares of such series held
by such Existing Holder over the number of shares of such series subject to any
Hold Orders referred to in clause (i) above;
(B) subject to subclause (A), if more than one Bid of an Existing Holder
for shares of such series is submitted to the Auction Agent with the same rate
and the number of Outstanding shares of such series subject to such Bids is
greater than such excess, such Bids shall be considered valid up to and
including the amount of such excess, and the number of shares of such series
subject to each Bid with the same rate shall be reduced pro rata to cover the
number of shares of such series equal to such excess;
(C) subject to subclauses (A) and (B), if more than one Bid of an Existing
Holder for shares of such series is submitted to the Auction Agent with
different rates, such Bids shall be considered valid in the ascending order of
their respective rates up to and including the amount of such excess; and
(D) in any such event, the number, if any, of such Outstanding shares of
such series subject to any portion of Bids considered not valid in whole or in
part under this clause (ii) shall be treated as the subject of a Bid for shares
of such series by or on behalf of a Potential Holder at the rate therein
specified; and
(iii) all Sell Orders for shares of such series shall be considered valid
up to and including the excess of the number of Outstanding shares of such
series held by such Existing Holder over the sum of shares of such series
subject to valid Hold Orders referred to in clause (i) above and valid Bids
referred to in clause (ii) above.
(e) If more than one Bid for one or more shares of a series of AMPS is
submitted to the Auction Agent by or on behalf of any Potential Holder, each
such Bid submitted shall be a separate Bid with the rate and number of shares
therein specified.
(f) Any Order submitted by a Beneficial Owner or a Potential Beneficial
Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to
the Submission Deadline on any Auction Date, shall be irrevocable.
3. Determination of Sufficient Clearing Bids, Winning Bids Rate and
Applicable Rate.
(a) Not earlier than the Submission Deadline on each Auction Date for
shares of a series of AMPS, the Auction Agent shall assemble all valid Orders
submitted or deemed submitted to it by the Broker-Dealers in respect of shares
of such series (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as
a "Submitted Order" and collectively as "Submitted Hold Orders," "Submitted
Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted Orders")
and shall determine for such series:
(i) the excess of the number of Outstanding shares of such series over the
number of Outstanding shares of such series subject to Submitted Hold Orders
(such excess being hereinafter referred to as the "Available AMPS");
(ii) from the Submitted Orders for shares of such series whether:
(A) the number of Outstanding shares of such series subject to
Submitted Bids of Potential Holders specifying one or more rates
equal to or lower than the Maximum Rate for shares of such
series;
exceeds or is equal to the sum of:
(B) the number of Outstanding shares of such series subject to
Submitted Bids of Existing Holders specifying one or more rates
higher than the Maximum Rate for shares of such series; and
(C) the number of Outstanding shares of such series subject to
Submitted Sell Orders
(in the event such excess or such equality exists (other than because the
number of shares of such series in subclauses (B) and (C) above is zero because
all of the Outstanding shares of such series are subject to Submitted Hold
Orders), such Submitted Bids in subclause (A) above being hereinafter referred
to collectively as "Sufficient Clearing Bids" for shares of such series); and
(iii) if Sufficient Clearing Bids for shares of such series exist, the
lowest rate specified in such Submitted Bids (the "Winning Bid Rate") which if:
(A) (I) each such Submitted Bid of Existing Holders specifying such lowest
rate and (II) all other such Submitted Bids of Existing Holders specifying lower
rates were rejected, thus entitling such Existing Holders to continue to hold
the shares of such series that are subject to such Submitted Bids; and
(B) (I) each such Submitted Bid of Potential Holders specifying such lowest
rate and (II) all other such Submitted Bids of Potential Holders specifying
lower rates were accepted;
would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such series
which, when added to the number of Outstanding shares of such series to be
purchased by such Potential Holders described in subclause (B) above, would
equal not less than the Available AMPS of such series.
(b) Promptly after the Auction Agent has made the determinations pursuant
to paragraph (a) of this Section 3, the Auction Agent shall advise the Fund of
the Maximum Rate for shares of the series of AMPS for which an Auction is being
held on the Auction Date and, based on such determination the Applicable Rate
for shares of such series for the next succeeding Rate Period thereof as
follows:
(i) if Sufficient Clearing Bids for shares of such series exist, that the
Applicable Rate for all shares of such series for the next Succeeding Rate
Period thereof shall be equal to the Winning Bid Rate for shares of such series
so determined;
(ii) if sufficient Clearing Bids for shares of such series do not exist
(other than because all of the Outstanding shares of such series are subject to
Submitted Hold Orders), that the Applicable Rate for all shares of such series
for the next succeeding Rate Period thereof shall be equal to the Maximum Rate
for shares of such series; or
(iii) if all of the Outstanding shares of such series are subject to
Submitted Hold Orders, that the Applicable Rate for all shares of such series
for the next succeeding Rate Period thereof shall be equal to the lesser of the
Kenny Index (if such Rate Period consists of fewer than 183 Rate Period Days) or
the product of (A)(I) the "AA" Financial Composite Commercial Paper Rate on such
Auction Date for such Rate Period, if such Rate Period consists of fewer than
183 Rate Period Days; (II) the Treasury Bill Rate on such Auction Date for such
Rate Period, if such Rate Period consists of more than 182 but fewer than 365
Rate Period Days; or (III) the Treasury Note Rate on such Auction Date for such
Rate Period, if such Rate Period is more than 364 Rate Period Days (the rate
described in the foregoing clause (A)(I), (II) or (III), as applicable, being
referred to herein as the "Benchmark Rate") and (B) 1 minus the maximum marginal
regular Federal individual income tax rate applicable to ordinary income or the
maximum marginal regular Federal corporate income tax rate applicable to
ordinary income, whichever is greater; provided, however, that if the Fund has
notified the Auction Agent of its intent to allocate to shares of such series in
such Rate Period any net capital gains or other income taxable for Federal
income tax purposes ("Taxable Income"), the Applicable Rate for shares of such
series for such Rate Period will be (i) if the Taxable Yield Rate (as defined
below) is greater than the Benchmark Rate, then the Benchmark Rate, or (ii) if
the Taxable Yield Rate is less than or equal to the Benchmark Rate, then the
rate equal to the sum of (x) the lesser of the Kenny Index (if such Rate Period
consists of fewer than 183 Rate Period Days) or the product of the Benchmark
Rate multiplied by the factor set forth in the preceding clause (B) and (y) the
product of the maximum marginal regular Federal individual income tax rate
applicable to ordinary income or the maximum marginal regular Federal corporate
income tax applicable to ordinary income, whichever is greater, multiplied by
the Taxable Yield Rate. For purposes of the foregoing, Taxable Yield Rate means
the rate determined by (a) dividing the amount of Taxable Income available for
distribution per such share of AMPS by the number of days in the Dividend Period
in respect of which such Taxable Income is contemplated to be distributed, (b)
multiplying the amount determined in (a) above by 365 (in the case of a Dividend
Period of 7 Rate Period Days) or 360 (in the case of any other Dividend Period),
and (c) dividing the amount determined in (b) above by $25,000.
4. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares.
Existing Holders shall continue to hold the AMPS that are subject to
Submitted Hold Orders, and, based on the determinations made pursuant to
paragraph (a) of Section 3 of this Part II, the Submitted Bids and Submitted
Sell Orders shall be accepted or rejected by the Auction Agent and the Auction
Agent shall take such other action as set forth below:
(a) If Sufficient Clearing Bids for shares of a series of AMPS have been
made, all Submitted Sell Orders with respect to shares of such series shall be
accepted and, subject to the provisions of paragraphs (d) and (e) of this
section 4, Submitted Bids with respect to shares of such series shall be
accepted or rejected as follows in the following order of priority and all other
Submitted Bids with respect to shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such series specifying
any rate that is higher than the Winning Bid Rate for shares of such series
shall be accepted, thus requiring each such Existing Holder to sell the AMPS
subject to such Submitted Bids;
(ii) Existing Holders' Submitted Bids for shares of such series specifying
any rate that is lower than the Winning Bid Rate for shares of such series shall
be rejected, thus entitling each such Existing Holder to continue to hold the
AMPS subject to such Submitted Bids;
(iii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of such
series shall be accepted;
(iv) each Existing Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be rejected, thus entitling such Existing Holder to continue to
hold the AMPS subject to such Submitted Bid, unless the number of Outstanding
AMPS subject to all such Submitted Bids shall be greater than the number of AMPS
("remaining shares") in the excess of the Available AMPS of such series over the
number of AMPS subject to Submitted Bids described in clauses (ii) and (iii) of
this paragraph (a), in which event such Submitted Bid of such Existing Holder
shall be rejected in part, and such Existing Holder shall be entitled to
continue to hold AMPS subject to such Submitted Bid, but only in an amount equal
to the number of AMPS of such series obtained by multiplying the number of
remaining shares by a fraction, the numerator of which shall be the number of
Outstanding AMPS held by such Existing Holder subject to such Submitted Bid and
the denominator of which shall be the aggregate number of Outstanding AMPS
subject to such Submitted Bids made by all such Existing Holders that specified
a rate equal to the Winning Bid Rate for shares of such series; and
(v) each Potential Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be accepted but only in an amount equal to the number of shares of
such series obtained by multiplying the number of shares in the excess of the
Available AMPS of such series over the number of AMPS subject to Submitted Bids
described in clauses (ii) through (iv) of this paragraph (a) by a fraction, the
numerator of which shall be the number of Outstanding AMPS subject to such
Submitted Bid and the denominator of which shall be the aggregate number of
Outstanding AMPS subject to such Submitted Bids made by all such Potential
Holders that specified a rate equal to the Winning Bid Rate for shares of such
series.
(b) If Sufficient Clearing Bids for shares of a series of AMPS have not
been made (other than because all of the Outstanding shares of such series are
subject to Submitted Hold Orders), subject to the provisions of paragraph (d) of
this Section 4, Submitted Orders for shares of such series shall be accepted or
rejected as follows in the following order of priority and all other Submitted
Bids for shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such series specifying
any rate that is equal to or lower than the Maximum Rate for shares of such
series shall be rejected, thus entitling such Existing Holders to continue to
hold the AMPS subject to such Submitted Bids;
(ii) Potential Holders' Submitted Bids for shares of such series specifying
any rate that is equal to or lower than the Maximum Rate for shares of such
series shall be accepted; and
(iii) Each Existing Holder's Submitted Bid for shares of such series
specifying any rate that is higher than the Maximum Rate for shares of such
series and the Submitted Sell Orders for shares of such series of each Existing
Holder shall be accepted, thus entitling each Existing Holder that submitted or
on whose behalf was submitted any such Submitted Bid or Submitted Sell Order to
sell the shares of such series subject to such Submitted Bid or Submitted Sell
Order, but in both cases only in an amount equal to the number of shares of such
series obtained by multiplying the number of shares of such series subject to
Submitted Bids described in clause (ii) of this paragraph (b) by a fraction, the
numerator of which shall be the number of Outstanding shares of such series held
by such Existing Holder subject to such Submitted Bid or Submitted Sell Order
and the denominator of which shall be the aggregate number of Outstanding shares
of such series subject to all such Submitted Bids and Submitted Sell Orders.
(c) If all of the Outstanding shares of a series of AMPS are subject to
Submitted Hold Orders, all Submitted Bids for shares of such series shall be
rejected.
(d) If, as a result of the procedures described in clause (iv) or (v) of
paragraph (a) or clause (iii) of paragraph (b) of this Section 4, any Existing
Holder would be entitled or required to sell, or any Potential Holder would be
entitled or required to purchase, a fraction of a share of a series of AMPS on
any Auction Date, the Auction Agent shall, in such manner as it shall determine
in its sole discretion, round up or down the number of AMPS of such series to be
purchased or sold by any Existing Holder or Potential Holder on such Auction
Date as a result of such procedures so that the number of shares so purchased or
sold by each Existing Holder or Potential Holder on such Auction Date shall be
whole AMPS.
(e) If, as a result of the procedures described in clause (v) of paragraph
(a) of this Section 4, any Potential Holder would be entitled or required to
purchase less than a whole share of a series of AMPS on any Auction Date, the
Auction Agent shall, in such manner as it shall determine in its sole
discretion, allocate AMPS of such series for purchase among Potential Holders so
that only whole shares of AMPS of such series are purchased on such Auction Date
as a result of such procedures by any Potential Holder, even if such allocation
results in one or more Potential Holders not purchasing AMPS of such series on
such Auction Date.
(f) Based on the results of each Auction for shares of a series of AMPS,
the Auction Agent shall determine the aggregate number of shares of such series
to be purchased and the aggregate number of shares of such series to be sold by
Potential Holders and Existing Holders and, with respect to each Potential
Holder and Existing Holder, to the extent that such aggregate number of shares
to be purchased and such aggregate number of shares to be sold differ, determine
to which other Potential Holder(s) or Existing Holder(s) they shall deliver, or
from which other Potential Holder(s) or Existing Holder(s) they shall receive,
as the case may be, AMPS of such series. Notwithstanding any provision of the
Auction Procedures to the contrary, in the event an Existing Holder or
Beneficial Owner of a series of AMPS with respect to whom a Broker-Dealer
submitted a Bid to the Auction Agent for such shares that was accepted in whole
or in part, or submitted or is deemed to have submitted a Sell Order for such
shares that was accepted in whole or in part, fails to instruct its Agent Member
to deliver such shares against payment therefor, partial deliveries of AMPS that
have been made in respect of Potential Holders' or Potential Beneficial Owners'
Submitted Bids for shares of such series that have been accepted in whole or in
part shall constitute good delivery to such Potential Holders and Potential
Beneficial Owners.
(g) Neither the Fund nor the Auction Agent nor any affiliate of either
shall have any responsibility or liability with respect to the failure of an
Existing Holder, a Potential Holder, a Beneficial Owner, a Potential Beneficial
Owner or its respective Agent Member to deliver AMPS of any series or to pay for
AMPS of any series sold or purchased pursuant to the Auction Procedures or
otherwise.
5. Notification of Allocations.
Whenever the Fund intends to include any net capital gains or other income
taxable for Federal income tax purposes in any dividend on AMPS, the Fund may,
but shall not be required to, notify the Auction Agent of the amount to be so
included not later than the Dividend Payment Date next preceding the Auction
Date on which the Applicable Rate for such dividend is to be established.
Whenever the Auction Agent receives such notice from the Fund, it will be
required in turn to notify each Broker-Dealer, who, on or prior to such Auction
Date, in accordance with its Broker-Dealer Agreement, will be required to notify
its Beneficial Owners and Potential Beneficial Owners of AMPS believed by it to
be interested in submitting an Order in the Auction to be held on such Auction
Date.
6. Auction Agent.
For so long as any AMPS are outstanding, the Auction Agent, duly appointed
by the Fund to so act, shall be in each case a commercial bank, trust company or
other financial institution independent of the Fund and its affiliates (which
however may engage or have engaged in business transactions with the Fund or its
affiliates) and at no time shall the Fund or any of its affiliates act as the
Auction Agent in connection with the Auction Procedures. If the Auction Agent
resigns or for any reason its appointment is terminated during any period that
any AMPS are outstanding, the Board of Trustees shall use its best efforts
promptly thereafter to appoint another qualified commercial bank, trust company
or financial institution to act as the Auction Agent. The Auction Agent's
registry of Existing Holders of a series of AMPS shall be conclusive and binding
on the Broker-Dealers. A Broker-Dealer may inquire of the Auction Agent between
3:00 p.m. on the Business Day preceding an Auction for a series of AMPS and 9:30
a.m. on the Auction Date for such Auction to ascertain the number of shares of
such series in respect of which the Auction Agent has determined such Broker-
Dealer to be an Existing Holder. If such Broker-Dealer believes it is the
Existing Holder of fewer shares of such series than specified by the Auction
Agent in response to such Broker-Dealer's inquiry, such Broker-Dealer may so
inform the Auction Agent of that belief. Such Broker-Dealer shall not, in its
capacity as Existing Holder of shares of such series, submit Orders in such
Auction in respect of shares of such series covering in the aggregate more than
the number of shares of such series specified by the Auction Agent in response
to such Broker-Dealer's inquiry.
7. Transfer of AMPS.
Unless otherwise permitted by the Fund, a Beneficial Owner or an Existing
Holder may sell, transfer or otherwise dispose of AMPS only in whole shares and
only pursuant to a Bid or Sell Order placed with the Auction Agent in accordance
with the procedures described in this Part II or to a Broker-Dealer; provided,
however, that (a) a sale, transfer or other disposition of AMPS from a customer
of a Broker-Dealer who is listed on the records of that Broker-Dealer as the
holder of such shares to that Broker-Dealer or another customer of that
Broker-Dealer shall not be deemed to be a sale, transfer or other disposition
for purposes of this Section 7 if such Broker-Dealer remains the Existing Holder
of the shares so sold, transferred or disposed of immediately after such sale,
transfer or disposition and (b) in the case of all transfers other than pursuant
to Auctions, the Broker-Dealer (or other Person, if permitted by the Fund) to
whom such transfer is made shall advise the Auction Agent of such transfer.
8. Global Certificate.
Prior to the commencement of a Voting Period, (i) all of the shares of a
series of AMPS outstanding from time to time shall be represented by one global
certificate registered in the name of the Securities Depository or its nominee
and (ii) no registration of transfer of shares of a series of AMPS shall be made
on the books of the Fund to any Person other than the Securities Depository or
its nominee.
IN WITNESS WHEREOF, FEDERATED PREMIER MUNICIPAL INCOME FUND, has caused
these presents to be signed as of [___________], 2003 in its name and on its
behalf by its President and attested by its Secretary. Said officers of the Fund
have executed this Statement as officers and not individually, and the
obligations and rights set forth in this Statement are not binding upon any such
officers, or the Trustees or shareholders of the Fund, individually, but are
binding only upon the assets and property of the Fund.
FEDERATED PREMIER MUNICIPAL INCOME FUND
By:
Name:
Title:
ATTEST:
Name:
Title:
[___________], 2003
EXHIBIT A
FEDERATED PREMIER MUNICIPAL INCOME FUND
SECTION 1
Designation as to Series.
SERIES A: A series of 2,147 AMPS, par value $.01 per share, liquidation
preference $25,000 per share, is hereby designated "Auction Market Preferred
Shares, Series A" Each of the 2,147 shares of Series A AMPS issued on
[___________], 2003 shall, for purposes hereof, be deemed to have a Date of
Original Issue of [___________], 2003; have an Applicable Rate for its Initial
Rate Period equal to [____]% per annum; have an initial Dividend Payment Date of
February 28, 2003; and have such other preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption, in addition to those required by applicable law or set
forth in the Declaration, applicable to preferred shares of the Fund, as set
forth in Part I and Part II of this Statement. Any shares of Series A AMPS
issued thereafter shall be issued on the first day of a Rate Period of the then
outstanding shares of Series A AMPS, shall have, for such Rate Period, an
Applicable Rate equal to the Applicable Rate for shares of such series
established in the first Auction for shares of such series preceding the date of
such issuance; and shall have such other preferences, rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption, in addition to those required by applicable law or set
forth in the Declaration applicable to preferred shares of the Fund, as set
forth in Part I and Part II of this Statement. The Series A AMPS shall
constitute a separate series of AMPS of the Fund, and each share of Series A
AMPS shall be identical except as provided in Section 11 of Part I of this
Statement.
SECTION 2
Number of Authorized Shares Per Series.
The number of authorized shares constituting Series A AMPS is 2,147.
SECTION 3
Exceptions to Certain Definitions.
Notwithstanding the definitions contained under the heading "Definitions"
in this Statement, the following terms shall have the following meanings for
purposes of this Statement:
Not applicable.
SECTION 4
Certain Definitions.
For purposes of this Statement, the following terms shall have the
following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:
Not applicable.
SECTION 5
Initial Rate Periods.
The Initial Rate Period for shares of Series A AMPS shall be the period
from and including the Date of Original Issue thereof to but excluding February
28, 2003.
SECTION 6
Date for Purposes of the Definition of "Quarterly Valuation Date" Contained
Under the Heading "Definitions" in this Statement.
May 30, 2003
SECTION 7
Dividend Payment Dates.
Except as otherwise provided in paragraph (d) of Section 2 of Part I of
this Statement, dividends shall be payable on shares of Series A AMPS, for the
Initial Rate Period on February 28, 2003, and on each Friday thereafter.
SECTION 8
Adjustment of Length of Special Rate Period.
In the event the Fund wishes to designate a Subsequent Rate Period for any
Series A AMPS as a Special Rate Period, but the day following what would
otherwise be the last day of such Special Rate Period is not a Friday that is a
Business Day, then the Fund shall designate such Subsequent Rate Period as a
Special Rate Period consisting of the period commencing on the first day
following the end of the immediately preceding Rate Period and ending on the
first Thursday that is followed by a Friday that is a Business Day preceding
what would otherwise be such last day.
SECTION 9
Redemption Provisions Applicable to Initial Rate Periods.
Not applicable.
APPENDIX B
Investment Ratings
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
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
CUSIP 31423P207
Exhibit (d)(i) under Form N-2
CERTIFICATE NO. 1 ____SHARES
FEDERATED PREMIER MUNICIPAL INCOME FUND
Organized under the Laws of the State of Delaware
Auction Market Preferred Shares - Series A
$.01 Par Value Per Share
$25,000 Liquidation Preference Per Share
Cusip No. 31423P207
This certifies that Cede & Co. is the owner of ----- fully paid and
non-assessable shares of Auction Market Preferred Shares - Series A, $.01 par
value per share, $25,000 liquidation preference per share, of Federated Premier
Municipal Income Fund (the "Trust") transferable only on the books of the Trust
by the holder thereof in person or by duly authorized Attorney upon surrender of
this Certificate properly endorsed. This Certificate is not valid unless
countersigned by the transfer agent and registrar.
A statement in full, of all the designations, preferences, qualifications,
limitations, restrictions and special or relative rights of the shares of each
class authorized to be issued, will be furnished by the Trust to any
shareholders upon request and without charge.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed by
its duly authorized officers this - day of ---------, 2003.
DEUTSCHE BANK TRUST COMPANY FEDERATED PREMIER MUNICIPAL
AMERICAS INCOME FUND
As Transfer Agent and Registrar
By: By:
Attest:
FOR VALUE RECEIVED, ________ hereby sells, assigns and transfers ___ Shares
represented by this Certificate unto ______, and do hereby irrevocably
constitute and appoint ________ Attorney to transfer the said Shares on the
books of the within named Trust with full power of substitution in the premises.
Dated _______, 2003
In presence of
_________________________
Shares of Auction Market Preferred Shares evidenced by this Certificate may
be sold, transferred, or otherwise disposed of only pursuant to the provisions
of the Trust's Agreement and Declaration of Trust and the Trust's Statement of
Preferences.
The Trust will furnish to any shareholder, upon request and without charge,
the Trust's Agreement and Declaration of Trust and a full statement of the
designations, preferences, limitations and relative rights of the shares of each
class or series of capital stock of the Trust authorized to be issued, so far as
they have been determined, and the authority of the Board of Trustees to
determine the relative rights and preferences of subsequent classes or series.
Any such request should be addressed to the Secretary of the Trust.
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Trust or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
Exhibit (h)(i) under Form N-2
Federated Premier Municipal Income Fund
(a Delaware statutory trust)
5,850,000 Common Shares of Beneficial Interest
(Par Value $.01 Per Share)
FORM OF PURCHASE AGREEMENT
December 19, 2002
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
UBS Warburg LLC
A.G. Edwards & Sons, Inc.
RBC Dain Rauscher Inc.
Wachovia Securities, Inc.
Wells Fargo Securities, LLC
Advest, Inc.
Robert W. Baird & Co. Incorporated
BB&T Capital Markets, a subsidiary of Scott & Stringfellow, Inc.
Fahnestock & Co. Inc.
Ferris, Baker Watts, Incorporated
Janney Montgomery Scott LLC
McDonald Investments Inc., a KeyCorp Company
Parker/Hunter Incorporated
Quick & Reilly, Inc.
Stephens Inc.
Stifel, Nicolaus & Company, Incorporated
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, New York 10080
Ladies and Gentlemen:
Federated Premier Municipal Income Fund, a Delaware statutory trust (the
"Fund") and the Fund's investment adviser, Federated Investment Management
Company, a Delaware statutory trust (the "Adviser"), each confirms its agreement
with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and each of the other Underwriters named in Schedule A hereto
(collectively, the "Underwriters", which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom Merrill
Lynch and UBS Warburg LLC, A.G. Edwards & Sons, Inc., RBC Dain Rauscher Inc.,
Wachovia Securities, Inc., Wells Fargo Securities, LLC, Advest, Inc., Robert W.
Baird & Co. Incorporated, BB&T Capital Markets, a subsidiary of Scott &
Stringfellow, Inc., Fahnestock & Co., Inc., Ferris, Baker Watts, Incorporated,
Janney Montgomery Scott LLC, McDonald Investments Inc., a KeyCorp Company,
Parker/Hunter Incorporated, Quick & Reilly, Inc., Stephens Inc and Stifel,
Nicolaus & Company, Incorporated are acting as representative (in such capacity,
the "Representative"), with respect to the issue and sale by the Fund and the
purchase by the Underwriters, acting severally and not jointly, of the
respective number of common shares of beneficial interest, par value $.01 per
share, of the Fund ("Common Shares") set forth in said Schedule A, and with
respect to the grant by the Fund to the Underwriters, acting severally and not
jointly, of the option described in Section 2(b) hereof to purchase all or any
part of 877,500 additional Common Shares to cover over-allotments, if any. The
aforesaid 5,850,000] Common Shares (the "Initial Securities") to be purchased by
the Underwriters and all or any part of the 877,500 Common Shares subject to the
option described in Section 2(b) hereof (the "Option Securities") are
hereinafter called, collectively, the "Securities."
The Fund understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representative deem advisable after
this Agreement has been executed and delivered.
The Fund has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form N-2 (No. 333-100605 and No.
811-21235) covering the registration of the Securities under the Securities Act
of 1933, as amended (the "1933 Act"), including the related preliminary
prospectus or prospectuses, and a notification on Form N-8A of registration of
the Fund as an investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the rules and regulations of the Commission under
the 1933 Act and the 1940 Act (the "Rules and Regulations"). Promptly after
execution and delivery of this Agreement, the Fund will prepare and file a
prospectus in accordance with the provisions of Rule 430A ("Rule 430A") of the
Rules and Regulations and paragraph (c) or (h) of Rule 497 ("Rule 497") of the
Rules and Regulations. The information included in any such prospectus, that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective, if applicable, pursuant to paragraph (b) of Rule 430A is referred to
as "Rule 430A Information." Each prospectus used before such registration
statement became effective, and any prospectus that omitted, as applicable, the
Rule 430A Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, including in each case any statement
of additional information incorporated therein by reference, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
thereto and schedules thereto at the time it became effective and including the
Rule 430A Information, is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) of the Rules and
Regulations is herein referred to as the "Rule 462(b) Registration Statement,"
and after such filing the term "Registration Statement" shall include the Rule
462(b) Registration Statement. The final prospectus in the form first furnished
to the Underwriters for use in connection with the offering of the Securities,
including the statement of additional information incorporated therein by
reference, is herein called the "Prospectus." For purposes of this Agreement,
all references to the Registration Statement, any preliminary prospectus, the
Prospectus or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Fund and the Adviser. The Fund
and the Adviser jointly and severally represent and warrant to each Underwriter
as of the date hereof, as of the Closing Time referred to in Section 2(c)
hereof, and as of each Date of Delivery (if any) referred to in Section 2(b)
hereof, and agree with each Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the Registration
Statement and any Rule 462(b) Registration Statement has become effective under
the 1933 Act and no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under the
1933 Act, or order of suspension or revocation of registration pursuant to
Section 8(e) of the 1940 Act, and no proceedings for any such purpose have been
instituted or are pending or, to the knowledge of the Fund or the Adviser, are
contemplated by the Commission, and any request on the part of the Commission
for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any Option Securities are purchased,
at the Date of Delivery), the Registration Statement, the Rule 462(b)
Registration Statement, the notification on Form N-8A and any amendments and
supplements thereto complied and will comply in all material respects with the
requirements of the 1933 Act, the 1940 Act and the Rules and Regulations and did
not and will not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading. Neither the Prospectus nor any amendments or
supplements thereto, at the time the Prospectus or any such amendment or
supplement was issued and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment thereto,
or filed pursuant to Rule 497 under the 1933 Act, complied when so filed in all
material respects with the Rules and Regulations and each preliminary prospectus
and the Prospectus delivered to the Underwriters for use in connection with this
offering was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
If a Rule 462(b) Registration Statement is required in connection with the
offering and sale of the Securities, the Fund has complied or will comply with
the requirements of Rule 111 under the 1933 Act Regulations relating to the
payment of filing fees thereof.
(ii) Independent Accountants. The accountants who certified the statement
of assets and liabilities included in the Registration Statement are independent
public accountants as required by the 1933 Act and the Rules and Regulations.
(iii) Financial Statements. The statement of assets and liabilities
included in the Registration Statement and the Prospectus, together with the
related notes, presents fairly the financial position of the Fund at the date
indicated; said statement has been prepared in conformity with generally
accepted accounting principles ("GAAP").
(iv) Expense Summary. The information set forth in the Prospectus in the
Fee Table has been prepared in accordance with the requirements of Form N-2 and
to the extent estimated or projected, such estimates or projections are
reasonably believed to be attainable and reasonably based.
(v) No Material Adverse Change. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, except as
otherwise stated therein, (A) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Fund, whether or not arising in the ordinary course of
business (a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Fund, other than those in the ordinary course of business,
which are material with respect to the Fund, and (C) there has been no dividend
or distribution of any kind declared, paid or made by the Fund on any class of
its capital stock.
(vi) Good Standing of the Fund. The Fund has been duly organized and is
validly existing as a statutory trust in good standing under the laws of the
State of Delaware and has statutory trust power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under this Agreement;
and the Fund is duly qualified as a foreign statutory trust to transact business
and is in good standing in each other jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.
(vii) No Subsidiaries. The Fund has no subsidiaries.
(viii) Investment Company Status. The Fund is duly registered with the
Commission under the 1940 Act as a closed-end diversified management investment
company, and no order of suspension or revocation of such registration has been
issued or proceedings therefor initiated or threatened by the Commission.
(ix) Officers and Trustees. No person is serving or acting as an officer,
trustee or investment adviser of the Fund except in accordance with the
provisions of the 1940 Act and the Rules and Regulations and the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), and the rules and
regulations of the Commission promulgated under the Advisers Act (the "Advisers
Act Rules and Regulations"). Except as disclosed in the Registration Statement
and the Prospectus (or any amendment or supplement to either of them), no
trustee of the Fund is an "interested person" (as defined in the 1940 Act) of
the Fund or an "affiliated person" (as defined in the 1940 Act) of any
Underwriter.
(x) Capitalization. The authorized, issued and outstanding shares of
beneficial interest of the Fund are as set forth in the Prospectus. All issued
and outstanding shares of beneficial interest of the Fund have been duly
authorized and validly issued and are fully paid and non-assessable, except as
provided for in the Fund's declaration of trust, and have been offered and sold
or exchanged by the Fund in compliance with all applicable laws (including,
without limitation, federal and state securities laws); none of the outstanding
shares of beneficial interest of the Fund was issued in violation of the
preemptive or other similar rights of any securityholder of the Fund.
(xi) Authorization and Description of Securities. The Securities to be
purchased by the Underwriters from the Fund have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Fund pursuant to this Agreement against payment of
the consideration set forth herein, will be validly issued and fully paid and
non-assessable, except as provided for in the Fund's declaration of trust. The
Common Shares conform to all statements relating thereto contained in the
Prospectus and such description conforms to the rights set forth in the
instruments defining the same; no holder of the Securities will be subject to
personal liability by reason of being such a holder; and the issuance of the
Securities is not subject to the preemptive or other similar rights of any
securityholder of the Fund.
