[logo] FEDERATED INVESTORS
since 1955
Federated
Municipal
Opportunities
Fund, Inc.
(formerly, Fortress
Municipal Income
Fund, Inc.)
9th Semi-Annual Report
February 29, 1996
Established 1987
President's Message
Dear Fellow Shareholder:
I am pleased to present the 9th Semi-Annual Report of Federated Municipal
Opportunities Fund, Inc., formerly known as Fortress Municipal Income Fund,
Inc. The fund's name now begins with ``Federated'' to make it easy for
investors to locate all Federated Funds in newspapers and other publications.
This report covers the six-month period from September 1, 1995, through
February 29, 1996. It begins with a discussion with Jonathan C. Conley, Senior
Vice President, Federated Advisers, about the municipal market, the fund's
performance, and investment strategy. Following the portfolio manager's
discussion are three additional items of shareholder interest. First is a
series of graphs that display the fund's performance with income dividends
reinvested and the investment results of making additional investment in the
fund shares with dividends reinvested. Second is a complete listing of the
fund's municipal bond holdings. Third is the publication of the fund's
financial statements.
During the six-month period, the fund achieved a total return of 4.39% based on
net asset value.* This return was the result of dividends totaling $0.32 per
share and a modest increase in share price from $10.71 to $10.85. The fund's
30-day SEC yield on February 29, 1996, was 5.49% based on offering price-free
of federal regular income tax.* On that date, the fund's total net assets stood
at $421.9 million. Since 1987, Federated Municipal Opportunities Fund, Inc. has
provided tax-free income from a broadly diversified list of long-term municipal
issues.** The fund's portfolio included 123 tax-free securities issued by
municipalities in 33 states across our country. The fund's average maturity was
23.9 years. The fund's top five holdings consisted of:
1. Massachusetts-Industrial Finance Agency, Solid Waste Disposal: $20.9 million
2. Minnesota-St. Paul Housing & Redevelopment Authority: $19.1 million
3. Texas-Houston Water & Sewer System: $19.0 million
4. Indiana-Indianapolis Airport Authority: $18.4 million
5. Pennsylvania-EDFA Wastewater: $11.2 million
Thank you for selecting Federated Municipal Opportunities Fund, Inc. as a
convenient way to invest in a broad list of municipal securities. You can
receive income from the fund or increase your wealth by reinvesting your
dividends and compounding tax free.
Sincerely,
Richard B. Fisher
President
April 15, 1996
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Total return for the
period based on offering price was 2.28%.
** State, local, and federal alternative minimum taxes may apply.
Investment Review
[PHOTO]
Jonathan C. Conley,
Senior Vice President
Federated Advisers
Jonathan, could you please comment on developments in the long-term municipal
bond market over the past six months of the fund's current fiscal year?
During the past six months, interest rates for fixed-income issues staged
overall declines that included ending surges in yields. From August 31, 1995,
to December 29, 1995, the 30-year U.S. Treasury bond yield descended from 6.65%
to 5.95%. A subsequent rise took that yield to 6.47% by February 29, 1996. As
for tax-exempt issues, the yield for the Municipal Bond Index* plummeted from
6.11% to 5.56% from August 31, 1995, to February 13, 1996, then staged a brief
retreat to 5.71% by February 29, 1996.
With the presidential campaign in full swing, the issue of tax reform-notably a
flat tax-continues to make the news. What has been the response of the
municipal bond market to such conditions?
The municipal bond market experienced much relative improvement to the Treasury
issue market over the past six months. As the outlook for agreement on, or
passage let alone implementation of a flat tax system waned in the estimation
- -
of municipal market practitioners, municipal bond values either increased or
held their own versus those of Treasury bonds. On August 31, 1995, 30-year
municipal issue yields were 91.9% of comparable Treasury issues. At the close
of 1995, that figure increased to 93.5%. By February 29, 1996, the relative
yield had declined to 88.3%.
Confirmation of municipal bond outperformance was offered in the futures
market. The ``MOB Spread'' (near-term municipal bond futures contract price
less near-term Treasury bond futures contract price, expressed in 32nds of a
point) initially fell from ``+41'' on August 31, 1995 to ``-21'' on
September 27, 1995, then soared to ``+102'' by February 29, 1996.
* Municipal Bond Index consists of 40 actively traded and quoted municipal bonds
of long-term maturity with ratings of ``A'' or better. Substitutions are made
to issues in the index bi-weekly. The index is published by the Bond Buyer.
In this environment, how did shareholders' investments in the fund perform with
respect to investment return over the six-month reporting period?
For the six-month period ended February 29, 1996, an investor in Federated
Municipal Opportunities Fund, Inc. experienced a total return of 4.39% based on
a net asset value (NAV), or 2.28% based on offering price.* The NAV per share
of the fund grew by 1.31%, from $10.71 to $10.85. Dividends per share totaled
$0.32, equating to an annualized income yield of 6.01% on average NAV. There
were no capital gains distributions made during the period. In comparison, the
Lipper General Municipal Debt Fund Average** total return on an NAV basis for
the past six months was 4.98%, while the annualized income yield was 5.03%.*
Jonathan, could you describe the primary investment strategies employed by the
fund during the past six months?
For the past six months, the fund sought to augment its total return potential
by lowering the average coupon rate of issues held and by extending the average
call protection embodied with the holdings. This goal was pursued at the
beginning of the calendar year. From August 31, 1995, to December 31, 1995, the
average issue coupon hovered at 7.34%; between the end of 1995 and the end of
February 1996, that coupon rate fell to 7.25%. During this time, portfolio
duration contracted from 7.16 years to 6.09 years (reflecting bond price
appreciation and ``in-the-money'' status of bond call provisions).
Recalibration of the portfolio via purchase of new issues took the portfolio
duration to 6.58 years by the close of February 1996. In sum, $38.6 million par
value of new issues, some with medium coupons and ``original issue discount,''
were purchased with the proceeds from the sale of $21.9 million of premium,
short-call/duration issues, and from fund shares issued. Among other
considerations, the mix of issues sold was chosen so as to balance realized
gains and losses so as to avoid the generation and distribution of net realized
capital gains.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
** Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the respective categories indicated. These figures do not
reflect sales charges.
Have there been significant changes to portfolio composition or to credit
quality over the reporting period?
The activity cited on the previous page resulted in a reduction in the
portfolio exposure to hospital revenue issues, state housing finance agency
single-family mortgage revenue issues, and to university tuition and fee
revenue issues.
Positions were established or expanded in obligations of Houston, TX Water and
Sewer System (FGIC Insured), pollution control revenue financings guaranteed by
Weyerhauser, Inc. and by Champion International, Inc.
A breakdown of portfolio credit quality follows:
February 29, 1996 August 31, 1995
----------------- ---------------
AAA 8.9% 4.5%
AA 12.4% 13.4%
A 9.1% 8.8%
BBB 47.5% 49.7%
BB 3.6% 3.3%
NR 18.5% 20.3%
The use of insured bonds was spurred by narrow market yield spreads between
those and uninsured issues, engendered in part by the ongoing market
penetration of the municipal bond insurers, who wrote policies on over 43% of
new issuance in 1995.