(xii) Absence of Defaults and Conflicts. The Fund is not in violation of
its declaration of trust or by-laws, or in default in the performance or
observance of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which it is a party or by which it may
be bound, or to which any of the property or assets of the Fund is subject
(collectively, "Agreements and Instruments") except for such violations or
defaults that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement, the Investment Management Agreement,
the Amended and Restated Agreement for Fund Accounting Services, Administrative
Services, Transfer Agency Services and Custody Services Procurement, the
Custodian Contract and the Transfer Agency and Service Agreement referred to in
the Registration Statement (as used herein, the "Management Agreement," the
"Administration Agreement," the "Custodian Agreement" and the "Transfer Agency
and Service Agreement," respectively) and the consummation of the transactions
contemplated herein and in the Registration Statement (including the issuance
and sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectus under the caption "Use of Proceeds")
and compliance by the Fund with its obligations hereunder have been duly
authorized by all necessary action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined below) under,
or result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Fund pursuant to, the Agreements and Instruments
(except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not result in a Material Adverse Effect), nor will such
action result in any violation of the provisions of the declaration of trust or
by-laws of the Fund or any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Fund or any of its assets,
properties or operations. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder's behalf) the right to require
the repurchase, redemption or repayment of all or a portion of such indebtedness
by the Fund.
(xiii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental agency
or body, domestic or foreign, now pending, or, to the knowledge of the Fund or
the Adviser, threatened, against or affecting the Fund, which is required to be
disclosed in the Registration Statement (other than as disclosed therein), or
which might reasonably be expected to result in a Material Adverse Effect, or
which might reasonably be expected to materially and adversely affect the
properties or assets of the Fund or the consummation of the transactions
contemplated in this Agreement or the performance by the Fund of its obligations
hereunder. The aggregate of all pending legal or governmental proceedings to
which the Fund is a party or of which any of its property or assets is the
subject which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, could not reasonably be
expected to result in a Material Adverse Effect.
(xiv) Accuracy of Exhibits. There are no contracts or documents which are
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits thereto by the 1933 Act, the 1940 Act or by the Rules and
Regulations which have not been so described and filed as required.
(xv) Possession of Intellectual Property. The Fund owns or possesses, or
can acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other intellectual
property (collectively, "Intellectual Property") necessary to carry on the
business now operated by the Fund, and the Fund has not received any notice or
is not otherwise aware of any infringement of or conflict with asserted rights
of others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or inadequate
to protect the interest of the Fund therein, and which infringement or conflict
(if the subject of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would result in a Material Adverse
Effect.
(xvi) Absence of Further Requirements. No filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of, any
court or governmental authority or agency is necessary or required for the
performance by the Fund of its obligations hereunder, in connection with the
offering, issuance or sale of the Securities hereunder or the consummation of
the transactions contemplated by this Agreement, except such as have been
already obtained or as may be required under the 1933 Act, the 1940 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), or state
securities laws.
(xvii) Possession of Licenses and Permits. The Fund possesses such permits,
licenses, approvals, consents and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies necessary to operate its properties and to
conduct the business as contemplated in the Prospectus; the Fund is in
compliance with the terms and conditions of all such Governmental Licenses,
except where the failure so to comply would not, singly or in the aggregate,
have a Material Adverse Effect; all of the Governmental Licenses are valid and
in full force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force and
effect would not have a Material Adverse Effect; and the Fund has not received
any notice of proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a Material Adverse
Effect.
(xviii) Advertisements. Any advertising, sales literature or other
promotional material (including "prospectus wrappers," "broker kits," "road show
slides" and "road show scripts" and "electronic road show presentations")
prepared or approved by the Fund or the Adviser and used in connection with the
public offering of the Securities (collectively, "sales material") does not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. Moreover, all sales material complied and will comply in all
material respects with the applicable requirements of the 1933 Act, the 1940
Act, the Rules and Regulations and the rules and interpretations of the National
Association of Securities Dealers, Inc. ("NASD").
(xix) Subchapter M. The Fund intends to direct the investment of the
proceeds of the offering described in the Registration Statement in such a
manner as to comply with the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended ("Subchapter M of the Code" and the "Code,"
respectively), and intends to qualify as a regulated investment company under
Subchapter M of the Code.
Distribution of Offering Materials. The Fund has not distributed and, prior
to the later to occur of (A) the Closing Time and (B) completion of the
distribution of the Shares, will not distribute any offering material in
connection with the offering and sale of the Shares other than the Registration
Statement, a preliminary prospectus, the Prospectus or other materials, if any,
permitted by the 1933 Act or the 1940 Act or the Rules and Regulations.
Accounting Controls. The Fund maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (A) transactions are
executed in accordance with management's general or specific authorization and
with the applicable requirements of the 1940 Act, the Rules and Regulations and
the Code; (B) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting principles
and to maintain accountability for assets and to maintain compliance with the
books and records requirements under the 1940 Act and the Rules and Regulations;
(C) access to assets is permitted only in accordance with management's general
or specific authorization; and (D) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
Absence of Undisclosed Payments. To the Fund's knowledge, neither the Fund
nor any employee or agent of the Fund has made any payment of funds of the Fund
or received or retained any funds, which payment, receipt or retention of funds
is of a character required to be disclosed in the Prospectus.
(xx) Material Agreements. This Agreement, the Management Agreement, the
Administration Agreement, the Custodian Agreement and the Transfer Agency and
Service Agreement have each been executed and delivered by the Fund, as of the
dates noted therein, and each complies with all applicable provisions of the
1940 Act. Assuming due authorization, execution and delivery by the other
parties thereto with respect to the Management Agreement, the Administration
Agreement, the Custodian Agreement and the Transfer Agency and Service
Agreement, each of the Management Agreement, the Administration Agreement, the
Custodian Agreement and the Transfer Agency and Service Agreement constitutes a
valid and binding agreement of the Fund, enforceable in accordance with its
terms, except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, and general equitable principles (whether
considered in a proceeding in equity or at law).
(xxi) Registration Rights. There are no persons with registration rights or
other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Fund under the 1933 Act.
(xxii) NYSE Listing. The Securities have been duly authorized for listing,
upon notice of issuance, on the New York Stock Exchange ("NYSE") and the Fund's
registration statement on Form 8-A under the 1934 Act has become effective.
(b) Representations and Warranties by the Adviser. The Adviser represents
and warrants to each Underwriter as of the date hereof, as of the Closing Time
referred to in Section 2(c) hereof, and as of each Date of Delivery (if any)
referred to in Section 2(b) hereof as follows:
(i) Good Standing of the Adviser. The Adviser has been duly organized and
is validly existing and in good standing as a statutory trust under the laws of
the State of Delaware with full statutory trust power and authority to own,
lease and operate its properties and to conduct its business as described in the
Prospectus and is duly qualified as a foreign trust to transact business and is
in good standing in each other jurisdiction in which such qualification is
required, except as would not, individually or in the aggregate, result in a
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of such Adviser, whether or not
arising in the ordinary course of business (an "Adviser Material Adverse
Effect").
(ii) Investment Adviser Status. The Adviser is duly registered and in good
standing with the Commission as an investment adviser under the Advisers Act,
and is not prohibited by the Advisers Act or the 1940 Act, or the rules and
regulations under such acts, from acting under the Management Agreement for the
Fund as contemplated by the Prospectus.
(iii) Description of Adviser. The description of the Adviser in the
Registration Statement and the Prospectus (and any amendment or supplement to
either of them) complied and comply in all material respects with the provisions
of the 1933 Act, the 1940 Act, the Advisers Act, the Rules and Regulations and
the Advisers Act Rules and Regulations and is true and correct and does not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(iv) Capitalization. The Adviser has the financial resources available to
it necessary for the performance of its services and obligations as contemplated
in the Prospectus, this Agreement and under the Management Agreement to which it
is a party.
(v) Authorization of Agreements; Absence of Defaults and Conflicts. This
Agreement, the Management Agreement and the Additional Compensation Agreement
have each been duly authorized, executed and delivered by the Adviser, and the
Management Agreement and the Additional Compensation Agreement each constitute a
valid and binding obligation of the Adviser, enforceable in accordance with its
terms, except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and general equitable principles (whether considered
in a proceeding in equity or at law); and neither the execution and delivery of
this Agreement, the Management Agreement or the Additional Compensation
Agreement nor the performance by the Adviser of its obligations hereunder or
thereunder will conflict with, or result in a breach of any of the terms and
provisions of, or constitute, with or without the giving of notice or lapse of
time or both, a default under, any agreement or instrument to which the Adviser
is a party or by which it is bound, the agreement and declaration of trust, the
by-laws or other organizational documents of the Adviser, or to the Adviser's
knowledge, by any law, order, decree, rule or regulation applicable to it of any
jurisdiction, court, federal or state regulatory body, administrative agency or
other governmental body, stock exchange or securities association having
jurisdiction over the Adviser or its properties or operations; and no consent,
approval, authorization or order of any court or governmental authority or
agency is required for the consummation by the Adviser of the transactions
contemplated by this Agreement, the Management Agreement and the Additional
Compensation Agreement, except as have been obtained or may be required under
the 1933 Act, the 1940 Act, the 1934 Act or state securities laws.
(vi) No Material Adverse Change. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, except as
otherwise stated therein, there has not occurred any event which should
reasonably be expected to have a material adverse effect on the ability of the
Adviser to perform its respective obligations under this Agreement and the
Management Agreement to which it is a party.
(vii) Absence of Proceedings. There is no action, suit, proceeding, inquiry
or investigation before or brought by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Adviser,
threatened against or affecting the Adviser or any "affiliated person" of the
Adviser (as such term is defined in the 1940 Act) or any partners, trustees,
officers or employees of the foregoing, whether or not arising in the ordinary
course of business, which would reasonably be expected to result in any Adviser
Material Adverse Effect or materially and adversely affect the ability of the
Adviser to function as an investment adviser or perform its obligations under
the Management Agreement, or which is required to be disclosed in the
Registration Statement and the Prospectus.
(viii) Absence of Violation or Default. The Adviser is not in violation of
its agreement and declaration of trust, by-laws or other organizational
documents or in default under any agreement, indenture or instrument, except for
such violations or defaults that would not result in an Adviser Material Adverse
Effect.
(c) Officer's Certificates. Any certificate signed by any officer of the
Fund or the Adviser delivered to the Representative or to counsel for the
Underwriters shall be deemed a representation and warranty by the Fund or the
Adviser, as the case may be, to each Underwriter as to the matters covered
thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Fund agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Fund, at the
price per share set forth in Schedule B, the number of Initial Securities set
forth in Schedule A opposite the name of such Underwriter, plus any additional
number of Initial Securities which such Underwriter may become obligated to
purchase pursuant to the provisions of Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Fund hereby grants an option to the Underwriters, severally and not
jointly, to purchase up to an additional 877,500 Common Shares in the aggregate
at the price per share set forth in Schedule B, less an amount per share equal
to any dividends or distributions declared by the Fund and payable on the
Initial Securities but not payable on the Option Securities. The option hereby
granted will expire 45 days after the date hereof and may be exercised in whole
or in part from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the
Initial Securities upon notice by the Representative to the Fund setting forth
the number of Option Securities as to which the several Underwriters are then
exercising the option and the time and date of payment and delivery for such
Option Securities. Any such time and date of delivery (a "Date of Delivery")
shall be determined by the Representatives, but shall not be later than seven
full business days after the exercise of said option, nor in any event prior to
the Closing Time, as hereinafter defined. If the option is exercised as to all
or any portion of the Option Securities, each of the Underwriters, acting
severally and not jointly, will purchase that proportion of the total number of
Option Securities then being purchased which the number of Initial Securities
set forth in Schedule A opposite the name of such Underwriter bears to the total
number of Initial Securities, subject in each case to such adjustments as
Merrill Lynch in its discretion shall make to eliminate any sales or purchases
of a fractional number of Option Securities.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Clifford Chance US LLP, 200 Park Avenue, New York, New York 10166 or at such
other place as shall be agreed upon by the Representative and the Fund, at 10:00
A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M.
(Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
Representative and the Fund (such time and date of payment and delivery being
herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Fund, on each Date of Delivery as specified in the notice from the
Representatives to the Fund.
Payment shall be made to the Fund by wire transfer of immediately available
funds to a bank account designated by the Fund, against delivery to the
Representatives for the respective accounts of the Underwriters of certificates
for the Securities to be purchased by them. It is understood that each
Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and registered
in such names as the Representatives may request in writing at least one full
business day before the Closing Time or the relevant Date of Delivery, as the
case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representative in the City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants.
(a) The Fund and the Adviser, jointly and severally, covenant with each
Underwriter as follows:
(i) Compliance with Securities Regulations and Commission Requests. The
Fund, subject to Section 3(a)(ii), will comply with the requirements of Rule
430A and will notify the Representative immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration Statement
shall become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Fund will promptly effect the filings necessary pursuant to
Rule 497 and will take such steps as it deems necessary to ascertain promptly
whether the form of prospectus transmitted for filing under Rule 497 was
received for filing by the Commission and, in the event that it was not, it will
promptly file such prospectus. The Fund will make reasonable efforts to prevent
the issuance of any stop order, or order of suspension or revocation of
registration pursuant to Section 8(e) of the 1940 Act, and, if any such stop
order or order of suspension or revocation of registration is issued, to obtain
the lifting thereof at the earliest possible moment.
(ii) Filing of Amendments. The Fund will give the Representatives notice of
its intention to file or prepare any amendment to the Registration Statement
(including any filing under Rule 462(b)) or any amendment, supplement or
revision to either the prospectus included in the Registration Statement at the
time it became effective or to the Prospectus, will furnish the Representatives
with copies of any such documents a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file or use any such
document to which the Representatives or counsel for the Underwriters shall
reasonably object.
(iii) Delivery of Registration Statements. The Fund has furnished or will
deliver to the Representatives and counsel for the Underwriters, without charge,
signed copies of the Registration Statement as originally filed and of each
amendment thereto (including exhibits filed therewith or incorporated by
reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the Representatives, without charge, a
conformed copy of the Registration Statement as originally filed and of each
amendment thereto (without exhibits) for each of the Underwriters. The copies of
the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(iv) Delivery of Prospectuses. The Fund has delivered to each Underwriter,
without charge, as many copies of each preliminary prospectus as such
Underwriter reasonably requested, and the Fund hereby consents to the use of
such copies for purposes permitted by the 1933 Act. The Fund will furnish to
each Underwriter, without charge, during the period when the Prospectus is
required to be delivered under the 1933 Act or the 1934 Act, such number of
copies of the Prospectus (as amended or supplemented) as such Underwriter may
reasonably request. The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(v) Continued Compliance with Securities Laws. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection with sales
of the Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the Underwriters or for the
Fund, to amend the Registration Statement or amend or supplement the Prospectus
in order that the Prospectus will not include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein not misleading in the light of the circumstances existing at the time it
is delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement the Prospectus in order to comply with the requirements of the 1933
Act or the Rules and Regulations, the Fund will promptly prepare and file with
the Commission, subject to Section 3(a)(ii), such amendment or supplement as may
be necessary to correct such statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements, and the Fund will
furnish to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.
(vi) Blue Sky Qualifications. The Fund will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other jurisdictions
of the United States as the Representatives may designate and to maintain such
qualifications in effect for a period of not less than one year from the later
of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Fund shall not be obligated
to file any general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is not
so qualified or to subject itself to taxation in respect of doing business in
any jurisdiction in which it is not otherwise so subject. In each jurisdiction
in which the Securities have been so qualified, the Fund will file such
statements and reports as may be required by the laws of such jurisdiction to
continue such qualification in effect for a period of not less than one year
from the effective date of the Registration Statement and any Rule 462(b)
Registration Statement.
(vii) Rule 158. The Fund will timely file such reports pursuant to the 1934
Act as are necessary in order to make generally available to its securityholders
as soon as practicable an earning statement for the purposes of, and to provide
the benefits contemplated by, the last paragraph of Section 11(a) of the 1933
Act.
(viii) Use of Proceeds. The Fund will use the net proceeds received by it
from the sale of the Securities in the manner specified in the Prospectus under
"Use of Proceeds."
(ix) Listing. The Fund will use its reasonable best efforts to effect the
listing of the Securities on the NYSE, subject to notice of issuance,
concurrently with the effectiveness of the Registration Statement.
(x) Restriction on Sale of Securities. During a period of 180 days from the
date of the Prospectus, the Fund will not, without the prior written consent of
Merrill Lynch, (A) directly or indirectly, offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of Common Shares or any securities convertible into or exercisable or
exchangeable for Common Shares or file any registration statement under the 1933
Act with respect to any of the foregoing or (B) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Shares, whether
any such swap or transaction described in clause (A) or (B) above is to be
settled by delivery of Common Shares or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (1) the Securities to be
sold hereunder or (2) Common Shares issued pursuant to any dividend reinvestment
plan.
(xi) Reporting Requirements. The Fund, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1940
Act and the 1934 Act within the time periods required by the 1940 Act and the
Rules and Regulations and the 1934 Act and the rules and regulations of the
Commission thereunder, respectively.
(xii) Subchapter M. The Fund will comply with the requirements of
Subchapter M of the Code to qualify as a regulated investment company under the
Code.
(xiii) No Manipulation of Market for Securities. The Fund will not (a)
take, directly or indirectly, any action designed to cause or to result in, or
that might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Fund to facilitate the sale or
resale of the Securities, and (b) until the Closing Date, or the Date of
Delivery, if any, (i) sell, bid for or purchase the Securities or pay any person
any compensation for soliciting purchases of the Securities or (ii) pay or agree
to pay to any person any compensation for soliciting another to purchase any
other securities of the Fund .
(xiv) Rule 462(b) Registration Statement. If the Fund elects to rely upon
Rule 462(b), the Fund shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time,
on the date of this Agreement, and the Fund shall at the time of filing either
pay to the Commission the filing fee for the Rule 462(b) Registration Statement
or give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the 1933 Act.
(b) The Adviser covenants with each Underwriter that for a period of 180
days from the date of the Prospectus, the Adviser will not, without your prior
written consent which consent shall not be unreasonably withheld, act as
investment adviser to any other closed end registered investment company having
an investment objective, policies and restrictions substantially similar to
those of the Fund. For this purpose, Federated Premier Intermediate Municipal
Income Fund shall not be deemed to be substantially similar to the Fund.
SECTION 4. Payment of Expenses.
(a) Expenses. The Fund will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the preparation, printing
and filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, printing and delivery to the Underwriters of this Agreement, any
Agreement among Underwriters and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the Underwriters, including any stock or other transfer taxes
and any stamp or other duties payable upon the sale, issuance or delivery of the
Securities to the Underwriters, (iv) the fees and disbursements of the Fund's
counsel, accountants and other advisers, (v) the qualification of the Securities
under securities laws in accordance with the provisions of Section 3(a)(vi)
hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing
and delivery to the Underwriters of copies of each preliminary prospectus,
Prospectus and any amendments or supplements thereto, (vii) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Survey and
any supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Securities, (ix) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the Securities, (x) the
fees and expenses incurred in connection with the listing of the Securities on
the NYSE and (xi) the printing of any sales material. Also, the Fund shall pay
to Merrill Lynch, on behalf of the Underwriters, $.005 per share of the
securities purchased pursuant to this agreement as partial reimbursement of
expenses incurred in connection with the offering. The Adviser has agreed to pay
organizational expenses and offering costs (other than sales load) of the Fund
that exceed $.03 per Common Share.
(b) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section 9(a)
hereof, the Fund and the Adviser, jointly and severally, agree that they shall
reimburse the Underwriters for all of their out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations.
The obligations of the several Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Fund and the Adviser
contained in Section 1 hereof or in certificates of any officer of the Fund or
the Adviser delivered pursuant to the provisions hereof, to the performance by
the Fund and the Adviser of their respective covenants and other obligations
hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act, no notice or order pursuant
to Section 8(e) of the 1940 Act shall have been issued, and no proceedings with
respect to either shall have been initiated or threatened by the Commission, and
any request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
Underwriters. A prospectus containing the Rule 430A Information shall have been
filed with the Commission in accordance with Rule 497 (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430A).
(b) Opinion of Counsel for Fund and the Adviser. At Closing Time, the
Representatives shall have received the favorable opinions, dated as of Closing
Time, of Dickstein Shapiro Morin & Oshinsky LLP, counsel for the Fund, and Reed
Smith LLP, counsel for the Adviser, in form and substance satisfactory to
counsel for the Underwriters, together with signed or reproduced copies of such
letters for each of the other Underwriters substantially to the effect set forth
in Exhibit A hereto and to such further effect as counsel to the Underwriters
may reasonably request.
(c) Opinion of Counsel for Underwriters. At Closing Time, the
Representative shall have received the favorable opinion, dated as of Closing
Time, of Clifford Chance US LLP, counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters
with respect to the matters set forth in clauses (A) (i), (ii), (vi), (vii)
(solely as to preemptive or other similar rights arising by operation of law or
under the charter or by-laws of the Fund), (viii) through (x), inclusive, (xii),
(xiv) (solely as to the information in the Prospectus under "Description of
Shares") and the last paragraph of Exhibit A hereto. In giving such opinion such
counsel may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of New York and the federal law of the United States,
upon the opinions of counsel satisfactory to the Representative. Such counsel
may also state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Fund and certificates of public officials.
(d) Officers' Certificates. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Fund, whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of a duly authorized officer
of the Fund and of the chief financial or chief accounting officer of the Fund
and of the President or a Vice President or Managing Director of the Adviser,
dated as of Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties in Sections 1(a) and (b)
hereof are true and correct with the same force and effect as though expressly
made at and as of Closing Time, (iii) each of the Fund and the Adviser,
respectively, has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to Closing Time, and (iv) no
stop order suspending the effectiveness of the Registration Statement, or order
of suspension or revocation of registration pursuant to Section 8(e) of the 1940
Act, has been issued and no proceedings for any such purpose have been
instituted or are pending or are contemplated by the Commission.
(e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representatives shall have received from Ernst & Young LLP a
letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial and other information
contained in the Registration Statement and the Prospectus.
(f) Bring-down Comfort Letter. At Closing Time, the Representatives shall
have received from Ernst & Young LLP a letter, dated as of Closing Time, to the
effect that they reaffirm the statements made in the letter furnished pursuant
to subsection (e) of this Section, except that the specified date referred to
shall be a date not more than three business days prior to Closing Time.
(g) Approval of Listing. At Closing Time, the Securities shall have been
approved for listing on the NYSE, subject only to official notice of issuance.
(h) Execution of Additional Compensation Agreement. At Closing Time,
Merrill Lynch shall have received the Additional Compensation Agreement, dated
the date of the Closing Time, as executed by the Adviser.
(i) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(j) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities, the representations and warranties
of the Fund contained herein and the statements in any certificates furnished by
the Fund hereunder shall be true and correct as of each Date of Delivery and, at
the relevant Date of Delivery, the Representative shall have received:
(i) Officers' Certificates. Certificates, dated such Date of Delivery, of a
duly authorized officer of the Fund and of the chief financial or chief
accounting officer of the Fund and of the President or a Vice President or
Managing Director of the Adviser confirming that the information contained in
the certificate delivered by each of them at the Closing Time pursuant to
Section 5(d) hereof remains true and correct as of such Date of Delivery.
(ii) Opinions of Counsel for the Fund and the Adviser. The favorable
opinion of Dickstein Shapiro Morin & Oshinsky LLP, counsel for the Fund, and
Reed Smith LLP, counsel for the Adviser, in form and substance satisfactory to
counsel for the Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Section 5(b) hereof.
(iii) Opinion of Counsel for the Underwriters. The favorable opinion of
Clifford Chance US LLP, counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required by Section
5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from Ernst & Young LLP, in form
and substance satisfactory to the Representative and dated such Date of
Delivery, substantially in the same form and substance as the letter furnished
to the Representative pursuant to Section 5(f) hereof, except that the
"specified date" in the letter furnished pursuant to this paragraph shall be a
date not more than five days prior to such Date of Delivery.
(k) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Fund and the Adviser in connection with the organization and
registration of the Fund under the 1940 Act and the issuance and sale of the
Securities as herein contemplated shall be satisfactory in form and substance to
the Representatives and counsel for the Underwriters.
(l) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representatives by notice to the Fund at
any time at or prior to Closing Time or such Date of Delivery, as the case may
be, and such termination shall be without liability of any party to any other
party except as provided in Section 4 and except that Sections 1, 6, 7, 8 and 13
shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Fund and the Adviser, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act, and any director, officer, employee
or affiliate thereof as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or arising
out of any untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission; provided that (subject to Section 6(e) below) any such
settlement is effected with the written consent of the Fund; and
(iii) against any and all expense whatsoever, as incurred (including the
fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred
in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the Fund
or the Adviser by any Underwriter through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto).
(b) Indemnification of Fund, Adviser, Trustees and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Fund and the
Adviser, their respective trustees, each of the Fund's officers who signed the
Registration Statement, and each person, if any, who controls the Fund or the
Adviser within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Fund or the Adviser by such Underwriter through Merrill Lynch expressly
for use in the Registration Statement (or any amendment thereto) or such
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) Indemnification for Marketing Materials. In addition to the foregoing
indemnification, the Fund and the Adviser also, jointly and severally, agree to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any and all loss, liability, claim, damage
and expense described in the indemnity contained in Section 6(a), as limited by
the proviso set forth therein, with respect to any sales material. The
Underwriters shall not use any marketing materials other than those prepared or
approved by the Fund.
(d) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Fund and the Adviser. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(e) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
SECTION 7. Contribution.
If the indemnification provided for in Section 6 hereof is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Fund and the Adviser on the one hand and the
Underwriters on the other hand from the offering of the Securities pursuant to
this Agreement or (ii) if the allocation provided by clause (i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Fund and the Adviser on the one hand and of the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Fund and the Adviser on the one hand
and the Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Fund and the total underwriting discount received by the Underwriters
(whether from the Fund or otherwise), in each case as set forth on the cover of
the Prospectus bear to the aggregate initial public offering price of the
Securities as set forth on such cover.
The relative fault of the Fund and the Adviser on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Fund or the Adviser or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Fund, the Adviser and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each trustee of the Fund and each director of the Adviser, respectively, each
officer of the Fund who signed the Registration Statement, and each person, if
any, who controls the Fund or the Adviser, within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Fund and the Adviser, respectively. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement
or in certificates of officers of the Fund or the Adviser submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or controlling person, or
by or on behalf of the Fund or the Adviser, and shall survive delivery of the
Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representative may terminate this Agreement,
by notice to the Fund, at any time at or prior to Closing Time (i) if there has
been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Fund or the Adviser, whether or not arising
in the ordinary course of business, or (ii) if there has occurred any material
adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representatives, impracticable or inadvisable to market the
Securities or to enforce contracts for the sale of the Securities, or (iii) if
trading in the Common Shares of the Fund has been suspended or materially
limited by the Commission or the NYSE, or if trading generally on the NYSE or
the American Stock Exchange or in the Nasdaq National Market has been suspended
or materially limited, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the NASD or any other governmental
authority, or a material disruption has occurred in commercial banking or
securities settlement or clearance services in the United States, or (iv) if a
banking moratorium has been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7, 8 and 13 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Underwriters.
If one or more of the Underwriters shall fail at Closing Time or a Date of
Delivery to purchase the Securities which it or they are obligated to purchase
under this Agreement (the "Defaulted Securities"), the Representatives shall
have the right, within 24 hours thereafter, to make arrangements for one or more
of the non-defaulting Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the Representative
shall not have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the number
of Securities to be purchased on such date, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
Securities to be purchased on such date, this Agreement or, with respect to any
Date of Delivery which occurs after the Closing Time, the obligation of the
Underwriters to purchase and of the Fund to sell the Option Securities to be
purchased and sold on such Date of Delivery shall terminate without liability on
the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Fund to sell the relevant Option Securities, as
the case may be, either the Representative or the Fund shall have the right to
postpone Closing Time or the relevant Date of Delivery, as the case may be, for
a period not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or arrangements.
As used herein, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 10.
SECTION 11. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be directed to the
Representative, Merrill Lynch & Co., North Tower, 4 World Financial Center, New
York, New York 10080, attention of [Equity Capital Markets]; and notices to the
Fund or the Adviser shall be directed, as appropriate, to the office of
Federated Investors, Inc., Attention: Lisa E. Peternel, Federated Investors
Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779; with copies to Dickstein
Shapiro Morin & Oshinsky LLP, Attention: Matthew G. Maloney, Esq., 2101 L Street
NW, Washington, DC 20037-1526 and to Federated Investors, Inc., Stephen A. Keen,
Esq., Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
SECTION 12. Parties.
This Agreement shall each inure to the benefit of and be binding upon the
Underwriters, the Fund, the Adviser and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Underwriters, the Fund, the
Adviser and their respective successors and the controlling persons and officers
and trustees referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Fund, the Adviser and their
respective successors, and said controlling persons and officers, trustees and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
IN SAID STATE. UNLESS OTHERWISE EXPLICITLY PROVIDED, SPECIFIED TIMES OF DAY
REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument,
along with all counterparts, will become a binding agreement among the
Underwriters, the Fund and the Adviser in accordance with its terms.
Very truly yours,
FEDERATED PREMIER MUNICIPAL INCOME FUND
By:/s/ J. Christopher Donahue
Name: J. Christopher Donahue
Title: President
FEDERATED INVESTMENT MANAGEMENT COMPANY
By:/s/ Keith M.Schappert
Name: Keith M. Schappert
Title: President
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
UBS WARBURG LLC
A.G. EDWARDS & SONS, INC.
RBC DAIN RAUSCHER INC.
WACHOVIA SECURITIES, INC.
WELLS FARGO SECURITIES, LLC
ADVEST, INC.
ROBERT W. BAIRD & CO. INCORPORATED
BB&T CAPITAL MARKETS, A SUBSIDIARY OF SCOTT & STRINGFELLOW, INC.
FAHNESTOCK & CO. INC.
FERRIS, BAKER WATTS, INCORPORATED
JANNEY MONTGOMERY SCOTT LLC
MCDONALD INVESTMENTS INC., A KEYCORP COMPANY
PARKER/HUNTER INCORPORATED
QUICK & REILLY, INC.
STEPHENS INC.
STIFEL, NICOLAUS & COMPANY, INCORPORATED
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:
Authorized Signatory
For itself and as
Representative of the
other Underwriters named
in Schedule A hereto.
Sch A-1
SCHEDULE A
Name of Underwriter Number of Initial
Securities
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 800,000
UBS Warburg LLC 800,000
A.G. Edwards & Sons, Inc. 400,000
RBC Dain Rauscher Inc. 400,000
Wachovia Securities, Inc. 400,000
Wells Fargo Securities, LLC 400,000
Advest, Inc. 150,000
Robert W. Baird & Co. Incorporated 150,000
BB&T Capital Markets, a subsidiary of Scott & Stringfellow, Inc. 150,000
Fahnestock & Co. Inc. 150,000
Ferris, Baker Watts, Incorporated 150,000
Janney Montgomery Scott LLC 150,000
McDonald Investments Inc., a KeyCorp Company 150,000
Parker/Hunter Incorporated 150,000
Quick & Reilly, Inc. 150,000
Stephens Inc. 150,000
Stifel, Nicolaus & Company, Incorporated 150,000
CIBC World Markets Corp. 80,000
Deutsche Bank Securities Inc. 80,000
Salomon Smith Barney Inc. 80,000
US Bancorp Piper Jaffray 80,000
Crowell, Weedon & Co. 40,000
Legg Mason Wood Walker, Incorporated 40,000
Morgan Keegan & Company, Inc. 40,000
TD Waterhouse Investor Services, Inc. 40,000
William Blair & Company, L.L.C. 40,000
Allen & Co. of Florida, Inc. 20,000
Arthurs, Lestrange & Company, Incorporated 20,000
Brean Murray & Co., Inc. 20,000
Chatsworth Securities LLC 20,000
D.A. Davidson & Co. 20,000
Gilford Securities Incorporated 20,000
Howe Barnes Investments, Inc. 20,000
J.J.B. Hilliard, W.L. Lyons, Inc. 20,000
Johnston, Lemon & Co. Incorporated 20,000
Mesirow Financial, Inc. 20,000
Needham & Company, Inc. 20,000
David A. Noyes & Company 20,000
Pacific Crest Securities, Inc. 20,000
Peacock, Hilsop, Staley & Givens, Inc. 20,000
Ramirez & Co., Inc. 20,000
Sands Brothers & Co., Ltd. 20,000
Smith, Moore & Co. 20,000
Sterling Financial Investment Group, Inc. 20,000
SWS Securities, Inc. 20,000
The Seidler Companies Incorporated 20,000
Torrey Pines Securities 20,000
Utendahl Capital Partners, L.P. 20,000
C.E. Unterberg, Towbin 20,000
Wedbush Morgan Securities Inc. 20,000
Total 5,850,000
28
SCHEDULE B
Federated Premier Municipal Income Fund
5,850,000 Common Shares of Beneficial Interest
(Par Value $.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $15.00.
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $14.325, being an amount equal to the initial
public offering price set forth above less $.675 per share; provided that the
purchase price per share for any Option Securities purchased upon the exercise
of the over-allotment option described in Section 2(b) shall be reduced by an
amount per share equal to any dividends or distributions declared by the Fund
and payable on the Initial Securities but not payable on the Option Securities.
Exhibit (h)(iii) under Form N-2
ADDITIONAL COMPENSATION AGREEMENT
ADDITIONAL COMPENSATION AGREEMENT (the "Agreement"), dated as of December
20, 2002, between Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and Federated Investment Management Company
("Federated").
WHEREAS, Federated Premier Municipal Income Fund (including any successor
by merger or otherwise, the "Fund") is a newly organized, diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), and its publicly offered common shares
are registered under the Securities Act of 1933, as amended; and
WHEREAS, Federated is the investment adviser of the Fund;
WHEREAS, Merrill Lynch is acting as lead underwriter in an offering of the
Fund's common shares;
WHEREAS, Federated desires to provide additional compensation to Merrill
Lynch for acting as lead underwriter in an offering of the Fund's common shares;
and
WHEREAS, Federated desires to retain Merrill Lynch to provide after-market
support services designed to maintain the visibility of the Fund on an ongoing
basis, and Merrill Lynch is willing to render such services;
NOW, THEREFORE, in consideration of the mutual terms and conditions set
forth below, the parties hereto agree as follows:
1. (a) Federated hereby employs Merrill Lynch, for the period and on the
terms and conditions set forth herein, to provide the following services at the
reasonable request of Federated:
(1) to provide after-market support services designed to maintain the
visibility of the Fund on an ongoing basis;
(2) to provide relevant information, studies or reports regarding general
trends in the closed-end investment company and asset management industries, if
reasonably obtainable, and consult with representatives of Federated in
connection therewith; and
(3) to provide information to and consult with Federated with respect to
applicable strategies designed to address market value discounts, if any.
(b) At the request of Federated, Merrill Lynch shall limit or cease any
action or service provided hereunder to the extent and for the time period
requested by Federated; provided, however, that pending termination of this
Agreement as provided for in Section 5 hereof, any such limitation or cessation
shall not relieve Federated of its payment obligations pursuant to Section 2
hereof.
(c) Merrill Lynch will promptly notify Federated if it learns of any
material inaccuracy or misstatement in, or material omission from, any written
information, as of the date such information was published, provided by Merrill
Lynch to Federated in connection with the performance of services by Merrill
Lynch under this Agreement.
2. Federated shall pay Merrill Lynch a fee computed weekly and payable
quarterly in arrears commencing January 15, 2003 at an annualized rate of 0.10%
of the Fund's managed assets for a term as described in Section 5 hereof;
provided that the total amount of the fee hereunder plus the amount of the
expense reimbursement of $.005 per common share payable by the Fund to the
underwriters pursuant to the Purchase Agreement dated December 19, 2002, by and
among the Fund, Federated and each of the Underwriters named therein (the
"Purchase Agreement") shall not exceed 4.5% of the total price (including all
Initial Securities and Option Securities as such terms are described in the
Purchase Agreement) to the public of the Fund's common shares offered by the
prospectus dated December 19, 2002; and provided further, that in determining
when this maximum fee amount has been paid, the value of each of the quarterly
payments made hereunder shall be discounted at the annual rate of 10% to the
closing date of offering. All quarterly fees payable hereunder shall be paid to
Merrill Lynch within 15 days following the end of each calendar quarter.
3. Federated acknowledges that the services of Merrill Lynch provided for
hereunder do not include any advice as to the value of securities or regarding
the advisability of purchasing or selling any securities for the Fund's
portfolio. No provision of this Agreement shall be considered as creating, nor
shall any provision create, any obligation on the part of Merrill Lynch, and
Merrill Lynch is not hereby agreeing, to: (i) furnish any advice or make any
recommendations regarding the purchase or sale of portfolio securities or (ii)
render any opinions, valuations or recommendations of any kind or to perform any
such similar services in connection with providing the services described in
Section 1 hereof.
4. Nothing herein shall be construed as prohibiting Merrill Lynch or its
affiliates from providing similar or other services to any other clients
(including other registered investment companies or other investment managers),
so long as Merrill Lynch's services to Federated are not impaired thereby.
5. The term of this Agreement shall commence upon the date referred to
above and shall be in effect so long as Federated acts as the investment manager
to the Fund pursuant to the Investment Management Agreement (as such term is
defined in the Purchase Agreement) or other subsequent advisory agreement.
6. Federated will furnish Merrill Lynch with such information as Merrill
Lynch believes appropriate to its assignment hereunder (all such information so
furnished being the "Information"). Federated recognizes and confirms that
Merrill Lynch (a) will use and rely primarily on the Information and on
information available from generally recognized public sources in performing the
services contemplated by this Agreement without having independently verified
the same and (b) does not assume responsibility for the accuracy or completeness
of the Information and such other information. To the best of Federated's
knowledge, the Information to be furnished by Federated when delivered, will be
true and correct in all material respects and will not contain any material
misstatement of fact or omit to state any material fact necessary to make the
statements contained therein not misleading. Federated will promptly notify
Merrill Lynch if it learns of any material inaccuracy or misstatement in, or
material omission from, any Information delivered to Merrill Lynch.
7. It is understood that Merrill Lynch is being engaged hereunder solely to
provide the services described above to Federated and that Merrill Lynch is not
acting as an agent or fiduciary of, and shall have no duties or liability to the
current or future shareholders of the Fund or any other third party in
connection with its engagement hereunder, all of which are hereby expressly
waived.
8. Federated agrees that Merrill Lynch shall have no liability to Federated
or the Fund for any act or omission to act by Merrill Lynch in the course of its
performance under this Agreement, in the absence of gross negligence or willful
misconduct on the part of Merrill Lynch. Federated agrees to the indemnification
and other agreements set forth in the Indemnification Agreement attached hereto,
the provisions of which are incorporated herein by reference and shall survive
the termination, expiration or supercession of this Agreement.
9. This Agreement and any claim, counterclaim or dispute of any kind or
nature whatsoever arising out of or in any way relating to this Agreement
("Claim") shall be governed by and construed in accordance with the laws of the
State of New York.
10. No Claim may be commenced, prosecuted or continued in any court other
than the courts of the State of New York located in the City and County of New
York or in the United States District Court for the Southern District of New
York, which courts shall have exclusive jurisdiction over the adjudication of
such matters, and Federated and Merrill Lynch consent to the jurisdiction of
such courts and personal service with respect thereto. Each of Merrill Lynch and
Federated waives all right to trial by jury in any proceeding (whether based
upon contract, tort or otherwise) in any way arising out of or relating to this
Agreement. Federated agrees that a final judgment in any proceeding or
counterclaim brought in any such court shall be conclusive and binding upon
Federated and may be enforced in any other courts to the jurisdiction of which
Federated is or may be subject, by suit upon such judgment.
11. This Agreement may not be assigned by either party without the prior
written consent of the other party.
12. This Agreement (including the attached Indemnification Agreement)
embodies the entire agreement and understanding between the parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof. If any provision of this Agreement is determined to be invalid or
unenforceable in any respect, such determination will not affect such provision
in any other respect or any other provision of this Agreement, which will remain
in full force and effect. This Agreement may not be amended or otherwise
modified or waived except by an instrument in writing signed by both Merrill
Lynch and Federated.
13. All notices required or permitted to be sent under this Agreement shall
be sent, if to Federated:
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attention: Lisa E. Peternel
or if to Merrill Lynch:
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower, World Financial Center
New York, New York 10080
Attention: Doug Bond
or such other name or address as may be given in writing to the other
parties. Any notice shall be deemed to be given or received on the third day
after deposit in the US mail with certified postage prepaid or when actually
received, whether by hand, express delivery service or facsimile transmission,
whichever is earlier.
14. This Agreement may be executed in separate counterparts, each of which
is deemed to be an original and all of which taken together constitute one and
the same agreement.
IN WITHESS WHEREOF, the parties hereto have duly executed this Additional
Compensation Agreement as of the date first above written.
FEDERATED INVESTMENT MANAGEMENT MERRILL LYNCH & CO.
COMPANY MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By: /s/ Keith M. Schappert By: /s/ Douglas R. Bond
Name: Keith M. Schappert Name: Douglas R. Bond
Title: President Title: Director
Merrill Lynch & Co. Indemnification Agreement
December 19, 2002
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower, World Financial Center
New York, New York 10080
Ladies and Gentlemen:
In connection with the engagement of Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") to advise and assist the
undersigned (together with its affiliates and subsidiaries, referred to as the
"Company") with the matters set forth in the Additional Compensation Agreement
dated December 20, 2002, between the Company and Merrill Lynch (the
"Agreement"), in the event that Merrill Lynch becomes involved in any capacity
in any claim, suit, action, proceeding, investigation or inquiry (including,
without limitation, any shareholder or derivative action or arbitration
proceeding) (collectively, a "Proceeding") arising out of the matters
contemplated by the Agreement, including, without limitation, related services
and activities prior to the date of the Agreement, the Company agrees to
indemnify, defend and hold Merrill Lynch harmless to the fullest extent
permitted by law, from and against any losses, claims, damages, liabilities and
expenses in connection with such Proceeding, except to the extent that such
losses, claims, damages, liabilities and expenses resulted from the gross
negligence or willful misconduct of Merrill Lynch. In addition, in the event
that Merrill Lynch becomes involved in any capacity in any Proceeding arising
out of the matters contemplated by the Agreement, including, without limitation,
related services and activities prior to the date of the Agreement, the Company
will reimburse Merrill Lynch for its reasonable legal and other expenses
(including the cost of any investigation and preparation) as such expenses are
incurred by Merrill Lynch in connection therewith; subject, however, to the
obligation of Merrill Lynch to reimburse the Company to the extent it is
ultimately determined that Merrill Lynch is not entitled to indemnification
hereunder. If such indemnification were not to be available for any reason, the
Company agrees to contribute to the losses, claims, damages, liabilities and
expenses involved (i) in the proportion appropriate to reflect the relative
benefits received or sought to be received by the Company and its stockholders
and affiliates and other constituencies, on the one hand, and Merrill Lynch, on
the other hand, in the matters contemplated by the Agreement or (ii) if (but
only if and to the extent) the allocation provided for in clause (i) is for any
reason held unenforceable, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) but also the relative fault
of the Company and its stockholders and affiliates and other constituencies, on
the one hand, and the party entitled to contribution, on the other hand, as well
as any other relevant equitable considerations. The Company agrees that for the
purposes of this paragraph the relative benefits received, or sought to be
received, by the Company and its stockholders and affiliates, on the one hand,
and the party entitled to contribution, on the other hand, of a transaction as
contemplated shall be deemed to be in the same proportion that the total value
received or paid or contemplated to be received or paid by the Company or its
stockholders or affiliates and other constituencies, as the case may be, as a
result of or in connection with the transaction (whether or not consummated) for
which Merrill Lynch has been retained to perform financial services bears to the
fees paid to Merrill Lynch under the Agreement; provided, that in no event shall
the Company contribute less than the amount necessary to assure that Merrill
Lynch is not liable for losses, claims, damages, liabilities and expenses in
excess of the amount of fees actually received by Merrill Lynch pursuant to the
Agreement. Relative fault shall be determined by reference to, among other
things, whether any alleged untrue statement or omission or any other alleged
conduct relates to information provided by the Company or other conduct by the
Company (or its employees or other agents), on the one hand, or by Merrill
Lynch, on the other hand. The Company will not settle any Proceeding in respect
of which indemnity may be sought hereunder, whether or not Merrill Lynch is an
actual or potential party to such Proceeding, without Merrill Lynch's prior
written consent. For purposes of this Indemnification Agreement, Merrill Lynch
shall include Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, any of its affiliates, each other person, if any, controlling
Merrill Lynch or any of its affiliates, their respective officers, current and
former directors, employees and agents, and the successors and assigns of all of
the foregoing persons. The foregoing indemnity and contribution agreement shall
be in addition to any rights that any indemnified party may have at common law
or otherwise.
The Company agrees that neither Merrill Lynch nor any of its affiliates,
directors, agents, employees or controlling persons shall have any liability to
the Company or any person asserting claims on behalf of or in right of the
Company in connection with or as a result of either Merrill Lynch's engagement
under the Agreement, including, without limitation, related services and
activities prior to the date of the Agreement, except to the extent that it
shall be determined by a court of competent jurisdiction in a judgment that has
become final in that it is no longer subject to appeal or other review that any
losses, claims, damages, liabilities or expenses incurred by the Company
resulted solely from the gross negligence or willful misconduct of Merrill Lynch
in performing the services that are the subject of the Agreement.
This INDEMNIFICATION Agreement and any claim, counterclaim or dispute of
any kind or nature whatsoever arising out of or in any way relating to this
Agreement ("Claim"), DIRECTLY OR INDIRECTLY, shall be governed by and construed
in accordance with the laws of the State of New York. Except as set forth below,
no Claim may be commenced, prosecuted or continued in any court other than the
courts of the State of New York located in the City and County of New York or in
the United States District Court for the Southern District of New York, which
courts shall have exclusive jurisdiction over the adjudication of such matters,
and the Company and Merrill Lynch consent to the jurisdiction of such courts and
personal service with respect thereto. Each of Merrill Lynch and the Company
waives all right to trial by jury in any proceeding or claim (whether based upon
contract, tort or otherwise) arising out of or in any way relating to this
Agreement. The PARTIES agree that a final judgment in any proceeding or claim
arising out of or in any way relating to this agreement brought in any such
court shall be conclusive and binding upon the parties and may be enforced in
any other courts to the jurisdiction of which the party is or may be subject, by
suit upon such judgment.
The foregoing Indemnification Agreement shall remain in full force and
effect notwithstanding any termination of Merrill Lynch's engagement. This
Indemnification Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same agreement.
Very truly yours,
FEDERATED INVESTMENT MANAGEMENT COMPANY
By: /s/ Keith M. Schappert
Name: Keith M. Schappert
Title: President
Accepted and agreed to as of
the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By _____________________
Name:
Title:
Exhibit (h)(iv) under Form N-2
Federated Premier Municipal Income Fund
(a Delaware statutory trust)
Auction Market Preferred Shares ("AMPS")
2,147 Shares [ ]% AMPS, Series A
Liquidation Preference $25,000 per share
FORM OF PURCHASE AGREEMENT
February 13, 2003
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
UBS Warburg LLC
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
4 World Financial Center
New York, New York 10080
Ladies and Gentlemen:
Federated Premier Municipal Income Fund, a Delaware statutory trust (the
"Fund"), proposes, upon the terms and conditions set forth herein, to issue and
sell an aggregate of 2,147 Shares of its Auction Market Preferred Shares, Series
A with a liquidation preference of $25,000 per share (the "AMPS"). The AMPS will
be authorized by, and subject to the terms and conditions of, the Declaration of
Trust of the Fund, including the Statement of Preferences of Auction Market
Preferred Shares (the "Statement of Preferences"), as amended through [ ], 2003
(collectively, the "Charter"), in the form filed as an exhibit to the
Registration Statement referred to in the second following paragraph of this
Agreement, as the same may be amended from time to time. The Fund and the Fund's
investment adviser, Federated Investment Management Company, a Delaware
statutory trust (the "Adviser"), each confirms its agreement with Merrill Lynch
& Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
each of the other Underwriters named in Schedule A hereto (collectively, the
"Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom Merrill Lynch is acting as
representative (in such capacity, the "Representative"), with respect to the
issue and sale by the Fund and the purchase by the Underwriters, acting
severally and not jointly, of the respective number of AMPS set forth in said
Schedule A.
The Fund understands that the Underwriters propose to make a public
offering of the AMPS as soon as the Representative deems advisable after this
Agreement has been executed and delivered.
The Fund has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form N-2 (No. 333-102033 and No.
811-21235) covering the registration of the AMPS under the Securities Act of
1933, as amended (the "1933 Act"), including the related preliminary prospectus
or prospectuses. Promptly after execution and delivery of this Agreement, the
Fund will prepare and file a prospectus in accordance with the provisions of
Rule 430A ("Rule 430A") of the rules and regulations of the Commission under the
1933 Act and the Investment Company Act of 1940, as amended (the "1940 Act")
(the "Rules and Regulations") and paragraph (c) or (h) of Rule 497 ("Rule 497")
of the Rules and Regulations. The information included in any such prospectus,
that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective, if applicable, pursuant to paragraph (b) of Rule 430A
is referred to as "Rule 430A Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, including in each
case any statement of additional information incorporated therein by reference,
is herein called a "preliminary prospectus." Such registration statement,
including the exhibits thereto and schedules thereto at the time it became
effective and including the Rule 430A Information, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the Rules and Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final prospectus in
the form first furnished to the Underwriters for use in connection with the
offering of the AMPS, including the statement of additional information
incorporated therein by reference, is herein called the "Prospectus." For
purposes of this Agreement, all references to the Registration Statement, any
preliminary prospectus, the Prospectus or any amendment or supplement to any of
the foregoing shall be deemed to include the copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("EDGAR").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document that is incorporated by reference in the Registration Statement,
such preliminary prospectus or the Prospectus, as the case may be.
SECTION 15. Representations and Warranties.
(a) Representations and Warranties by the Fund and the Adviser. The Fund
and the Adviser jointly and severally represent and warrant to each Underwriter
as of the date hereof and as of the Closing Time referred to in Section 2(c)
hereof, and agree with each Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the Registration
Statement and any Rule 462(b) Registration Statement has become effective under
the 1933 Act and no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under the
1933 Act, or order of suspension or revocation of registration pursuant to
Section 8(e) of the 1940 Act, and no proceedings for any such purpose have been
instituted or are pending or, to the knowledge of the Fund or the Adviser, are
contemplated by the Commission, and any request on the part of the Commission
for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time, the Registration Statement, the Rule 462(b)
Registration Statement, the notification on Form N-8A and any amendments and
supplements thereto complied and will comply in all material respects with the
requirements of the 1933 Act, the 1940 Act and the Rules and Regulations and did
not and will not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading. Neither the Prospectus nor any amendments or
supplements thereto, at the time the Prospectus or any such amendment or
supplement was issued and at the Closing Time, included or will include an
untrue statement of a material fact or omitted or will omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment thereto,
or filed pursuant to Rule 497 under the 1933 Act, complied when so filed in all
material respects with the Rules and Regulations and each preliminary prospectus
and the Prospectus delivered to the Underwriters for use in connection with this
offering was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
If a Rule 462(b) Registration Statement is required in connection with the
offering and sale of the AMPS, the Fund has complied or will comply with the
requirements of Rule 111 under the 1933 Act Regulations relating to the payment
of filing fees thereof.
(ii) Independent Accountants. The accountants who certified the statement
of assets and liabilities included in the Registration Statement are independent
public accountants as required by the 1933 Act and the Rules and Regulations.
(iii) Financial Statements. The financial statements included in the
Registration Statement and the Prospectus, together with the related notes,
present fairly the financial position of the Fund at the dates indicated; said
statements have been prepared in conformity with generally accepted accounting
principles ("GAAP").
(iv) Expense Summary. The information set forth in the Prospectus in the
Fee Table has been prepared in accordance with the requirements of Form N-2 and
to the extent estimated or projected, such estimates or projections are
reasonably believed to be attainable and reasonably based.
(v) No Material Adverse Change. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, except as
otherwise stated therein, (A) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Fund, other than as a result of a change in the
financial markets generally, whether or not arising in the ordinary course of
business (a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Fund, other than those in the ordinary course of business,
which are material with respect to the Fund, and (C) except for a regular
dividend on the common shares declared on February 10, 2003, there has been no
dividend or distribution of any kind declared, paid or made by the Fund on any
class of its capital shares.
(vi) Good Standing of the Fund. The Fund has been duly organized and is
validly existing as a statutory trust in good standing under the laws of the
State of Delaware and has the statutory trust power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under this Agreement;
and the Fund is duly qualified as a foreign statutory trust to transact business
and is in good standing in each other jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.
(vii) No Subsidiaries. The Fund has no subsidiaries.
(viii) Investment Company Status. The Fund is duly registered with the
Commission under the 1940 Act as a closed-end diversified management investment
company, and no order of suspension or revocation of such registration has been
issued or proceedings therefor initiated or threatened by the Commission.
(ix) Officers and Trustees. No person is serving or acting as an officer,
trustee or investment adviser of the Fund except in accordance with the
provisions of the 1940 Act and the Rules and Regulations and the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), and the rules and
regulations of the Commission promulgated under the Advisers Act (the "Advisers
Act Rules and Regulations"). Except as disclosed in the Registration Statement
and the Prospectus (or any amendment or supplement to either of them), no
trustee of the Fund is an "interested person" (as defined in the 1940 Act) of
the Fund or an "affiliated person" (as defined in the 1940 Act) of any
Underwriter.
(x) Capitalization. The authorized, issued and outstanding shares of
beneficial interest of the Fund are as set forth in the Prospectus. All issued
and outstanding shares of beneficial interest of the Fund have been duly
authorized and validly issued and are fully paid and non-assessable, except as
provided for in the Fund's declaration of trust, and have been offered and sold
or exchanged by the Fund in compliance with all applicable laws (including,
without limitation, federal and state securities laws); none of the outstanding
shares of beneficial interest of the Fund was issued in violation of the
preemptive or other similar rights of any securityholder of the Fund.
(xi) Authorization and Description of AMPS. The AMPS to be purchased by the
Underwriters from the Fund have been duly authorized for issuance and sale to
the Underwriters pursuant to this Agreement and, when issued and delivered by
the Fund pursuant to this Agreement against payment of the consideration set
forth herein, will be validly issued and fully paid and non-assessable, except
as provided for in the Fund's declaration of trust. The AMPS conform to all
statements relating thereto contained in the Prospectus and such description
conforms to the rights of holders of AMPS set forth in the Charter; no holder of
the AMPS will be subject to personal liability by reason of being such a holder;
and the issuance of the AMPS is not subject to the preemptive or other similar
rights of any securityholder of the Fund.
(xii) Absence of Defaults and Conflicts. The Fund is not in violation of
its Charter or by-laws, or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease or
other agreement or instrument to which it is a party or by which it may be
bound, or to which any of the property or assets of the Fund is subject
(collectively, "Agreements and Instruments") except for such violations or
defaults that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement, the Investment Management Agreement,
the Amended and Restated Agreement for Fund Accounting Services, Administrative
Services, Transfer Agency Services and Custody Services Procurement, the
Custodian Contract, the Transfer Agency and Service Agreement and the Auction
Agency Agreement referred to in the Registration Statement (as used herein, the
"Management Agreement," the "Administration Agreement," the "Custodian
Agreement," the "Transfer Agency and Service Agreement" and the "Auction Agency
Agreement," respectively) and the consummation of the transactions contemplated
herein and in the Registration Statement (including the issuance and sale of the
AMPS and the use of the proceeds from the sale of the AMPS as described in the
Prospectus under the caption "Use of Proceeds") and compliance by the Fund with
its obligations hereunder have been duly authorized by all necessary action and
do not and will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default or Repayment
Event (as defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Fund pursuant to,
the Agreements and Instruments (except for such conflicts, breaches or defaults
or liens, charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the provisions of the
Charter or by-laws of the Fund or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Fund or any of its
assets, properties or operations. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder's behalf) the
right to require the repurchase, redemption or repayment of all or a portion of
such indebtedness by the Fund.
(xiii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental agency
or body, domestic or foreign, now pending, or, to the knowledge of the Fund or
the Adviser, threatened, against or affecting the Fund, which is required to be
disclosed in the Registration Statement (other than as disclosed therein), or
which might reasonably be expected to result in a Material Adverse Effect, or
which might reasonably be expected to materially and adversely affect the
properties or assets of the Fund or the consummation of the transactions
contemplated in this Agreement or the performance by the Fund of its obligations
hereunder. The aggregate of all pending legal or governmental proceedings to
which the Fund is a party or of which any of its property or assets is the
subject which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, could not reasonably be
expected to result in a Material Adverse Effect.
(xiv) Accuracy of Exhibits. There are no contracts or documents which are
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits thereto by the 1933 Act, the 1940 Act or by the Rules and
Regulations which have not been so described and filed as required.
(xv) Possession of Intellectual Property. The Fund owns or possesses, or
can acquire on reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other intellectual
property (collectively, "Intellectual Property") necessary to carry on the
business now operated by the Fund, and the Fund has not received any notice or
is not otherwise aware of any infringement of or conflict with asserted rights
of others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or inadequate
to protect the interest of the Fund therein, and which infringement or conflict
(if the subject of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would result in a Material Adverse
Effect.
(xvi) Absence of Further Requirements. No filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of, any
court or governmental authority or agency is necessary or required for the
performance by the Fund of its obligations hereunder, in connection with the
offering, issuance or sale of the AMPS hereunder or the consummation of the
transactions contemplated by this Agreement, except such as have been already
obtained or as may be required under the 1933 Act, the 1940 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), or as may be required under
state securities laws.
(xvii) Possession of Licenses and Permits. The Fund possesses such permits,
licenses, approvals, consents and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies necessary to operate its properties and to
conduct the business as contemplated in the Prospectus; the Fund is in
compliance with the terms and conditions of all such Governmental Licenses,
except where the failure so to comply would not, singly or in the aggregate,
have a Material Adverse Effect; all of the Governmental Licenses are valid and
in full force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force and
effect would not have a Material Adverse Effect; and the Fund has not received
any notice of proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a Material Adverse
Effect.
(xviii) Subchapter M. The Fund intends to direct the investment of the
proceeds of the offering described in the Registration Statement in such a
manner as to comply with the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended ("Subchapter M of the Code" and the "Code,"
respectively), and intends to qualify as a regulated investment company under
Subchapter M of the Code.
(xix) Distribution of Offering Materials. The Fund has not distributed and,
prior to the later to occur of (A) the Closing Time and (B) completion of the
distribution of the AMPS, will not distribute any offering material in
connection with the offering and sale of the AMPS other than the Registration
Statement, a preliminary prospectus, the Prospectus or other materials, if any,
permitted by the 1933 Act or the 1940 Act or the Rules and Regulations.
(xx) Accounting Controls. The Fund maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's general or specific
authorization and with the applicable requirements of the 1940 Act, the Rules
and Regulations and the Code; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets and to maintain
compliance with the books and records requirements under the 1940 Act and the
Rules and Regulations; (C) access to assets is permitted only in accordance with
management's general or specific authorization; and (D) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(xxi) Absence of Undisclosed Payments. To the Fund's knowledge, except as
disclosed in the Prospectus, neither the Fund nor any employee or agent of the
Fund has made any payment of funds of the Fund or received or retained any
funds, which payment, receipt or retention of funds is of a character required
to be disclosed in the Prospectus.
(xxii) Material Agreements. This Agreement, the Management Agreement, the
Administration Agreement, the Custodian Agreement, the Transfer Agency and
Service Agreement and the Auction Agency Agreement have each been executed and
delivered by the Fund, as of the dates noted therein, and each complies with all
applicable provisions of the 1940 Act. Assuming due authorization, execution and
delivery by the other parties thereto with respect to the Management Agreement,
the Administration Agreement, the Custodian Agreement, the Transfer Agency and
Service Agreement and the Auction Agency Agreement, each of the Management
Agreement, the Administration Agreement, the Custodian Agreement, the Transfer
Agency and Service Agreement and the Auction Agency Agreement constitutes a
valid and binding agreement of the Fund, enforceable in accordance with its
terms, except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, and general equitable principles (whether
considered in a proceeding in equity or at law).
(xxiii) Registration Rights. There are no persons with registration rights
or other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Fund under the 1933 Act.
(xxiv) NYSE Listing. The Fund's common shares of beneficial interest are
duly listed on the New York Stock Exchange ("NYSE"). (b) Representations and
Warranties by the Adviser. The Adviser represents and warrants to each
Underwriter as of the date hereof, and as of the Closing Time referred to in
Section 2(c) hereof, as follows:
(i) Good Standing of the Adviser. The Adviser has been duly organized and
is validly existing and in good standing as a statutory trust under the laws of
the State of Delaware with full statutory trust power and authority to own,
lease and operate its properties and to conduct its business as described in the
Prospectus and is duly qualified as a foreign trust to transact business and is
in good standing in each other jurisdiction in which such qualification is
required, except as would not, individually or in the aggregate, result in a
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of such Adviser, whether or not
arising in the ordinary course of business (an "Adviser Material Adverse
Effect").
(ii) Investment Adviser Status. The Adviser is duly registered and in good
standing with the Commission as an investment adviser under the Advisers Act,
and is not prohibited by the Advisers Act or the 1940 Act, or the rules and
regulations under such acts, from acting under the Management Agreement for the
Fund as contemplated by the Prospectus.
(iii) Description of Adviser. The description of the Adviser in the
Registration Statement and the Prospectus (and any amendment or supplement to
either of them) complied and comply in all material respects with the provisions
of the 1933 Act, the 1940 Act, the Advisers Act, the Rules and Regulations and
the Advisers Act Rules and Regulations and is true and correct and does not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(iv) Capitalization. The Adviser has the financial resources available to
it necessary for the performance of its services and obligations as contemplated
in the Prospectus, this Agreement and under the Management Agreement to which it
is a party.
(v) Authorization of Agreements; Absence of Defaults and Conflicts. This
Agreement and the Management Agreement have each been duly authorized, executed
and delivered by the Adviser, and the Management Agreement constitutes a valid
and binding obligation of the Adviser, enforceable in accordance with its terms,
except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and general equitable principles (whether considered
in a proceeding in equity or at law); and neither the execution and delivery of
this Agreement or the Management Agreement nor the performance by the Adviser of
its obligations hereunder or thereunder will conflict with, or result in a
breach of any of the terms and provisions of, or constitute, with or without the
giving of notice or lapse of time or both, a default under, any agreement or
instrument to which the Adviser is a party or by which it is bound, the
agreement and declaration of trust, the by-laws or other organizational
documents of the Adviser, or to the Adviser's knowledge, by any law, order,
decree, rule or regulation applicable to it of any jurisdiction, court, federal
or state regulatory body, administrative agency or other governmental body,
stock exchange or securities association having jurisdiction over the Adviser or
its properties or operations; and no consent, approval, authorization or order
of any court or governmental authority or agency is required for the
consummation by the Adviser of the transactions contemplated by this Agreement
and the Management Agreement, except as have been obtained or may be required
under the 1933 Act, the 1940 Act, the 1934 Act or state securities laws.