Two Ways You May Seek to Invest for Success in
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
Initial Investment:
If you made an initial investment of $9,000 in Federated Municipal
Opportunities Fund, Inc. on April 10, 1987, reinvested your dividends and
capital gains, and did not redeem any shares, your account would be worth
$17,343 on February 29, 1996. You would have earned a 7.66% average annual
total return for the nine-year investment life span.*
One key to investing wisely is to reinvest all tax-free distributions in fund
shares. This increases the number of shares on which you can earn future
tax-free dividends, and you gain the benefit of compounding tax-free.
As of March 31, 1996, the average annual one-year, five-year, and since
inception (4/10/87) returns were 5.68%, 6.98%, and 7.47%, respectively.*
Graphic representation "A" omitted. See Appendix.
* Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 1% sales
charge and the 1% contingent deferred sales charge. Data quoted represent past
performance and do not guarantee future results. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
One Step at a Time:
$1,000 invested each year for nine years (reinvesting all dividends and capital
gains) grew to $13,083.
With this approach, the key is consistency.
If you had started investing $1,000 annually in Federated Municipal
Opportunities Fund, Inc. on April 10, 1987, reinvested your dividends and
capital gains and did not redeem any shares, you would have invested only
$9,000, but your account would have reached a total value of $13,083* by
February 29, 1996. You would have earned an average annual total return of
7.56%.
A practical investment plan helps you pursue a high level of income through
tax-free municipal bonds. Through systematic investing, you buy shares on a
regular basis and reinvest all tax-free earnings. An investment plan works for
you even if you invest only $1,000 annually. You can take it one step at a
time. Put time, money, and compounding to work!
Graphic representation "B" omitted. See Appendix.
* No method of investing can guarantee a profit or protect against loss in down
markets. However, by investing regularly over time and buying shares at
various prices, investors can purchase more shares at lower prices, and all
accumulated shares have the ability to pay income to the investor. Because
such a plan involves continuous investment, regardless of changing price
levels, the investor should consider whether or not to continue purchases
through periods of low price levels.
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
Investing for Tax-Free Monthly Income
Fred and Margie Potter both work, and have no children. At the peak of their
careers, this tax- sensitive couple was seeking a way to keep more of what they
earn. On April 10, 1987, they invested $5,000 in Federated Municipal
Opportunities Fund, Inc., and continue to invest $500 in the fund on the first
of every month.
As this chart shows, since that time, their investment has grown on a tax-free
-
basis to $83,608.* This represents a 7.46% average annual total return.+ For
-
the Potters, the decision to invest tax-free has made the future worth waiting
for.
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
Graphic representation "C" omitted. See Appendix.
+ This hypothetical scenario is provided for illustrative purposes only and
does not represent the results obtained by any particular shareholder. Past
performance does not guarantee future results.
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
Portfolio of Investments
- --------------------------------------------------------------------------------
February 29, 1996 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--102.7%
- -------------------------------------------------------------------------------------
ALABAMA--2.2%
----------------------------------------------------------------------
$ 6,000,000 Courtland, AL IDB, Solid Waste Disposal Revenue Bonds (Series A),
6.375% (Champion International Corp.)/(Original Issue Yield: 6.52%),
3/1/2029 Baa1 $ 6,024,420
----------------------------------------------------------------------
3,000,000 Courtland, AL IDB, Solid Waste Disposal Revenue Bonds (Series A),
6.50% (Champion International Corp.)/(Original Issue Yield: 6.654%),
9/1/2025 Baa1 3,088,170
---------------------------------------------------------------------- --------------
Total 9,112,590
---------------------------------------------------------------------- --------------
ARKANSAS--2.0%
----------------------------------------------------------------------
2,920,000 Conway, AR Hospital Authority, Revenue Bonds, 7.125% (Conway Regional
Hospital), 2/1/2013 BBB 3,010,461
----------------------------------------------------------------------
3,000,000 Conway, AR Hospital Authority, Revenue Refunding Bonds, 8.125% (Conway
Regional Hospital), 7/1/2005 BBB 3,245,130
----------------------------------------------------------------------
1,000,000 Conway, AR Hospital Authority, Revenue Refunding Bonds, 8.375% (Conway
Regional Hospital), 7/1/2011 BBB 1,089,470
----------------------------------------------------------------------
1,000,000 Little Rock, AR Health Facilities Board, Revenue Refunding Bonds,
7.00% (Baptist Medical Center, AR),
10/1/2017 A+ 1,077,810
---------------------------------------------------------------------- --------------
Total 8,422,871
---------------------------------------------------------------------- --------------
CALIFORNIA--0.7%
----------------------------------------------------------------------
3,000,000 Foothill/Eastern Transportation Corridor Agency, CA, (Series 1995A)
Senior Lien Toll Road Revenue Bonds, 6.50% (Original Issue Yield:
6.78%), 1/1/2032 BBB- 3,061,650
---------------------------------------------------------------------- --------------
COLORADO--2.2%
----------------------------------------------------------------------
780,000 Colorado HFA, SFM Revenue Bonds (Series A-2), 7.70% (FHA GTD),
2/1/2023 AA 828,859
----------------------------------------------------------------------
2,930,000 Colorado HFA, SFM Revenue Bonds (Series C-2), 7.375% (FHA GTD),
8/1/2023 AA 3,094,725
----------------------------------------------------------------------
$ 5,000,000 Colorado Health Facilities Authority, (Series 1995A) Revenue Bonds,
6.60% (Vail Valley Medical Center)/(Original Issue Yield: 6.625%),
1/15/2020 BBB $ 5,114,400
----------------------------------------------------------------------
</TABLE>
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
COLORADO--CONTINUED
----------------------------------------------------------------------
315,000 El Paso County, CO HFA, SFM Revenue Bonds, 8.00% (GNMA COL), 9/1/2022 AAA 334,625
---------------------------------------------------------------------- --------------
Total 9,372,609
---------------------------------------------------------------------- --------------
FLORIDA--1.0%
----------------------------------------------------------------------
2,835,000 Dade County, FL HFA, SFM Revenue Bonds (Series B), 8.75% (GNMA COL),
7/1/2017 AAA 2,972,186
----------------------------------------------------------------------
1,120,000 Jacksonville, FL Health Facilities Authority, Industrial Development
Revenue Bonds, 6.40% (National Benevolent Association), 12/1/2016 Baa1 1,121,064
---------------------------------------------------------------------- --------------
Total 4,093,250
---------------------------------------------------------------------- --------------
GEORGIA--0.5%
----------------------------------------------------------------------
2,000,000 Fulco, GA Hospital Authority, Revenue Bonds (Series A), 6.25% (Georgia
Baptist Health Care)/(Original Issue Yield: 6.486%), 9/1/2013 Baa1 1,980,080
---------------------------------------------------------------------- --------------
IDAHO--1.1%
----------------------------------------------------------------------
1,250,000 Idaho Housing Agency, SFM Revenue Bonds (Series A), 7.50% (FHA GTD),
7/1/2024 AA 1,321,662
----------------------------------------------------------------------
2,975,000 Idaho Housing Agency, SFM Revenue Bonds (Series F-2), 7.80% (FHA GTD),
1/1/2023 AA 3,153,441
---------------------------------------------------------------------- --------------
Total 4,475,103
---------------------------------------------------------------------- --------------
ILLINOIS--4.3%
----------------------------------------------------------------------
4,500,000 Granite City, IL Hospital Facilities Authority, Revenue Refunding
Bonds (Series A), 8.125% (St. Elizabeth Medical Center)/(Original
Issue Yield: 8.167%), 6/1/2008 BB+ 4,675,680
----------------------------------------------------------------------
3,000,000 Illinois Development Finance Authority, Housing Revenue Bonds, 6.10%
(Catholic Charities Housing Development Corp), 1/1/2020 NR 2,917,170
----------------------------------------------------------------------
</TABLE>
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
ILLINOIS--CONTINUED
----------------------------------------------------------------------
$ 10,000,000 Illinois Health Facilities Authority, Hospital Revenue Bonds (Series
A), 9.25% (Edgewater Hospital & Medical Center), 7/1/2024 NR $ 10,426,800
---------------------------------------------------------------------- --------------
Total 18,019,650
---------------------------------------------------------------------- --------------
INDIANA--10.1%
----------------------------------------------------------------------
3,000,000 Indiana Port Commission, Port Facility Revenue Refunding Bonds, 6.875%
(Cargill, Inc.), 5/1/2012 Aa3 3,267,570
----------------------------------------------------------------------
920,000 Indiana State HFA, SFM Revenue Bonds (Series A), 8.20% (GNMA COL),
7/1/2020 Aaa 980,407
----------------------------------------------------------------------
2,785,000 Indiana State HFA, SFM Revenue Home Mortgage Program (Series F-2),
7.75% (GNMA COL), 7/1/2022 Aaa 2,962,460
----------------------------------------------------------------------
17,100,000 Indianapolis, IN Airport Authority, Special Facilities Revenue Bonds,
7.10% (Federal Express Corp.)/(Original Issue Yield: 7.178%),
1/15/2017 BBB 18,474,156
----------------------------------------------------------------------
4,350,000 Kokomo, IN Hospital Authority, Revenue Refunding Bonds, 6.35% (St.