(vi) No Material Adverse Change. Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, except as
otherwise stated therein, there has not occurred any event which should
reasonably be expected to have a material adverse effect on the ability of the
Adviser to perform its respective obligations under this Agreement and the
Management Agreement to which it is a party.
(vii) Absence of Proceedings. There is no action, suit, proceeding, inquiry
or investigation before or brought by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Adviser,
threatened against or affecting the Adviser or any "affiliated person" of the
Adviser (as such term is defined in the 1940 Act) or any partners, trustees,
officers or employees of the foregoing, whether or not arising in the ordinary
course of business, which would reasonably be expected to result in any Adviser
Material Adverse Effect or materially and adversely affect the ability of the
Adviser to function as an investment adviser or perform its obligations under
the Management Agreement, or which is required to be disclosed in the
Registration Statement and the Prospectus.
(viii) Absence of Violation or Default. The Adviser is not in violation of
its agreement and declaration of trust, by-laws or other organizational
documents or in default under any agreement, indenture or instrument, except for
such violations or defaults that would not result in an Adviser Material Adverse
Effect.
(c) Officer's Certificates. Any certificate signed by any officer of the
Fund or the Adviser delivered to the Representative or to counsel for the
Underwriters shall be deemed a representation and warranty by the Fund or the
Adviser, as the case may be, to each Underwriter as to the matters covered
thereby.
SECTION 16. Sale and Delivery to Underwriters; Closing.
(a) AMPS. On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Fund
agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Fund, at the
price per share set forth in Schedule B, the number of AMPS set forth in
Schedule A opposite the name of such Underwriter, plus any additional number of
AMPS which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof.
(b) Commission. The Fund agrees to pay to the Underwriters the commission
set forth in Schedule B as compensation to the Underwriters for their
commitments under this Agreement.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the AMPS shall be made at the offices of Clifford Chance US
LLP, 200 Park Avenue, New York, New York 10166 or at such other place as shall
be agreed upon by the Representative and the Fund, at 10:00 A.M. (Eastern time)
on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on
any given day) business day after the date hereof (unless postponed in
accordance with the provisions of Section 10), or such other time not later than
ten business days after such date as shall be agreed upon by the Representative
and the Fund (such time and date of payment and delivery being herein called
"Closing Time").
Payment shall be made to the Fund by wire transfer of immediately available
funds to a bank account designated by the Fund, against delivery to the
Representative for the respective accounts of the Underwriters of certificates
for the AMPS to be purchased by them. It is understood that each Underwriter has
authorized the Representative, for its account, to accept delivery of, receipt
for, and make payment of the purchase price for, the AMPS that it has agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the AMPS to be purchased by any Underwriter whose funds have not been
received by the Closing Time, but such payment shall not relieve such
Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the AMPS shall be in such
denominations and registered in such names as the Representative may request in
writing at least one full business day before the Closing Time. The certificates
for the AMPS will be made available for examination and packaging by the
Representative in the City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time.
SECTION 17. Covenants.
(a) The Fund and the Adviser, jointly and severally, covenant with each
Underwriter as follows:
(i) Compliance with Securities Regulations and Commission Requests. The
Fund, subject to Section 3(a)(ii), will comply with the requirements of Rule
430A and will notify the Representative immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration Statement
shall become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the AMPS for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Fund will promptly effect the filings necessary pursuant to
Rule 497 and will take such steps as it deems necessary to ascertain promptly
whether the form of prospectus transmitted for filing under Rule 497 was
received for filing by the Commission and, in the event that it was not, it will
promptly file such prospectus. The Fund will make reasonable efforts to prevent
the issuance of any stop order, or order of suspension or revocation of
registration pursuant to Section 8(e) of the 1940 Act, and, if any such stop
order or order of suspension or revocation of registration is issued, to obtain
the lifting thereof at the earliest possible moment.
(ii) Filing of Amendments. The Fund will give the Representative notice of
its intention to file or prepare any amendment to the Registration Statement
(including any filing under Rule 462(b)) or any amendment, supplement or
revision to either the prospectus included in the Registration Statement at the
time it became effective or to the Prospectus, will furnish the Representative
with copies of any such documents a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file or use any such
document to which the Representative or counsel for the Underwriters shall
reasonably object.
(iii) Delivery of Registration Statements. The Fund has furnished or will
deliver to the Representative and counsel for the Underwriters, without charge,
signed copies of the Registration Statement as originally filed and of each
amendment thereto (including exhibits filed therewith or incorporated by
reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the Representative, without charge, a
conformed copy of the Registration Statement as originally filed and of each
amendment thereto (without exhibits) for each of the Underwriters. The copies of
the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(iv) Delivery of Prospectuses. The Fund has delivered to each Underwriter,
without charge, as many copies of each preliminary prospectus as such
Underwriter reasonably requested, and the Fund hereby consents to the use of
such copies for purposes permitted by the 1933 Act. The Fund will furnish to
each Underwriter, without charge, during the period when the Prospectus is
required to be delivered under the 1933 Act or the 1934 Act, such number of
copies of the Prospectus (as amended or supplemented) as such Underwriter may
reasonably request. The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T. (v) Continued Compliance with
Securities Laws. If at any time when a prospectus is required by the 1933 Act to
be delivered in connection with sales of the AMPS, any event shall occur or
condition shall exist as a result of which it is necessary, in the opinion of
counsel for the Underwriters or for the Fund, to amend the Registration
Statement or amend or supplement the Prospectus in order that the Prospectus
will not include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein not misleading
in the light of the circumstances existing at the time it is delivered to a
purchaser, or if it shall be necessary, in the opinion of such counsel, at any
such time to amend the Registration Statement or amend or supplement the
Prospectus in order to comply with the requirements of the 1933 Act or the Rules
and Regulations, the Fund will promptly prepare and file with the Commission,
subject to Section 3(a)(ii), such amendment or supplement as may be necessary to
correct such statement or omission or to make the Registration Statement or the
Prospectus comply with such requirements, and the Fund will furnish to the
Underwriters such number of copies of such amendment or supplement as the
Underwriters may reasonably request.
(vi) Blue Sky Qualifications. The Fund will use its best efforts, in
cooperation with the Underwriters, to qualify the AMPS for offering and sale
under the applicable securities laws of such states and other jurisdictions of
the United States as the Representative may designate and to maintain such
qualifications in effect for a period of not less than one year from the later
of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Fund shall not be obligated
to file any general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is not
so qualified or to subject itself to taxation in respect of doing business in
any jurisdiction in which it is not otherwise so subject. In each jurisdiction
in which the AMPS have been so qualified, the Fund will file such statements and
reports as may be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement and any Rule 462(b) Registration
Statement.
(vii) Rule 158. The Fund will timely file such reports pursuant to the 1934
Act as are necessary in order to make generally available to its securityholders
as soon as practicable an earning statement for the purposes of, and to provide
the benefits contemplated by, the last paragraph of Section 11(a) of the 1933
Act.
(viii) Use of Proceeds. The Fund will use the net proceeds received by it
from the sale of the AMPS in the manner specified in the Prospectus under "Use
of Proceeds."
(ix) Reporting Requirements. The Fund, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1940
Act and the 1934 Act within the time periods required by the 1940 Act and the
Rules and Regulations and the 1934 Act and the rules and regulations of the
Commission thereunder, respectively.
(x) Subchapter M. The Fund will comply with the requirements of Subchapter
M of the Code to qualify as a regulated investment company under the Code.
(xi) No Manipulation of Market for AMPS. The Fund will not (a) take,
directly or indirectly, any action designed to cause or to result in, or that
might reasonably be expected to constitute, the stabilization or manipulation of
the price of any security of the Fund to facilitate the sale or resale of the
AMPS, and (b) until the Closing Time, (i) sell, bid for or purchase the AMPS or
pay any person any compensation for soliciting purchases of the AMPS or (ii) pay
or agree to pay to any person any compensation for soliciting another to
purchase any other securities of the Fund .
(xii) Rule 462(b) Registration Statement. If the Fund elects to rely upon
Rule 462(b), the Fund shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time,
on the date of this Agreement, and the Fund shall at the time of filing either
pay to the Commission the filing fee for the Rule 462(b) Registration Statement
or give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the 1933 Act.
(xiii) Accountant's Confirmation. The Fund will furnish to the
Representative, on the date on which delivery is made to the rating agencies
rating the AMPS, the Accountant's Confirmation (as defined in the Statement of
Preferences) corresponding to the Preferred Shares Basic Maintenance Report (as
defined in the Statement of Preferences) for the first Quarterly Valuation Date
(as defined in the Statement of Preferences) following the Closing Time.
(b) Except as provided in this Agreement, the Fund will not sell, contract
to sell or otherwise dispose of any of its shares of preferred shares of the
same series as the AMPS or any securities convertible into or exercisable or
exchangeable for its shares of preferred shares of the same series as the AMPS,
or grant any options or warrants to purchase its shares of preferred shares of
the same series as the AMPS, for a period of 180 days after the date of the
Prospectus, without the prior written consent of Merrill Lynch.
(c) On the date of the purchase and sale contemplated by this Agreement
(the "Closing Date"), and assuming on the receipt of the proceeds of the
issuance of the AMPS on such date, the Fund will use all or a portion of such
proceeds to repay any liability that the Fund has for borrowed money outstanding
on the Closing Date (except for short-term liabilities in connection with
settling sales or purchases of portfolio securities), including interest
thereon, including for this purpose any liability of the Fund outstanding on
such date under any reverse repurchase agreement.
SECTION 18. Payment of Expenses.
(a) Expenses. The Fund will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the preparation, printing
and filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, printing and delivery to the Underwriters of this Agreement, any
Agreement among Underwriters and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the AMPS,
(iii) the preparation, issuance and delivery of the certificates for the AMPS to
the Underwriters, including any shares or other transfer taxes and any stamp or
other duties payable upon the sale, issuance or delivery of the AMPS to the
Underwriters, (iv) the fees and disbursements of the Fund's counsel, accountants
and other advisers, (v) the qualification of the AMPS under securities laws in
accordance with the provisions of Section 3(a)(vi) hereof, including filing fees
and the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, Prospectus and any
amendments or supplements thereto, (vii) the preparation, printing and delivery
to the Underwriters of copies of the Blue Sky Survey and any supplement thereto,
(viii) the fees and expenses of any transfer agent or registrar for the AMPS and
(ix) the filing fees incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, the review by the NASD of the
terms of the sale of the AMPS.
(b) Termination of Agreement. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or Section 9(a)
hereof, the Fund and the Adviser, jointly and severally, agree that they shall
reimburse the Underwriters for all of their out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters.
SECTION 19. Conditions of Underwriters' Obligations.
The obligations of the several Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Fund and the Adviser
contained in Section 1 hereof or in certificates of any officer of the Fund or
the Adviser delivered pursuant to the provisions hereof, to the performance by
the Fund and the Adviser of their respective covenants and other obligations
hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act, no notice or order pursuant
to Section 8(e) of the 1940 Act shall have been issued, and no proceedings with
respect to either shall have been initiated or threatened by the Commission, and
any request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
Underwriters. A prospectus containing the Rule 430A Information shall have been
filed with the Commission in accordance with Rule 497 (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430A).
(b) Opinion of Counsel for the Fund and the Adviser. At Closing Time, the
Representative shall have received the favorable opinions, dated as of Closing
Time, of Dickstein Shapiro Morin & Oshinsky LLP, counsel for the Fund, and Reed
Smith LLP, counsel for the Adviser, in form and substance satisfactory to
counsel for the Underwriters, together with signed or reproduced copies of such
letters for each of the other Underwriters substantially to the effect set forth
in Exhibit A hereto and to such further effect as counsel to the Underwriters
may reasonably request.
(c) Opinion of Counsel for Underwriters. At Closing Time, the
Representative shall have received the favorable opinion, dated as of Closing
Time, of Clifford Chance US LLP, counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters
with respect to the matters set forth in clauses (A) (i), (ii), (vi), (vii)
(solely as to preemptive or other similar rights arising by operation of law or
under the charter or by-laws of the Fund), (viii) through (x), inclusive, (xiv)
(solely as to the information in the Prospectus under "Description of AMPS") and
the last paragraph of Exhibit A hereto. In giving such opinion such counsel may
rely, as to all matters governed by the laws of jurisdictions other than the law
of the State of New York and the federal law of the United States, upon the
opinions of counsel satisfactory to the Representative. Such counsel may also
state that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon certificates of officers of the Fund and
certificates of public officials.
(d) Officers' Certificates. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Fund, whether or not arising in the ordinary course of business, and the
Representative shall have received a certificate of a duly authorized officer of
the Fund and of the chief financial or chief accounting officer of the Fund and
of the President or a Vice President or Managing Director of the Adviser, dated
as of Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties in Sections 1(a) and (b)
hereof are true and correct with the same force and effect as though expressly
made at and as of Closing Time, (iii) each of the Fund and the Adviser,
respectively, has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to Closing Time, and (iv) no
stop order suspending the effectiveness of the Registration Statement, or order
of suspension or revocation of registration pursuant to Section 8(e) of the 1940
Act, has been issued and no proceedings for any such purpose have been
instituted or are pending or are contemplated by the Commission.
(e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representative shall have received from Ernst & Young LLP a
letter dated such date, in form and substance satisfactory to the
Representative, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial and other information
contained in the Registration Statement and the Prospectus.
(f) Bring-down Comfort Letter. At Closing Time, the Representative shall
have received from Ernst & Young LLP a letter, dated as of Closing Time, to the
effect that they reaffirm the statements made in the letter furnished pursuant
to subsection (e) of this Section, except that the specified date referred to
shall be a date not more than three business days prior to Closing Time.
(g) Rating. The Fund shall have delivered and the Representative shall have
received evidence satisfactory to the Representative that the AMPS are rated
`Aaa' by Moody's and `AAA' by Fitch as of the Closing Time, and there shall not
have been given any written notice of any intended or potential downgrading, or
of any review for a potential downgrading, in the rating accorded to the AMPS by
Moody's or by Fitch.
(h) Asset Coverage. As of the Closing Time, and assuming the receipt of the
net proceeds from the sale of the AMPS, and, with respect to the Preferred
Shares Basic Maintenance Amount requirement only, using portfolio holdings and
valuations as of the close of business on any day not more than six business
days preceding the Closing Time (provided that the total net assets of the Fund
as of the Closing Time have not declined by 5% or more from such valuation
date), the Investment Company Act Preferred Shares Asset Coverage and the
Preferred Shares Basic Maintenance Amount (each as defined in the Statement of
Preferences) requirements of Sections 6 and 7(a) of the Statement of Preferences
each will be met.
(i) Additional Documents. At Closing Time, counsel for the Underwriters
shall have been furnished with such documents and opinions as they may require
for the purpose of enabling them to pass upon the issuance and sale of the AMPS
as herein contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Fund and the Adviser in
connection with the issuance and sale of the AMPS as herein contemplated shall
be satisfactory in form and substance to the Representative and counsel for the
Underwriters.
(j) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Representative by notice to the Fund at any
time at or prior to Closing Time and such termination shall be without liability
of any party to any other party except as provided in Section 4 and except that
Sections 1, 6, 7, 8 and 13 shall survive any such termination and remain in full
force and effect.
SECTION 20. Indemnification.
(a) Indemnification of Underwriters. The Fund and the Adviser, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act, and any director, officer, employee
or affiliate thereof as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or arising
out of any untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission; provided that (subject to Section 6(d) below) any such
settlement is effected with the written consent of the Fund; and
(iii) against any and all expense whatsoever, as incurred (including the
fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred
in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the Fund
or the Adviser by any Underwriter through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto).
(b) Indemnification of Fund, Adviser, Trustees and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Fund and the
Adviser, their respective trustees, each of the Fund's officers who signed the
Registration Statement, and each person, if any, who controls the Fund or the
Adviser within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information, if applicable, or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Fund or the Adviser by such Underwriter through Merrill Lynch expressly
for use in the Registration Statement (or any amendment thereto) or such
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Fund and the Adviser. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
SECTION 21. Contribution.
If the indemnification provided for in Section 6 hereof is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Fund and the Adviser on the one hand and the
Underwriters on the other hand from the offering of the AMPS pursuant to this
Agreement or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Fund and the Adviser on the one hand and of the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Fund and the Adviser on the one hand
and the Underwriters on the other hand in connection with the offering of the
AMPS pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the AMPS pursuant to
this Agreement (before deducting expenses) received by the Fund and the total
underwriting discount received by the Underwriters (whether from the Fund or
otherwise), in each case as set forth on the cover of the Prospectus bear to the
aggregate initial public offering price of the AMPS as set forth on such cover.
The relative fault of the Fund and the Adviser on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Fund or the Adviser or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Fund, the Adviser and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the AMPS underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of any such untrue or alleged
untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each trustee of the Fund and each director of the Adviser, respectively, each
officer of the Fund who signed the Registration Statement, and each person, if
any, who controls the Fund or the Adviser, within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Fund and the Adviser, respectively. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of AMPS set forth opposite their respective names in
Schedule A hereto and not joint.
SECTION 22. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement
or in certificates of officers of the Fund or the Adviser submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or controlling person, or
by or on behalf of the Fund or the Adviser, and shall survive delivery of the
AMPS to the Underwriters.
SECTION 23. Termination of Agreement.
(a) Termination; General. The Representative may terminate this Agreement,
by notice to the Fund, at any time at or prior to Closing Time (i) if there has
been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Fund or the Adviser, whether or not arising
in the ordinary course of business, or (ii) if there has occurred any material
adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representative, impracticable or inadvisable to market the AMPS
or to enforce contracts for the sale of the AMPS, or (iii) if trading in the
common shares of the Fund has been suspended or materially limited by the
Commission or the NYSE, or if trading generally on the NYSE or the American
Stock Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the NASD or any other governmental authority, or
a material disruption has occurred in commercial banking or securities
settlement or clearance services in the United States, or (iv) if a banking
moratorium has been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7, 8 and 13 shall survive such termination and remain in full force and effect.
SECTION 24. Default by One or More of the Underwriters.
If one or more of the Underwriters shall fail at Closing Time to purchase
the AMPS which it or they are obligated to purchase under this Agreement (the
"Defaulted AMPS"), the Representative shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted AMPS in such amounts as may be agreed upon and upon the terms
herein set forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted AMPS does not exceed 10% of the number of
AMPS to be purchased on such date, each of the non-defaulting Underwriters shall
be obligated, severally and not jointly, to purchase the full amount thereof in
the proportions that their respective underwriting obligations hereunder bear to
the underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted AMPS exceeds 10% of the number of AMPS to be
purchased on such date, this Agreement shall terminate without liability on the
part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the Representative or the Fund shall have the right to
postpone Closing Time for a period not exceeding seven days in order to effect
any required changes in the Registration Statement or Prospectus or in any other
documents or arrangements. As used herein, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 10.
SECTION 25. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be directed to the
Representative, Merrill Lynch & Co., North Tower, 4 World Financial Center, New
York, New York 10080, attention of Equity Capital Markets; and notices to the
Fund or the Adviser shall be directed, as appropriate, to the office of
Federated Investors, Inc., Attention: Lisa E. Peternel, Federated Investors
Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779; with copies to Dickstein
Shapiro Morin & Oshinsky LLP, Attention: Matthew G. Maloney, Esq., 2101 L Street
NW, Washington, DC 20037-1526 and to Federated Investors, Inc., Stephen A. Keen,
Esq., Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
SECTION 26. Parties.
This Agreement shall each inure to the benefit of and be binding upon the
Underwriters, the Fund, the Adviser and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Underwriters, the Fund, the
Adviser and their respective successors and the controlling persons and officers
and trustees referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Fund, the Adviser and their
respective successors, and said controlling persons and officers, trustees and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of AMPS from any Underwriter
shall be deemed to be a successor by reason merely of such purchase.
SECTION 27. GOVERNING LAW AND TIME.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
IN SAID STATE. UNLESS OTHERWISE EXPLICITLY PROVIDED, SPECIFIED TIMES OF DAY
REFER TO NEW YORK CITY TIME.
SECTION 28. Effect of Headings.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument,
along with all counterparts, will become a binding agreement among the
Underwriters, the Fund and the Adviser in accordance with its terms.
Very truly yours,
FEDERATED PREMIER MUNICIPAL INCOME FUND
By:
Name:
Title:
FEDERATED INVESTMENT MANAGEMENT COMPANY
By:
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
UBS WARBURG LLC
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
Authorized Signatory
For themselves and as Representative of the
other Underwriters named in Schedule A hereto.
Sch A-1
SCHEDULE A
Number of
Name of Underwriter AMPS
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................................
UBS Warburg LLC............................................................
Total..............................................................2,147
SCHEDULE B
Federated Premier Municipal Income Fund
Auction Market Preferred Shares
2,147 Shares, Series A
Liquidation Preference $25,000 per Share
1. The liquidation preference per share for the AMPS shall be $25,000.
2. The purchase price per share for the AMPS to be paid by the several
Underwriters shall be $24,750, such discount from the liquidation preference
representing the commission to be paid to the Underwriters for their commitment
hereunder of $250.
3. The initial dividend rate of the AMPS, Series A shall be [ ]% per annum.
Exhibit (k)(i) under Form N-2
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT made as of the 19th day of December, 2002 by and
between Federated Premier Municipal Income Fund, a Delaware statutory trust (the
"Fund") and Federated Investment Management Company, a Delaware statutory trust
(the "Adviser").
WHEREAS, the Fund has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (the "Registration Statement") on
Form N-2 pursuant to the Securities Act of 1933, as amended (the "1933 Act')
(File No. 333-100605) and the Investment Company Act of 1940, as amended (the
"1940 Act") (File No. 811-21235) pursuant to which the Fund proposes to sell to
the public an aggregate of 5,850,000 shares of the Fund's common shares of
beneficial interest through several underwriters led by Merrill Lynch & Co. and
others (collectively, the "Underwriters") in connection with an offering
pursuant to a purchase agreement (the "Purchase Agreement") to be entered into
by the Fund, the Adviser and the Underwriters. The Fund also proposes to grant
the Underwriters an option to purchase up to an additional 877,500 common shares
of beneficial interest solely to cover over-allotments.
WHEREAS, the Purchase Agreement contains certain provisions with respect to
the obligations and liabilities between the Fund and the Adviser on the one hand
and the Underwriters on the other.
WHEREAS, the Underwriters require the Fund and the Adviser to agree to
jointly and severally indemnify the Underwriters for certain liabilities. 45
WHEREAS, the Fund and the Adviser desire to set forth their understanding
and agreement concerning certain liabilities arising out of their obligations to
the Underwriters under the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
The Adviser agrees to indemnify and hold harmless the Fund, its trustees
and each of the Fund's officers who signed the Registration Statement, against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section6(a) of the Purchase Agreement, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or any amendment
thereto), including the Rule 430A Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the Fund
by the Adviser expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
An indemnified party shall give notice as promptly as reasonably
practicable to the Adviser of any action commenced against it in respect of
which indemnity may be sought hereunder, but failure to so notify shall not
relieve the Adviser from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this
Indemnification Agreement. In respect of any such proceeding, counsel shall be
selected by the Fund. The Adviser may participate at its own expense in the
defense of any such action; provided, however, that counsel to the Adviser shall
not (except with the consent of the Fund) also be counsel to the Fund. In no
event shall the Adviser be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from its own counsel in connection
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
Without the prior written consent of an indemnified party, the Adviser shall not
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Indemnification Agreement (whether or
not the indemnified party is an actual or potential party thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of the
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of the
indemnified party.
If at any time an indemnified party shall have requested the Adviser to
reimburse an indemnified party for fees and expenses of counsel, the Adviser
agrees that it shall be liable for any settlement effected without its written
consent if (i) such settlement is entered into more than 45 days after receipt
by the Adviser of the aforesaid request, (ii) the Adviser shall have received
notice of the terms of such settlement at least 30 days prior to such settlement
being entered into and (iii) the Adviser shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement.
Any notice, claim or demand hereunder shall be made in writing and if
required to be given to an indemnified party shall be sufficient if given as
provided in the Purchase Agreement for notices to the Fund and any notice, claim
or demand hereunder to be given to the Adviser shall be made in writing and
likewise shall be sufficient if given as provided in the Purchase Agreement.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns. This Agreement shall be governed by the laws of the State of New
York without regard to such jurisdiction's conflicts of laws principles. This
Agreement may be executed by one or more parties hereto in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall be deemed to be one and the same instrument.
Except as otherwise specifically defined herein, all capitalized terms used
in this Agreement shall have the meanings assigned such terms in the Purchase
Agreement.
IN WITNESS WHEREOF, the parties below have caused the foregoing to be
executed on their behalf this 19th day of December, 2002.
FEDERATED PREMIER MUNCIPAL INCOME FUND
By: /s/J. Christopher Donahue
Name: J. Christopher Donahue
Title: President
FEDERATED INVESTMENT MANAGEMENT COMPANY
By: /s/ Keith M. Schappert
Name: Keith M. Schappert
Title: President
Exhibit (k)(ii) under Form N-2
Transfer Agency and Service Agreement
Among
Each of the Closed End Investment Companies Listed on Exhibit B Hereto
and
EquiServe Trust Company, N.A.
and
EquiServe, Inc.
Table of Contents
Section 1. Certain Definitions 4
Section 2. Appointment of Agent 5
Section 3. Standard Services 6
Section 4. Dividend Disbursing Services 8
Section 5. Shareholder Internet Account Access Services 9
Section 6. Optional Services.............................. 10
Section 7 Fee and Expenses 10
Section 8. Representations and Warranties of Transfer Agent 12
Section 9. Representations and Warranties of Customer 12
Section 10. Indemnification/Limitation of Liability..... 13
Section 11. Damages 15
Section 12. Responsibilites of the Transfer Agent 15
Section 13. Covenants of the Customer and Transfer Agent 16
Section 14. Data Access and Propreitary Information 17
Section 15. Confidentiality 19
Section 16. Term and Terminiation 19
Section 17. Assignment 21
Section 18. Unaffiliated Third Parties 21
Section 19. Miscellaneous 21
Section 19.1 Notice. 21
Section 19.2 Successors 22
Section 19.3. Amendments.................................22
Section 19.4.
Severability.................................................22
Section 19.5. Governing
Law..........................................................22
Section 19.6 Force
Majeure......................................................22
Section 19.7 Descriptive Headings..........................22
Section 19.8 Third Party Beneficiaries.....................22
Section 19.9 Survival .................................23
Section 19.10 Priorities 23
Section 19.11. Merger of Agreement...........................23
Section 19.12 Counterparts.................................23
AGREEMENT made as of the 19th day of December, 2002, by and among each of
the closed-end investment companies listed on Exhibit B hereto, a corporation,
having a principal office and place of business at 5800 Corporate Drive,
Pittsburgh, PA, 15237-7000 (each a "Customer" or the "Customer"), and EquiServe,
Inc., a Delaware corporation, and its fully owned subsidiary EquiServe Trust
Company, N.A., a federally charted trust company doing business at [525
Washington Boulevard, Jersey City, New Jersey 07310 or 150 Royall Street,
Canton, Massachusetts 02021] (collectively, the "Transfer Agent" or individually
"EQI" and the "Trust Company", respectively).
WHEREAS, the Customer desires to appoint the Transfer Agent as sole
transfer agent, registrar, administrator of dividend reinvestment plans, option
plans, and direct stock purchase plans and EQI as dividend disbursing agent and
processor of all payments received or made by Customer under this Agreement.
WHEREAS, the Trust Company and EQI desire to accept such respective
appointments and perform the services related to such appointments;
WHEREAS, the Board of Trustees of each Customer has approved appointment of
the Transfer Agent.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Certain Definitions.
(a) "Account" or "Accounts" shall mean the account of each Shareholder
which account shall hold any full or fractional shares of stock held by such
Shareholder and/or outstanding funds or tax reporting to be done.
(b) "Additional Services" shall mean any and all services which are not
Services as set forth in the Fee and Service Schedule, but performed by Transfer
Agent upon request of Customer.
(c) "Agreement" shall mean this agreement and any and all exhibits or
schedules attached hereto and any and all amendments or modifications, which may
from time to time be executed.
(d) "Annual Period" shall mean each twelve (12) month period commencing on
the Effective Date and, thereafter, on each anniversary of the Effective Date.
(e) "Closed Account" shall mean an account with a zero share balance, no
outstanding funds or no reportable tax information.
(f) "Customer ID(s)" shall have the meaning set forth in Section 14.3.
(g) "Data Access Service" shall have the meaning set forth in Section 14.1.
(h) "Dividend Reinvestment Plan" and "Direct Stock Purchase Plan" shall
mean the services as set forth in Section 4 and in the Fee and Service Schedule.
(i) "Effective Date" shall mean the date first stated above.
(j) "Fee and Service Schedule" shall mean the fees and services set forth
in the "Fee and Service Schedule" attached hereto.
(k) "Password(s)" shall have the meaning set forth in Section 14.3.
(l) "Proprietary Information" shall have the meaning set forth in Section
14.3.
(m) "Security Procedures" shall have the meaning set forth in Section 5.1.
(n) "Services" shall mean any and all services as further described herein
and in the "Fee and Service Schedule" or other schedules attached hereto.
(o) "Share" shall mean Customer's common shares of beneficial interest par
value $0.01 per share authorized by the Customer's Declaration of Trust and
other classes of Customer's stock to be designated by the Customer in writing
and for which the Transfer Agent agrees to service under this Agreement.
(p) "Shareholder" shall mean the holder of record of Shares.
(q) "Shareholder Data" shall have the meaning set forth in Section 14.2.
(r) "Shareholder Internet Services" shall have the meaning set forth in
Section 5.1.
2. Appointment of Agent.
2.1 Appointments. The Customer hereby appoints the Transfer Agent to act as
sole transfer agent and registrar for all Shares in accordance with the terms
and conditions hereof and as administrator of Plans and appoints EQI as dividend
disbursing agent and processor of all payments received or made by or on behalf
of the Customer under this Agreement, and the Transfer Agent and EQI accept the
appointments. Customer shall provide Transfer Agent with certified copies of
resolutions appointing the Trust Company as Transfer Agent.
2.2 Documents. In connection with the appointing of Transfer Agent as the
transfer agent and registrar for each Customer, the Customer will provide or has
previously provided each of the following documents to the Transfer Agent:
(a) Copies of Registration Statements and amendments thereto, filed with
the Securities and Exchange Commission for initial public offerings;
(b) Specimens of all forms of outstanding stock certificates , with a
certificate of the Secretary of the Customer as to their authenticity;
(c) Specimens of the Signatures of the officers of the Customer authorized
to sign stock certificates and individuals authorized to sign written
instructions and requests; and
(d) An opinion of counsel for the Customer addressed to both the Trust
Company and EQI with respect to:
(i) The Customer's organization and existence under the laws of its state
of organization; and
(ii) That all issued Shares are, and all unissued Shares will be, when
issued, validly issued, fully paid and non-assessable.
2.3 Records. Transfer Agent may adopt as part of its records all lists of
holders, records of Customer's stock, books, documents and records which have
been employed by any former agent of Customer for the maintenance of the ledgers
for the Customer's shares, provided such ledger is certified by an officer of
Customer or the prior transfer agent to be true, authentic and complete.
2.4 Shares. Customer shall, if applicable, inform Transfer Agent as to (i)
the existence or termination of any restrictions on the transfer of Shares and
in the application to or removal from any certificate of stock of any legend
restricting the transfer of such Shares or the substitution for such certificate
of a certificate without such legend, (ii) any authorized but unissued Shares
reserved for specific purposes, (iii) any outstanding Shares which are
exchangeable for Shares and the basis for exchange, (iv) reserved Shares subject
to option and the details of such reservation and (v) special instructions
regarding dividends and information of foreign holders.
2.5 Customer's Agent. Transfer Agent represents that it is engaged in an
independent business and will perform its obligations under this Agreement as an
agent of Customer.
2.6 Certificates. Customer shall deliver to Transfer Agent an appropriate
supply of stock certificates, which certificates shall provide a signature panel
for use by an officer of or authorized signor for Transfer Agent to sign as
transfer agent and registrar, and which shall state that such certificates are
only valid after being countersigned and registered.
3. Standard Services.
3.1 Transfer Agent Services. The Transfer Agent will perform the following
services:
In accordance with the procedures established from time to time by
agreement between the Customer and the Transfer Agent, the Transfer Agent shall:
(a) issue and record the appropriate number of Shares as authorized and
hold such Shares in the appropriate Shareholder account;
(b) effect transfers of Shares by the registered owners thereof upon
receipt of appropriate documentation;
(c) act as agent for Shareholders pursuant to the Dividend Reinvestment
Plan, and other investment programs as amended from time to time in accordance
with the terms of the agreements relating thereto to which the Transfer Agent is
or will be a party; and
(d) issue replacement certificates for those certificates alleged to have
been lost, stolen or destroyed in accordance with procedures adopted by the
Customer.
3.2 EQI Services. In accordance with procedures established from time to
time by agreement between the Customer and EQI, EQI shall:
(a) prepare and transmit payments for dividends and distributions declared
by the Customer, provided good funds for said dividends or distributions are
received by EQI prior to the scheduled payable date for said dividends or
distributions;
(b) issue replacement checks and place stop orders on original checks based
on shareholder's representation that a check was not received or was lost.EQI
shall be responsible for all losses or claims resulting from such replacement;
and
(c) Receive all payments made to the Customer or the Transfer Agent under
the Dividend Reinvestment Plan, Direct Stock Purchase Plan, and Plans and make
all payments required to be made under such plans, including all payments
required to be made to the Customer.
3.3 Customary Services. The Transfer Agent shall perform all the customary
services of a transfer agent, agent of dividend reinvestment plan, cash purchase
plan and other investment programs as described in Section 3.1 consistent with
those requirements in effect as of the date of this Agreement. EQI shall perform
all the customary services of a dividend disbursing agent and a processor of
payments as described in Section 3.2 consistently with those requirements in
effect as of the date of this Agreement. The detailed services and definition,
frequency, limitations and associated costs (if any) of the Services to be
performed by the Transfer Agent are set out in the attached Fee and Service
Schedule.
3.4 Compliance with Laws. The Customer agrees that each of the Trust
Company and EQI is obligated to and the Trust Company and EQI agree to comply
with all applicable federal, state and local laws and regulations, codes, order
and government rules in the performance of its duties under this Agreement.
3.5 Unclaimed Property and Lost Shareholders. The Transfer Agent shall
report unclaimed property to each state in compliance with state law and shall
comply with Section 17Ad-17 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), for lost Shareholders. If the Customer is not in
compliance with applicable state laws, there will be no charge for the first two
years for this service for such Customer, other than a charge of $3.00 per due
diligence notice mailed; provided that after the first two years, the Transfer
Agent will charge such Customer a reasonable fee to be mutually agreed upon plus
any out-of-pocket expenses.
3.6 Compliance with Office of Foreign Asset Control ("OFAC") Regulations.
The Transfer Agent shall ensure compliance with OFAC laws.
4. Dividend Disbursing Services.
4.1 Declaration of Dividends. Upon receipt of a written notice from the
President, any Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer of Customer declaring the payment of a dividend, EQI shall
disburse such dividend payments provided that in advance of such payment,
Customer furnishes EQI with sufficient funds. The payment of such funds to EQI
for the purpose of being available for the payment of dividend checks from time
to time is not intended by Customer to confer any rights in such funds on
Customer's Shareholders whether in trust or in contract or otherwise.
4.2 Stop Payments. Customer hereby authorizes EQI to stop payment of checks
issued in payment of dividends, but not presented for payment, when the payees
thereof allege either that they have not received the checks or that such checks
have been mislaid, lost, stolen, destroyed or, through no fault of theirs, are
otherwise beyond their control and cannot be produced by them for presentation
and collection, and EQI shall issue and deliver duplicate checks in replacement
thereof.
4.3 Tax Withholding. EQI is hereby authorized to deduct from all dividends
declared by a Customer and disbursed by EQI, as dividend disbursing agent, the
tax required to be withheld pursuant to Sections 1441, 1442 and 3406 of the
Internal Revenue Code of 1986, as amended, or by any Federal or State statutes
subsequently enacted, and to make the necessary return and payment of such tax
in connection therewith.
5. Shareholder Internet Account Access Services.
5.1 Shareholder Internet Services. The Transfer Agent shall provide
internet access to each Customer's shareholders through Transfer Agent's web
site, equiserve.com ("Shareholder Internet Services"), pursuant to its
established procedures ("Security Procedures"), to allow shareholders to view
their account information and perform certain on-line transaction request
capabilities. The Shareholder Internet Services shall be provided at no
additional charge at this time, other than the transaction fees currently being
charged for the different transactions as described on the Fee and Service
Schedule. The Transfer Agent reserves the right to charge a fee for this service
at any time in the future.
5.2 Scope of Transfer Agent Shareholder Internet Services Obligations.
Transfer Agent shall at all times use reasonable care in performing Shareholder
Internet Services under this Agreement. With respect to any claims for losses,
damages, costs or expenses which may arise directly or indirectly from Security
Procedures which Transfer Agent has implemented or omitted, Transfer Agent shall
be presumed to have used reasonable care if it has followed, in all material
respects, its Security Procedures then in effect. Transfer Agent may, but shall
not be required to, modify such Security Procedures from time to time to the
extent it believes, in good faith, that such modifications will enhance the
security of Shareholder Internet Services. All data and information
transmissions accessed via Shareholder Internet Services are for informational
purposes only, and are not intended to satisfy regulatory requirements or comply
with any laws, rules, requirements or standards of any federal, state or local
governmental authority, agency or industry regulatory body, including the
securities industry, which compliance is the sole responsibility of Customer.
5.3 No Other Warranties.
EXCEPT AS OTHERWISE EXPRESSLY STATED IN SECTION 5.2 OF THIS AGREEMENT, THE
SHAREHOLDER INTERNET SERVICES ARE PROVIDED "AS-IS," ON AN "AS AVAILABLE" BASIS,
AND TRANSFER AGENT HEREBY SPECIFICALLY DISCLAIMS ANY AND ALL REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, REGARDING SUCH SERVICES PROVIDED BY TRANSFER
AGENT HEREUNDER, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING
OR COURSE OF PERFORMANCE.
6. Optional Services.
To the extent that a Customer elects to engage the Transfer Agent to
provide the services listed below the Customer shall engage the Transfer Agent
to provide such services upon terms and fees to be agreed upon by the parties:
(a) Corporate actions (including inter alia, odd lot buy backs, exchanges,
mergers, redemptions, subscriptions, capital reorganization, coordination of
post-merger services and special meetings).
7. Fees and Expenses.
7.1 Fee and Service Schedules. Each Customer agrees to pay Transfer Agent
the fees for Services performed pursuant to this Agreement as set forth in the
Fee and Service Schedule attached hereto, for the initial term of the Agreement
(the "Initial Term").
7.2COLA/Fee Increases. After the Initial Term of the Agreement, providing
that service mix and volumes remain constant, the fees listed in the Fee and
Service Schedule shall be increased by the accumulated change in the National
Employment Cost Index for Service Producing Industries (Finance, Insurance, Real
Estate) for the preceding years of the contract, as published by the Bureau of
Labor Statistics of the United States Department of Labor. Fees will be
increased on each successive contract anniversary thereafter by an amount equal
to the change in the National Employment Cost Index for Service Producing
Industries (Finance, Insurance, Real Estate) for the preceding year.
7.3 Adjustments. Notwithstanding Section 7.1 above, fees, and the
out-of-pocket expenses and advances identified under Section 7.4 below, may be
changed from time to time as agreed upon in writing between the Transfer Agent
and the Customer.
7.4 Out-of-Pocket Expenses. In addition to the fees paid under Section 7.1
above, the Customer agrees to reimburse the Transfer Agent for reasonable
out-of-pocket expenses, including but not limited to postage, forms, telephone,
microfilm, microfiche, taxes, records storage, exchange and broker fees, or
advances incurred by the Transfer Agent for the items set out in Exhibit A
attached hereto. Out-of-pocket expenses may include the costs to transfer agent
of administrative expenses. In addition, any other expenses incurred by the
Transfer Agent at the request or with the consent of the Customer, will be
reimbursed by the Customer.
7.5 Conversion Funds. Conversion funding required by any out of proof
condition caused by a prior agents' services shall be advanced to Transfer Agent
prior to the commencement of services.
7.6 Postage. Postage for mailing of dividends, proxies, Customer reports
and other mailings to all Shareholder Accounts shall be advanced to the Transfer
Agent by the Customer prior to commencement of the mailing date of such
materials.
7.7 Invoices. The Customer agrees to pay all fees and reimbursable expenses
within 30 days of the date of the respective billing notice, except for any fees
or expenses that are subject to good faith dispute. In the event of such a
dispute, the Customer may only withhold that portion of the fee or expense
subject to the good faith dispute. The Customer shall notify the Transfer Agent
in writing within twenty-one (21) calendar days following the receipt of each
billing notice if the Customer is disputing any amounts in good faith. If the
Customer does not provide such notice of dispute within the required time, the
billing notice will be deemed accepted by the Customer. The Customer shall
settle such disputed amounts within five (5) business days of the day on which
the parties agree on the amount to be paid by payment of the agreed amount. If
no agreement is reached, then such disputed amounts shall be settled as may be
required by law or legal process.
7.8 Taxes. Customer shall pay all sales or use taxes in lieu thereof with
respect to the Services (if applicable) provided by Transfer Agent under this
Agreement.
7.9 Late Payments.
(a) If any undisputed amount in an invoice of the Transfer Agent (for fees
or reimbursable expenses) is not paid when due, the Customer shall pay the
Transfer Agent interest thereon (from the due date to the date of payment) at a
per annum rate equal to one percent (1.0%) plus the Prime Rate (that is, the
base rate on corporate loans posted by large domestic banks) published by The
Wall Street Journal (or, in the event such rate is not so published, a
reasonably equivalent published rate selected by Customer on the first day of
publication during the month when such amount was due). Notwithstanding any
other provision hereof, such interest rate shall be no greater than permitted
under applicable provisions of Massachusetts or New Jersey law.
(b) The failure by Customer to pay an invoice within 90 days after receipt
of such invoice or the failure by the Customer to timely pay two consecutive
invoices shall constitute a material breach pursuant to Section 16.4(a) below.
The Transfer Agent may terminate this Agreement for such material breach
immediately and shall not be obligated to provide the Customer with 30 days to
cure such breach.
7.10 Services Required by Legislation. Services required by legislation or
regulatory mandate that become effective after the Effective Date of this
Agreement shall not be part of the Services, and shall be billed by appraisal.
7.11 Overtime Charges. Overtime charges will be assessed in the event of a
late delivery to the Transfer Agent of Customer material for mailings to
Shareholders, unless the mail date is rescheduled. Such material includes, but
is not limited to, proxy statements, quarterly and annual reports, dividend
enclosures and news releases.
7.12 Bank Accounts. The Customer acknowledges that the bank accounts
maintained by EQI in connection with the Services will be in its name and that
EQI may receive investment earnings in connection with the investment at EQI's
risk and for its benefit of funds held in those accounts from time to time.
However, Transfer Agen shall indemnify and hold Customer harmless from and
against, any and all losses, claims, damages, costs, charges, counsel fees and
expenses, payments, and liability arising out of or attributable to such
investment.
8. Representations and Warranties of Transfer Agent.
8.1 Governance. The Trust Company is a federally chartered limited purpose
national bank duly organized under the laws of the United States and EQI is a
corporation validly existing and in good standing under the laws of the State of
Delaware and each has full corporate power, authority and legal right to
execute, deliver and perform this Agreement. The execution, delivery and
performance of this Agreement by Transfer Agent has been duly authorized by all
necessary corporate action and constitutes the legal valid and binding
obligation of Transfer Agent enforceable against Transfer Agent in accordance
with its terms.
8.2 Compliance. The execution, delivery and performance of the Agreement by
Transfer Agent will not violate, conflict with or result in the breach of any
material term, condition or provision of, or require the consent of any other
party to, (i) any existing law, ordinance, or governmental rule or regulation to
which Transfer Agent is subject, (ii) any judgement, order, writ, injunction,
decree or award of any court, arbitrator or governmental or regulatory official,
body or authority which is applicable to Transfer Agent, (iii) the incorporation
documents or by-laws of , or any material agreement to which Transfer Agent is a
party.
8.3 Facilities. The Transfer Agent has and will continue to have access to
the necessary facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
8.4 Computer Services. DATA ACCESS SERVICE AND ALL COMPUTER PROGRAMS AND
SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS,
AS AVAILABLE BASIS. TRANSFER AGENT EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT
THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. CUSTOMER
HEREBY ACKNOWLEDGES THAT THE DATA ACCESS SERVICE MAY NOT BE OR BECOME AVAILABLE
DUE TO ANY NUMBER OF FACTORS INCLUDING WITHOUT LIMITATION PERIODIC SYSTEM
MAINTENANCE, SCHEDULED OR UNSCHEDULED, ACTS OF GOD, TECHNICAL FAILURE,
TELECOMMUICATIONS INFRASTRUCTURE OR DELAY OR DISRUPTION ATTRIBUTATLE TO VIRUSES,
DENIAL OF SERVICE ATTACKS, INCREASED OR FLUCTUATING DEMAND, AND ACTIONS AND
OMISSIONS OF THIRD PARTIES. THEREFORE TRANSFER AGENT EXPRESSLY DISCLAIMS ANY
EXPRESS OR IMPLIED WARRANTY REGARDING SYSTEM AND/OR DATA ACCESS SERVICE
AVAILABILITY, ACCESSABILITY, OR PERFORMANCE.
9. Representations and Warranties of Customer.
Each Customer represents and warrants to the Transfer Agent that:
9.1 Organizations. It is a business trust duly organized and existing and
in good standing under the laws of Delaware;
9.2 Governance. It is empowered under applicable laws and by Declaration of
Trust and By-Laws to enter into and perform this Agreement. All corporate
proceedings required by said Declaration of Trust, By-Laws and applicable law
have been taken to authorize it to enter into and perform this Agreement; and
9.3 Securities Act of 1933. A registration statement under the Securities
Act of 1933, as amended (the "1933 Act") has been filed and is currently
effective, or will be effective prior to the sale of any Shares, and will remain
so effective, and all appropriate state securities law filings have been made
with respect to all the Shares of the Customer being offered for sale except for
any Shares which are offered in a transaction or series of transactions which
are exempt from the registration requirements of the 1933 Act and state
securities laws; information to the contrary will result in immediate
notification to the Transfer Agent.
10. Indemnification/Limitation of Liability.
10.1 Standard of Care. The Transfer Agent shall at all times act in good
faith and agrees to use its best efforts within reasonable time limits to insure
the accuracy of all services performed under this Agreement, but assumes no
responsibility and shall not be liable for loss or damage due to errors unless
said errors are caused by its negligence, bad faith or willful misconduct or
that of its employees as set forth and subject to the limitations set forth in
Section 10.4 below.
10.2 Customer Indemnity. The Transfer Agent shall not be responsible for,
and the Customer shall indemnify and hold the Transfer Agent harmless from and
against, any and all losses, claims, damages, costs, charges, counsel fees and
expenses, payments, expenses and liability arising out of or attributable to:
(a) All actions of the Transfer Agent or its agents or subcontractors
required to be taken pursuant to this Agreement, provided such actions are taken
in good faith and without negligence or willful misconduct;
(b) The Customer's gross negligence or willful misconduct or the breach of
any representation or warranty of the Customer hereunder;
(c) The reliance or use by the Transfer Agent of information, records and
documents which (i) are received by the Transfer Agent and furnished to it by or
on behalf of the Customer, and (ii) have been prepared and /or maintained by the
Customer or any other person or firm on behalf of the Customer. Such other
person or firm shall include any former transfer agent or former registrar, or
co-transfer agent or co-registrar or any current registrar where the Transfer
Agent is not the current registrar;
(d) The reliance or use by the Transfer Agent of any paper or document
reasonably believed to be genuine and to have been signed by the proper person
or persons including Shareholders or electronic instruction from Shareholders
submitted through the shareholder Internet Services or other electronic means
pursuant to security procedures established by the Transfer Agent, provided
Transfer Agent is not negligent in the implementation of such security
procedures;
(e) The reliance on, or the carrying out by the Transfer Agent of any
instructions or requests of the Customer's representatives;
(f) The offer or sale of Shares in violation of any federal or state
securities laws requiring that such Shares be registered or in violation of any
stop order or other determination or ruling by any federal or state agency with
respect to the offer or sale of such Shares;
(g) The negotiation, presentment, delivery or transfer of Shares through
the Direct Registration System Profile System.
10.3 Instructions. At any time the Transfer Agent may apply to any officer
of the Customer. The Transfer Agent shall be protected and indemnified in acting
upon any paper or document reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any instruction, information,
data, records or documents provided the Transfer Agent by telephone, in person,
machine readable input, telex, CRT data entry or similar means authorized by the
Customer, and shall not be held to have notice of any change of authority of any
person, until receipt of written notice thereof from the Customer. The Transfer
Agent shall also be protected and indemnified in recognizing stock certificates
which are reasonably believed to bear the proper manual or facsimile signatures
of officers of the Customer, and the proper countersignature of any former
transfer agent or former registrar, or of a co-transfer agent or co-registrar.
10.4 Transfer Agent Indemnification/Limitation of Liability. Transfer Agent
shall be responsible for and shall indemnify and hold the Customer harmless from
and against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to Transfer Agent's
refusal or failure to comply with the terms of this Agreement, or which arise
out of Transfer Agent's negligence or willful misconduct or which arise out of
the breach of any representation or warranty of Transfer Agent hereunder, for
which Transfer Agent is not entitled to indemnification under this Agreement;
provided, however, that Transfer Agent's aggregate liability during any term of
this Agreement with respect to, arising from, or arising in connection with this
Agreement, or from all services provided or omitted to be provided under this
Agreement, whether in contract, or in tort, or otherwise, is limited to, and
shall not exceed, the amounts paid hereunder by the Customer to Transfer Agent
as fees and charges, but not including reimbursable expenses, under this
Agreement.
10.5 Notice. In order that the indemnification provisions contained in this
Section shall apply, upon the assertion of a claim for which one party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The
indemnifying party shall have the option to participate with the indemnified
party in the defense of such claim or to defend against said claim in its own
name or the name of the indemnified party. The indemnified party shall in no
case confess any claim or make any compromise in any case in which the
indemnifying party may be required to indemnify it except with the indemnifying
party's prior written consent.
11. Damages.
NO PARTY SHALL BE LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER, INCLUDING, BUT NOT LIMITED TO,
LOSS OF ANTICIPATED PROFITS, OCCASIONED BY A BREACH OF ANY PROVISION OF THIS
AGREEMENT EVEN IF APPRISED OF THE POSSIBILITY OF SUCH DAMAGES.
12. Responsibilities of the Transfer Agent.
The Transfer Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Customer,
by its acceptance hereof, shall be bound:
12.1 Whenever in the performance of its duties hereunder the Transfer Agent
shall deem it necessary or desirable that any fact or matter be proved or
established prior to taking or suffering any action hereunder, such fact or
matter may be deemed to be conclusively proved and established by a certificate
signed by the Chairman of the Board, the President, any Vice President, the
Treasurer, any Assistant treasurer, the Secretary or any Assistant Secretary of
the Customer and delivered to the Transfer Agent. Such certificate shall be full
authorization to the recipient for any action taken or suffered in good faith by
it under the provisions of this Agreement in reliance upon such certificate.
12.2 The Customer agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Transfer Agent for the carrying out, or performing by the Transfer Agent
of the provisions of this Agreement.
12.3 Transfer Agent, any of its affiliates or subsidiaries, and any
stockholder, director, officer or employee of the Transfer Agent may buy, sell
or deal in the securities of the Customer or become pecuniary interested in any
transaction in which the Customer may be interested, or contract with or lend
money to the Customer or otherwise act as fully and freely as though it were not
appointed as agent under this Agreement. Nothing herein shall preclude the
Transfer Agent from acting in any other capacity for the Customer or for any
other legal entity.
12.4 No provision of this Agreement shall require the Transfer Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
it shall believe in good faith that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to it.
13. Covenants of the Customer and Transfer Agent.
13.1 Customer Corporate Authority. The Customer shall furnish to the
Transfer Agent the following:
(a) A copy of the Declaration of Trust and By-Laws of the Customer;
(b) Copies of all material amendments to its Declaration of Trust or
By-Laws made after the date of this Agreement, promptly after such amendments
are made; and
(c) A certificate of the Customer as to the Shares authorized, issued and
outstanding, as well as a description of all reserves of unissued Shares
relating to the exercise of options, warrants or a conversion of debentures or
otherwise.
13.2 Transfer Agent Facilities. The Transfer Agent hereby agrees to
establish and maintain facilities and procedures reasonably acceptable to the
Customer for the safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any, and for the preparation, use, and
recordkeeping of such certificates, forms and devices.
13.3 Records. The Transfer Agent shall keep records relating to the
services to be performed hereunder, in the form and manner as it may deem
advisable. The Transfer Agent agrees that all such records prepared or
maintained by it relating to the services performed hereunder are the property
of the Customer and will be preserved, maintained and made available in
accordance with the requirements of law, and will be surrendered promptly to the
Customer on and in accordance with its request.
13.4 Confidentiality. The Transfer Agent and the Customer agree that all
books, records, information and data pertaining to the business of the other
party which are exchanged or received pursuant to the negotiation or the
carrying out of this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except as may be required by law.
Transfer Agent acknowledges that it will receive "nonpublic personal
information," as such term is defined in Regulation S-P, 17 CFR ss. 248 (such
information is referred to herein as "NPI") of Shareholders, and agrees that it
shall use such information solely in furtherance of fulfilling its contractual
obligations under this Agreement. Transfer Agent further agrees to use and
redisclose such NPI only for the limited purpose of fulfilling its duties and
obligations under the Agreement, for law enforcement and miscellaneous purposes
as permitted in 17 CFR ss.ss. 248.15, or as permitted, required or otherwise
authorized by other state or federal laws, rules or regulations, or in
connection with joint marketing arrangements that Customer may establish with
Transfer Agent in accordance with the limited exception set forth in 17 CFR ss.
248.13. Transfer Agent has implemented, and will continue to maintain for the
term of the Agreement, policies and procedures reasonably designed to insure the
security and confidentiality of records and NPI of Shareholders, subject to
standards prevailing in the industry for such procedures.
13.5 Non-Solicitation of Transfer Agent Employees. Customer shall not
knowingly attempt to hire or assist with the hiring of an employee of Transfer
Agent or encourage any employee to terminate their relationship with Transfer
Agent.
13.6 Notification. Customer shall notify Transfer Agent as soon as possible
in advance of any stock split, stock dividend similar event which may affect the
Shares, and any bankruptcy, insolvency, moratorium or other proceeding regarding
Customer affecting the enforcement of creditors' rights. Notwithstanding any
other provision of the Agreement to the contrary, Transfer Agent will have no
obligation to perform any Services under the Agreement subsequent to the
commencement of any bankruptcy, insolvency, moratorium or other proceeding
regarding Customer affecting the enforcement of creditor' rights unless Transfer
Agent receives assurance satisfactory to it that it will receive full payment
for such services. Further, Customer may not assume the Agreement after the
filing of a bankruptcy petition without transfer agents written consent.
14. Data Access Service and Proprietary Information.
14.1 Transfer Agent has developed a data access service that enables the
Customer to access the Customer's shareholder records maintained on Transfer
Agent's computer system through the Internet or remote access, as the case may
be (the "Data Access Service"). The Customer wishes to use such Data Access
Service subject to the terms and conditions set forth herein. Therefore, the
Customer and Transfer Agent agree as follows:
14.2 Access to Shareholder Data.
The Service provided to the Customer pursuant to this Agreement shall
include granting the Customer access to the Shareholder, Customer and proxy
information ("Shareholder Data") maintained on the records database for the
purpose of examining, maintaining, editing, or processing transactions with
respect to Shareholder Data.
14.3 Procedures for Access.
To use the Data Access Service, the Customer must access through the
Internet or remote terminal, as the case may be, pursuant to the procedures
provided by Transfer Agent. Such access is accomplished by entering a unique
Customer identification ("Customer ID(s)") and passwords ("Password(s)")
assigned to the Customer by Transfer Agent. Each Customer ID and Password
assigned to the Customer is for use only by the Customer. The Customer shall
establish and maintain reasonable security and control over all such Customer
IDs and Passwords. Transfer Agent shall maintain reasonable security and control
over each Customer ID. After Transfer Agent assigns the Customer a Password, the
Customer shall change the Password. The Customer recognizes that Transfer Agent
does not have knowledge of the Password, which is selected by the Customer and
is within the Customer's exclusive control after the necessary change. The
Customer may change any Password thereafter at any time. Customer agrees to
notify Transfer Agent immediately if any employee of Customer granted access to
the Data Access Service leaves the employ of the Customer, in order to enable
Transfer Agent to terminate such employee's access.
14.4 Proprietary Information.
The Customer acknowledges that the databases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Customer by the Transfer Agent as part of the Data
Access Service to access Shareholder Data maintained by the Transfer Agent on
data bases under the control and ownership of the Transfer Agent or other third
party constitute copyrighted, trade secret, or other proprietary information
(collectively, "Proprietary Information") of substantial value to the Transfer
Agent or other third party. In no event shall Proprietary Information be deemed
Shareholder Data. The Customer agrees to treat all Proprietary Information as
proprietary to the Transfer Agent and further agrees that it shall not divulge
any Proprietary Information to any person or organization except as may be
provided hereunder. Without limiting the foregoing, the Customer agrees for
itself and its employees and agents:
(a) to refrain from copying or duplicating in any way the Proprietary
Information, other than to print out pages reflecting Shareholder Data to
provide to shareholders or for Customer's internal use;
(b) to refrain from obtaining unauthorized access to any portion of the
Proprietary Information, and if such access is inadvertently obtained, to inform
Transfer Agent in a timely manner of such fact and dispose of such information
in accordance with Transfer Agent's instructions;
(c) to refrain from causing or allowing the Proprietary Information from
being retransmitted to any other computer facility or other location, except
with the prior written consent of Transfer Agent;
(d) that the Customer shall have access only to those authorized
transactions agreed upon by the parties; and
(e) to honor all reasonable written requests made by Transfer Agent to
protect at Transfer Agent's expense the rights of Transfer Agent Proprietary
Information at common law, under federal copyright law and under other federal
or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 14.
14.5 Content. If the Customer notifies the Transfer Agent that any part of
the Data Access Service does not operate in material compliance with the user
documentation provided by the Transfer Agent for such service, the Transfer
Agent shall endeavor in a timely manner to correct such failure. Organizations
from which the Transfer Agent may obtain certain data included in the Services
are solely responsible for the contents of such data and the Customer agrees to
make no claim against the Transfer Agent arising out of the contents of such
third party data, including, but not limited to, the accuracy thereof.
14.6 Transactions. If the transactions available to the Customer include
the ability to originate electronic instructions to the Transfer Agent in order
to (i) effect the transfer or movement of Shares or direct EQI to transfer cash
or (ii) transmit Shareholder information or other information, then in such
event the Transfer Agent shall be entitled to rely on the validity and
authenticity of such instructions without undertaking any further inquiry as
long as such instructions are undertaken in conformity with security procedures
established by the Transfer Agent from time to time.
15. Confidentiality.
15.1 Covenant. The Transfer Agent and the Customer agree that they will
not, at any time during the term of this Agreement or after its termination,
reveal, divulge, or make known to any person, firm, corporation or other
business organization, any customers' lists, trade secrets, cost figures and
projections, profit figures and projections, or any other secret or confidential
information whatsoever, whether of the Transfer Agent or of the Customer, used
or gained by the Transfer Agent or the Customer during performance under this
Agreement. The Customer and the Transfer Agent further covenant and agree to
retain all such knowledge and information acquired during and after the term of
this Agreement respecting such lists, trade secrets, or any secret or
confidential information whatsoever in trust for the sole benefit of the
Transfer Agent or the Customer and their successors and assigns. The above
prohibition of disclosure shall not apply to the extent that the Transfer Agent
must disclose such data to its sub-contractor or agent for purposes of providing
services under this Agreement.
15.2 Request for Records. In the event that any requests or demands are
made for the inspection of the Shareholder records of the Customer, other than
request for records of Shareholders pursuant to standard subpoenas from state or
federal government authorities (e.g., in divorce and criminal actions), the
Transfer Agent will endeavor to notify the Customer and to secure instructions
from an authorized officer of the Customer as to such inspection. The Transfer
Agent expressly reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by counsel that it may be held liable for
the failure to exhibit the Shareholder records to such person or if required by
law or court order.
16. Term and Termination.
16.1 Term. The Initial Term of this Agreement shall be three (3) years from
the date first stated above unless terminated pursuant to the provisions of this
Section 16. Unless a terminating party gives written notice to the other party
sixty (60) days before the expiration of the Initial Term this Agreement will
renew automatically from year to year ("Renewal Term"). Sixty (60) days before
the expiration of the Initial Term or a Renewal Term the parties to this
Agreement will agree upon a Fee Schedule for the upcoming Renewal Term. If no
new fee schedule is agreed upon, the fees will increase as set forth in Section
7.2.
16.2 Early Termination. Notwithstanding anything contained in this
Agreement to the contrary, should Customer desire to move any of its Services
provided by the Transfer Agent hereunder to a successor service provider prior
to the expiration of the then current Initial or Renewal Term, or without the
required notice period, the Transfer Agent shall make a good faith effort to
facilitate the conversion on such prior date, however, there can be no guarantee
that the Transfer Agent will be able to facilitate a conversion of Services on
such prior date. In connection with the foregoing, should Services be converted
to a successor service provider, or if the Customer is liquidated or its assets
merged or purchased or the like with another entity which does not utilize the
services of the Transfer Agent, Transfer Agent shall be entitled to receive all
reasonable and demonstrable out-of-pocket expenses or costs associated with the
conversion of the Services. Section 16.2 shall not apply if the Transfer Agent
is terminated for cause under Section 16.4(a) of this Agreement.
16.3 Expiration of Term. After the expiration of the Initial Term or
Renewal Term whichever currently in effect, should either party exercise its
right to terminate, all reasonable out-of-pocket expenses or costs associated
with the movement of records and material will be borne by the Customer.
16.4 Termination.
This Agreement may be terminated in accordance with the following:
(a) at any time by any party upon a material breach of a representation,
covenant or term of this Agreement by any other unaffiliated party which is not
cured within a period not to exceed thirty (30) days after the date of written
notice thereof by one of the other parties; and
(b) at any time by any party, in the event that during the term of this
Agreement, a bankruptcy or insolvency proceeding is filed by or against any
party or a trustee or receiver is appointed for any substantial part of any
party's property (and in a case of involuntary bankruptcy, insolvency or
receivership proceeding, there is entered an order for relief, or order
appointing a receiver or some similar order or decree and the party does not
succeed in having such order lifted or stayed within sixty (60) days from the
date of its entry), or any party makes an assignment of all or substantially all
of its property for the benefit of creditors or ceases to conduct its operations
in the normal course or business.
16.5 Records. Upon receipt of written notice of termination, the parties
will use commercially practicable efforts to effect an orderly termination of
this Agreement. Without limiting the foregoing, Transfer Agent will deliver
promptly to Customer, in machine readable form on media as reasonably requested
by Customer, all Shareholder and other records, files and data supplied to or
compiled by Transfer Agent on behalf of Customer.