Joseph Hospital, IN)/(Original Issue Yield: 6.40%), 8/15/2013 BBB 4,354,437
----------------------------------------------------------------------
2,750,000 LaPorte County, IN Hospital Authority, Hospital Facilities Revenue
Refunding Bond, 8.75% (LaPorte Hospital, Inc.)/ (United States
Treasury PRF)/(Original Issue Yield: 8.848%), 3/1/1997 (@102) Aaa 2,950,805
----------------------------------------------------------------------
5,000,000 LaPorte County, IN Hospital Authority, Hospital Facility Revenue
Refunding Bonds, 6.00% (LaPorte Hospital, Inc.)/ (Original Issue
Yield: 6.35%), 3/1/2023 BBB 4,665,700
----------------------------------------------------------------------
5,000,000 LaPorte County, IN Hospital Authority, Hospital Facility Revenue
Refunding Bonds, 6.25% (LaPorte Hospital, Inc.)/ (Original Issue
Yield: 6.35%), 3/1/2012 BBB 4,910,850
---------------------------------------------------------------------- --------------
Total 42,566,385
---------------------------------------------------------------------- --------------
</TABLE>
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
IOWA--0.3%
----------------------------------------------------------------------
$ 1,000,000 Davenport, IA PCA, PCR Refunding Bonds, Nicols-Homeshield Project,
8.375% (Quanex Corp.),
12/1/2005 NR $ 1,075,670
---------------------------------------------------------------------- --------------
KENTUCKY--0.9%
----------------------------------------------------------------------
3,500,000 Kenton County, KY Airport Board, Special Facilities Revenue Bonds
(Series A), 7.50% (Delta Air Lines, Inc.)/(Original Issue Yield:
7.60%), 2/1/2020 BB 3,796,590
---------------------------------------------------------------------- --------------
LOUISIANA--6.5%
----------------------------------------------------------------------
3,000,000 De Soto Parish, LA Environmental Improvement Authority, Revenue Bonds,
7.70% (International Paper Co.),
11/1/2018 A- 3,447,030
----------------------------------------------------------------------
5,000,000 Lake Charles, LA Harbor & Terminal District, Port Facilities Revenue
Refunding Bond, Trunkline Lining Co Project, 7.75% (Panhandle Eastern
Corp.), 8/15/2022 Baa3 5,666,300
----------------------------------------------------------------------
1,650,000 St. Charles Parish, LA, Environmental Improvement Revenue Bonds
(Series A), 6.20% (Louisiana Power & Light Co.)/(Original Issue Yield:
6.25%), 5/1/2023 BBB+ 1,593,158
----------------------------------------------------------------------
5,645,000 St. Charles Parish, LA, PCR Bonds, 7.50% (Louisiana Power & Light
Co.)/(Original Issue Yield: 7.542%), 6/1/2021 BBB+ 6,035,239
----------------------------------------------------------------------
1,400,000 St. Charles Parish, LA, PCR Bonds, 8.00% (Louisiana Power & Light
Co.), 12/1/2014 Baa3 1,570,744
----------------------------------------------------------------------
2,100,000 St. Charles Parish, LA, PCR Bonds, 8.25% (Louisiana Power & Light
Co.)/(Original Issue Yield: 8.273%), 6/1/2014 NR 2,344,608
----------------------------------------------------------------------
3,650,000 St. Charles Parish, LA, Solid Waste Disposal Revenue Bonds (Series A),
7.00% (Louisiana Power & Light Co.)/ (Original Issue Yield: 7.04%),
12/1/2022 BBB+ 3,816,951
----------------------------------------------------------------------
3,000,000 St. James Parish, LA, Solid Waste Disposal Revenue Bonds, 7.70%
(Freeport McMoRan, Inc.)/(Original Issue Yield: 7.75%), 10/1/2022 NR 3,098,430
---------------------------------------------------------------------- --------------
Total 27,572,460
---------------------------------------------------------------------- --------------
</TABLE>
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
MAINE--1.1%
----------------------------------------------------------------------
$ 4,200,000 Maine State Housing Authority , Revenue Bonds (Series D-3), 8.20%,
11/15/2019 A+ $ 4,466,153
---------------------------------------------------------------------- --------------
MARYLAND--0.7%
----------------------------------------------------------------------
900,000 Gaithersburg, MD, First Mortgage Economic Development Revenue
Refunding Bonds, 5.50% (Asbury Methodist Homes, Inc.)/(Original Issue
Yield: 6.05%), 1/1/2020 A 821,484
----------------------------------------------------------------------
2,550,000 Maryland State Health & Higher Educational Facilities, Revenue Bonds,
5.50% (Howard County General Hospital)/ (Original Issue Yield: 5.80%),
7/1/2025 Baa1 2,286,228
---------------------------------------------------------------------- --------------
Total 3,107,712
---------------------------------------------------------------------- --------------
MASSACHUSETTS--5.8%
----------------------------------------------------------------------
380,000 Massachusetts State HFA, Residential Housing Revenue Bonds (Series B),
8.10% (Original Issue Yield: 8.186%),
8/1/2023 A+ 399,920
----------------------------------------------------------------------
1,110,000 Massachusetts State HFA, Revenue Bonds (Series 21), 6.30%, 6/1/2025 Aa 1,112,697
----------------------------------------------------------------------
2,000,000 Massachusetts State HFA, SFM Revenue Bonds (Series 9), 8.10% (FHA
GTD), 12/1/2021 Aa 2,092,560
----------------------------------------------------------------------
21,000,000 (a)Massachusetts, IFA, Solid Waste Disposal Sr. Lien Revenue Bonds
(Series A), 9.00% (Massachusetts Recycling Association), 8/1/2016 NR 20,861,610
---------------------------------------------------------------------- --------------
Total 24,466,787
---------------------------------------------------------------------- --------------
MICHIGAN--0.4%
----------------------------------------------------------------------
1,500,000 Western Townships MI, Utilities Authority, LT GO Sewer Disposal System
Bonds, 8.20%, 1/1/2018 BBB+ 1,679,085
---------------------------------------------------------------------- --------------
MINNESOTA--6.1%
----------------------------------------------------------------------
1,700,000 Minnesota State HFA, SFM Revenue Bonds (Series A), 7.95% (FHA GTD),
7/1/2022 AA 1,803,717
----------------------------------------------------------------------
635,000 Minnesota State HFA, SFM Revenue Bonds (Series D), 8.05% (FHA GTD),
8/1/2018 Aa 658,044
----------------------------------------------------------------------
</TABLE>
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
MINNESOTA--CONTINUED
----------------------------------------------------------------------
$ 795,000 Minnesota State HFA, SFM Revenue Bonds (Series D), 8.25% (FHA GTD),
8/1/2020 Aa $ 843,503
----------------------------------------------------------------------
3,000,000 Minnesota State HFA, SFM Revenue Bonds (Series E), 6.85%, 1/1/2024 AA 3,121,200