17. Assignment.
17.1 Affiliates. The Transfer Agent may, without further consent of the
Customer assign its rights and obligations hereunto to any affiliated transfer
agent registered under Section 17A(c)(2) of the Exchange Act.
17.2 Sub-contractors. Transfer Agent may, without further consent on the
part of Customer, subcontract with other subcontractors for telephone and
mailing services as may be required from time to time; provided, however, that
the Transfer Agent shall be as fully responsible to the Customer for the acts
and omissions of any subcontractor as it is for its own acts and omissions.
18. Unaffiliated Third Parties.
Nothing herein shall impose any duty upon the Transfer Agent in connection
with or make the Transfer Agent liable for the actions or omissions to act of
unaffiliated third parties such as, by way of example and not limitation,
airborne services, the U.S. mails and telecommunication companies, provided, if
the Transfer Agent selected such company, the Transfer Agent shall have
exercised due care in selecting the same.
19. Miscellaneous.
19.1 Notices.
Any notice or communication by the Transfer Agent or the Customer to the
other is duly given if in writing and delivered in person or mailed by first
class mail, postage prepaid, telex, telecopier or overnight air courier
guaranteeing next day delivery, to the other's address:
If to the Customer:
Federated Investors, Inc.
1001 Liberty Avenue
Pittsburgh, PA 15222
Attn: General Counsel
(412) 288-1567
If to the Transfer Agent:
EquiServe Trust Company, N.A.
c/o EquiServe, Inc.
150 Royall Street
Canton, MA 02021
Telecopy No.: (781) 575-4188
Attn: General Counsel
The Transfer Agent and the Customer may, by notice to the other, designate
additional or different addresses for subsequent notices or communications.
19.2 Successors.
All the covenants and provisions of this agreement by or for the benefit of
the Customer or the Transfer Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
19.3 Amendments.
This Agreement may be amended or modified by a written amendment executed
by the parties hereto and, to the extent required, authorized or approved by a
resolution of the Board of Directors of the Customer.
19.4 Severability.
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provision, covenants and restrictions
of this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
19.5 Governing Law.
This Agreement shall be governed by the laws of The Commonwealth of
Massachusetts .
19.6 Force Majeure.
Notwithstanding anything to the contrary contained herein, Transfer Agent
shall not be liable for any delays or failures in performance resulting from
acts beyond its reasonable control including, without limitation, acts of God,
terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or
malfunction of computer facilities, or loss of data due to power failures or
mechanical difficulties with information storage or retrieval systems, labor
difficulties, war, or civil unrest.
19.7 Descriptive Headings.
Descriptive headings of the several sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning or construction
of any of the provisions hereof.
19.8 Third Party Beneficiaries.
The provisions of this Agreement are intended to benefit only the Transfer
Agent, the Customer and their respective permitted successors and assigns. No
rights shall be granted to any other person by virtue of this agreement, and
there are no third party beneficiaries hereof.
19.9 Survival.
All provisions regarding indemnification, warranty, liability and limits
thereon, and confidentiality and protection of proprietary rights and trade
secrets shall survive the termination of this Agreement.
19.10 Priorities.
In the event of any conflict, discrepancy, or ambiguity between the terms
and conditions contained in this Agreement and any schedules or attachments
hereto, the terms and conditions contained in this Agreement shall take
precedence.
19.11 Merger of Agreement.
This agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter hereof,
whether oral or written.
19.12 Counterparts.
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by one of its officers thereunto duly authorized, all as of the date
first written above.
Federated Premier Municipal Income Fund
Federated Premier Intermediate Municipal
Income Fund
By:_/s/Richard J. Thomas
Name:_Richard J. Thomas
Title:Senior Vice President - Treasurer
EquiServe, Inc. EquiServe Trust Company, N.A.
By:_/s/Dennis V. Moccia By:_Dennis V. Moccia
Name:Dennis V. Moccia Name: Dennis V. Moccia
Title:_Managing Director Title:__Managing Director
Exhibit (k)(iii) under Form N-2
FEDERATED PREMIER MUNICIPAL INCOME FUND
_______________________________________________
AUCTION AGENCY AGREEMENT
dated as of [February 18], 2003
Relating to
Auction Market Preferred Shares
Series A
of
FEDERATED PREMIER MUNICIPAL INCOME FUND
______________________________________________
DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Auction Agent
This Auction Agency Agreement (this "Agreement"), dated as of [February
18], 2003, is by and between FEDERATED PREMIER MUNICIPAL INCOME FUND, a Delaware
statutory trust (the "Trust") and Deutsche Bank Trust Company Americas, a New
York banking corporation.
The Trust proposes to issue an aggregate of 2,147 preferred shares, par
value $0.01 per share, liquidation preference $25,000 per share, designated as
Auction Market Preferred Shares, Series A (the "AMPS"), pursuant to the
Statement (as defined below).
The Trust desires that Deutsche Bank Trust Company Americas perform certain
duties as agent in connection with each Auction (as defined below) (in such
capacity, the "Auction Agent"), and as the transfer agent, registrar, dividend
paying agent and redemption agent with respect to the AMPS (in such capacity,
the "Paying Agent"), upon the terms and conditions of this Agreement, and the
Trust hereby appoints Deutsche Bank Trust Company Americas as said Auction Agent
and Paying Agent.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Trust and the Auction Agent agree as follows:
1. Definitions and Rules of Construction.
1.1 Terms Defined By Reference to Statement.
Capitalized terms not defined herein shall have the respective meanings
specified in the Statement.
1.2 Terms Defined Herein.
As used herein and in the Settlement Procedures, the following terms shall
have the following meanings, unless the context otherwise requires:
(a) "Agent Member" of any Person shall mean the member of, or participant
in, the Securities Depository that will act on behalf of a Bidder.
(b) "Agreement" shall mean this Agreement relating to the AMPS.
(c) "AMPS" shall mean the preferred shares, $0.01 par value per share, of
the Trust designated as its "Auction Market Preferred Shares" and bearing such
further designation as to series as the Trust shall specify.
(d) "Auction" shall have the meaning specified in Section 2.1 hereof.
(e) "Auction Procedures" shall mean the auction procedures constituting
Part II of the form of Statement.
(f) "Authorized Officer" of the Auction Agent shall mean each Vice
President, Assistant Vice President and Associate of the Auction Agent assigned
to its Corporate Trust and Agency Services and every other officer or employee
of the Auction Agent designated as an "Authorized Officer" for purposes hereof
in a communication to the Trust.
(g) "Broker-Dealer Agreement" shall mean each agreement between the Auction
Agent and a Broker-Dealer substantially in the form attached hereto as Exhibit
A.
(h) "Settlement Procedures" shall mean the Settlement Procedures attached
hereto as Exhibit B.
(i) "Statement" shall mean the Trust's Statement of Preferences of Auction
Market Preferred Shares, as the same may be amended, supplemented or modified
from time to time.
(j) "Treasury Index Rate" shall mean a Treasury Bill Rate and/or a Treasury
Note Rate, each as defined in the Statement.
(k) "Trust Officer" shall mean the Chairman, the President, each Vice
President (whether or not designated by a number or word or words added before
or after the title "Vice President"), the Secretary, the Treasurer, each
Assistant Secretary and each Assistant Treasurer of the Trust and every other
officer or employee of the Trust designated as a "Trust Officer" for purposes
hereof in a notice to the Auction Agent.
1.3 Rules of Construction.
Unless the context or use indicates another or different meaning or intent,
the following rules shall apply to the construction of the Agreement:
(a) words importing the singular number shall include the plural number and
vice versa.
(b) the captions and headings herein are solely for convenience of
reference and shall not constitute a part of the Agreement nor shall they affect
its meaning, construction or effect.
(c) the words "hereof", "herein", "hereto" and other words of similar
import refer to the Agreement as a whole.
(d) to the extent that this Agreement conflicts with the Statement, the
Statement shall control.
(e) all references herein to a particular time of day shall be to New York
City time.
2. The Auction.
2.1 Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) The Board of Trustees of the Trust has adopted a resolution appointing
Deutsche Bank Trust Company Americas as Auction Agent for purposes of the
Auction Procedures. The Auction Agent hereby accepts such appointment and agrees
that, on each Auction Date, it shall follow the procedures set forth in this
Section 2 and the Auction Procedures for the purpose of determining the
Applicable Rate for any Subsequent Rate Period of the AMPS for which the
Applicable Rate is to be determined by auction. Each periodic operation of such
procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part hereof to the same extent as if such provisions
were fully set forth herein.
2.2 Preparation for Each Auction; Maintenance of Registry of Beneficial
Owners.
(a) Not later than seven days prior to the first Auction Date for the AMPS,
the Trust shall provide the Auction Agent with a list of the Broker-Dealers. Not
later than seven days prior to any Auction Date for the AMPS for which any
change in such list of Broker-Dealers is to be effective, the Trust will notify
the Auction Agent in writing of such change and, if any such change involves the
addition of a Broker-Dealer to such list, shall cause to be delivered to the
Auction Agent for execution by the Auction Agent a Broker-Dealer Agreement
signed by such Broker-Dealer; provided, however, that if the Trust proposes to
designate any Special Rate Period of AMPS pursuant to Section 4 of Part I of the
Statement, not later than 11:00 A.M. on the Business Day next preceding the
Auction Date next preceding the first day of such Rate Period or by such later
time or date, or both, as may be agreed to by the Auction Agent, the Trust shall
provide the Auction Agent with a list of the Broker-Dealers for such series and
a manually signed copy of each Broker-Dealer Agreement with each Broker-Dealer
for such series. The Auction Agent shall have entered into a Broker-Dealer
Agreement with each Broker-Dealer prior to the participation of any such
Broker-Dealer in any Auction.
(b) In the event that any Auction Date for the AMPS shall be changed after
the Auction Agent shall have given the notice referred to in paragraph (a) of
the Settlement Procedures, or after the notice referred to in Section 2.3
hereof, if applicable, the Auction Agent, by such means as the Auction Agent
deems practicable, shall give notice of such change to the Broker-Dealers for
such series not later than the earlier of 9:15 A.M. on the new Auction Date or
9:15 A.M. on the old Auction Date.
(c) (i) The Auction Agent shall maintain a registry of the beneficial
owners of the AMPS who shall constitute Existing Holders of AMPS for purposes of
Auctions. The Auction Agent shall indicate thereon the identity of the
respective Broker-Dealer of each Existing Holder on whose behalf such
Broker-Dealer submitted the most recent Order in any Auction which resulted in
such Existing Holder continuing to hold or purchasing AMPS of such series. The
Auction Agent shall keep such registry current and accurate based on the
information provided to it from time to time by the Broker-Dealer. The Trust
shall provide or cause to be provided to the Auction Agent at or prior to the
Date of Original Issue of the AMPS a list of the initial Existing Holders of the
shares of AMPS, the number of shares purchased by each such Existing Holder and
the respective Broker-Dealer of each such Existing Holder or the affiliate
thereof through which each such Existing Holder purchased such shares. The
Auction Agent may rely upon, as conclusive evidence of the identities of the
Existing Holders of AMPS of any series (A) such list, (B) the results of
Auctions, (C) notices from any Broker-Dealer as described in the first sentence
of Section 2.2(c)(iii) hereof and (D) the results of any procedures approved by
the Trust that have been devised for the purpose of determining the identities
of Existing Holders in situations where AMPS may have been transferred without
compliance with any restriction on the transfer thereof set forth in the Auction
Procedures.
(ii) In the event of any partial redemption of AMPS, the Auction Agent
shall, at least two Business Days prior to the next Auction for such series,
request each Broker-Dealer to provide the Auction Agent with a list of Persons
whom such Broker-Dealer believes are Existing Holders after giving effect to
such redemption based upon inquiries of the Persons reflected in such
Broker-Dealer's records as Beneficial Owners as a result of the most recent
Auction and with respect to each such Person, the number of AMPS such
Broker-Dealer believes are owned by such Person after giving effect to such
redemption. In the absence of receiving any such information from any
Broker-Dealer, the Auction Agent may continue to treat the Persons listed in its
registry of Existing Holders as the beneficial owner of the number of AMPS shown
in such registry.
(iii) The Auction Agent shall be required to register a transfer of AMPS
from an Existing Holder of such AMPS only if such transfer is to another
Existing Holder, or other Person if permitted by the Trust, and only if such
transfer is made (A) pursuant to an Auction, (B) if the Auction Agent has been
notified in writing (I) in a notice substantially in the form of Exhibit B to
the Broker-Dealer Agreements by a Broker-Dealer of such transfer or (II) in a
notice substantially in the form of Exhibit C to the Broker-Dealer Agreements by
the Broker-Dealer of any Existing Holder, or other Person if permitted by the
Trust, that purchased or sold such AMPS in an Auction of the failure of such
AMPS to be transferred as a result of such Auction or (C) pursuant to procedures
approved by both the Trust and the Auction Agent that have been devised for the
purpose of determining the identities of Existing Holders in situations where
AMPS may have been transferred without compliance with any restriction on the
transfer thereof set forth in the Auction Procedures. The Auction Agent is not
required to accept any notice described in clause (B) of the preceding sentence
for an Auction unless the Auction Agent receives it by 3:30 P.M. on the Business
Day preceding such Auction. The Auction Agent shall rescind a transfer made on
the registry of the Existing Holders of any AMPS if the Auction Agent has been
notified in writing by the Broker Dealer of any Person that (i) purchased any
AMPS and the seller failed to deliver such shares or (ii) sold any AMPS and the
purchaser failed to make payment to such Person upon delivery to the purchaser
of such shares.
(d) The Auction Agent may, but shall have no obligation to, request the
Broker-Dealers, as set forth in the Broker-Dealer Agreements, to provide the
Auction Agent with a list of Persons who such Broker-Dealer believes are
Existing Holders based upon inquiries of those Persons such Broker-Dealer's
records indicate are Beneficial Owners as a result of the most recent Auction
and with respect to each such Person, the number of shares of AMPS such
Broker-Dealer believes to be owned by such Person. The Auction Agent shall keep
confidential such registry of Existing Holders and shall not disclose the
identities of the Existing Holders of such AMPS to any Person other than the
Trust and the Broker-Dealer that provided such information; provided, however,
that the Auction Agent reserves the right and is authorized to disclose any such
information if (a) it is ordered to do so by a court of competent jurisdiction
or a regulatory body, judicial or quasi-judicial agency or authority having the
authority to compel such disclosure, (b) it is advised by its counsel that its
failure to do so would be unlawful or (c) failure to do so would expose the
Auction Agent to loss, liability, claim, damage or expense for which it has not
received indemnity or security satisfactory to it.
2.3 Auction Schedule.
The Auction Agent shall conduct Auctions in accordance with the schedule
set forth below. Such schedule may be changed by the Auction Agent with the
consent of the Trust, which consent shall not be unreasonably withheld. The
Auction Agent shall give written notice of any such change to each
Broker-Dealer. Such notice shall be given prior to the close of business on the
Business Day next preceding the first Auction Date on which any such change
shall be effective.
Time Event
By 9:30 A.M. Auction Agent advises the Trust and
Broker-Dealers of the applicable Maximum Rate
and the Reference Rate(s) and Treasury Note
Rate(s), as the case may be, used in
determining such Maximum Rate as set forth in
Section 2.7 hereof.
9:30 A.M. - 1:30 P.M. Auction Agent assembles information
communicated to it by Broker-Dealers as
provided in Section 1(a) of the Auction
Procedures. Submission Deadline is 1:30 P.M.
Not earlier than 1:30 P.M. Auction Agent makes determinations pursuant to
Section 3(a) of the Auction Procedures.
By approximately 3:30 P.M. Auction Agent advises Trust of results of
Auction as provided in Section 3(b) of the
Auction Procedures.
Submitted Bids and Submitted Sell Orders are
accepted and rejected and AMPS allocated as
provided in Section 4 of the Auction
Procedures. Auction Agent gives notice of
Auction results as set forth Section 2.4
hereof.
The Auction Agent shall follow the notification procedures set forth in
paragraph (a) of the Settlement Procedures.
2.4 Notice of Auction Results.
The Auction Agent will advise each Broker-Dealer who submitted a Bid or
Sell Order in an Auction whether such Bid or Sell Order was accepted or rejected
in whole or in part and of the Applicable Rate for the next Rate Period for the
related AMPS by telephone or through its Auction Processing System as set forth
in paragraph (a) of the Settlement Procedures.
2.5 Broker-Dealers.
(a) Not later than 12:00 Noon on each Auction Date of AMPS, the Trust shall
pay to the Auction Agent an amount in cash equal to the aggregate fees payable
to the Broker-Dealers for the AMPS pursuant to Section 2.6 of the Broker-Dealer
Agreements for the AMPS. The Auction Agent shall apply such moneys as set forth
in Section 2.6 of each such Broker-Dealer Agreement.
(b) The Trust shall obtain the consent of the Auction Agent prior to
selecting any Person to act as a Broker-Dealer, which consent shall not be
unreasonably withheld. The Trust may designate an Affiliate of Merrill Lynch,
Pierce, Fenner & Smith Incorporated to act as a Broker-Dealer.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement as set
forth therein if so directed by the Trust, provided that at least one
Broker-Dealer Agreement would be in effect for the AMPS after such termination.
(d) Subject to the Auction Agent's having consented to the selection of the
relevant Broker-Dealer pursuant to Section 2.5(b) hereof, the Auction Agent
shall from time to time enter into such Broker-Dealer Agreements with one or
more Broker-Dealers as the Trust shall request.
2.6 Special Rate Periods.
The provisions contained in Section 4 of Part I of the Statement concerning
Special Rate Periods and the notification of a Special Rate Period will be
followed by the Trust and, to the extent applicable, the Auction Agent, and the
provisions contained therein are incorporated herein by reference in their
entirety and shall be deemed to be a part of this Agreement to the same extent
as if such provisions were set forth fully herein.
2.7 Determination of Maximum Rate.
(a) (i) On each Auction Date, the Auction Agent shall determine the Maximum
Rate. If any "AA" Financial Composite Commercial Paper Rate, Treasury Note Rate
or Reference Rate, as the case may be, is not quoted on an interest or bond
equivalent, as the case may be, basis, the Auction Agent shall convert the
quoted rate to the interest or bond equivalent thereof as set forth in the
definition of such rate in the Statement if the rate obtained by the Auction
Agent is quoted on a discount basis, or if such rate is quoted on a basis other
than an interest or bond equivalent or discount basis the Auction Agent shall
convert the quoted rate to an interest or bond equivalent rate after
consultation with the Fund as to the method of such conversion.
(ii) If any "AA" Financial Composite Commercial Paper Rate is to be based
on rates supplied by Commercial Paper Dealers and one or more of the Commercial
Paper Dealers shall not provide a quotation for the determination of such "AA"
Financial Composite Commercial Paper Rate, the Auction Agent shall immediately
notify the Trust so that the Trust can determine whether to select a Substitute
Commercial Paper Dealer or Substitute Commercial Paper Dealers to provide the
quotation or quotations not being supplied by any Commercial Paper Dealer or
Commercial Paper Dealers. The Trust shall promptly advise the Auction Agent of
any such selection.
(iii) If any Treasury Index Rate is to be based on rates supplied by U.S.
Government Securities Dealers and one or more of the U.S. Government Securities
Dealers shall not provide a quotation for the determination of such Treasury
Index Rate, the Auction Agent shall immediately notify the Trust so that the
Trust can determine whether to select a Substitute U.S. Government Securities
Dealer or Substitute U.S. Government Securities Dealers to provide the quotation
or quotations not being supplied by any U.S. Government Securities Dealer or
U.S. Government Securities Dealers. The Trust shall promptly advise the Auction
Agent of any such selection.
2.8 Ownership of Shares of AMPS.
The Trust shall notify the Auction Agent if the Trust or any affiliate of
the Trust acquires any AMPS. Neither the Trust nor any affiliate of the Trust
shall submit any Order in any Auction for AMPS, except as set forth in the next
sentence. Any Broker-Dealer that is an affiliate of the Trust may submit Orders
in Auctions, but only if such Orders are not for its own account. For purposes
of this Section 2.8, a Broker-Dealer shall not be deemed to be an affiliate of
the Trust solely because one or more of the directors or executive officers of
such Broker-Dealer or of any Person controlled by, in control of or under common
control with such Broker-Dealer is also a director of the Trust. The Auction
Agent shall have no duty or liability with respect to enforcement of this
Section 2.8.
2.9 Access to and Maintenance of Auction Records.
The Auction Agent shall afford to the Trust, its agents, independent public
accountants and counsel and the Broker-Dealers, access at reasonable times
during normal business hours to review and make extracts or copies of all books,
records, documents and other information concerning the conduct and results of
Auctions (at no cost to the Auction Agent), provided that any such agent,
accountant, counsel or Broker-Dealer shall furnish the Auction Agent with a
letter from the Trust requesting that the Auction Agent afford such person
access. The Auction Agent shall maintain records relating to any Auction for a
period of six years after such Auction, and such records shall, in reasonable
detail, accurately and fairly reflect the actions taken by the Auction Agent
hereunder.
3. The Auction Agent as Dividend and Redemption Price Disbursing Agent.
The Auction Agent, as dividend and redemption price disbursing agent, shall
pay to the Holders of AMPS (i) on each Dividend Payment Date for the AMPS,
dividends on the AMPS, (ii) on any date fixed for redemption of AMPS, the
Redemption Price of any shares called for redemption and (iii) any Late Charge
related to any payment of dividends or Redemption Price, in each case after
receipt of the necessary funds from the Trust with which to pay such dividends,
Redemption Price or Late Charge. The amount of dividends for any Rate Period for
the AMPS to be paid by the Auction Agent to the Holders of such shares will be
determined by the Trust as set forth in Section 2 of Part I of the Statement
with respect to the AMPS. The Redemption Price of any shares to be paid by the
Auction Agent to the Holders will be determined by the Trust as set forth in
Section 11 of Part I of the Statement with respect to the AMPS. The Trust shall
notify the Auction Agent in writing of a decision to redeem shares of AMPS at
least five days prior to the date a notice of redemption is required to be
mailed to the Holders of the shares to be redeemed by paragraph (c) of Section
11 of Part I of the Statement. Such notice by the Trust to the Auction Agent
shall contain the information required by paragraph (c) of Section 11 of Part I
of the Statement to be stated in the notice of redemption required to be mailed
by the Trust to such Holders.
4. The Auction Agent as Transfer Agent and Registrar.
4.1 Issue of Stock or Shares Certificates.
Upon the Date of Original Issue of AMPS, one or more certificates
representing all of the shares issued on such date shall be issued by the Trust
and, at the request of the Trust, registered in the name of Cede & Co. and
countersigned by the Auction Agent.
4.2 Registration of Transfer of Shares.
Prior to the commencement of a Voting Period, shares of AMPS shall be
registered solely in the name of the Securities Depository or its nominee.
4.3 Removal of Legend on Restricted Shares.
All requests for removal of legends on AMPS indicating restrictions on
transfer shall be accompanied by an opinion of counsel stating that such legends
may be removed and such shares freely transferred, such opinion to be delivered
under cover of a letter from a Trust Officer authorizing the Auction Agent to
remove the legend on the basis of said opinion.
4.4 Lost Stock or Share Certificates.
The Auction Agent shall issue and register replacement certificates for
certificates represented to have been lost, stolen or destroyed upon the
fulfillment of such requirements as shall be deemed appropriate by the Trust and
the Auction Agent, subject at all times to provisions of law, the Declaration
and By-Laws of the Trust governing such matters and resolutions adopted by the
Trust with respect to lost securities. The Auction Agent may issue new
certificates in exchange for and upon the cancellation of mutilated
certificates. Any request by the Trust to the Auction Agent to issue a
replacement or new certificate pursuant to this Section 4.4 shall be deemed to
be a representation and warranty by the Trust to the Auction Agent that such
issuance will comply with such provisions of law and the By-Laws and resolutions
of the Trust.
4.5 Disposition of Cancelled Certificates; Record Retention.
The Auction Agent shall retain all stock or share certificates which have
been cancelled in transfer or exchange and all accompanying documentation in
accordance with applicable rules and regulations of the Securities and Exchange
Commission for six calendar years. The Trust shall also undertake to furnish to
the Securities and Exchange Commission and to the Board of Governors of the
Federal Reserve System, upon demand, at either the principal office or at any
regional office, complete, correct and current hard copies of any and all such
records. The Auction Agent, upon written request from the Trust, shall afford to
the Trust, its agent and counsel access at reasonable times during normal
business hours to review and make extracts or copies of such certificates and
accompanying documentation. Upon the expiration of this six year period, the
Auction Agent shall deliver to the Trust the canceled certificates and
accompanying documentation.
4.6 Stock or Record Books.
For so long as the Auction Agent is acting as the transfer agent for the
AMPS pursuant to the Agreement, it shall maintain a stock or record book
containing a list of the Holders of the AMPS. In case of any request or demand
for the inspection of the stock or record books of the Trust or any other books
in the possession of the Auction Agent, the Auction Agent will notify the Trust
and secure instructions as to permitting or refusing such inspection. The
Auction Agent reserves the right, however, to exhibit the stock or record books
or other books to any Person if (a) it is ordered to do so by a court of
competent jurisdiction or a regulatory body, judicial or quasi-judicial agency
or authority having the authority to compel such disclosure, (b) it is advised
by its counsel that its failure to do so would be unlawful or (c) failure to do
so would expose the Auction Agent to loss, liability, claim, damage or expense
for which it has not received indemnity or security satisfactory to it.
4.7 Return of Funds.
Any funds deposited with the Auction Agent hereunder by the Trust for any
reason, including but not limited to redemption of AMPS, that remain unpaid
after sixty days shall be repaid to the Trust upon the written request of the
Trust.
5. Representations and Warranties.
5.1 Representations and Warranties of the Trust.
The Trust represents and warrants to the Auction Agent that:
(a) the Trust is duly organized and existing statutory trust in good
standing under the laws of the State of its organization and has full trust
power or all requisite power to execute and deliver the Agreement and to
authorize, create and issue the AMPS, and the AMPS when issued, will be duly
authorized, validly issued, fully paid and nonassessable;
(b) the Agreement has been duly and validly authorized, executed and
delivered by the Trust and constitutes the legal, valid and binding obligation
of the Trust enforceable against the Auction Agent in accordance with its terms,
subject to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equitable principles;
(c) the form of the certificate evidencing the AMPS complies or will comply
with all applicable laws of the State of its organization;
(d) when issued, the AMPS will have been duly registered under the
Securities Act of 1933, as amended, and no further action by or before any
governmental body or authority of the United States or of any state thereof is
required of the Trust in connection with the execution and delivery of the
Agreement or will have been required of the Trust in connection with the
issuance of AMPS;
(e) the execution and delivery of the Agreement and the issuance and
delivery of the AMPS do not and will not conflict with, violate or result in a
breach of, the terms, conditions or provisions of, or constitute a default
under, the Declaration or the By-Laws of the Trust, any law or regulation, any
order or decree of any court or public authority having jurisdiction, or any
mortgage, indenture, contract, agreement or undertaking to which the Trust is a
party or by which it is bound the effect of which conflict, violation, default
or breach would be material to the Trust; and
(f) no taxes are payable upon or in respect of the execution of the
Agreement or the issuance of the AMPS.
5.2 Representations and Warranties of the Auction Agent.
The Auction Agent represents and warrants to the Trust that:
(i) the Auction Agent is duly organized and is validly existing as a
banking corporation in good standing under the laws of New York and has the
corporate power to enter into and perform its obligations under this Agreement;
and
(ii) this Agreement has been duly and validly authorized, executed and
delivered by the Auction Agent and constitutes the legal, valid and binding
obligation of the Auction Agent, enforceable against the Auction Agent in
accordance with its terms, subject to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors' rights
and to general equitable principles.
6. The Auction Agent.
6.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and
owes no fiduciary duties to any Person, other than the Trust, by reason of the
Agreement.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in the Agreement (including the Auction and
Settlement Procedures incorporated herein), and no implied covenants or
obligations shall be read into the Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered or omitted or for any
error of judgment made by it in the performance of its duties under the
Agreement. The Auction Agent shall not be liable for any error of judgment made
in good faith unless the Auction Agent shall have been negligent in ascertaining
the pertinent facts.
6.2 Rights of the Auction Agent.
(a) The Auction Agent may conclusively rely and shall be protected in
acting or refraining from acting in reliance upon any communication authorized
hereby and upon any written instruction, notice, request, direction, consent,
report, certificate, share certificate or other instrument, paper or document
believed in good faith by it to be genuine. The Auction Agent shall not be
liable for acting in reliance upon any telephone communication authorized hereby
which the Auction Agent believes in good faith to have been given by the Trust
or by a Broker-Dealer. The Auction Agent may record telephone communications
with the Trust or with the Broker-Dealers or both.
(b) The Auction Agent may consult with counsel of its choice and the advice
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its
own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed by it with due care hereunder.
(e) The Auction Agent shall not be responsible or liable for any failure or
delay in the performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its reasonable
control, it being understood that the Auction Agent shall use reasonable efforts
which are consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.
6.3 Compensation, Expenses and Indemnification.
(a) The Trust shall pay the Auction Agent an annual fee as compensation for
all services rendered by it under the Agreement and the Broker-Dealer Agreements
as the Trust and the Auction Agent have agreed to from time to time.
(b) The Trust shall reimburse the Auction Agent upon its request for all
reasonable out-of-pocket expenses, disbursements and advances incurred or made
by the Auction Agent in accordance with any provision of the Agreement and the
Broker-Dealer Agreements (including the reasonable compensation and the
reasonable expenses and disbursements of its agents (unless such agent is
providing a service for which the Auction Agent is already being compensated by
the Trust) and counsel), except any expense or disbursement attributable to its
negligence or bad faith. In no event shall the Auction Agent be responsible or
liable for special, indirect or consequential loss or damage of any kind
whatsoever (including, but not limited to, loss of profit), even if the Auction
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of action.
(c) The Trust shall indemnify the Auction Agent for and hold it harmless
against any loss, liability or expense incurred without negligence or bad faith
on its part, arising out of or in connection with its agency under the Agreement
and the Broker-Dealer Agreements, including the costs and expenses of defending
itself against any such claim or liability in connection with its exercise or
performance of any of its duties hereunder and thereunder.
6.4 Auction Agent's Disclaimer.
The Auction Agent makes no representation as to the validity or adequacy of
the Agreement, the Broker-Dealer Agreements or the AMPS except that the Auction
Agent hereby represents that the Agreement has been duly authorized, executed
and delivered by the Auction Agent and constitutes a legal and binding
obligation of the Auction Agent.
7. Miscellaneous.
7.1 Term of Agreement.
(a) The term of the Agreement is unlimited unless it shall be terminated as
provided in this Section 7.1. The Trust may terminate the Agreement at any time
by so notifying the Auction Agent, provided that the Trust has entered into an
agreement with a successor Auction Agent. The Auction Agent may terminate the
Agreement upon written notice to the Trust on the date specified in such notice,
which date shall be no earlier than 45 days after the date of delivery of such
notice.
(b) Except as otherwise provided in this paragraph (b), the respective
rights and duties of the Trust and the Auction Agent under the Agreement shall
cease upon termination of the Agreement. The representations, warranties,
covenants and obligations under Sections 5 and 6.3 hereof shall survive the
termination of the Agreement. Upon termination of the Agreement, the Auction
Agent shall, at the Trust's request, promptly deliver to the Trust copies of all
books and records maintained by it with respect to AMPS in connection with its
duties hereunder and to any successor Auction Agent any funds then held by the
Auction Agent for the benefit of the Holders of AMPS or the Trust.
7.2 Communications.
Except for (i) communications authorized to be by telephone pursuant to the
Agreement or the Auction Procedures and (ii) communications in connection with
Auctions (other than those expressly required to be in writing), all notices,
requests and other communications to any party hereunder shall be in writing
(including telecopy or similar writing) and shall be given to such party,
addressed to it, at its address or telecopy number set forth below:
If to the Trust: Federated Premier Municipal Income Fund
c/o Beverly Pirker
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Facsimile No: (412) 288-6788
Telephone No: (412) 288-1770
with a copy to: Stephen A. Keen, General Counsel
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Facsimile No: (412) 288-3939
Telephone No: (412) 288-1567
If to the Auction Agent: Deutsche Bank Trust Company Americas
Corporate Trust & Agency Services
280 Park Avenue, 9th Floor
New York, NY 10017
Attention: Auction Rate Securities
Facsimile No.: (212) 454-2030
Telephone No.: (212) 454-4042
Each such notice, request or communication shall be effective when
delivered at the address specified herein. Communications shall be given on
behalf of the Trust by a Trust Officer and on behalf of the Auction Agent by
telephone (confirmed by telecopy or in writing) by an Authorized Officer.
7.3 Entire Agreement.
The Agreement (including the Auction and Settlement Procedures incorporated
herein) contains the entire agreement between the parties relating to, and
superseding any prior agreement between the parties relating to, the subject
matter hereof, and there are no other representations, endorsements, promises,
agreements or understandings, oral, written or implied, between the parties
relating to the subject matter hereof except for agreements relating to the
compensation of the Auction Agent.
7.4 Benefits.
Nothing herein, express or implied, shall give to any Person, other than
the Trust, the Auction Agent and their respective successors and assigns, any
benefit of any legal or equitable right, remedy or claim hereunder.
7.5 Amendment; Waiver.
(a) The Agreement shall not be deemed or construed to be modified, amended,
rescinded, cancelled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged.
(b) Failure of either party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
7.6 Successors and Assigns.
The Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and assigns of each of the Trust and
the Auction Agent. The Auction Agent may not assign this Agreement, whether by
merger or otherwise, without the prior written consent of the Trust.
7.7 Severability.
If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.
7.8 Disclosure of Information.
The Auction Agent agrees that it will not disclose or use any "non-public
personal information" about the Fund's shareholders other than such uses or
disclosures as are permitted by Regulation S-P under Section 504 of the
Gramm-Leach Biley Act ("Regulation S-P"). "Nonpublic personal information" about
a shareholder shall mean: (i) personally identifiable financial information;
(ii) any list, description, or other grouping of consumers that is derived from
using any personally identifiable information that is not publicly available;
and (iii) any other information that a Customer or the Transfer Agent is
prohibited from using or disclosing pursuant to Regulation S-P.
7.9 Governing Law.
The Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument,
along with all counterparts, will become a binding agreement among the Trust and
the Auction Agent in accordance with its terms.
FEDERATED PREMIER MUNICIPAL INCOME FUND
By:
Name
Title
DEUTSCHE BANK TRUST COMPANY AMERICAS
By:
Name
Title
A-1
EXHIBIT A
FORM OF
BROKER-DEALER AGREEMENT
EXHIBIT B
SETTLEMENT PROCEDURES
The following summary of Settlement Procedures sets forth the procedures
expected to be followed in connection with the settlement of each Auction and
will be incorporated by reference in the Auction Agency Agreement and each
Broker-Dealer Agreement. Nothing contained in this Appendix constitutes a
representation by the Trust that in each Auction each party referred to herein
will actually perform the procedures described herein to be performed by such
party.
(a) On each Auction Date, the Auction Agent shall notify by telephone the
Broker-Dealers that participated in the Auction held on such Auction Date and
submitted an order on behalf of any Existing Holder or Potential Holder of:
(i) the Applicable Rate fixed for the next succeeding Rate Period;
(ii) whether Sufficient Clearing Bids existed for the determination of the
Applicable Rate;
(iii) if such Broker-Dealer (a "Seller's Broker-Dealer") submitted a Bid or
Sell Order on behalf of an Existing Holder, the number of shares, if any, of
AMPs to be sold by such Existing Holder;
(iv) if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted a Bid on
behalf of a Potential Holder, the number of shares, if any, of AMPs to be
purchased by such Potential Holder;
(v) if the aggregate number of AMPs to be sold by all Existing Holders on
whose behalf such Broker-Dealer submitted a Bid or a Sell Order exceeds the
aggregate number of AMPs to be purchased by all Potential Holders on whose
behalf such Broker-Dealer submitted a Bid, the name or names of one or more
Buyer's Broker-Dealers (and the name of the Agent Member, if any, of each such
Buyer's Broker-Dealer) acting for one or more purchasers of such excess number
of AMPs and the number of such shares to be purchased from one or more Existing
Holders on whose behalf such Broker-Dealer acted by one or more Potential
Holders on whose behalf each of such Buyer's Broker-Dealers acted;
(vi) if the aggregate number of AMPs to be purchased by all Potential
Holders on whose behalf such Broker-Dealer submitted a Bid exceeds the aggregate
number of AMPs to be sold by all Existing Holders on whose behalf such
Broker-Dealer submitted a Bid or a Sell Order, the name or names of one or more
Seller's Broker Dealers ( and the name of the Agent Member, if any, of each such
Seller's Broker-Dealer) acting for one or more sellers of such excess number of
AMPs and the number of such shares to be sold to one or more Potential Holders
on whose behalf such Broker-Dealer acted by one or more Existing Holders on
whose behalf each of such Seller's Broker-Dealers acted; and
(vii) the Auction Date of the next succeeding Auction with respect to the
AMPs. (b) On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Existing Holder or Potential Holder shall:
(i) in the case of a Broker-Dealer that is a Buyer's Broker-Dealer,
instruct each Potential Holder on whose behalf such Broker-Dealer submitted a
Bid that was accepted, in whole or in part, to instruct such Potential Holder's
Agent Member to pay to such Broker-Dealer (or its Agent Member) through the
Securities Depository the amount necessary to purchase the number of AMPs to be
purchased pursuant to such Bid against receipt of such shares and advise such
Potential Holder of the Applicable Rate for the next succeeding Rate Period;
(ii) in the case of a Broker-Dealer that is a Seller's Broker-Dealer,
instruct each Existing Holder on whose behalf such Broker-Dealer submitted a
Sell Order that was accepted, in whole or in part, to instruct such Existing
Holder's Agent Member to deliver to such Broker-Dealer (or its Agent Member)
through the Securities Depository the number of AMPs to be sold pursuant to such
Order against payment therefor and advise any such Existing Holder that will
continue to hold AMPs of the Applicable Rate for the next succeeding Rate
Period;
(iii) advise each Existing Holder on whose behalf such Broker-Dealer
submitted a Hold Order of the Applicable Rate for the next succeeding Rate
Period;
(iv) advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order of the Auction Date for the next succeeding Auction; and
(v) advise each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, of the Auction Date for
the next succeeding Auction.
(c) On the basis of the information provided to it pursuant to (a) above,
each Broker-Dealer that submitted a Bid or a Sell Order on behalf of a Potential
Holder or an Existing Holder shall, in such manner and at such time or times as
in its sole discretion it may determine, allocated any funds received by it
pursuant to (b)(i) above and any AMPs received by it pursuant to (b)(ii) above
among the Potential Holders, if any, on whose behalf such Broker-Dealer
submitted Bids, the Existing Holders, if any, on whose behalf such Broker-Dealer
submitted Bids that were accepted or Sell Orders, and any Broker-Dealer or
Broker-Dealers identified to it by the Auction Agent pursuant to (a)(v) or
(a)(vi) above.
(d) On each Auction Date:
(i) each Potential Holder and Existing Holder shall instruct its Agent
Member as provided in (b)(i) or (ii) above, as the case may be;
(ii) each Seller's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (A) pay through the
Securities Depository to the Agent Member of the Existing Holder delivering
shares to such Broker-Dealer pursuant to (b)(ii) above the amount necessary to
purchase such shares against receipt of such shares, and (B) deliver such shares
through the Securities Depository to a Buyer's Broker-Dealer (or its Agent
Member) identified to such Seller's Broker-Dealer pursuant to (a)(v) above
against payment therefor; and
(iii) each Buyer's Broker-Dealer which is not an Agent Member of the
Securities Depository shall instruct its Agent Member to (A) pay through the
Securities Depository to a Seller's Broker-Dealer (or its Agent Member)
identified pursuant to (a) (vi) above the amount necessary to purchase the
shares to be purchased pursuant to (b) (i) above against receipt of such shares,
and (B) deliver such shares through the Securities Depository to the Agent
Member of the purchaser thereof against payment therefor.
(e) On the Business Day after the Auction Date:
(i) each Bidder's Agent Member referred to in (d) (i) above shall instruct
the Securities Depository to execute the transactions described under (b) (i) or
(ii) above, and the Securities Depository shall execute such transactions;
(ii) each Seller's Broker-Dealer or its Agent Member shall instruct the
Securities Depository to execute the transactions described in (d) (ii) above,
and the Securities Depository shall execute such transactions; and
(iii) each Buyer's Broker-Dealer or its Agent Member shall instruct the
Securities Depository to execute the transactions described in (d) (iii) above,
and the Securities Depository shall execute such transactions.
(f) If an Existing Holder selling AMPs in an Auction fails to deliver such
shares (by authorized book-entry), a Broker-Dealer may deliver to the Potential
Holder on behalf of which it submitted a Bid that was accepted a number of whole
AMPs that is less than the number of shares that otherwise was to be purchased
by such Potential Holder. In such event, the number of AMPs to be so delivered
shall be determined solely by such Broker-Dealer. Delivery of such lesser number
of shares shall constitute good delivery. Notwithstanding the foregoing terms of
this paragraph (f), any delivery or non-delivery of shares which shall represent
any departure from the results of an Auction, as determined by the Auction
Agent, shall be of no effect unless and until the Auction Agent shall have been
notified of such delivery or non-delivery in accordance with the provisions of
the Auction Agent Agreement and the Broker-Dealer Agreements.
Exhibit (k)(iv) under Form N-2
================================================================================
BROKER-DEALER AGREEMENT
Among
DEUTSCHE BANK TRUST COMPANY AMERICAS
as Auction Agent
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
as Broker-Dealer
Dated as of [February 18], 2003
Relating to
AUCTION MARKET PREFERRED SHARES
SERIES A
of
FEDERATED PREMIER MUNICIPAL INCOME FUND
================================================================================
11
This BROKER-DEALER AGREEMENT dated as of [February 18], 2003 (this
"Agreement"), among (i) Deutsche Bank Trust Company Americas, a New York banking
corporation, as auction agent (the "Auction Agent") (not in its individual
capacity but solely as agent of FEDERATED PREMIER MUNICIPAL INCOME FUND, a
Delaware statutory trust (the "Trust")) pursuant to authority granted to it in
the Auction Agency Agreement and (ii) Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as broker-dealer (together with its successors and assigns as such
hereinafter referred to as "BD").
The Trust intends to issue one series of Auction Market Preferred Shares,
par value $0.01 per share, liquidation preference $25,000 per share, designated
Series A (the "AMPS"). The AMPS shall be issued in book-entry form through the
facilities of the Securities Depository. References to "Shares of AMPS" or
"AMPS" in this Agreement shall refer only to the beneficial interests in the
AMPS unless the context otherwise requires.
The Auction Procedures require the participation of a Broker-Dealer.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Auction Agent, the Trust and BD
agree as follows:
8. Definitions and Rules of Construction
8.1 Terms Defined by Statement of Preferences. Capitalized terms not
defined herein shall have the respective meanings specified in the Statement.
8.2 Terms Defined Herein. As used herein and in the Settlement Procedures,
the following terms shall have the following meanings, unless the context
otherwise requires:
(a) "Agent Member" of any Person shall mean the member of, or participant
in, the Securities Depository that will act on behalf of a Bidder.
(b) "Agreement" with respect to the Trust shall mean this Agreement as may
be amended in writing with written consent of the Trust.
(c) "AMPS" shall mean the preferred shares, $0.01 par value per share, of
the Trust designated as its "Auction Market Preferred Shares" and bearing such
further designation as to series as the Trust shall specify.
(d) "Auction" shall have the meaning specified in Section 2.1 hereof.
(e) "Auction Agency Agreement" shall mean the Auction Agency Agreement
dated as of [February 18], 2003 between the Auction Agent and the Trust.
(f) "Auction Procedures" shall mean the auction procedures constituting
Part II of the Statement.
(g) "BD Officer" shall mean the Chairman, the President, each Vice
President (whether or not designated by a number or word or words added before
or after the title "Vice President"), the Secretary, the Treasurer, each
Assistant Vice President, each Assistant Secretary and each Assistant Treasurer
of the Trust and every other officer or employee of BD designated as a "BD
Officer" for purposes hereof in a notice to the Auction Agent.
(h) "Authorized Officer" of the Auction Agent shall mean each Senior Vice
President, Vice President, Assistant Vice President and Associate of the Auction
Agent assigned to its Corporate Trust and Agency Services and every other
officer or employee of the Auction Agent designated as an "Authorized Officer"
for purposes hereof in a communication to the Trust.
(i) "Settlement Procedures" shall mean the Settlement Procedures attached
to the Auction Agency Agreement as Exhibit B.
(j) "Statement" shall mean the Trust's Statement of Preferences of Auction
Market Preferred Shares, as the same may be amended, supplemented or modified
from time to time.
(k) "Trust Officer" shall mean the Chairman, the President, each Vice
President (whether or not designated by a number or word or words added before
or after the title "Vice President"), the Secretary, the Treasurer, each
Assistant Secretary and each Assistant Treasurer of the Trust and every other
officer or employee of the Trust designated as a "Trust Officer" for purposes
hereof in a notice to the Auction Agent.
8.3 Rules of Construction. Unless the context or use indicates another or
different meaning or intent, the following rules shall apply to the construction
of this Agreement:
(a) Words importing the singular number shall include the plural number and
vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto" and other words of similar
import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York
City time.
(e) This Agreement shall apply separately but equally to all series of AMPS
that may be issued. Section 1 and 2 hereof shall be read in conjunction with the
Statement and in the event of any conflict with the Statement, the Statement
shall take precedence.
8.4 Warranties of BD. BD hereby represents and warrants that this
Broker-Dealer Agreement has been duly authorized, executed and delivered by BD
and that, assuming the due authorization, execution and delivery hereof by the
Auction Agent, this Broker-Dealer Agreement constitutes a valid and binding
agreement of BD, enforceable against it in accordance with its terms. BD's
representations and warranties in this Section 1.4 shall survive the termination
of this Agreement.
9. The Auctions.
9.1 Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be
followed by the Auction Agent for the purpose of determining the Applicable Rate
for the AMPS for the next Rate Period. Each periodic implementation of such
procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part of this Agreement to the same extent as if such
provisions were fully set forth herein.
(c) BD agrees to act as, and assumes the obligations of and limitations and
restrictions placed upon, a Broker-Dealer under this Agreement.
(d) BD acknowledges and agrees that each provision of the Auction
Procedures that requires BD to perform an obligation or procedure is hereby
incorporated herein by reference and that this Agreement shall constitute the
Trust's instruction, and BD hereby agrees, to perform such obligations and
procedures without further request by or instructions from the Trust.
(e) BD may participate in Auctions for its own account.
9.2 Preparation for Each Auction.
(a) Not later than 9:30 a.m. on each Auction Date, the Auction Agent shall
advise BD by telephone or other electronic means, to be confirmed in writing by
the Auction Agent, of the Maximum Rate, Reference Rate(s) and Treasury Note
Rate(s).
(b) BD shall cause the Maximum Rate to be communicated as promptly as
practicable to its customers who hold or may be interested in acquiring AMPS.
(c) If required by applicable law, or requested by the Auction Agent, BD
shall provide a list of Existing Holders based upon inquiries of those Persons
such Broker-Dealer believes are Beneficial Owners as a result of the most recent
Auction to the Auction Agent promptly after any date so requested by the Auction
Agent. The Auction Agent shall keep confidential any such information, including
information received as to the identity of Bidders in any Auction, and shall not
disclose any such information so provided to any Person other than the other
parties hereto, provided that the Auction Agent each reserves the right to
disclose any such information if (a) it is ordered to do so by a court of
competent jurisdiction or a regulatory, judicial or quasi-judicial agency, (b)
it is advised by its counsel that its failure to do so would be unlawful or (c)
failure to do so would expose the Auction Agent to loss, liability, claim,
damage or expense for which it has not received indemnity satisfactory to it.
(d) BD agrees to maintain a list of customers relating to the AMPS and to
use its best efforts, subject to existing laws and regulations, to contact the
customers on such list whom BD believes may be interested in participating in
the Auction on each Auction Date, as a Potential Holder or a Potential
Beneficial Owner, for the purposes set forth in the Auction Procedures. Nothing
herein shall require BD to submit an Order for any customer in any Auction.
(e) The Auction Agent's registry of Existing Holders of shares of the AMPS
shall be conclusive and binding on BD. BD may inquire of the Auction Agent
between 3:00 P.M. on the Business Day preceding an Auction for shares of a
series of AMPS and 9:30 A.M. on the Auction Date for such Auction to ascertain
the number of shares of such series in respect of which the Auction Agent has
determined BD to be an Existing Holder. If BD believes it is the Existing Holder
of fewer shares of such series than specified by the Auction Agent in response
to BD's inquiry, BD may so inform the Auction Agent of that belief. BD shall
not, in its capacity as Existing Holder of shares of such series, submit Orders
in such Auction in respect of shares of such series covering in the aggregate
more than the number of shares of such series specified by the Auction Agent in
response to BD's inquiry.
9.3 Auction Schedule; Method of Submission of Orders.
(a) The Auction Agent shall conduct Auctions in accordance with the
schedule set forth below. Such schedule may be changed at any time by the
Auction Agent with the consent of the Trust, which consent shall not be
unreasonably withheld. The Auction Agent shall give written notice of any such
change to BD which shall have the right to review such change. Such notice shall
be received one Business Day prior to the first Auction Date on which any such
change shall be effective.
Time Event
By 9:30 a.m. Auction Agent advises the Trust and the
Broker-Dealer of the applicable Maximum
Rate and the Reference Rate(s) and
Treasury Note Rate(s) as set forth in
Section 2.2(a) hereof.
9:30 a.m. - 1:30 p.m. Auction Agent assembles information
communicated to it by Broker-Dealer as
provided in Section 1(a) of the Auction
Procedures. Submission Deadline is
1:30 p.m.
Not earlier than Auction Agent makes determinations
1:30 p.m. pursuant to 3(a) of the Auction
Procedures.
By approximately Auction Agent advises the Trust of
3:30 p.m. results of Auction as provided in
Section 3(b) of the Auction
Procedures. Submitted Bids and
Submitted Sell Orders are accepted and
rejected in whole or in part and AMPS
are allocated as provided in Section 4
of the Auction Procedures. Auction
Agent gives notice of Auction results
as set forth in Section 2.4(a) hereof.
(b) BD may designate one or more individuals in its organization who will
coordinate its procedures in connection with Auctions and purchases and sales of
shares of the AMPS.
(c) BD agrees to handle its customers' order in accordance with its duties
under applicable securities laws and rules.
(d) To the extent that pursuant to Section 4 of the Auction Procedures of
the Trust, BD continues to hold, sells or purchases a number of shares that is
fewer than the number of shares in an Order submitted by BD to the Auction Agent
in which BD designated itself as an Existing Holder or Potential Holder in
respect of customer Orders, BD shall make appropriate pro rata allocations among
its customers for which it submitted Orders of similar tenor. If as a result of
such allocations, any Beneficial Owner would be entitled or required to sell, or
any Beneficial Owner would be entitled or required to purchase, a fraction of a
Share of AMPS on any Auction Date, BD shall, in such manner as it shall
determine in its sole discretion, round up or down the number of AMPS to be
purchased or sold on such Auction Date by any Beneficial Owner or Potential
Beneficial Owner on whose behalf BD submitted an Order so that the number of
shares so purchased or sold by each such Beneficial Owner or Potential
Beneficial Owner on such Auction Date shall be whole shares.
(e) BD shall submit Orders to the Auction Agent in writing in substantially
the form attached hereto as Exhibit A. BD shall submit separate Orders to the
Auction Agent for each Potential Holder or Existing Holder on whose behalf BD is
submitting an Order and shall not net or aggregate the Orders of Potential
Holders or Existing Holders on whose behalf BD is submitting Orders.
(f) BD shall deliver to the Auction Agent (i) a written notice,
substantially in the form attached hereto as Exhibit B, of transfers of AMPS
made through BD by an Existing Holder to another Person other than pursuant to
an Auction and (ii) a written notice, substantially in the form attached hereto
as Exhibit C, of the failure of any AMPS to be transferred to or by any Person
that purchased or sold AMPS through BD pursuant to an Auction. The Auction Agent
is not required to accept any notice delivered pursuant to the terms of the
foregoing sentence with respect to an Auction unless the Auction Agent receives
it by 3:30 p.m. on the Business Day preceding such Auction.
9.4 Notices.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone or
facsimile (or other electronic means acceptable to both parties) of the results
of the Auction as set forth in paragraph (a) of the Settlement Procedures. By
approximately 11:30 A.M. on the Business Day next succeeding such Auction Date,
the Auction Agent shall notify BD in writing of the disposition of all Orders
submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Existing Holder or Potential Holder on whose
behalf BD has submitted an Order as set forth in paragraph (b) of the Settlement
Procedures and take such other action as is required of BD pursuant to the
Settlement Procedures.
9.5 Notification of Dividend.
The provisions contained in Section 4 of Part I of the Statement concerning
the notification of a Special Rate Period will be followed by the Auction Agent
and BD, and the provisions contained therein are incorporated herein by
reference in their entirety and shall be deemed to be a part of this Agreement
to the same extent as if such provisions were set forth fully herein.
9.6 Service Charge to Be Paid to BD.
(a) No later than 12:00 noon on each Dividend Payment Date, the Auction
Agent after each Auction will pay a service charge from funds provided by the
Trust to each Broker-Dealer on the basis of the purchase price of AMPS placed by
such Broker-Dealer at such Auction. The service charge shall be (i) in the case
of any Auction Date immediately preceding a Rate Period other than a Special
Rate Period, the product of (A) a fraction the numerator of which is the number
of days in such Rate Period (calculated by counting the date of original issue
of such shares to but excluding the next succeeding dividend payment date of
such shares) and the denominator of which is 360, times (B) 1/4 of 1%, times (C)
$25,000 times (D) the sum of the aggregate number of shares of outstanding AMPS
for which the Auction is conducted and (ii) in the case of any Special Rate
Period the amount determined by mutual consent of the Trust and any such
Broker-Dealers and shall be based upon a selling concession that would be
applicable to an underwriting of fixed rate AMPS with a similar final maturity
at the commencement of the Rate Period with respect to such Auction (the
"Broker-Dealer Fee").
(b) If the Trust determines to change the rate at which the Broker-Dealer
Fee accrues, the Trust shall mail to the Auction Agent a notice thereof within
two Business Days of such change. Any change in the Broker-Dealer Fee shall be
effective on the Auction Date next succeeding the Auction Agent's receipt of
notice of such change.
9.7 Settlement.
(a) If any Existing Holder selling AMPS in an Auction fails to deliver such
AMPS (by authorized book-entry), the BD of any Person that was to have purchased
AMPS in such Auction may deliver to such Person a number of Shares of AMPS that
is less than the number of Shares of AMPS that otherwise were to be purchased by
such Person. In such event, the number of Shares of AMPS to be so delivered
shall be determined by BD. Delivery of such lesser number of Shares of AMPS
shall constitute good delivery. Upon the occurrence of any such failure to
deliver Shares of AMPS, BD shall deliver to the Auction Agent the notice
required by Section 2.3(f)(ii) hereof. Notwithstanding the foregoing provisions
of this Section 2.7(a), any delivery or non-delivery of AMPS which represents
any departure from the results of an Auction, as determined by the Auction
Agent, shall be of no effect unless and until the Auction Agent shall have been
notified of such delivery or non-delivery in accordance with the terms of
Section 2.3(f) hereof. The Auction Agent shall have no duty or liability with
respect to enforcement of this Section 2.7(a).
(b) Neither the Auction Agent nor the Trust shall have any responsibility
or liability with respect to the failure of an Existing Holder, a Potential
Holder or an Agent Member or any of them to deliver AMPS or to pay for AMPS sold
or purchased pursuant to the Auction Procedures or otherwise.
(c) Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event BD is an Existing Holder
with respect to shares of AMPS and the Auction procedures provide that BD shall
be deemed to have submitted a Sell Order in an Auction with respect to such
shares if BD fails to submit an Order in that Auction with respect to such
shares, BD shall have no liability to any Person for failing to sell such shares
pursuant to such a deemed Sell Order if (i) such shares were transferred by the
beneficial owner thereof without notification of such transfer in compliance
with the Auction Procedures or (ii) BD has indicated to the Auction Agent
pursuant to Section 2.2(e) of this Agreement that, according to BD's records, BD
is not the Existing Holder of such shares.
(d) Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event an Existing Holder or
Beneficial Owner of shares of AMPS with respect to whom a Broker-Dealer
submitted a Bid to the Auction Agent for such shares that was accepted in whole
or in part, or submitted or is deemed to have submitted a Sell Order for such
shares that was accepted in whole or in part, fails to instruct its Agent Member
to deliver such shares against payment therefore, partial deliveries of AMPS
that have been made in respect of Potential Holders' or Potential Beneficial
Owners' Submitted Bids for shares of such series that have been accepted in
whole or in part shall constitute good delivery to such Potential Holders and
Potential Beneficial Owners.
10. The Auction Agent.
10.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and
owes no duties, fiduciary or otherwise, to any other Person.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement, the Auction Agency Agreement,
Auction Procedures or the Settlement Procedures against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under this
Agreement. The Auction Agent shall not be liable for any error resulting from
the use or reliance on a source of information used in good faith and without
negligence to make any determination, calculation or declaration hereunder. The
Auction Agent shall not be liable for any error of judgment made in good faith
unless the Auction Agent shall have been negligent in ascertaining or failing to
ascertain the pertinent facts.
(d) The Auction Agent shall not be: (i) required to, and does not, make any
representations or have any responsibilities as to the validity, accuracy, value
or genuineness of any signatures or endorsements, other than its own; (ii)
obligated to take any legal action hereunder that might, in its judgment,
involve any expense or liability, unless it has been furnished with indemnity
satisfactory to the Auction Agent; and (iii) responsible for or liable in any
respect on account of the identity, Trust or rights of any Person (other than
itself and its agents and attorneys) executing or delivering or purporting to
execute or deliver any document under this Agreement or any Broker-Dealer
Agreement.
10.2 Rights of the Auction Agent.
(a) The Auction Agent may conclusively rely and shall be fully protected in
acting or refraining from acting upon any communication authorized by this
Agreement and upon any written instruction, notice, request, direction, consent,
report, certificate, share certificate or other instrument, paper or document
believed by it to be genuine. The Auction Agent shall not be liable for acting
upon any communication authorized by this Agreement (including, but not limited
to, any made by telephone, telecopier or other means of electronic communication
acceptable to the parties hereto) which the Auction Agent believes in good faith
to have been given by the Trust or by BD. The Auction Agent may record telephone
communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its
own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed by it with due care.
10.3 Auction Agent's Disclaimer. The Auction Agent makes no representation
as to, and shall have no liability with respect to, the correctness of the
recitals in, or the validity, adequacy or accuracy of, this Agreement, the
Auction Agency Agreement, the Auction Procedures, the offering material used in
connection with the offer and sale of the AMPS or any other agreement or
instrument executed in connection with the transactions contemplated herein or
in any thereof.
11. Miscellaneous.
11.1 Termination. (a) Any party may terminate this Agreement at any time
upon five (5) days written notice to the other parties, which notice may be
given by facsimile as provided in Section 4.3 hereof. This Agreement shall
automatically terminate upon the redemption of all outstanding AMPS or upon
termination of the Auction Agency Agreement.
(b) BD represents that it (or if BD does not act as Agent Member, one of
its affiliates) shall make all dividend payments on the AMPS available in
same-day funds on each Dividend Payment Date to customers that use BD or
affiliate as Agent Member.
11.2 Agent Member. BD is, and shall remain for the term of this Agreement,
a member of, or participant in, the Securities Depository (or an affiliate of
such a member or participant).
11.3 Communications. Except for (i) communications authorized to be by
telephone pursuant to this Agreement or the Auction Procedures and (ii)
communications in connection with the Auctions (other than those expressly
required to be in writing), all notices, requests and other communications to
any party hereunder shall be in writing (for the purposes of this Agreement,
telecopy or other means of electronic communication acceptable to the parties
shall be deemed to be in writing) and shall be given to such party, addressed to
it, at its address or facsimile number set forth below and, where appropriate
reference the particular Auction to which such notice relates:
If to BD,
addressed: Merrill Lynch, Pierce Fenner & Smith Incorporated
4 World Financial Center
New York, NY 10080
Attention: Francis Constable, Variable Rate Preferred
Desk
Telephone No.: (212) 449-4941
Facsimile No.: (212) 449-2761
If to the Auction
Agent, addressed: Deutsche Bank Trust Company Americas
Corporate Trust & Agency Services
280 Park Avenue, 9th Floor
New York, NY 10017
Attention: Auction Rate Securities
Telephone No.: (212) 454-4042
Facsimile No.: (212) 454-2030
If to the Trust,
addressed: Federated Premier Municipal Income Fund
Beverly Pirker
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Telephone No: (412) 288-1770
Facsimile No.: (412) 288-6788
With copies to: Stephen A. Keen, General Counsel
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Telephone No: (412) 288-1567
Facsimile No.: (412) 288-3939
or such other address or facsimile number as such party may hereafter
specify for such purpose by notice to the other parties. Each such notice,
request or communication shall be effective when delivered at the address
specified herein. Communications shall be given on behalf of BD by a BD Officer,
on behalf of the Auction Agent by an Authorized Officer and on behalf of the
Trust by an Authorized Trust Officer. Telephone communications may be recorded.
11.4 Entire Agreement. This Agreement contains the entire agreement between
the parties relating to the subject matter hereof, and there are no other
representations, endorsements, promises, agreements or understandings, oral,
written or inferred, between the parties relating to the subject matter hereof.
11.5 Benefits. Nothing in this Agreement, express or implied, shall give to
any person, other than the Auction Agent, the Trust and BD and their respective
successors and permitted assigns, any benefit of any legal or equitable right,
remedy or claim under this Agreement.
11.6 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of each of the
parties hereto.
(b) Failure of any party to this Agreement to exercise any right or remedy
hereunder in the event of a breach of this Agreement by any other party shall
not constitute a waiver of any such right or remedy with respect to any
subsequent breach.
11.7 Successors and Assigns. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by, the respective successors and permitted
assigns of each of the parties hereto. This Agreement may not be assigned by any
party hereto absent the prior written consent of the other parties.
11.8 Severability. If any clause, provision or section of this Agreement
shall be ruled invalid or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision or section shall
not affect any remaining clause, provision or section hereof.
11.9 Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
11.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW, OTHER THAN SECTION 5-1401 OF
THE GENERAL OBLIGATIONS LAW OF NEW YORK).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
DEUTSCHE BANK TRUST COMPANY AMERICAS
as Auction Agent
By:
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
as Broker-Dealer
By:
Name:
Title:
A-1
Exhibit A
To BROKER-DEALER
AGREEMENT
AUCTION BID FORM
(Submit only one Order on this Order Form)
FEDERATED PREMIER MUNICIPAL INCOME FUND
Auction Market Preferred Shares ("AMPS")
To: Deutsche Bank Trust Company Americas Date of Auction
280 Park Avenue, 9th Floor ____________
New York, NY 10017 Series of AMPS (Series
Attn: Auction Rate Securities A)
Facsimile No. (212) 454-2030
The undersigned Broker-Dealer submits the following Order on behalf of the
Bidder listed below:
Name of Bidder:
Bidder placed the Order listed below covering the number of shares
indicated (complete only one blank):
number of Shares of AMPS now held by
Bidder (an Existing Holder), and the Order is a (check one):
|_| Hold Order; or
|_| Bid at a rate of ____%; or
|_| Sell Order;
- or -
number of Shares of AMPS not now held
by Bidder (a Potential Holder), and the Order is
a Bid at a rate of ______%
Notes:
(1) If submitting more than one Bid for one Bidder, use additional Order Forms.