----------------------------------------------------------------------
19,000,000 St. Paul, MN Housing & Redevelopment Authority , Hospital Revenue
Refunding Bonds (Series A), 6.625% (Healtheast)/(Original Issue Yield:
6.687%), 11/1/2017 BBB- 19,132,430
---------------------------------------------------------------------- --------------
Total 25,558,894
---------------------------------------------------------------------- --------------
MISSISSIPPI--0.9%
----------------------------------------------------------------------
2,000,000 Columbus, MS IDA, Revenue Bonds, 8.25% (Baldor Electric Co.), 5/1/2004 NR 2,053,180
----------------------------------------------------------------------
1,725,000 Mississippi Housing Finance Corp., SFM Revenue Bond, 8.25% (FGIC INS),
10/15/2018 Aaa 1,827,482
---------------------------------------------------------------------- --------------
Total 3,880,662
---------------------------------------------------------------------- --------------
MONTANA--0.5%
----------------------------------------------------------------------
850,000 Montana State Board of Housing, SFM Revenue Bonds (Series A-2), 8.30%
(FHA GTD), 10/1/2020 AA 889,109
----------------------------------------------------------------------
1,150,000 Montana State Board of Housing, SFM Revenue Bonds (Series B-2), 7.50%
(FHA GTD), 4/1/2023 NR 1,211,663
---------------------------------------------------------------------- --------------
Total 2,100,772
---------------------------------------------------------------------- --------------
NEW HAMPSHIRE--5.8%
----------------------------------------------------------------------
10,000,000 New Hampshire Higher Educational & Health Facilities Authority,
Hospital Revenue Bonds, 6.00% (Nashua Memorial Hospital, NH)/(Original
Issue Yield: 6.40%), 10/1/2023 A- 10,104,600
----------------------------------------------------------------------
1,185,000 New Hampshire State HFA, SFM Revenue Bond, 7.90% (FHA GTD)/(Original
Issue Yield: 7.942%), 7/1/2022 Aa 1,252,142
----------------------------------------------------------------------
1,310,000 New Hampshire State HFA, SFM Revenue Bonds (Series B), 7.75%, 7/1/2023 Aa 1,394,613
----------------------------------------------------------------------
$ 6,735,000 New Hampshire State HFA, SFM Revenue Bonds (Series D), 7.25%, 7/1/2015 Aa $ 7,068,921
----------------------------------------------------------------------
</TABLE>
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
NEW HAMPSHIRE--CONTINUED
----------------------------------------------------------------------
2,865,000 New Hampshire State IDA, PCR Bonds (Series A), 8.00% (United
Illuminating Co.), 12/1/2014 BBB- 3,121,016
----------------------------------------------------------------------
1,500,000 New Hampshire State IDA, PCR Bonds (Series B), 10.75% (United
Illuminating Co.), 10/1/2012 BBB- 1,678,560
---------------------------------------------------------------------- --------------
Total 24,619,852
---------------------------------------------------------------------- --------------
NEW YORK--0.6%
----------------------------------------------------------------------
2,500,000 New York State Energy Research & Development Authority, Electric
Facilities Revenue Bonds (Series A), 7.50% (Consolidated Edison
Co.)/(Original Issue Yield: 7.65%),
1/1/2026 Aa2 2,730,800
---------------------------------------------------------------------- --------------
NORTH CAROLINA--2.3%
----------------------------------------------------------------------
3,500,000 Haywood Cnty, NC Industrial Facilities & Pollution Control Financing
Authority, (Series A) Revenue Bonds, 5.75% (Champion International
Corp.)/(Original Issue Yield: 5.975%), 12/1/2025 Baa1 3,412,045
----------------------------------------------------------------------
6,000,000 Martin County, NC IFA, (Series 1995) Solid Waste Disposal Revenue
Bonds, 6.00% (Weyerhauser Co.), 11/1/2025 A 6,100,140
---------------------------------------------------------------------- --------------
Total 9,512,185
---------------------------------------------------------------------- --------------
NORTH DAKOTA--0.7%
----------------------------------------------------------------------
2,740,000 North Dakota State HFA, SFM Revenue Bonds (Series C), 7.30%, 7/1/2024 Aa 2,869,903
---------------------------------------------------------------------- --------------
OHIO--2.5%
----------------------------------------------------------------------
2,400,000 Hamilton County, OH Hospital Facilities Authority, Revenue Refunding &
Improvement Bonds, 7.00% (Deaconess Hospital)/(Original Issue Yield:
7.046%), 1/1/2012 A 2,590,080
----------------------------------------------------------------------
1,400,000 Lucas County, OH HFA, Revenue Refunding Bonds, 7.625% (Riverside
Hospital, OH), 6/1/2015 BBB+ 1,435,546
----------------------------------------------------------------------
$ 1,700,000 Ohio HFA, SFM Revenue Bonds (Series A), 7.65% (GNMA COL)/(Original
Issue Yield: 7.669%), 3/1/2029 AAA $ 1,800,742
----------------------------------------------------------------------
</TABLE>
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
OHIO--CONTINUED
----------------------------------------------------------------------
1,390,000 Ohio HFA, SFM Revenue Bonds (Series B), 8.25% (GNMA COL), 12/15/2019 AAA 1,466,672
----------------------------------------------------------------------
500,000 Ohio State Water Development Authority, PCR Bonds (Series A), 8.10%
(Ohio Edison Co.)/(Original Issue Yield: 8.142%), 10/1/2023 BBB- 536,560
----------------------------------------------------------------------
1,250,000 Ohio State Water Development Authority, PCR Bonds (Series A-1), 9.75%
(Cleveland Electric Illuminating Co.), 11/1/2022 BBB 1,332,150
----------------------------------------------------------------------
1,350,000 Trumbull County, OH Hospital Authority, Hospital Revenue Refunding
Bonds, 7.75% (St. Joseph Riverside Hospital)/(United States Treasury
PRF)/(Original Issue Yield: 7.795%), 11/1/1997 (@102) AAA 1,465,695
---------------------------------------------------------------------- --------------
Total 10,627,445
---------------------------------------------------------------------- --------------
OKLAHOMA--1.9%
----------------------------------------------------------------------
1,250,000 Tulsa, OK Municipal Airport, Revenue Bonds, 7.375% (American
Airlines),
12/1/2020 Baa2 1,342,400
----------------------------------------------------------------------
6,200,000 Tulsa, OK Municipal Airport, Revenue Bonds, 7.60% (American
Airlines)/(Original Issue Yield: 7.931%),
12/1/2030 Baa2 6,772,632
---------------------------------------------------------------------- --------------
Total 8,115,032
---------------------------------------------------------------------- --------------
PENNSYLVANIA--15.5%
----------------------------------------------------------------------
3,000,000 Allegheny County, PA HDA, Health & Education Revenue Bonds, 7.00%
(Rehabilitation Institute of Pittsburgh)/(Original Issue Yield:
7.049%), 6/1/2010 BBB 3,102,960
----------------------------------------------------------------------
4,000,000 Allegheny County, PA HDA, Health & Education Revenue Bonds, 7.00%
(Rehabilitation Institute of Pittsburgh)/(Original Issue Yield:
7.132%), 6/1/2022 BBB 4,088,560
----------------------------------------------------------------------
$ 2,850,000 Allegheny County, PA HDA, Health Facilities Revenue Refunding Bonds,
6.00% (South Hills Health System)/ (Original Issue Yield: 6.40%),
5/1/2020 A $ 2,815,686
----------------------------------------------------------------------
</TABLE>
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
----------------------------------------------------------------------
3,500,000 Allegheny County, PA HDA, Revenue Refunding Bonds, 5.875% (Ohio Valley
General Hospital)/(Original Issue Yield: 6.125%), 4/1/2011 Baa1 3,450,265
----------------------------------------------------------------------
5,545,000 Allegheny County, PA Higher Education, Bldg Auth Revenue Bonds, 7.375%
(La Roche College), 7/15/2012 NR 5,770,737
----------------------------------------------------------------------
1,690,000 Allegheny County, PA IDA, Revenue Bonds, 8.75% (United Parcel
Service), 2/15/2009 NR 1,806,306
----------------------------------------------------------------------
665,000 Allegheny County, PA Residential Finance Agency, Mortgage Revenue
Bonds (Series G), 9.50% (GNMA COL),
12/1/2018 Aaa 706,848
----------------------------------------------------------------------
500,000 Allegheny County, PA Residential Finance Agency, SFM Revenue Bonds
(Series K), 7.75% (GNMA COL), 12/1/2022 Aaa 531,570
----------------------------------------------------------------------
1,495,000 Allegheny County, PA Residential Finance Agency, SFM Revenue Bonds
(Series M), 7.95% (GNMA COL)/(Original Issue Yield: 7.97%), 6/1/2023 Aaa 1,593,535
----------------------------------------------------------------------
3,000,000 Delaware County Authority, PA, College Revenue Bonds, 7.25% (Eastern
College)/(Original Issue Yield: 7.875%),
3/1/2012 NR 3,160,680
----------------------------------------------------------------------
2,055,000 Erie County, PA Hospital Authority, Revenue Bonds, 7.50% (Erie Infants
& Youth Home , Inc.), 10/1/2011 NR 2,147,043
----------------------------------------------------------------------
1,925,000 Erie, PA Municipal Airport Authority, Parking Revenue Bonds, 8.25%,
7/1/2009 NR 2,002,501
----------------------------------------------------------------------
1,000,000 Montgomery County, PA IDA, PCR Bonds, 8.875% (Philadelphia Electric
Co.), 6/1/2016 BBB 1,026,920
----------------------------------------------------------------------
1,730,000 Northeastern, PA Hospital & Education Authority, College Revenue
Refunding Bonds (Series B), 6.00% (Kings College)/(Original Issue
Yield: 6.174%), 7/15/2018 BBB 1,683,186
----------------------------------------------------------------------
$ 10,000,000 Pennsylvania EDFA, Wastewater Treatment Revenue Bonds (Series A),
7.60% (Sun Co., Inc.)/(Original Issue Yield: 7.653%), 12/1/2024 Baa1 $ 11,202,600
----------------------------------------------------------------------
</TABLE>
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
----------------------------------------------------------------------
6,000,000 Pennsylvania HFA, SFM Revenue Bonds (Series 34-B), 7.00% (FHA and FHA
GTDs), 4/1/2024 AA 6,285,720
----------------------------------------------------------------------
2,660,000 Pennsylvania HFA, SFM Revenue Bonds (Series 28), 7.65% (FHA GTD),
10/1/2023 AA 2,835,507
----------------------------------------------------------------------
1,740,000 Pennsylvania State HEFA, College & University Revenue Bonds, 6.75%
(Thiel College), 9/1/2017 NR 1,838,014
----------------------------------------------------------------------
3,250,000 Pennsylvania State HEFA, College & University Revenue Refunding Bonds
(Series A), 6.10% (Allegheny College)/ (Original Issue Yield: 6.23%),
11/1/2008 BBB+ 3,346,558
----------------------------------------------------------------------
3,875,000 Pennsylvania State HEFA, Revenue Bonds (Series A), 7.375% (Medical
College of Pennsylvania)/(Original Issue Yield: 7.45%), 3/1/2021 Baa1 4,022,598
----------------------------------------------------------------------
1,750,000 Pennsylvania State HEFA, Revenue Bonds (Series A), 8.375% (Medical
College of Pennsylvania)/(Original Issue Yield: 8.448%), 3/1/2011 Baa1 1,897,840
---------------------------------------------------------------------- --------------
Total 65,315,634
---------------------------------------------------------------------- --------------
SOUTH CAROLINA--0.5%
----------------------------------------------------------------------
1,250,000 Charleston County, SC Resource Recovery, Revenue Bonds (Series A),
9.25% (Foster Wheeler Corp.), 1/1/2010 A 1,378,200
----------------------------------------------------------------------
810,000 South Carolina State Housing Finance & Development Authority,
Homeownership Mortgage Revenue Bonds (Series A), 7.40% (FHA GTD),
7/1/2023 AA 851,917
---------------------------------------------------------------------- --------------
Total 2,230,117
---------------------------------------------------------------------- --------------
TENNESSEE--4.0%
----------------------------------------------------------------------
2,475,000 Memphis-Shelby County, TN, Airport Refunding Revenue Bonds, 6.75%
(Federal Express Corp.), 9/1/2012 BBB 2,629,069
----------------------------------------------------------------------
$ 3,100,000 Springfield, TN Health & Educational Facilities Board, Hospital
Revenue Bonds, 8.25% (Jesse Holman Jones Hospital Corp.)/(Original
Issue Yield: 8.50%), 4/1/2012 NR $ 3,288,697
----------------------------------------------------------------------
</TABLE>
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
TENNESSEE--CONTINUED
----------------------------------------------------------------------
7,800,000 Springfield, TN Health & Educational Facilities Board, Hospital
Revenue Bonds, 8.50% (Jesse Holman Jones Hospital Corp.)/(Original
Issue Yield: 8.875%), 4/1/2024 NR 8,143,824
----------------------------------------------------------------------
2,825,000 Tennessee Housing Development Agency, Homeownership Program, Issue V
Revenue Bonds, 7.65%, 7/1/2022 AA 3,000,546
---------------------------------------------------------------------- --------------
Total 17,062,136
---------------------------------------------------------------------- --------------
TEXAS--16.3%
----------------------------------------------------------------------