(2) If one or more Bids covering in the aggregate more than the outstanding
number of Shares of AMPS held by any Existing Holder are submitted, such
Bids shall be considered valid in the order of priority set forth in the
Auction Procedures.
(3) A Hold or Sell Order may be placed only by an Existing Holder covering a
number of Shares of AMPS not greater than the number of Shares of AMPS
currently held by such Existing Holder.
(4) Potential Holders may make Bids only, each of which must specify a rate. If
more than one Bid is submitted on behalf of any Potential Holder, each Bid
submitted shall be a separate Bid with the rate specified.
(5) Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%).
(6) An Order must be submitted in whole Shares of AMPS with an aggregate
liquidation preference of $25,000.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By:
B-29
Exhibit B
To BROKER-DEALER
AGREEMENT
(To be used only for transfers made other than
pursuant to an Auction)
TRANSFER FORM
FEDERATED PREMIER MUNICIPAL INCOME FUND
Auction Market Preferred Shares ("AMPS")
Series A AMPS
(indicate by Number Designation)
We are (check one):
|_| the Existing Holder named below; or
|_| the Broker-Dealer for such Existing Holder; or
|_| the Agent Member for such Existing Holder.
We hereby notify you that such Existing Holder will transfer ___ Shares of
AMPS to ____________________ and represent that such transfer complies with the
requirements of the Agreement and Declaration of Trust of FEDERATED PREMIER
MUNICIPAL INCOME FUND, the Statement of Preferences of Auction Market Preferred
Shares and applicable federal and state law. Upon the request of the Trust or
the Auction Agent the undersigned will provide such documentation as shall be
reasonably requested to demonstrate such compliance as a condition of the
registration of such transfer.
(Name of Existing Holder)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Name of Broker-Dealer)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Name of Agent Member)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
By: _______________________________
Name:
Title:
-----------------------------------------
Exhibit C
To BROKER-DEALER
AGREEMENT
(To be used only for failures to deliver
AMPS sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
FEDERATED PREMIER MUNICIPAL INCOME FUND
Auction Market Preferred Shares ("AMPS")
Series A AMPS
(indicate by Number Designation)
Complete either I. or II.
I. We are a Broker-Dealer for ______________ (the "Purchaser"), which
purchased ____ Shares of AMPS in the Auction held on __________________
from the seller of such AMPS.
II. We are a Broker-Dealer for _____________ (the "Seller"), which sold ____
Shares of AMPS in the Auction held on ____________________ to the purchaser
of such AMPS.
We hereby notify you that (check one):
__________ the Seller failed to deliver such AMPS to the Purchaser; or
__________ the Purchaser failed to make payment to the Seller upon delivery of
such AMPS.
Name: ________________________________
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
By:
____________________________________
Printed Name:
Title:
-----------------------------------------
Exhibit (k)(v) under Form N-2
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT made as of the [____] of February, 2003 by and
between Federated Premier Municipal Income Fund, a Delaware statutory trust (the
"Fund") and Federated Investment Management Company, a Delaware statutory trust
(the "Adviser").
WHEREAS, the Fund has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (the "Registration Statement") on
Form N-2 pursuant to the Securities Act of 1933, as amended (the "1933 Act')
(File No. 333-102033) and the Investment Company Act of 1940, as amended (the
"1940 Act") (File No. 811-21235) pursuant to which the Fund proposes to sell to
the public an aggregate of 2,147 shares of the Fund's Auction Market Preferred
Shares through several underwriters led by Merrill Lynch & Co. and others
(collectively, the "Underwriters") in connection with an offering pursuant to a
purchase agreement (the "Purchase Agreement") to be entered into by the Fund,
the Adviser and the Underwriters.
WHEREAS, the Purchase Agreement contains certain provisions with respect to
the obligations and liabilities between the Fund and the Adviser on the one hand
and the Underwriters on the other.
WHEREAS, the Underwriters require the Fund and the Adviser to agree to
jointly and severally indemnify the Underwriters for certain liabilities.
WHEREAS, the Fund and the Adviser desire to set forth their understanding
and agreement concerning certain liabilities arising out of their obligations to
the Underwriters under the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
The Adviser agrees to indemnify and hold harmless the Fund, its trustees
and each of the Fund's officers who signed the Registration Statement, against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in Section6(a) of the Purchase Agreement, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or any amendment
thereto), including the Rule 430A Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the Fund
by the Adviser expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
An indemnified party shall give notice as promptly as reasonably
practicable to the Adviser of any action commenced against it in respect of
which indemnity may be sought hereunder, but failure to so notify shall not
relieve the Adviser from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this
Indemnification Agreement. In respect of any such proceeding, counsel shall be
selected by the Fund. The Adviser may participate at its own expense in the
defense of any such action; provided, however, that counsel to the Adviser shall
not (except with the consent of the Fund) also be counsel to the Fund. In no
event shall the Adviser be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from its own counsel in connection
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
Without the prior written consent of an indemnified party, the Adviser shall not
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Indemnification Agreement (whether or
not the indemnified party is an actual or potential party thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of the
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of the
indemnified party.
If at any time an indemnified party shall have requested the Adviser to
reimburse an indemnified party for fees and expenses of counsel, the Adviser
agrees that it shall be liable for any settlement effected without its written
consent if (i) such settlement is entered into more than 45 days after receipt
by the Adviser of the aforesaid request, (ii) the Adviser shall have received
notice of the terms of such settlement at least 30 days prior to such settlement
being entered into and (iii) the Adviser shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement.
Any notice, claim or demand hereunder shall be made in writing and if
required to be given to an indemnified party shall be sufficient if given as
provided in the Purchase Agreement for notices to the Fund and any notice, claim
or demand hereunder to be given to the Adviser shall be made in writing and
likewise shall be sufficient if given as provided in the Purchase Agreement.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and assigns. This Agreement shall be governed by the laws of the State of New
York without regard to such jurisdiction's conflicts of laws principles. This
Agreement may be executed by one or more parties hereto in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall be deemed to be one and the same instrument.
Except as otherwise specifically defined herein, all capitalized terms used
in this Agreement shall have the meanings assigned such terms in the Purchase
Agreement.
IN WITNESS WHEREOF, the parties below have caused the foregoing to be
executed on their behalf this [____] day of February, 2003.
FEDERATED PREMIER MUNCIPAL INCOME FUND
By: _______________________________
Name:
Title:
FEDERATED INVESTMENT MANAGEMENT COMPANY
By: _______________________________
Name:
Title:
Exhibit (k)(vi) under Form N-2
[LOGO]
Book-Entry-Only Auction-Rate/Money Market Preferred/
and Remarketed Preferred Securities
Letter of Representations
[To be Completed by Issuer and Trust Company]
Federated Premier Municipal Income Fund
[Name of Issuer}
Depository Trust Company
[Name of Trust Company]
_________________
[Date]
Attention: General Counsel's Office
The Depository Trust Company
55 Water Street 49th Floor
New York, NY 10041-0099
Re:_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
[Issue description, including CUSIP number (the "Securities")]
Ladies and Gentlemen: This letter sets forth our understanding with respect
to certain matters relating to the Securities. Trust Company shall act as
transfer agent, registrar, dividend disbursing agent, redemption agent or other
such agent with respect to the Securities. The Securities have been issued
pursuant to a prospectus, private placement memorandum, or other such document
authorizing the issuance of the Securities dated _____________________________
(the "Document"). _______________________________ is distributing the Securities
through the ["Underwriter/Placement Agent"] Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC, and
to act in accordance with its Rules with respect to the Securities, Issuer and
Trust Company make the following representations to DTC:
1. Prior to closing on the Securities on _________________ there shall be
deposited with DTC one or more Security certificates registered in the name of
DTC's nominee, Cede & Co., which represents 100% of the offering value of the
Securities. Said certificate(s) shall remain in DTC's custody as provided in the
Document. If, however, the aggregate principal amount of the Securities exceeds
$400 million, one certificate shall be issued with respect to each $400 million
of principal amount and an additional certificate shall be issued with respect
to any remaining principal amount, Each Security certificate shall bear the
following legend:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to Issuer or its agent for registration
of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative
of DTC (and any payment is made to Cede & Co. or to such
other entity as is requested by an authorized representative
of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.
2. Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its participants ("Participants") or to any person having an
interest in the Securities any information contained in the Security
certificate(s); and (b) acknowledges that neither DTC's Participants nor any
person having an interest in the Securities shall be deemed to have notice of
the provisions of the Security certificate(s) by virtue of submission of such
certificate(s) to DTC.
3. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer shall establish a record date for such purposes (with
no provision for revocation of consents or votes by subsequent holders) and
shall send notice of such record date to DTC no fewer than 15 calendar days in
advance of such record date. Notices to DTC pursuant to this Paragraph by
telecopy shall be directed to DTC's Reorganization Department, Proxy Unit at
(212) 855-5181 or (212) 855-5182. If the party sending the notice does not
receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (212) 855-5202. Notices to DTC pursuant to
this Paragraph, by mail or by any other means, shall be sent to:
Supervisor, Proxy Unit
Reorganization Department
The Depository Trust Company
55 Water Street 50th Floor
New York, NY 10041-0099
4. In the event of a full or partial redemption of the Securities, Issuer
or Trust Company shall send a notice to DTC specifying: (a) the number of
Securities to be redeemed, and (b) the date such notice is to be distributed to
Security holders (the "Publication Date"). Such notice shall be sent to DTC by a
secure means (e.g., legible telecopy, registered or certified mail, overnight
delivery) in a timely manner designed to assure that such notice is in DTC's
possession no later than the close of business on the business day before or, if
possible, two business days before the Publication Date. Issuer or Trust Company
shall forward such notice either in a separate secure transmission for each
CUSIP number or in a secure transmission for multiple CUSIP numbers (if
applicable) which includes a manifest or list of each CUSIP number submitted in
that transmission. (The party sending such notice shall have a method to verify
subsequently the use of such means and the timeliness of such notice). The
Publication Date shall be no fewer than 17 days nor more than 30 days prior to
the redemption date. Notices to DTC pursuant to this Paragraph by telecopy shall
be directed to DTC's Call Notification department at (516) 227-4164 or (5150
227-4190. If the Party sending the notice does not receive a telecopy receipt
from DTC confirming that the notice has been received, such arty shall telephone
(516) 227-4070. Notices to DTC pursuant to this Paragraph, by mail or by any
other means, shall be sent to:
Manager, Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
5. In the event of an invitation to tender the Securities (including
mandatory tenders, exchanges, and capital changes), notice by Issuer or Trust
Company to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions by telecopy shall be directed
to DTC's Reorganization Department at (212) 855-5488. If the party sending the
notice does not receive a telecopy receipt from DTC confirming that the notice
has been received, such party shall telephone (212) 855-5290. Notices to DTC
pursuant to this Paragraph, by mail or by any other means, shall be sent to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
55 Water Street 50th Floor
New York, NY 10041-0099
6. All notices and payment advices sent to DTC shall contain the CUSlP
number of the Securities.
7. The Document indicates that the dividend rate for the Securities may
vary from time to time. Absent other existing arrangements with DTC, Issuer or
Trust Company shall give DTC notice of each such change in the dividend rate, on
the same day that the new -rate is determined, by telephoning DTC's Dividend
Announcement Section at (212) 855-4550, or by telecopy sent to (212) 855-4555.
Such verbal or telecopy notice shall be followed by prompt written confirmation
sent by a secure means (e.g., legible telecopy, registered or certified mail,
overnight delivery) in a timely manner. Issuer or Agent shall forward such
notice either in a separate secure transmission for each CUSIP number or in a
secure transmission for multiple CUSIP numbers (if applicable) which includes a
manifest or list of each CUSIP number submitted in that transmission. (The party
sending such notice shall have a method to verify subsequently the use and
timeliness of such notice). Notice to DTC pursuant to this Paragraph, by mail or
by any other means, shall be sent to:
Manager, Announcements
Dividend Department
The Depository Trust Company
55 Water Street 25th Floor
New York, NY 10041-0099
8. Issuer and Trust Company acknowledge that as long as Cede & co. is the
sole record owner of the Securities, Cede & Co. shall be entitled to all voting
rights applicable to the Securities and to receive the full amount of all
dividends, liquidation proceeds, and redemption proceeds payable with respect to
the Securities. Issuer and Trust Company acknowledge that DTC shall treat any
Participate having Securities credited to its DTC accounts as entitled to the
full benefits of ownership of such Securities. Without limiting the generality
of the preceding sentence, Issuer and trust Company acknowledge that DTC shall
treat any Participant having Securities credited to its DTC accounts as entitled
to receive dividends, distributions, and voting rights, if any, in respect of
Securities and subject to Paragraph 12 and 13, to receive certificates
evidencing Securities if such certificates are to be issued in accordance with
Issuer's Amended and Restated By-Laws. (The treatment of DTC of the effects of
the crediting by it of Securities to the accounts of Participants described in
the preceding two sentences shall not affect the rights of Issuer, participants
in auctions relating to the Securities, purchasers, sellers, or holders of
Securities against any Participant.)
9. Issuer or Trust Company shall provide a written notice of dividend
payment and distribution information to DTC as soon as the information is
available, Issuer or Trust Company shall provide this information to DTC
electronically, as previously arranged by Issuer or Trust Company and DTC, as
soon as the information is available. If electronic transmission has not been
arranged, absent any other arrangements between Issuer or Trust Company and DTC,
such information shall be sent by telecopy to DTC's Dividend Department at (212)
855-4555 or (212) 855-4556, and receipt of such notices shall be confirmed by
telephoning (212) 855-4550. Notices to DTC pursuant to this Paragraph, by mail
or by any other means, shall be addressed as indicated in Paragraph 7.
10. Dividend payments and distributions shall be received by Cede & Co., as
nominee of DTC, or its registered assigns, in same-day funds no later than 2:30
p.m. (Eastern Time) on the payment date. Issuer shall remit by 190 p.m. (Eastern
Time) on the payment date, dividend and distribution payments due Trust Company,
or at such earlier time as may be required by Trust Company to guarantee that
DTC shall receive payment in same-day funds no later than 2:30 p.m. (Eastern
Time) on the payment date. Absent any other arrangements between Issuer or Trust
Company and DTC, such funds shall be wired to the Dividend Deposit Account
number that will be stamped on the signature page hereof at the time DTC
executes this Letter of Representations.
11. Issuer or Trust Company shall provide DTC, no later than 12:00 noon
(Eastern Time) on each payment date, automated notification of CUSIP-level
detail. If the circumstances prevent the funds paid to DTC from equaling the
dollar amount associated with the detail payments by 12:00 noon (Eastern Time),
Issuer or Trust Company must provide CUSIP-level reconciliation to DTC no later
than 2:30 p.m. (Eastern Time). Reconciliation must be provided by either
automated means or written format. Such reconciliation notice, if sent by
telecopy, shall be directed to DTC's Dividend Department at (212) 855-4633, and
receipt of such reconciliation notice shall be confirmed by telephoning (212)
855-4430.
12. Redemption payments shall be received by Cede & Co., as nominee of DTC,
or its registered assigns, in same-day funds no later than 2:30 p.m. (Eastern
Time) on the payment date. Issuer shall remit by 1:00 p.m. (Eastern Time) on the
payment date all such redemption payments due Trust Company, or at such earlier
time as required by Trust Company to guarantee that DTC shall receive payment in
same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date.
Absent any other arrangements between Issuer or Trust Company and DTC, such
funds shall be wired to the Redemption Deposit Account number that will be
stamped on the signature page hereof at the time DTC executes this Letter of
Representations.
13. Reorganization payments and CUSIP-level detail resulting from corporate
actions (such as tender offers, remarketings, or mergers) shall be received by
Cede & Co., as nominee of DTC, or its registered assigns, in same- day funds no
later than 2:30 p.m. (Eastern Time) on the payment date. Issuer shall remit by
1:00 p.m. (Eastern Time) on the payment date all such reorganization payments
due Trust Company, or at such earlier time as required by Trust Company to
guarantee that DTC shall receive payment in same-day funds no later than 2:30
p.m. (Eastern Time) on the payment date. Absent any other arrangements between
Issuer or Trust Company and DTC, such funds shall be wired to the Reorganization
Deposit Account number that will be stamped on the signature page hereof at the
time DTC executes this Letter of Representations.
14. DTC may direct Issuer or Trust Company to use any other number or
address as the number or address to which notices or payments may be sent.
15. In the event of a redemption acceleration, or any similar transaction
(e.g., tender made and accepted in response to Issuer's or Trust Company's
invitation) necessitating a reduction in the number of Securities outstanding,
or an advance refunding of part of the Securities outstanding DTC, in its
discretion: (a) may request Issuer or Trust Company to issue and authenticate a
new Security certificate; or (b) may make an appropriate notation on the
Security certificate indicating the date and amount of such reduction in the
number of Securities outstanding, except in the case of final redemption, in
which case the certificate will be presented to Issuer or Trust Company prior to
payment, if required.
16. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trust
Company shall notify DTC of the availability of certificates. In such event,
Issuer or Trust Company shall issue, transfer, and exchange certificates in
appropriate amounts, as required by DTC and others.
17. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Trust Company (at which time DTC will confirm with Issuer or Trust Company
the aggregate principal amount of Securities outstanding). Under such
circumstances, at DTC's request, Issuer and Trust Company shall cooperate fully
with DTC by taking appropriate action to make available one or more separate
certificates evidencing Securities to any DTC Participant having Securities
credited to its DTC accounts.
18. Issuer hereby authorizes DTC to provide to Test Company listings of
Participants' holdings, known as Security Position Listings ("SPLs") with
respect to the Securities, from time to time at the request of Trust Company.
Issuer also authorizes DTC, in the event of a partial redemption of Securities,
to provide Trust Company, upon request, with the names of those Participants
whose positions in Securities have been selected for redemption by DTC. DTC will
use its best efforts to notify Trust Company of those Participants whose
positions in Securities have been selected for redemption by DTC. Issuer
authorizes and instructs Trust Company to provide DTC with such signatures,
examples of signatures, and authorizations to act as may be deemed necessary or
appropriate by DTC to permit DTC to discharge its obligations to its
Participants and appropriate regulatory authorities. DTC charges a customary fee
for such SPLs. This authorization, unless revoked by Issuer, shall continue with
respect to the Securities while any Securities are on deposit at DTC, until and
unless Trust Company shall no longer be acting. In such event, Issuer shall
provide DTC with similar evidence, satisfactory to DTC, of the authorization of
any successor thereto so to act. Requests for SPLs shall be directed to the
Proxy Unit of DTC's Reorganization Department at (212) 855-5181 or (212) 855-
5182. Receipt of such requests shall be confirmed by telephoning (212) 855-5202.
Delivery by mail or by any other means, with respect to such SPL request, shall
be directed to the address indicated in Paragraph 3.
19. Nothing herein shall be deemed to require Trust Company to advance
funds, on behalf of Issuer.
20. This Letter of Representations may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts together shall constitute but one and the same
instrument.
21. This Letter of Representations shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
principles of conflicts of law.
22. The sender of each notice delivered to DTC pursuant to this Letter of
Representations is responsible for confirming that such notice was properly
received by DTC.
23. Issuer recognizes that DTC does not in any way undertake to, and shall
not have any responsibility to, monitor or ascertain the compliance of any
transactions in the Securities with the following, as amended from time to time:
(a) any exemptions from registration under the Securities Act of 1933; (b) the
Investment Company Act of 1940; (c) the Employee Retirement Income Security Act
of 1974; (d) the Internal Revenue Code of 1986; (e) any rules of any self-
regulatory organizations (as defined under the Securities Exchange Act of 1934);
or (f) any other local, state, or federal laws or regulations thereunder.
24. Issuer and Trust Company shall comply with the applicable requirements
stated in DTC's Operational Arrangements, as they may be amended from time to
time. DTC's Operational Arrangements are posted on DTC's website at
"www.DTC.org."
25. The following rider(s), attached hereto, are hereby incorporated into
this Letter of Representations:
Notes: ------ A. If there is a Trust Company (as defined in this Letter of
Representations), Trust Company, as well as Issuer, must sign this Letter. If
there is no Trust Company, in signing this Letter Issuer itself undertakes to
perform all of the obligations set forth herein. B. Schedule B contains
statements that DTC believes accurately describe DTC, the method of effecting
book-entry transfers of securities distributed through DTC, and certain related
matters.
Very truly yours,
________________________________________
[Issuer]
By:_____________________________________
[Authorized Officer's Signature]
________________________________________
[Trust Company]
By:_____________________________________
[Authorized Officer's Signature]
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
cc: Underwriter
Underwriter's Counsel
SCHEDULE A
_______________________________________________________
_______________________________________________________
[Describe Issue]
CUSIP Number Share Total Value ($Amount
SCHEDULE B
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
-------------------------------------------------------------------------------
(Prepared by DTC-bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities will
be issued as fully-registered securities registered in the name of Cede & Co.
(DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered Security certificate will
be issued for [each issue of] the Securities, [each] in the aggregate principal
amount of such issue, and will be deposited with DTC. [If, however, the
aggregate principal amount of [any] issue exceeds $400 million, one certificate
will be issued with respect to each $400 million of principal amount and an
additional certificate will be issued with respect to any remaining principal
amount of such issue.]
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Direct Participants")
deposit with DTC. DTC also facilitates the settlement among Direct Participants
of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Direct
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks, and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The Rules
applicable to DTC and its Direct and indirect Participants are on file with the
Securities and Exchange Commission,
3. Purchases of Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books
of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Securities, except in the event that use of the book-entry system
for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. or such other name as may be requested by an authorized
representative of DTC. The deposit of Securities with DTC and their registration
in the name of Cede & Co. or such other nominee do not effect any change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Securities are credited, which may or may
not be the Beneficial Owners, The Direct and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. [Beneficial Owners of Securities may wish to
take certain steps to augment transmission to them of notices of significant
events with respect to the Securities, such as redemptions, tenders, defaults,
and proposed amendments to the security documents. Beneficial Owners of
Securities may wish to ascertain that the nominee holding the Securities for
their benefit has agreed to obtain and transmit notices to Beneficial Owners, or
in the alternative, Beneficial Owners may wish to provide their names and
addresses to the registrar and request that copies of the notices be provided
directly to them.]
[6. Redemption notices shall be sent to DTC. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such issue to be
redeemed.]
7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or
vote with respect to the Securities. Under its usual procedures, DTC mails an
Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the
Securities will be made to Cede & Co., or such other nominee as may be requested
by an authorized representative of DTC. DTC's practice is to credit Direct
Participants' accounts, upon DTC's receipt of funds and corresponding detail
information from Issuer or Agent on payable date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of DTC, Agent, or Issuer, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
redemption proceeds, distributions, and dividends to Cede & Co. (or such other
nominee as may be requested by an authorized representative of DTC) is the
responsibility of Issuer or Agent, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.
9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to [Tender/Remarketing] Agent,
and shall effect delivery of such Securities by causing the Direct Participant
to transfer the Participant's interest in the Securities, on DTC's records, to
[Tender/Remarketing] Agent. The requirement for physical delivery of Securities
in connection with an optional tender or a mandatory purchase will be deemed
satisfied when the ownership rights in the Securities are transferred by Direct
Participants on DTC's records and followed by a book-entry credit of tendered
Securities to [Tender/Remarketing] Agent's DTC account.]
10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Agent. Under such circumstances, in the event that a successor securities
depository is not obtained, Security certificates are required to be printed and
delivered.
11. Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Issuer believes to be reliable, but
Issuer takes no responsibility for the accuracy thereof.
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; +
(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).
(h) Conformed Copy of Master Agreement Among Underwriters; (3)
(i)Conformed copy of Purchase Agreement (Common Shares); +
(ii)Form of Standard Dealer Agreement of Merrill
Lynch and Co.; (3)
(iii)Conformed copy of Additional Compensation Agreement; +
(iv)Form of Purchase Agreement (Preferred Shares); +
(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; +
(ii)Conformed copy of Transfer Agency Agreement of the Registrant; +
(iii)Form of Auction Agency Agreement; +
(iv)Form of Broker/Dealer Agreement; +
(v)Form of Indemnification Agreement (Preferred Shares) between the
Registrant and the Adviser; +
(vi) Form of Depository Trust Company Letter of Representations; +
(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).
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 February 3, 2003, set forth below is information concerning record holders
of the Fund's securities:
Title of Class Number of Record Holders
Common Shares 23
AMPS 0
Item 29. Indemnification:
Indemnification is provided to Officers and Trustees of the Registrant pursuant
to Article V of Registrant's Declaration of Trust. The Investment Management
Agreement between the Registrant and Federated Investment Management Company
("Adviser") provides that, in the absence of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the obligations or duties under the
Investment Management Agreement on the part of Adviser, Adviser shall not be
liable to the Registrant or to any shareholder for any act or omission in the
course of or connected in any way with rendering services or for any losses that
may be sustained in the purchase, holding, or sale of any security. Registrant's
Trustees and Officers are covered by an Investment Trust Errors and Omissions
Policy. The Purchase Agreement between the Registrant, the Adviser and the
Underwriters named therein provides for indemnification of the Underwriters by
the Registrant and the Adviser and of the Registrant and the Adviser and their
officers and trustees for certain liabilities and also provides for contribution
under certain circumstances. The Indemnification Agreement between the
Registrant and the Adviser provides for indemnification of the Registrant and
its officers and trustees for certain liabilities.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to Trustees, Officers, and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by Trustees), Officers, or controlling
persons of the Registrant in connection with the successful defense of any act,
suit, or proceeding) is asserted by such Trustees, Officers, or controlling
persons in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issues.
Insofar as indemnification for liabilities may be permitted pursuant to Section
17 of the Investment Company Act of 1940 for Trustees, Officers, and controlling
persons of the Registrant by the Registrant pursuant to the Declaration of Trust
or otherwise, the Registrant is aware of the position of the Securities and
Exchange Commission as set forth in Investment Company Act Release No. IC-11330.
Therefore, the Registrant undertakes that in addition to complying with the
applicable provisions of the Declaration of Trust or otherwise, in the absence
of a final decision on the merits by a court or other body before which the
proceeding was brought, that an indemnification payment will not be made unless
in the absence of such a decision, a reasonable determination based upon factual
review has been made (i) by a majority vote of a quorum of non-party Trustees
who are not interested persons of the Registrant or (ii) by independent legal
counsel in a written opinion that the indemnitee was not liable for an act of
willful misfeasance, bad faith, gross negligence, or reckless disregard of
duties. The Registrant further undertakes that advancement of expenses incurred
in the defense of a proceeding (upon undertaking for repayment unless it is
ultimately determined that indemnification is appropriate) against an Officer,
Trustee or controlling person of the Registrant will not be made absent the
fulfillment of at least one of the following conditions: (i) the indemnitee
provides security for his undertaking; (ii) the Registrant is insured against
losses arising by reason of any lawful advances; or (iii) a majority of a quorum
of disinterested non-party Trustees or independent legal counsel in a written
opinion makes a factual determination that there is reason to believe the
indemnitee will be entitled to indemnification.
Item 30. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment adviser, see the
section entitled "Management of the Fund" in Part A. The affiliations with the
Registrant of four of the Trustees and one of the Officers of the investment
adviser are included in Part B of this Registration Statement under "Management
of the Fund." The remaining Trustees of the investment adviser and, in
parentheses, their principal occupations are: Thomas R. Donahue, (Chief
Financial Officer, Federated Investors, Inc.), 1001 Liberty Avenue, Pittsburgh,
PA, 15222-3779 and Mark D. Olson (a principal of the firm, Mark D. Olson &
Company, L.L.C. and Partner, Wilson, Halbrook & Bayard, P.A.), 800 Delaware
Avenue, P.O. Box 2305, Wilmington, DE 19899-2305.
The remaining Officers of the investment adviser are:
Vice Chairman: J. Thomas Madden
President/ Chief Executive
Officer: Keith M. Schappert
Executive Vice Presidents:
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
Anthony Delserone, Jr.
Donald T. Ellenberger
Eamonn G. Folan
Kathleen M. Foody-Malus
Thomas M. Franks
John T. Gentry
David P. Gilmore
Marc Halperin
John W. Harris
Patricia L. Heagy
Susan R. Hill
Nikola A. Ivanov
William R. Jamison
Constantine J. Kartsonas
Nathan H. Kehm
John C. Kerber
Steven Lehman
Marian R. Marinack
Natalie F. Metz
Thomas J. Mitchell
Joseph M. Natoli
John L. Nichol
Mary Kay Pavuk
Jeffrey A. Petro
John P. Quartarolo
Ihab L. Salib
Roberto Sanchez-Dahl, Sr.
Aash M. Shah
John Sidawi
Michael W. Sirianni, Jr.
Christopher Smith
Timothy G. Trebilcock
Leonardo A. Vila
Paige M. Wilhelm
Richard M. Winkowski, Jr.
Lori A. Wolff
George B. Wright
Assistant Vice Presidents:
Catherine A. Arendas
Angela A. Auchey
Nicholas P. Besh
Hanan Callas
David W. Cook
James R. Crea, Jr.
Karol M. Crummie
David Dao
Richard J. Gallo
James Grant
Anthony Han
Kathryn P. Heagy
Carol B. Kayworth
J. Andrew Kirschler
Robert P. Kozlowski
Ted T. Lietz, Sr.
Monica Lugani
Tracey L. Lusk
Theresa K. Miller
Bob Nolte
Rae Ann Rice
Jennifer G. Setzenfand
Diane R. Startari
Kyle D. Stewart
Mary Ellen Tesla
Michael R. Tucker
Steven J. Wagner
Mark Weiss
Secretary: G. Andrew Bonnewell
Treasurer: Thomas R. Donahue
Assistant Secretaries:
Jay S. Neuman
Leslie K. Ross
Assistant Treasurer: Denis McAuley, III
The business address of each of the Officers of the investment adviser is
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3779. These individuals are also officers of a majority of the investment
advisers to the investment companies in the Federated Fund Complex described in
Part B of this Registration Statement.
Item 31. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Reed Smith LLP
Investment and Asset Management Group
(IAMG)
Federated Investors Tower
12th Floor
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(Notices should be sent to the
Agent for Service at above
address)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
EquiServe Trust Co., N.A. P.O. Box 43011
("Transfer Agent and Dividend Providence, RI 02940-3011
Disbursing Agent")
Federated Services Federated Investors Tower
Company 1001 Liberty Avenue
("Administrator") Pittsburgh, PA 15222-3779
(((
Federated Investment Federated Investors Tower
Management Company 1001 Liberty Avenue
("Adviser") Pittsburgh, PA 15222-3779
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
("Custodian")
Item 32. Management Services: Not applicable.
Item 33. Undertakings:
The Registrant undertakes to suspend the offering of shares until the
prospectus is amended if (1) subsequent to the effective date of its
registration statement, the net asset value declines more than ten percent from
its net asset value as of the effective date of the registration statement.
The Registrant undertakes that:
(a) for purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(b) for the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery within two business days of receipt
of a written or oral request, the Registrant's Statement of Additional
Information.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED PREMIER MUNICIPAL
INCOME FUND, has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Pittsburgh
and Commonwealth of Pennsylvania, on the 12th day of February, 2003.
FEDERATED PREMIER MUNICIPAL INCOME FUND
BY: /s/ Leslie K. Ross
Leslie K. Ross, Assistant Secretary
Attorney in Fact for John F. Donahue
February 12, 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 February 12, 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