2,500,000 Brazos River Authority, TX, PCR Revenue Bonds (Series A), 7.875%
(Texas Utilities Electric Co.), 3/1/2021 BBB 2,786,700
----------------------------------------------------------------------
1,800,000 Brazos River Authority, TX, PCR Revenue Bonds (Series A), 8.125%
(Texas Utilities Electric Co.), 2/1/2020 BBB 1,997,694
----------------------------------------------------------------------
7,320,000 Dallas-Fort Worth, TX International Airport Facilities, Revenue Bonds,
7.125% (Delta Air Lines, Inc.)/(Original Issue Yield: 7.55%),
11/1/2026 BB 7,681,535
----------------------------------------------------------------------
3,000,000 Dallas-Fort Worth, TX International Airport Facilities, Revenue Bonds,
7.25% (American Airlines)/(Original Issue Yield: 7.428%), 11/1/2030 Baa2 3,254,160
----------------------------------------------------------------------
2,370,000 Dallas-Fort Worth, TX International Airport Facilities, Revenue Bonds,
7.50% (American Airlines)/(Original Issue Yield: 8.20%), 11/1/2025 Baa2 2,554,694
----------------------------------------------------------------------
2,500,000 Dallas-Fort Worth, TX International Airport Facilities, Revenue Bonds,
7.625% (Delta Air Lines, Inc.)/(Original Issue Yield: 7.65%),
11/1/2021 BB 2,727,075
----------------------------------------------------------------------
1,000,000 Guadalupe-Blanco River Authority TX, Industrial Development Corp. PCR
Bonds, 8.60% (A.P. Green Industries),
4/1/2009 NR 1,063,130
----------------------------------------------------------------------
$ 2,500,000 Guadalupe-Blanco River Authority TX, Industrial Development Corp., PCR
Bonds, 8.60% (A.P. Green Industries),
4/1/2009 NR $ 2,741,875
----------------------------------------------------------------------
</TABLE>
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
TEXAS--CONTINUED
----------------------------------------------------------------------
5,000,000 Gulf Coast, TX Waste Disposal Authority, Revenue Bonds (Series A),
6.875% (Champion International Corp.)/(Original Issue Yield: 7.15%),
12/1/2028 Baa1 5,292,450
----------------------------------------------------------------------
20,000,000 Houston, TX Water & Sewer System, Junior Lien Refunding Revenue Bonds
(Series A), 5.25% (FGIC INS)/ (Original Issue Yield: 5.60%), 12/1/2025 Aaa 18,990,600
----------------------------------------------------------------------
9,095,000 Richardson, TX Hospital Authority, Hospital Refunding & Improvement
Bonds, 6.50% (Richardson Medical Center)/ (Original Issue Yield:
6.72%), 12/1/2012 BBB- 9,110,098
----------------------------------------------------------------------
7,630,000 Richardson, TX Hospital Authority, Hospital Refunding & Improvement
Bonds, 6.75% (Richardson Medical Center)/ (Original Issue Yield:
6.82%), 12/1/2023 BBB- 7,664,106
----------------------------------------------------------------------
1,000,000 Texarkana, TX Health Facilities, Refunding and Improvement Revenue
Bond, 8.50% (Wadley Regional Medical Center)/(Original Issue Yield:
8.645%), 10/1/2012 A- 1,066,710
----------------------------------------------------------------------
1,700,000 Tyler, TX Health Facilities Development Corp., Revenue Bonds, 6.75%
(East Texas Medical Center)/(Original Issue Yield: 7.00%), 11/1/2025 NR 1,687,930
---------------------------------------------------------------------- --------------
Total 68,618,757
---------------------------------------------------------------------- --------------
UTAH--1.4%
----------------------------------------------------------------------
1,030,000 Utah State HFA, SFM Revenue Bonds (Series B-3), 7.10%, 7/1/2024 AA 1,079,296
----------------------------------------------------------------------
1,575,000 Utah State HFA, SFM Revenue Bonds (Series E-2), 7.15% (FHA
GTD)/(Original Issue Yield: 7.169%), 7/1/2024 AA 1,651,577
----------------------------------------------------------------------
2,210,000 Utah State HFA, Single Family Mortgage Revenue Bonds, 7.55% (FHA GTD),
7/1/2023 AA 2,349,650
----------------------------------------------------------------------
</TABLE>
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<S> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
UTAH--CONTINUED
----------------------------------------------------------------------
$ 580,000 Utah State HFA, Single Family Mortgage Revenue Bonds, 7.75% (FHA GTD),
1/1/2023 AA $ 616,314
---------------------------------------------------------------------- --------------
Total 5,696,837
---------------------------------------------------------------------- --------------
WASHINGTON--2.9%
----------------------------------------------------------------------
4,250,000 Pierce County, WA Economic Development Corp., Solid Waste Revenue
Bond, 5.80% (Occidental Petroleum Corp.)/ (Original Issue Yield:
5.90%), 9/1/2029 BBB 3,872,728
----------------------------------------------------------------------
4,075,000 Pilchuck Development Public Corp., WA, Special Facilities Airport
Revenue Bonds (Series 1993),Tramco, Inc. Project, 6.00% (Goodrich
(B.F.) Co.), 8/1/2023 Baa1 3,917,135
----------------------------------------------------------------------
4,300,000 Port of Camas-Washougal, Washington, PCR Refunding Bonds (Series
1993), 6.70% (James River Project)/(Original Issue Yield: 6.75%),
4/1/2023 BBB+ 4,387,548
---------------------------------------------------------------------- --------------
Total 12,177,411
---------------------------------------------------------------------- --------------
WEST VIRGINIA--1.0%
----------------------------------------------------------------------
$ 5,000,000 (a)Marion County, WV County Commission, Solid Waste Facility Revenue
Bonds (Series 1993), 7.75% (American Power Paper Recycling), 12/1/2011 NR $ 4,296,650
---------------------------------------------------------------------- --------------
WISCONSIN--0.2%
----------------------------------------------------------------------
715,000 Wisconsin Housing & Economic Development Authority, Homeownership
Revenue Bonds (Series E), 8.00% (FHA GTD)/(Original Issue Yield:
8.044%), 3/1/2021 Aa 756,970
---------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $416,798,580)(B) $ 433,438,702
---------------------------------------------------------------------- --------------
</TABLE>
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At the end of the period, these securities
amounted to $25,158,260 which represents 6% of net assets.
(b) The cost of investments for federal tax purposes amounts to $416,798,580.
The net unrealized appreciation of investments on a federal tax basis
amounts to $16,640,122 which is comprised of $18,615,438 appreciation and
$1,975,316 depreciation at February 29, 1996.
Note: The categories of investments are shown as a percentage of net assets
($421,964,415) at February 29, 1996.
The following acronyms are used throughout this portfolio:
COL -- Collateralized
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
GNMA -- Government National Mortgage Association
GO -- General Obligation
GTD -- Guaranty
HDA -- Hospital Development Authority
HEFA -- Higher Education Facilities Authority
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Bond
IFA -- Industrial Finance Authority
INS -- Insured
LT -- Limited Tax
PCA -- Pollution Control Authority
PCR -- Pollution Control Revenue
PRF -- Prerefunded
SFM -- Single Family Mortgage
(See Notes which are an integral part of the Financial Statements)
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
February 29, 1996 (unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $416,798,580) $ 433,438,702
- -------------------------------------------------------------------------------------------------
Cash 90,137
- -------------------------------------------------------------------------------------------------
Income receivable 7,877,347
- -------------------------------------------------------------------------------------------------
Receivable for shares sold 183,520
- ------------------------------------------------------------------------------------------------- --------------
Total assets 441,589,706
- ------------------------------------------------------------------------------------------------- --------------
LIABILITIES:
- ----------------------------------------------------------------------------------
Payable for investments purchased $ 19,130,600
- ----------------------------------------------------------------------------------
Payable for shares redeemed 380,151
- ----------------------------------------------------------------------------------
Accrued expenses 114,540
- ---------------------------------------------------------------------------------- -------------
Total liabilities 19,625,291
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 38,903,357 shares outstanding $ 421,964,415
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------------
Paid in capital $ 415,963,260
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 16,640,122
- -------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (11,768,460)
- -------------------------------------------------------------------------------------------------
Undistributed net investment income 1,129,493
- ------------------------------------------------------------------------------------------------- --------------
Total Net Assets $ 421,964,415
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- -------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($421,964,415 / 38,903,357 shares outstanding) $10.85
- ------------------------------------------------------------------------------------------------- --------------
Offering Price Per Share (100/99.00 of $10.85)* $10.96
- ------------------------------------------------------------------------------------------------- --------------
Redemption Proceeds Per Share (99.00/100 of $10.85)** $10.74
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
* See "What Shares Cost" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
Statement of Operations
- --------------------------------------------------------------------------------
Six Months Ended February 29, 1996 (unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest $ 14,768,846
- ---------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------
Investment advisory fee $ 1,270,513
- -------------------------------------------------------------------------------------
Administrative personnel and services fee 160,194
- -------------------------------------------------------------------------------------
Custodian fees 29,987
- -------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 136,654
- -------------------------------------------------------------------------------------
Directors'/Trustees' fees 7,231
- -------------------------------------------------------------------------------------
Auditing fees 7,763
- -------------------------------------------------------------------------------------
Legal fees 6,923
- -------------------------------------------------------------------------------------
Portfolio accounting fees 52,328
- -------------------------------------------------------------------------------------
Shareholder services fee 529,380
- -------------------------------------------------------------------------------------
Share registration costs 13,601
- -------------------------------------------------------------------------------------
Printing and postage 27,349
- -------------------------------------------------------------------------------------
Insurance premiums 4,186
- -------------------------------------------------------------------------------------
Taxes 41,132
- -------------------------------------------------------------------------------------
Miscellaneous 4,669
- ------------------------------------------------------------------------------------- ------------
Total expenses 2,291,910
- -------------------------------------------------------------------------------------
Deduct--Waiver of shareholder services fee (21,175)
- ------------------------------------------------------------------------------------- ------------
Net expenses 2,270,735
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 12,498,111
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized loss on investments (883,452)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 6,436,396
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain on investments 5,552,944
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ 18,051,055
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
FEBRUARY 29, 1996 AUGUST 31, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------
Operations--
- ---------------------------------------------------------------------
Net investment income $ 12,498,111 $ 26,526,286
- ---------------------------------------------------------------------
Net realized gain (loss) on investments ($883,452 and $5,647,830 net
losses, respectively, as computed for federal tax purposes) (883,452) (5,755,376)
- ---------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 6,436,396 9,394,163
- --------------------------------------------------------------------- ---------------------- -------------------
Change in net assets resulting from operations 18,051,055 30,165,073
- --------------------------------------------------------------------- ---------------------- -------------------
NET EQUALIZATION CREDITS (DEBITS)-- (20,481) (83,189)
- --------------------------------------------------------------------- ---------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------
Distributions from net investment income (12,757,262) (25,975,624)
- --------------------------------------------------------------------- ---------------------- -------------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------------
Proceeds from sale of shares 12,116,380 37,161,759
- ---------------------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 7,669,863 11,961,548
- ---------------------------------------------------------------------
Cost of shares redeemed (29,104,781) (99,451,503)
- --------------------------------------------------------------------- ---------------------- -------------------
Change in net assets resulting from share
transactions (9,318,538) (50,328,196)
- --------------------------------------------------------------------- ---------------------- -------------------
Change in net assets (4,045,226) (46,221,936)
- ---------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------
Beginning of period 426,009,641 472,231,577
- --------------------------------------------------------------------- ---------------------- -------------------
End of period (including undistributed net investment income of
$1,129,493 and $1,409,125, respectively) $ 421,964,415 $ 426,009,641
- --------------------------------------------------------------------- ---------------------- -------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
Financial Highlights
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
FEBRUARY 29, YEAR ENDED AUGUST 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.71 $ 10.56 $ 11.28 $ 10.78 $ 10.39 $ 10.00 $ 10.23 $ 9.76 $10.07
- --------------------------
INCOME FROM INVESTMENT
OPERATIONS
- --------------------------
Net investment income 0.31 0.63 0.61 0.62 0.66 0.70 0.72 0.74 0.78
- --------------------------
Net realized and
unrealized gain (loss) on
investments 0.15 0.15 (0.73) 0.51 0.39 0.40 (0.23) 0.49 (0.36)
- -------------------------- ----- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 0.46 0.78 (0.12) 1.13 1.05 1.10 0.49 1.23 0.42
- -------------------------- ----- --------- --------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- --------------------------
Distributions from net
investment income (0.32) (0.63) (0.60) (0.63) (0.66) (0.71) (0.72) (0.76) (0.73)
- -------------------------- ----- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $ 10.85 $ 10.71 $ 10.56 $ 11.28 $ 10.78 $ 10.39 $ 10.00 $ 10.23 $9.76
- -------------------------- ----- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (B) 4.39% 7.73% (1.06%) 10.86% 10.45% 11.37% 4.98% 13.09% 4.43%
- --------------------------
RATIOS TO AVERAGE NET
ASSETS
- --------------------------
Expenses 1.08%* 1.08% 1.09% 1.09% 1.05% 1.02% 1.01% 0.90% 1.02%
- --------------------------
Net investment income 5.90%* 6.18% 5.56% 5.65% 6.18% 6.86% 7.07% 7.27% 8.03%
- --------------------------
Expense waiver/
reimbursement (c) 0.01%* -- -- -- 0.14% 0.33% 0.39% 0.83% 0.70%
- --------------------------
SUPPLEMENTAL DATA
- --------------------------
Net assets, end of period
(000 omitted) $421,964 $426,010 $472,232 $458,331 $248,768 $135,628 $89,907 $62,501 25,151
- --------------------------
Portfolio turnover 6% 13% 27% 7% 14% 18% 24% 24% 34%
- --------------------------
<CAPTION>
1987(A)
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 10.00
- --------------------------
INCOME FROM INVESTMENT
OPERATIONS
- --------------------------
Net investment income 0.26
- --------------------------
Net realized and
unrealized gain (loss) on
investments 0.07
- -------------------------- -----
Total from investment
operations 0.33
- -------------------------- -----
LESS DISTRIBUTIONS
- --------------------------
Distributions from net
investment income (0.26)
- -------------------------- -----
NET ASSET VALUE, END OF
PERIOD $ 10.07
- -------------------------- -----
TOTAL RETURN (B) 3.48%
- --------------------------
RATIOS TO AVERAGE NET
ASSETS
- --------------------------
Expenses 0.86%*
- --------------------------
Net investment income 7.14%*
- --------------------------
Expense waiver/
reimbursement (c) 0.29%*
- --------------------------
SUPPLEMENTAL DATA
- --------------------------
Net assets, end of period
(000 omitted) $2,829
- --------------------------
Portfolio turnover 0%
- --------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 10, 1987, (date of initial
public investment) to August 31, 1987. For the peroid from the start of
business, April 1, 1987 to April 9, 1987, net investment aggregating $0.01
per share was distributed to the Fund's investment adviser. Such
distribution represented the net investment income of the Fund prior to the
initial public offering of the Fund shares which commenced on April 10,
1987.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
Notes to Financial Statements
- --------------------------------------------------------------------------------
February 29, 1996 (unaudited)
(1) ORGANIZATION
Federated Municipal Opportunities Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company.
Effective March 31, 1996, the Fund changed its name from Fortress Muncipal
Income Fund, Inc. to Federated Municipal Opportunities Fund, Inc.
Also, effective March 31, 1996, the Board of Trustees (the "Trustees")
established four classes of shares for the Fund, known as Class A Shares, Class
B Shares, Class C Shares and Class F Shares. Class F Shares maintain the
historical performance of Federated Municipal Opportunities Fund, Inc.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant. Short-term securities are valued at the
prices provided by an independent pricing service. However, short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
At August 31, 1995, the Fund, for federal tax purposes, had a capital loss
carryforward of $8,718,466, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire as follows:
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
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<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
1996 $ 661,371
1998 168,972
1999 47,025
2000 68,565
2001 57,182
2002 2,067,521
2003 5,647,830
</TABLE>
Additionally, net capital losses of $3,677,871 attributable to security
transactions incurred after October 31, 1994 are treated as arising on the
first day of the Fund's next taxable year.
EQUALIZATION--The Fund follows the accounting practice known as
equalization. With equalization, a portion of the proceeds from sales and
costs of redemptions of fund shares (equivalent, on a per share basis, to
the amount of undistributed net investment income on the date of the
transaction) is credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share is unaffected by
sales or redemptions of fund shares.
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.
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 Board of Directors. 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 by the Fund's pricing committee.
Additional information on each restricted security held at February 29,
1996 is as follows:
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Massachusetts, IFA, Solid August 3, 1994 $ 21,183,750
Waste Disposal Sr. Lien
Revenue Bonds
- --------------------------------------------------------------
Marion County, WV County December 17, 1993 $ 5,034,445
Commission, Solid Waste
Facility Revenue Bonds
- --------------------------------------------------------------
</TABLE>
INVESTMENT RISK--Although the Fund has a diversified portfolio, the Fund
has 36% of its portfolio invested in lower rated and comparable quality
unrated high yield securities. Investments in higher yield securities are
accomplished by a greater degree of credit risk and the risk tends to be
more sensitive to economic conditions than higher rated securities. The
risk of loss due to default by the issuer may be significantly greater for
the holders of high yielding securities because such securities are
generally unsecured and are often subordinated to other creditors of the
issuer. The Fund held no defaulted securities at February 29, 1996.
OTHER--Investment transactions are accounted for on the trade date.
(3) CAPITAL STOCK
At February 29, 1996, there were 2,000,000,000 shares of $.001 par value capital
stock authorized. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 1996 AUGUST 31, 1995
<S> <C> <C>
Shares sold 1,119,179 3,617,186
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Shares issued to shareholders in payment of distributions declared 710,610 1,156,534
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Shares redeemed (2,692,989) (9,728,597)
- ---------------------------------------------------------------------- --------------------- -------------------
Net change resulting from share transactions (863,200) (4,954,877)
- ---------------------------------------------------------------------- --------------------- -------------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser, (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.60% of the Fund's average daily net assets.
ADMINISTRATIVE FEE--Federated Services Company ("FServ") under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of
Federated Municipal Opportunities Fund, Inc.
(formerly, Fortress Municipal Income Fund, Inc.)
- --------------------------------------------------------------------------------
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25%
of average daily net assets of the Fund for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive any portion of its fee. FSS can
modify or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through its
registered transfer and dividend disbursing agent, Federated Shareholder
Services Company, maintains all necessary shareholder records and receives a fee
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 29, 1996, the
Corporation engaged in purchase and sale transactions with funds that have a
common investment adviser (or affiliated investment advisers), common
Directors/Trustees, and/or common Officers. These purchase and sale transactions
were made at current market value pursuant to Rule 17a-7 under the Act amounting
to $18,300,000 and $33,200,000, respectively.
GENERAL--Certain of the Officers and Directors of the Corporation are Officers
and Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended February 29, 1996, were as follows:
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
PURCHASES $ 33,472,445
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 23,673,648
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
Directors Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Richard B. Fisher
William J. Copeland President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Richard B. Fisher Edward C. Gonzales
Edward L. Flaherty, Jr. Executive Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President and Secretary
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts Charles H. Field
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
[logo] FEDERATED INVESTORS
Since 1955
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
Cusip 313910101
8040407 (4/96)
APPENDIX
A. The graphic presentation here displayed consists of a legend in the
upper left quadrant of the chart indicating the components of the
corresponding line graph. The color-coded line graph is a visual
representation of the narrative text above it, which shows that an initial
investment of $9,000 on 04/10/87 in Federated Municipal Opportunities Fund,
Inc. would have grown to $17,343 by 02/29/96. The "x" axis reflects the
cost of the investment, the "y" axis reflects computation periods from 1987
through 1996, and the right margin of the chart reflects a total investment
range from $0 to $18,000. The chart further indicates the ending value
attributable to principal, as well as the ending value attributable to
reinvested income.
B. The graphic presentation here displayed consists of a legend in the
upper left quadrant of the chart indicating the components of the
corresponding line graph. The color-coded line graph is a visual
representation of the narrative text above it, which shows that, beginning
on 04/10/87, nine annual investments of $1,000 in Federated Municipal
Opportunities Fund, Inc. would have grown to $13,083 by 02/29/96. The "x"
axis reflects the cost of the investment, the "y" axis reflects computation
periods from 1987 through 1996, and the right margin of the chart reflects
a total investment range from $0 to $14,000. The chart further indicates
the ending value attributable to principal, as well as the ending value
attributable to reinvested income.
C. The graphic presentation here displayed consists of a legend in the
upper left quadrant of the chart indicating the components of the
corresponding line graph. The color-coded line graph is a visual
representation of the narrative text above it, which shows that an initial
investment of $5,000 on 04/10/87 in Federated Municipal Opportunities Fund,
Inc., with continuing monthly investments of $500, would have grown to
$83,608 by 02/29/96. The "x" axis reflects the cost of the investment, the
"y" axis reflects computation periods from 1987 through 1996, and the right
margin of the chart reflects a total investment range from $0 to $84,000.
The chart further indicates the ending value attributable to principal, as
well as the ending value attributable to reinvested income.
